Q2 2023 Desktop Metal Inc Earnings Call
Yes.
Greetings and walk the desktop metals second quarter 2023 financial results Conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please.
Press Star Zero on your telephone telephone keypad as a reminder, this call is being recorded.
Now I'd like to turn the conference over to your host Mr. Jake Ensco Vice President Investor Relations. Please go ahead.
Good afternoon, and thank you for joining today's call with me today are Rick <unk>, founder and CEO of desktop metal adjacent call CFO of desktop metal.
Please note our financial results press release and presentation slides referred to on this call are available under the events and presentations section of our Investor Relations website.
This call is also being webcast live with a link at the same site.
The webcast and accompanying slides will be available for replay for 12 months. Following this call. The content of today's call is the property of desktop metal it cannot be reproduced or transcribed without our prior consent.
Before we begin or for you to our safe Harbor disclaimer on slide three of the presentation. As a reminder, today's call will include forward looking statements. These forward looking statements reflect desktop metals views and expectations only as of today August three 2023, and actual results may vary materially based on a number of risks and uncertainties.
For more information about the risks that may impact desktop metals business and financial results. Please refer the risk factor section on Form 10-Q.
In addition to the company's other filings with the SEC.
We assume no obligation to update or revise the forward looking statements.
Additionally, during this presentation and the following Q&A session. We may refer to our results on a non-GAAP basis non-GAAP measures are intended to supplement but not substitute for performance measures calculated in accordance with GAAP are financial results release contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP.
The non-GAAP measures I will now turn the call over to Rick.
Thank you Jay welcome to our second quarter 2023 financial results call. It was a really solid quarter of execution for desktop metal I missed a very active market, including our announcement to combine with stratasys to form the largest company in the additive manufacturing business.
On today's agenda I'll begin with highlights of our Q2 financials I'll detail recent developments as well as highlight specific activity. We're excited about in binder jetting.
There have also been a number of things about our company and our technologies that we believe are incorrect and misleading and we'd like to set the record straight.
I will then wrap it up with some thoughts on the significance of our future combination with stratasys and the benefits and opportunities ahead.
And then Jason will provide more color on our financial results and outlook before we conclude and open it up for Q&A.
I'll start at the top of slide four it was a very good quarter as we combined solid top line performance with continued cost reduction execution to drive meaningful and expected improvements from Q1 numbers.
Being focused on balancing revenue growth with improving margins.
I'm proud of what the team has accomplished operationally and I'm very optimistic about the balance of 2023.
Revenue for the second quarter of 2023 was $53 3 million or <unk>.
Very strong 29% growth over the first quarter of 2023.
As Youll recall, we entered the year with a question about the outlook on the demand side as macro pressures weighed on our industry and we certainly felt that in the first quarter.
There was a continuation of that softness into the start of the second quarter. However, order momentum really began to pick up and we finished the quarter with strength.
While there is still some element of caution in the environment. We're very encouraged by the recent customer activity that led to our second quarter results.
Momentum gives us confidence and the early signs of a recovery and also validates feedback we've been receiving from customers that we would see an uptick in orders as we progress through 2023.
In combination with this improved customer demand profile and a variety of near term growth opportunities. We feel very good about the second half of 2023.
We're reaffirming our 2023 revenue guidance.
Meanwhile, the DM team has been laser focused on something we have full control over reducing our cost structure second quarter non-GAAP gross margins grew to 31% expanding 1300 basis points sequentially from the first quarter of 2023, and 435 basis points year over year from Q2 2022.
From a gross margin standpoint, this was a record for a second quarters in large part due to our efforts in reducing the fixed cost base in our Cogs and importantly.
We just completed several actions under the second tranche of our $50 million cost reduction plan towards the end of Q2, so those savings won't be fully reflected until we report Q3.
As a result, we expect continued gross margin expansion through the balance of the year, because we combine the benefits of this additional cost savings with expected higher revenue in the second half, we're very proud of our efforts to get gross margins back on track.
We've also driven significant improvements in our expense structure in the past six quarters, which has resulted in the best quarter of adjusted EBITDA since going public.
