Massachusetts-based 3D printer manufacturer Desktop Metal (NYSE: DM) has lowered its guidance for the financial year after it failed to meet revenue expectations during a turbulent Q3 2021.
As revealed in its recent financials, the firm brought in $25 million over the third quarter, 34% more than the $18 million it generated in Q2 2021, but 6% short of the $27 million reported to be expected on Wall Street. Due to global shipping delays, Desktop Metal says it was unable to sell 3D printers such as subsidiary EnvisionTEC’s Xtreme 8K in the “quantities expected,” which dented its Q3 earnings potential.
Following this tricky end to the quarter, which also saw its acquisition expenses soar, the firm has lowered its FY 2021 revenue and EBITDA guidance to $92-102 million and minus $80-90 million respectively. In the week since its results were published, Desktop’s Metal’s share price has similarly dipped 14%, but it remains flat when measured against the pre-earnings season period of late-October 2021.
“Global supply chain and logistic disruptions did have an effect towards the end of the quarter, and our team has done a great job adapting to the current environment,” explained Ric Fulop, CEO of Desktop Metal. “Ultimately, we didn’t execute in the last quarter, [but] we’re in a good position to drive very strong sequential growth in the fourth quarter and end the year strongly.”
Desktop Metal’s Q3 2021 results
Desktop Metal reports its revenue across two main segments: Products and Services, with the former generating the majority of its revenue in Q3 2021, bringing in $23.9 million. While this figure represents a rise of more than 1000% compared to the $1.9 million generated by the division in Q3 2020, shipping disruption prevented its potential from being fully-realized during the quarter.
To combat this moving forwards, Fulop said on the firm’s earnings call that it “has its best people focused on getting the P-50 out,” and it is increasing its manufacturing capacity in response to strong interest from Fortune 500 businesses, with initial builds already underway and shipments being targeted for the quarter ahead.
Comparatively, the company’s Services segment grew less quickly from $0.6 million to $1.4 million between Q3 2020 and 2021, but Fulop added that it’s “expanding the serviceable portion of its addressable market.” In particular, he said that he now expects the firm’s EnvisionTEC, Beacon Bio and ExOne subsidiaries to “bring AM into new applications,” creating it growth opportunities across the board.
On the profitability front, Desktop Metal managed to turn a gross loss of $2.3 million in Q3 2020 into a gross profit of $4 million in Q3 2021, yet its net loss still rose from $19 million to $67 million over the same period. This jump in spending between Q3 2020 and Q3 2021 was down to the firm’s expansion-related costs, which saw its R&D, marketing and admin expenses rise significantly from the $17 million spent last year.
|Revenue ($)||Q3 2020||Q3 2021||Difference (%)||6M 2020||6M 2021||Difference (%)|
|Cost of Sales||4.8m||21.5m||+348||21.5m||50m||+133|
The ‘AM 2.0’ expansion continues
Over the third quarter, there were no signs of Desktop Metal’s recent expansion slowing down, as the company acquired binder jetting rival ExOne, as well as Aidro and Aerosint. Now that the former deal has been completed, Fulop says that he anticipates the move will “cement his firm’s leadership in area-wide AM technologies for mass-production.”
“We’re particularly thrilled with the opportunity to combine ExOne’s sand printing expertise with our low-cost architectures, to make digital casting more accessible,” added Fulop. “We look forward to leveraging our complementary go-to-market activities to drive outsized growth, while seizing on opportunities to flip ExOne’s business into a more ‘turnkey built to forecast’ model.”
The firm also launched a new Desktop Health initiative during the quarter, through which it plans to build out its biofabrication platform, and better address a dental sector that it values at $30 billion. Already, Desktop Metal’s Beacon Bio division has created five biomaterials to help make this possible, and in future, the company aims to “increase the profitability and product capabilities” of related acquisitions.
In the shorter term, Desktop Metal says that its Q3 revenue growth originated in its “core metals business,” with initiatives such as the qualification of Ti64 for its Studio System 2 contributing to this. Likewise, the firm is now partnering with the University of Toledo, in a project that will see its P-1 3D printer used to develop Nitinol, Rene and other nickel-based alloys, potentially opening further binder jetting applications.
“Our Production System platform enables the development of new materials for binder jet 3D printing that can be used for at-scale production,” explained Fulop. “We are thrilled to partner with the University of Toledo on this disruptive technology development, opening up a tremendous opportunity for medical, aviation and space applications.”
Revised-down FY 2021 guidance
Looking ahead to Q4 2021, Fulop said that while ExOne’s robust $57 million backlog and Desktop Metal’s strong P-50 demand give him optimism for the firm’s future growth, the acquisition of the former raises “accounting implications” that make issuing profit/loss guidance “difficult.”
What the company has said, is that excluding its recent acquisitions and potential P-50 sales, it expects to generate $36 to $46 million in Q4 2021 and $75 to $85 million for FY 2021. These figures may be lower than initially projected, but if realized, they could still represent growth of up to 448% and 418% respectively, with the integration of its new subsidiaries set to accelerate this trend in 2022.
“As we near the end of 2021, we’re better-positioned with the right portfolio of differentiated additive manufacturing solutions to drive consistent growth through 2022 and over the longer term,” concluded Fulop. “I remain as excited as ever about the momentum of our business and our opportunity to deliver value to all of our stakeholders.”
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Featured image shows a suite of Desktop Metal-3D printed parts at the RAPID+TCT trade show. Photo via Desktop Metal.