Desktop Metal, Inc. Class A

Good day and welcome to the Desktop Medals first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. In the interest of time, please limit yourselves to one question and one follow-up. Please note this event is being recorded. I would now like to turn the conference over to Jay Gensko. Please go ahead.

Good morning, and thank you for joining us as we discuss first quarter 2022 financial results for Death South Metal. With me today are Rick Fuller, founder and CEO, and James Haley, CFO. Please note that our financial results press release and presentation slides referred to on this call are available under the events and presentation section of our investor relations website. This call is also being webcast live with a link at the same website. 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, I'd like to refer you to our safe harbor disclaimer on slide two of the presentation. Today's call will include forward-looking statements. These forward-looking statements reflect Desktop Metal's views and expectations only as of today, May 10, 2022, and actual results may vary materially based on a number of risks and uncertainties. For more information about the risks that may impact Desktop Metal's business and financial results, please refer to the risk factors section of the annual report on Form 10-K in addition to the company's other filings with the SEC. We assume no obligation to update 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. Our financial results release contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. With that, it's my pleasure to turn the call over to Rick Holt, founder and CEO of Desktop Metal. Thank you, Jay.

Hi, everyone. We're very excited to host you for Desktop Metal's first quarter 2022 financial results call. Today, I'll start with highlights of our quarterly financials, review a few exciting developments in the business to start the year, and spotlight some of the recent customer wins. I will then turn over the call to James to provide further color on the financial results of the quarter before closing with an update on our progress towards our key strategic priorities for 2022. We'll then open the call for Q&A. I'll begin on slide three with a financial results summary. Overall, I'm pleased with the first quarter's performance as we experienced another quarter of exciting demand, resulting in top-line growth, Consolidated revenue for the first quarter of 2022 was $43.7 million, representing a strong year-over-year growth of 286%. This was driven by a combination of broad-based organic growth, including shipments of new products, as well as contributions from acquisitions. We're really excited about the quality of the product portfolio that was put together and the opportunity to drive consistent long-term growth. Non-GAAP gross margins were 17.1% for the first quarter of 2022, versus 5.5% in the first quarter of 2021. This is an increase of over 1,150 basis points year over year. While it does represent a decline from the fourth quarter of 21, Q1 is seasonally the lowest revenue contributing quarter for our business, and so overhead absorption is a key factor pulling down our margin structure. As we continue to grow revenue throughout 2022, we expect a meaningful expansion in gross margins compared to this quarter, and we anticipate a full year 2022 non-GAAP gross margin to expand versus 2021, and it will exceed 30%. It's been a strong start to the year, and demand remains robust across all our full portfolio of AM technologies and solutions. Therefore, we're reaffirming 2022 revenue expectations of approximately $260 million, representing 131% growth over 2021. We're also reaffirming adjusted EBITDA expectations of approximately negative 90 million while maintaining our commitment to exit the calendar year 2023 break even on an adjusted EBITDA basis. I'd like to take a moment to reflect on the significant progress we've made since going public and where we're today. Over the past 18 months, our team has worked diligently to develop and bring to market a range of AM 2.0 metal platforms, which includes our flagship production system P50. Added to that, We utilized our strong balance sheet to acquire a wide breadth of capabilities and technologies that greatly broaden our AM2.0 portfolio and now provide us with a sustainable technology differentiation across a range of applications. As a result of this purposeful strategic efforts, we believe we have built the undisputed leading portfolio of pure play AM2.0 solutions. Today, we have 20 market-leading print platforms with a focus on high-volume production of end-use parts. Our platforms support a compelling portfolio of diverse materials, including metals, polymers, composites, sands, woods, and elastomers, amongst many others. These materials we have added help us address a growing array of end-use applications and have increased our presence in key verticals adopting additive, such as dental, healthcare, foundries, and automotive, to name a few. As we look at Desktop Metal's roadmap over the next few years, we've established a foundation, on top of which we can continue to rapidly scale as we're currently demonstrating. Importantly, we're also now well diversified and able to capitalize on growth drivers across many industries, accelerating the adoption of additive manufacturing. This adds durability to our trajectory and will enable us to grow across industry cycles with better predictability and precision. We're starting to see our vision come together to be the dominant player in AM for mass production as we progress towards our goal to capture a double-digit share of the over $100 billion added manufacturing market by the end of the decade. Moving down to a few business highlights. I'm very proud of what the team accomplished to kick off 2022. We made solid progress on our production system platform as we continue to grow our installed base of customers, leveraging our patent-pending single-pass genning technology. This differentiated technology sets us apart in the industry in terms of speed and part costs, and the customer response has been fantastic. In the first quarter, we commenced shipments to the production system P50 with our partners Stanley Black & Decker, and we can now report that we have production system P1 hardware installed in China as a step towards our goal of establishing and developing