Q2, 2023, adjusted EBITDA was negative $15 million, an improvement of $9 4 million sequentially from Q1 2023.
$12 $5 million improvement year over year.
Our adjusted EBITDA and operating cash flow losses are decreasing rapidly and we expect to drive continued significant improvement into the back half of 2023.
EBITDA is trending to our internal plans and we remain committed to our 2023 of adjusted EBITDA guidance range and achieving adjusted EBITDA profitability by the end of the year.
We expect our cash burn to continue to significantly decline in line with our pursuit to adjusted EBITDA breakeven.
Moving on to recent business highlights.
We had excellent activity in Q2 in binder, jetting, and metals, which was a key contributor to our solid financial results.
We continue to make meaningful advances in our production system platform, including continued commercial progress in consumer electronics.
And I'm excited to welcome Reierson, one of the largest global metal suppliers in medical aerospace and defense to our customer base, our production system P 50.
On the healthcare side desktop health platform, a leading dental solutions continues to capture market share for the first time, we're making our category leading flex our materials available to other platforms.
We recently signed a commercial supply agreement with our friends at carbon <unk>.
Company that is very successful of DLP printing to offer reflects cerro materials to their large dental customers installed base.
This is a testament to flex arris differentiated material properties, and we expect additional partnerships and licensing opportunities as we continue to find ways to monetize our portfolio of close to 1000 patents.
Our partnership with align technologies continues to be another exciting opportunity for our business.
In desktop Health also recently launched our new generation bio flutter system would print role the world's most advanced printer for by fabrication.
Print role is an innovative rotating build platform that can produce first of its kind intelligent printed tubular tissue.
<unk> was superior to existing manufacturing processes, because he can make tissue engineering parts with multiple materials, combining polymers like peak resorbable polymers combined with living cells Hydro gels and other biomaterials in a single part this revolutionary capability can be used to manufacture new kinds of stents or grafts.
For the body's vascular digestive and respiratory and reproductive organs.
Florida is a premier product in the field of bio printing desktop health <unk> is the worlds most sided and researched by our printer in peer reviewed scientific and medical journals with more than 2490 citations and over 600 peer reviewed research papers directly produced with this system.
While there are competitors that claim leadership in the marketing materials. We believe our bio floater is years ahead of competing products casing point. The FDA recently granted approval to our customer Chicago based dimension inks for C. M Flex hyper elastic three D printed ball.
This is the first time three D printed biofabrication products have been cleared by the SBA.
It's exciting that the first company with such clearance manufactured products on our <unk>.
Customers are choosing our desktop how five fabrication products, because we are clearly differentiated and have superior technology. This.
This is yet another area, where we have core IP that precedes competitors in both extrusion and photopolymer Biofabrication.
At the end of this presentation will include supplementary slides that display our capabilities in these products.
Turning to slide five as we've spoken about in the past we established clear leadership in two core print platforms that serve large Tam as a result of their unique mass production use cases.
One of them is binder jetting and the other one is for our polymer frankly.
As a reminder, unlike competitors are technologies leverage area wide processes that benefit over time through Moore's law, giving us long term compounding advantages desk.
Desktop metal has carved out a very strong competitive moat in binder jet with the number one selling binder jet products. The most experienced team in the world incredible IP an array of end use mass production applications to differentiate us from competitors and we've leveraged this leadership to.
To quickly grow our installed base to the largest in the binder jet industry.
We have also grown to a leadership position in dental and health care led by desktop health with combined best in class for our polymer printers designed for the production of end use parts with a leading catalog of differentiated materials that sets us apart in the market.
These businesses will serve as a foundation for our growth.
Turning to the following slide we've continued to innovate and then locked three new markets.
Printing of foams sheet metal, forming and printed hydraulics is a unique technologies bring additive manufacturing into new applications not traditionally accessible to legacy AAM processes.
Shifting back to Biogen on slide seven.
Desktop metal printers are the first and only metal printing technology currently used at scale in automotive.
Binder jet is now being used at scale by Oems like BMW, where we now have parts in almost every one of their new vehicles.
