Industrial 3D printer manufacturer Desktop Metal has announced a strategic integration and cost optimization initiative that will generate at least $100 million of aggregate cost savings over the next 24 months.
As part of the initiative, the company is planning to lay off around 12% of its global workforce, citing productivity gains as a result of the integration of the businesses it acquired last year.
“In 2021, we demonstrated significant growth, expanding our portfolio of products into new markets and innovative materials,” said Ric Fulop, Founder and CEO of Desktop Metal. “While the acquisitions we completed in 2021 contributed to this growth and to our total market opportunity as we focused initially on harvesting product and go-to-market synergies, they also increased our cost base and global facilities footprint.
“Today’s announcement of our strategic integration and cost optimization initiative is the result of a comprehensive portfolio and business operations review conducted across all functions at Desktop Metal.”
Desktop Metal’s rapid expansion
In addition to expanding its medical portfolio with the establishment of its Desktop Health subsidiary, and setting up its wood 3D printing Forust subsidiary, the company has carried out a number of acquisitions over the last 18 months. The firm bought up DLP system and material producer EnvisionTEC in January 2021, which it recently rebranded to ETEC, before snapping up resin supplier Adaptive3D, recoater system developer Aerosint, and hydraulic and fluid power system developer Aidro a few months later.
In August 2021, Desktop Metal announced it had entered into an agreement to acquire fellow binder jet 3D printer OEM ExOne for $575 million, a deal that when approved in November saw two of 3D printing’s biggest binder jet system manufacturers join forces.
Despite the company seeming to remain true to its FY 2022 outlook and making a strong start to the year with a 286% revenue rise during Q1 2022, Desktop Metal’s shares nosedived by 65%, potentially reflecting investor response to the firm’s current high rate of cash burn. Operating losses spiraled up to $69.5 million during the period, likely a key contributor to the announcement of the firm’s new cost optimization initiative.
The cost optimization initiative
Essentially, Desktop Metal hopes its new cost optimization initiative will pave the way to profitability, offering a simplified operational structure, a consolidated global facilities footprint, and reduced expenses, which will support the firm’s continued revenue growth over the next two years.
Broken down, the initiative is expected to result in $40 million of annualized run rate non-GAAP cost savings, $20 million of which will be realized in H2 2022. In total, the initiative will culminate in at least $100 million of aggregate cost savings over the next 24 months.
As of 31st March 2022, the company is sitting on more than $317 million in cash, with the cost optimization initiative expected to incur some $14 million before it is complete by the end of 2023. This cash balance, combined with the predicted impact of the initiative, will reportedly put the company in a “stong liquidity position” to break even on an adjusted EBITDA basis and fund its long-term growth trajectory.
“As outlined on prior financial results calls, we have been focused on identifying opportunities to optimize our expense structure while maintaining our growth opportunities,” said Fulop. “We believe this initiative, which builds on steps we began to take in the second half of 2021 to integrate our teams, positions Desktop Metal to meet our near- and long-term financial commitments and supports our path to profitability.”
Reducing global workforce
One casualty of this initiative, though, is Desktop Metal’s global workforce, which is set to be slashed by 12% as the company works to consolidate its facilities and streamline its product development programs. A key part of the initiative is aligning the operational structure of the company and its acquired brands, consolidating all engineering, manufacturing, marketing, finance, legal, human resources, and customer service functions under Desktop Metal’s corporate umbrella.
In particular, the company will focus on prioritizing near-term revenue and margin expansion across high-growth applications with the aim of delivering a “more efficient and effective” operating model. The company announced the impact on its US workforce to its employees yesterday and said it will continue to review international workforce changes.
“We look forward to combining industry-leading innovation with disciplined cost management to drive value for shareholders as we continue our mission to achieve a double-digit share of the rapidly growing additive manufacturing market by the end of the decade,” Fulop added.
“We value the dedicated team at Desktop Metal, including our departed colleagues, for all their hard work and contributions towards this goal.”
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Featured image shows Desktop Metal’s new ExOne S-Max Flex 3D printer. Photo via Desktop Metal.