hyperscale applications. We also have made excellent progress expanding our digital casting business, including the launch of our all-new SMAX Flex. Flex is a one-of-a-kind digital casting printer, which for the first time makes it affordable for any foundry to get into digital casting. The initial response in order book for this solution has been extremely encouraging. I will provide more color on the opportunity here in the following slides. Finally, the launch for our Einstein series of printers under Desktop Health is going extremely well and we're expanding production capacity to support demand. These are high-performance systems designed for precision dental and healthcare applications. And the differentiated features in the Einstein series and our leading portfolio of Class II FDA-cleared dental materials are driving increased demand in the market. We're very happy with how this business is shaping up with terrific potential for growth in the balance of 2022. Turning to slide four, one of the biggest opportunities in front of us is the extraordinary benefits of additive manufacturing and what it brings to the supply chain. These benefits have long been associated with additive manufacturing and have now become more top of mind than ever as a result of COVID and the resulting disruptions across the global supply chain and logistic networks. But supply chain challenges cannot be solved through rapid prototyping. You need high volume 3D printing capabilities in order to effectively and sustainably provide alternatives to conventional manufacturing. Desktop metal is a pure play on supply chain disruption. Our unique mass production capabilities unlock the ability to drive flexibility in global supply chains in a cost-effective way, including decentralized borderless production, on-demand inventory resiliency, onshoring, and localized production, and the ability to reduce dependencies on third-party suppliers. We've seen a number of recent customer wins here, where supply chain challenges are driving demand and purchase decisions. We have customers ranging from major manufacturers of electrical parts looking to print those components in the U.S., companies experiencing significant business disruption in overseas foundries, where we're helping those manufacturers restore production of those parts to the U.S. through digital casting. And as President Biden indicated last Friday as part of his new AM Forward initiative, U.S.-based 3D printing enables cost-effective production in our country. Our hydro business has seen a significant uptick in orders for the 3D printed hydraulic components, as well as customers looking for alternatives to the current supplier network due to challenges and delays. And finally, our desktop glass platform is expanding its capacity as many US dental practices are looking to improve turnaround times and reduce cost amid disruptions to their traditional model of working with international parts suppliers, which are now facing steep supply chains and logistic network issues. In each case and around the world, our AM 2.0 solutions are enabling companies to sidestep supply chain issues, improve environmental footprint of their products, and offer a path to flexible volume production through additive manufacturing. Even the Department of Defense recently awarded us a major award through their Defense Logistics Agency to address these issues. On the following slide, I'd like to briefly highlight one of our new print platforms offered under our X1 brand. The SMAX Lex is a scalable, large format binder jetting system for 3D printed sand molds and cores. The S-Max Flex democratizes access of digital casting to foundries around the world, bringing them numerous benefits of AM 2.0. Foundries can use digital casting solutions to quickly cast complex metal designs for markets such as aerospace, automotive, energy, among others. This innovative system is a result of integration efforts from our X1 acquisition last year. The S-Max Flex combines X1's market-leading sand printing expertise in process and materials with desktop metals, single-pass jetting technology in an affordable architecture to deliver value to foundries that have long awaited an S-Max Pro but found the premium price out of reach. This new solution leverages industrial robotics to bring a new level of affordability, reliability, and productivity to large-format binder jetting, offering a larger and more scalable build volume with improved tolerances and higher speeds. It's rare that you go from a product launch and customers are signing contracts for equipment on the spot. We have a growing order book for the S-Max Flex. This is debut at Castexpo in April, and we're also expanding production of this new product to meet demand. I wouldn't be surprised if the Flex becomes the world's best-selling digital casting printer by the year end. We're extremely excited about the opportunity for this class of system. With this new level of affordability, this technology is applicable to over 40,000 foundries globally, turning it into another growth driver for the company. Turning to slide six, we had a fantastic quarter of customer adoption across our brands, adding lots of new accounts as well as expanding within our existing customer base. We continue to see progress with marquee customers, an example of which are displayed on the left side of the slide, including Rolls-Royce, Microsoft, Schlumberger, and Collins Aerospace. On the right side, I want to highlight one of the customers, a really outstanding SME company called Printer Press. They have been using our shop system as well as other products like our P1s or E-Tech printers to combine benefits of metal 3D printing with their proprietary nanotechnology coatings to address the needs of medical device markets, including spinal and orthopedic medical devices. The shop system's bindogenic technology enables printer press to meet their customer demands for high volume of printed instruments while maintaining superior part quality and surface finish required for medical parts. Customer demand was spectacular to start the year, and we remain confident in our ability to expand our market share across the board as we see companies of all sizes in many different end markets embracing the benefits of added manufacturing 2.0. I will now turn the call over to James, our CFO, to cover some financial highlights. James?