We were part of a multiyear bake off I'd BMW, comparing all binder jet solutions and we're happy to report that we're the company that won that effort, which resulted in significant follow on orders for their new generation large format axial binder jet systems in the Atlanta plant.
These new systems are the fastest binder jet printers ever built with speeds exceeding 350000 cubic centimeters an hour.
We have many of them installed and in production of BMW today.
More will be delivered by the end of the year and we believe desktop metal has more indias parts made of metal in cars today than any other additive manufacturer.
In addition to printed centered parts or printed castings.
In the past I've said, you can have several hundred kilograms of additive manufactured parts in a car.
And we now have some customers that are starting to do this let me explain.
Today's cars are manufacturer with a process called body in white.
Since the Henry Ford days, most automobiles are made out of hundreds of sheet metal parts that are stamped cut welded and fastened on an assembly line.
Our binder Jetting technology is a key enabler of a new way to manufacture cars called Giga casting which is led by Tesla Giga.
Giga castings are the consolidation of hundreds of parts combined into a single giant part assembly.
Allows oems to dramatically reduce cost assembly time, capex and weight.
Giga casting also offers potential benefits for logistics and emissions reduction increasing flexibility and engineering of the vehicle platform and lowering this you have to fund.
And this process Binder jetting systems are used extensively in the front end to enable high complexity geometries with very rapid iteration cycles to improve the economics of vehicle manufacturing.
We now have several customers.
Using our printers, which supply Tesla vehicles built with Giga casting.
As well as other Oems such as Toyota Volvo Mercedes Benz and others were fast following two launch vehicle platforms to leverage these new process.
They use a binder jetting is rapidly increasing as future giga casting programs look to leverage even higher geometric complexity parts that could make die casting with internal course printed with binder jet.
Turning to the following slide nine this is an image of a desk my employee observing a gig of casting mold that was printed with our binder jet systems by a customer green Dreamworld.
Okay.
Note that the image on the back of the gentlemen, T shirt is a picture of our Giga cast part.
People don't usually make T shirts for things that aren't important.
Again this process allows tesla to assemble a vehicle and one third the time versus some other competitors.
Eliminating thousands of world hundreds of sheet metal parts in hundreds of tools aside from the significant capex savings per vehicle Oems and all of our major benefit of Binder jetting in this new way to make cars is that during the design cycle changes to the vehicle can be iterative in as little as one day versus almost more.
8% to 30 weeks for traditional Dicast tooling processes.
Turning to the following slide I'm, highlighting some of the strategic growth market for binder jet that are non production and starting to scale.
We just talked about enabling giga casting for automotive.
Highlighted on the left side of the slide outside the pioneering work from Tesla all the companies in marine and aerospace markets like Mercury Marine Airbus Eden.
Rolls Royce are successfully consolidating assemblies with larger binder jet printing castings to change production economics of their products.
And on the right side of the slide Here's an example of a multibillion dollar market that has not yet been able to embrace additive manufacturing because of the limitations of previously so we're printing technologies.
Through binder jetting desktop metal he's able to print silicon carbide at production scale.
This is an enabling technology for power electronics for electric vehicles.
And we have growing customer relationships with a number of companies, including Denso and companies like shrunk coherent and Northrop Grumman are adopting this technology to make single Crystal Silicon carbide wafers in other parts of our space and semiconductor manufacturing.
And like I mentioned on our first quarter call. Another application of our binder jet printers in production or three D printing of try so high assay low enriched uranium nuclear fuel that could it be made any other way.
This is a key enabler for fourth generation MMR and SME nuclear reactors and just last Wednesday, DARPA and Lockheed Martin held a press conference with our customer at BWXT technologies to showcased a first of its kind try so nuclear thermal propulsion powered rocket that will be demonstrated by 2027.
We're incredibly excited to be in production and fully qualified in these high value applications in semiconductor end use parts as well as being at the center of the future of automotive production.
The opportunities in binder jet with each passing month in desktop metal is better positioned than any company in the three D printing space.
Turning to the next page Slide 11 is here for your reference we're.
We're not necessarily going to walk you through it but our preferred for those that are interested in this level of detail during our Q&A or after the call.
Part of our pending merger with Stratasys a lot of things have been said recently in the public forum about desktop metal in binder jetting that are inaccurate or misleading.
The facts are.
Binder jetting is the fastest process for three D printing parts.
Binder jetting can make fully dense metal parts it has more material flexibility than welding processes.
He can make parts in many materials that will never be available to laser.
As a result of binder jetting speed and throughput advantages he delivers the lowest cost parts and is quickly gaining share in the added manufacturing market because it enables mass production capabilities in the new high volume use case that you cannot accomplish with all the processes.
At the end of the day market share is the best yardstick for measuring success and desktop metal has clear leadership demonstrated by revenue share in the binder jet space and in the metal <unk> printing space overall.
Shifting the discussion to progress of our cost reduction efforts on slide 12, we're 100% focused on achieving adjusted EBITDA profitability in 2023.
Outlined this call in early 2022 is a top priority for our company.
X quarters later, you can see that we're executing this plan.
Importantly.
We've been driving cost reduction actions without sacrificing the superior solutions, we provide to our customers and ensuring their success.
We're on track to achieve this $100 million in annualized cost savings by the end of the year.
In the quarter, we completed six facility closures on time.
We continued to drive cost synergies from business integrations.
Action is reflected in the second $50 million tranche were weighted more towards fixed cost base in Cogs and we saw that in Q2 with significant improvement in gross margins, both sequentially and year over year.
Third quarter 2023 will be the first full quarter. Realizing the majority of the second tranche of cost savings. So we expect continued improvements in the back half of the year and into 2024.
Weak cost of goods sold absorption had been a drag on our model in the past.
Our gross margins, we've made durable improvements to address our fixed cost base and you should expect to see less dramatic variability in gross margins going forward.
Finally, the result of these cost reduction actions supported another quarter of sequential improvement in adjusted EBITDA and operating cash flow.
This was the best quarter for adjusted EBITDA since going public and we expect this trend to continue into the back half of this year.
We're not to a full call yet, but adjusted EBITDA profitability and then eventually positive cash flow is insight and I'm very proud of the team's effort to uphold our commitment.
Now please turn to the next slide I'd like to transition to discuss our pending merger with Stratasys and our excitement about the deal.
Through this combination we are establishing a powerhouse in additive manufacturing.
This is not a deal we had to do but we believe that partnering with stratasys to create the first am company to achieve comprehensive scale across the entire manufacturing lifecycle from designing and prototyping to full scale mass production is a special opportunity for our combined companies together, we have incredible potential by combining desktop metals.
Complementary portfolio and track record of innovation and growth with Stratasys extensive market reach and operational excellence to serve the evolving needs of our customers.
The combination will also help us drive long term profitable growth, creating at over $1 $1 billion of revenue platform with sufficient scale and profitability to lead the industry in over 50% of our combined revenue from the fastest growing segment in additive manufacturing <unk>.
Mass production.
Together, we will have a diversified and comprehensive portfolio with virtually no product overlap, we're bringing together complementary products and technologies that cover a wide range of industry verticals and use cases.
Stratasys brings a leading position in polymer three D printing and exceptional strength in aerospace automotive consumer products and health care verticals and desktop metal brings its leadership in mass production of metal and ceramic and restaurant dental printing solutions.
Our combined materials library is highly differentiated and software capabilities complementary across print platforms.
The combined R&D teams of over 800, scientists and engineers represent the strongest and the smartest people in three D printing.
Combining our superior technical talent with more than 3400 patents issued and pending will allow us to continue to drive innovation for our customers and help us win growth.
While also benefiting from Tam expansion.
Combining with Stratasys will also allow us to leverage one of the largest global go to market networks in <unk> printing.
This transaction also creates the opportunity to realize approximately $50 million in annual run rate cost synergies in our <unk>.
<unk> $50 million in annual run rate revenue synergies across the business by 2025.
The combined company will have a very strong financial profile and an expectation to deliver over $300 million of adjusted EBITDA by 2026.
And approximately 20% pro forma adjusted EBITDA margin and this deal accelerates, our combined company's financial flexibility through a well capitalized balance sheet to drive future growth.
We're in complete support of this merger.
But it's not an acquisition of some have claimed desktop metal shareholders are receiving shares representing approximately 41% of the combined company and representation by designating nearly half the board.
We would not do this deal at less favorable times and we believe our combination with Stratasys is a superior combination and will position us to help shape. This additive manufacturing industry for years to come.
However, we are a fiduciary to our shareholders default them at least they decide this is not the best path for our company, we have not lost any confidence in our long term outlook.
Until this deal closes we're 100% focused on our outstanding Standalone prospects that include the growth and innovation that Stratasys is so attractive.
We're making steady improvements in our cost structure and are well capitalized with a plan to get to profitability on our existing cash and most importantly, we have an unmatched portfolio of mass production technologies. It is almost impossible to recreate and whereas focused as ever to leveraging that portfolio to make our customer successful with that let me turn the call.
All over to our CFO , Jason call Jason.
Thanks, Rick I'll begin on slide 15 with highlights of our financial performance for the second quarter of 2023.
Reminder, that we will be referring to several financial metrics on a non-GAAP basis and a reconciliation to GAAP data is included in the filed appendix.
In <unk>, we exited the quarter with strong customer demand signals.
As well as continued momentum on our cost reduction initiatives.
Both of these gives us confidence for what's ahead and I'm excited to walk you through the 223 results now.
Consolidated revenue for the second quarter of 2023 was $53 3 million up 29% sequentially from $41 3 million in the first quarter of 'twenty three.
Importantly demand for DM products and services accelerated across the quarter validating the customer signals, we consistently hear.
Leading revenue drivers in <unk>, where metal binder, jetting solutions and growth in consumables services and subscription.
Revenue was down year over year, partly due to efforts to deemphasize product lines with lower quality revenue prospects and doi lower gross margins.
Youll recall, we entered the year with headwinds that carried into the start up to Q.
As we conveyed in the prior quarter in the face of inconsistent and sometimes unclear demand trends, we stay close to our customers, while focusing and relying on their feedback ensuring customer success is a key pillar in our strategy for multiple quarters, our customers have validated the DM products and services create solutions to real business challenges with.
To drive meaningful and rapid return on investment.
Throughout the past year, plus customers across our businesses have validated that while some decisions may be delayed demand for <unk> solutions or wheel. It would pick up as we progressed through 2023, we saw this recurring customer sentiment materialize in the close of Q2, we finished the quarter strongly following a slow start which gives us.
And the revenue trends for the back half of the year.
non-GAAP gross margins expanded to 31% for the second quarter of 2023.
<unk> thousand 500 basis points sequentially over first quarter of 2003, and 435 basis points versus the second quarter of 'twenty two.
non-GAAP gross margin expansion was driven primarily by continued progress on our multi quarter cost reduction efforts, helping us gain leverage year over year and versus the first quarter of 2003.
We have fielded a number of questions on whether we could get this business to above 30% non-GAAP gross margins within 2023.
We're pleased to say we were able to hold that commitment ahead of schedule before the full effect of cost of sales reductions have been realized for a full quarter's impact and before realizing the gross margin tailwind that will follow with more meaningful top line growth.
In <unk>, we completed the closure of six production sites, leaving <unk> 23 to be the first full quarter with these savings will be realized for a full quarter.
From a gross margin standpoint. This gives us added confidence about the second half of 'twenty three and beyond.
Turning to the following slide non-GAAP operating expenses were $34 7 million for the second quarter of 2023. This represents a reduction of non-GAAP operating expenses by a quarterly total of $17 $4 million since the start of our cost reduction initiatives in the first quarter of 2022.
Including year over year reductions of 11 4 billion from the second quarter of 'twenty two.
non-GAAP operating expenses showed another quarter of improvements.
Spike, making some onetime investments in sales and marketing opportunities in the quarter, where we opted to make measured investments to secure potentially meaningful returns.
Additionally, as we detailed last quarter cost reductions in <unk> 'twenty three were weighted more toward structural cost of sales.
As compared to prior quarter cost reductions, where the mix was weighted more heavily towards operating expenses.
Importantly, we have more opportunities to improve our expense profile remaining in the year and expect to see continued leverage in the second half.
non-GAAP operating expenses as a percentage of revenue was 65% in the second quarter 'twenty, three which is a year over year improvement versus 80% in the second quarter of 'twenty two.
Note that operating expenses as a percentage of revenue was one of the lowest quarters since going public and we enter Q3 feeling confident the trends of continued leverage will continue.
We are nowhere near the top of the growth curve. So as we combine our more disciplined and efficient approach to spending with topline growth our pathway to profitability and positive cash flows becomes clearer.
Our cost reduction efforts are insulating and our business and we believe the graph on the right of this slide we will continue to trend favorably over the next year plus.
Turning to the next slide adjusted EBITDA for the second quarter of 2003 was negative $15 million.
Best quarter for EBITDA since going public adjusted EBITDA improved by $12 $5 million year over year compared to the second quarter 'twenty to.
$26 5 million since we initiated our cost reduction plans in the first quarter of 'twenty two.
We're proud of the efforts to date, but the bigger takeaway is we are not done.
We wanted to be adjusted EBITDA profitable by the end of the year and we've made that commitment to our stakeholders, regardless of the macro conditions and the tailwind entering the back half of this year of seasonally higher revenue combined with steadily declining spend support what we've been messaging with regard to adjusted EBITDA. Our brightest days are ahead of us.
We remain well funded from our cash position with $127 6 million in cash cash equivalents and short term investments to end the second quarter of 2003 compared to $149 8 million to close Q1 2023 for net cash burn of approximately $22 million in Q2, excluding <unk>.
Two when we last raised cash this is our lowest cash burn since going public we have reduced our operating cash flow burn from $56 3 million in the first quarter of 'twenty two to $33 1 million in the second quarter of 'twenty, three again, showing the cash impact from cost reduction efforts completed to date.
The operating cash number excludes proceeds from the sale of property that favorably impacted cash.
Cash is tracking right to our internal forecast and with more significant improvement to come before year end, we are in a solid position from a cash standpoint.
Finally, we ended the quarter with $103 million in inventory.
Cause of some of the strength, we've seen from customers. We've made investments in the quarter due to forecasted demand that we wanted to be prepared for in the second half of the year. However, even with these investments we did expect inventory levels to be lower in Q2 <unk>.
Completing the closure of six production facilities in the quarter impacted.
Inventory levels, and we have some lingering stubborn pockets of inventory, we're continuing to work through.
So there's more work to be done here and we're committed to monetizing inventory in the back half of the year, which will improve working capital and cash flows in 2023 and into 2024.
Finally, moving to our 2023 financial outlook on slide 19.
While there is still some element of caution in the environment. We are very encouraged by customer activity to end the second quarter with this improved customer demand profile in the near term growth opportunities, we see across our portfolio of solutions. We are confident about the second half of the year. As a result, we are reaffirming our revenue expectations of two.
$210 million to $260 million for 2023.
In addition, we are reaffirming our adjusted EBITDA expectations of negative 50 to negative $25 million for the year as well as achieving adjusted EBITDA profitability by the end of the year.
We expect adjusted EBITDA losses to continue nearly rapidly in the second half of the year as we combined positive customer demand signals in what is a seasonally favorable revenue period with continued and ongoing expense leverage.
As we sit today.
We understand we're trending towards the lower end of the range, but internally, we feel very positive about our plan to hit the midpoint or.
Our progress on cost reductions combined with our opportunity pipeline support this thesis.
We're pleased to reaffirm guidance and look forward to showcasing our results over the next two quarters and with that I will turn it back to Rick for his closing remarks.
Thank you Jason I, just wanted to take a second to thank Jason and the G&A team for their successful efforts to drive operational improvements.
Jason you've had a significant positive impact on the company in your short time here and I'm very grateful for all your efforts and experience.
To wrap up some key takeaways first we delivered a solid revenue quarter with our customer activity that was very strong, especially at the end of the quarter.
The customer demand profile is really shaping up.
Interest seasonally strong back half of 2023.
Second we continue to execute on our cost reduction efforts to achieve adjusted EBITDA profitability. This year.
A lot of levers to get there and confidence in our ability to get this company profitable and the cash we have on balance sheet and finally, we are relentless in delivering for our customers will continue to be energized by the benefits of mass production technologies that we're bringing to our customers and transforming their manufacturing environment.
The long term growth opportunity for mass production is still massive and largely unchanged from the $100 billion addressable market, we've consistently pointed out since going public.
What has changed is the scale was built at that time and the amount was accomplished as a company desktop metal has established a portfolio of mass production solutions unmatched in the industry.
We're a category leader in many area why technologies that benefit from Moore's law like Biogen and DLP.
Built and installed base to over 7000 customers.
And we're in the early innings of engagements with multiple fortune 500 companies on a number of projects that individually could significantly approach or exceed the size of our company today.
We're the largest library of production materials.
We have the most experienced and knowledgeable production theme in the additive manufacturing space.
And now, we're adding business discipline, and an improving financial profile that best positions us to capture this opportunity.
Production is the future of this industry.
And there is no company better positioned to capitalize on the next phase of the added manufacturing growth curve.
With that let's take some questions operator.
If you would like to ask a question. Please press star one on your telephone keypad now you will be placed into the queue. In the order received please be prepared to ask your question when prompted.
Once again, if you would like to ask a question. Please press star one on your phone now.
And our first question comes from Greg Palm from Craig Hallum. Please go ahead Greg.
Thanks, Good afternoon, everybody just wanted to maybe start off with a little bit more commentary on kind of the near term visibility sounds like the quarter ended on a high note and.
With some a positive outlook commentary just kind of curious as you think about you know.
Jason you made the comment that you think you can still get to the midpoint, which would.
You know represent a pretty big ramp from here, but you know what what gives you that confidence and I guess just more specifically any you know end markets geographic area is any sort of verticals that youre seeing the most strength and that gives you some of that confidence.
Yeah, Hey, great. Thanks for the question this is Jason.
Thank you.
We have kind of the first half of the year underperformed across from my original expectations or it kind of it to be fair. It was in line with what we sort of here and that's why we gave you the wide guidance range, we see strength across all of our businesses I think binder jetting in particular on the digital casting side feels pretty strong as does the metal, but we're also as I think we spoke with you about a lot with.
We're really excited about the growth curve in our dental space in the photopolymer healthcare side. So.
It's kind of across an array of opportunities.
We're still kind of operating great cautiously, but the signals are there and the close of <unk> gives us some confidence that there's simply demand.
Okay understood and the.
The P 50, so congrats on the the another customer win there, but can you give us some sense and is that a system is that for delivery. This year and then just a little bit more commentary on consumer electronics I think there was a bolt on the press release about continued progress but anymore.
Any more commentary there would be helpful.
Greg absolutely, yes, so that deliveries for for Ryerson as for this year and then.
In the consumer electronic side, our customers are.
We will probably do marketing once those products are shipping to consumers.
Other than that it's hard to comment in more detail.
Okay fair enough on the profitability.
Profitability.
It's going as well as it could be going.
Okay understood on the profitability side of things.
You know looking at year to date, so you're already at I don't know close to negative 40 million and EBITDA and.
The range is negative 25 to negative 50, so it implies a pretty significant improvement here in the back half.
Can you tell us how much you know from Q2 to Q3, what the incremental cost take outs are.
And you know again kind of going back to the commentary about still feeling confident that you can get to the midpoint that would suggest obviously profitability in the second half.
I'm not sure if that comment was meant to be on more of the revenue side or the EBITDA side, but I just wanted to clarify that as well.
Yes.
Thanks for the opportunity to explain so.
We don't give quarterly guidance I want to stop short of saying things here that kind of give you. The <unk> quarterly guide, but what I can direct you to a couple of data points that I think can help you map it out <unk>.
<unk> adjusted EBITDA loss of $15 million in Trinidad. Additionally.
Additionally, at <unk>, we had six production site closures several liquids related gains a quarter. So I think the tailwind we get from things that were executed in 10-Q with the shelf and a full quarter of <unk> can you kind of give you a sense that even if <unk> were seasonally weak. We expect continued progress on adjusted EBITDA and then in <unk>. We said, we were aiming to be breakeven or better.
Yes, it's breakeven obviously there is no addition to the loss, but with a little bit of ups.
We can actually neutralize some of that so.
I think it.
I can see you can claim that we're going to be breakeven or better in both <unk> and <unk>, but <unk> is going to be better than <unk> is what we said this will be all.
Okay that makes sense I will leave it there thanks.
Thank you Greg Thanks, Greg.
Our next question comes from William Katz, and Investor. Please go ahead William.
Hi.
Wondering if it so happened that the stratus merger was terminated by Stratus.
How much is the termination fee the stratus has to pay the desktop metal.
Okay.
It's in excess of $32 million.
Okay.
Yeah.
Alright, thank you.
As a reminder, if you would like to ask a question. Please press star one on your phone now.
At this time, there appears to be no ash.
So the question from Harold Weber from Aegis capital. Please go ahead Harold.
Hi, guys could you give me a little update on what's happening with the forest line of stuff.
Yes, yes, we have customers that are.
Continue to use the product to shelf system for the smart.
Okay.
Great product.
What type of uptake you're seeing in the industry.
But I would say, we don't breakout R. R.
Demand by product.
All variety of products.
I would say that the forest product.
We are still working on adapting that to the larger format machine.
<unk>.
Which are better suited for highest higher throughput production and.
We.
We think that the.
As we continue that development.
We're gonna be able to keep growing that.
Particular product lines installed millions of dollars' worth it.
For us.
Related printers, so we're happy with the progress to date, but I think over time, it can become a much bigger base.
As we target.
Larger components and furniture parts and things like that.
And we have a follow up question from Greg Palm from Craig Hallum. Please go ahead Greg.
Thanks, I thought I'd ask a couple of follow ups since it doesn't seem like there's there's many more.
And just in terms of kind of debunking some of the thesis.
Out there I was hoping maybe you could just spend a minute or two on P. 50, because you've got you know now another nice win here that you're announcing but can you give us some sense in terms of how many of these.
You have placed to date, either beta or commercially you know what we should expect in terms of revenue contribution. This year I think that'd be helpful for all of us.
Yes.
Several system then I think we are going to continue to grow our installed base.
Yeah. These are these are.
Multimillion dollar machines.
So they're they're expensive, but we have.
Very good progress at the throughput that they produce parts, which is dramatically higher than.
All of the products in the market.
The real target market for this.
The product is very high volume.
Entering of parts for automotive consumer electronics or.
For larger companies like horizon.
It can support.
The board.
The das systems can deliver.
Got it okay.
We continue to develop a market for those products are.
Okay.
Yeah.
Very bullish with.
Promise for that technology.
And then Jason just one more follow up maybe on the cash flow statement.
Do you have sort of a goal when you when you flip to cash flow positive and I guess, it's two part question.
As you achieve EBITDA breakeven or profitability you know, what's the lag in cash flow to achieving profitability as well and do you have a a sort of a target in mind, how much cash on the balance sheet. When you end up flip into cash flow positive.
Yeah, that's a great question thanks for that.
I think youre absolutely right the cash flow does trail the adjusted EBITDA by a little bit and I think you can draw a pretty easy correlation between the two if you just kind of tracking over time.
So if we're going to be breakeven on an adjusted EBITDA basis, I guess the way I'd say it is I expect the cash burn to be under $10 million a quarter.
Our kind of hope here is that we can kind of turn that corner on cash flow.
On or around $100 million of cash and we think we can close the year above that is kind of our internal thinking so.
It keeps coming down quickly and youre right that it will lag adjusted EBITDA, but not by much. So I think it's on the heels of that.
Okay, Great alright. Thanks.
Thank you and at this time there are no further questions I would like to turn the call back over to Rick <unk> for closing remarks.
Wonderful.
Thank you very much for joining us today and also thank you to the entire desktop metal team for all your hard work and build a great quarter.
And for all the investors interest in our company as always if you have any follow up questions. Please don't hesitate to contact us. If you are in Boston, We'd love to host you. If you want to come visit us and see our technologies have close.
Okay.
This concludes today's conference call. Thank you for attending.
The host has ended this call goodbye.