Fathom Digital Manufacturing Corporation Class A

Hello, my name is Emily and I will be your operator this morning. I'd like to welcome everyone to the Fathom Digital Manufacturing Earnings Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation, there will be a Q&A session with instructions to follow at that time. I would now like to turn the call over to Michael Simonyi, Fathom's Director of Investor Relations. Please go ahead.

Thank you, Emily, and good morning, everyone. Welcome to Fathom's third quarter 2022 earnings conference call. Before we begin, I'd like to mention that today's presentation and earnings press release are available on Fathom's website at www.fathommfg.com, where you will also find links to our SEC filings along with other important information about our company. Turning to slide two, we note that this presentation contains forward-looking statements within the meaning of the Securities Exchange Act. We encourage you to read the risk factors contained in our filings with the SEC become aware of the risk and uncertainties in our business, and understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements represent management's expectations only as of today, and the company disclaims any obligation to update them. We also note today's presentation includes non-GAAP measures to describe the way in which we manage and operate our business. We reconcile these measures to the most comparable GAAP measure and you are encouraged to examine those reconciliations which are found in the appendix to both the press release and the slide presentation. With us today are Ryan Martin, Fathom's chief executive officer, and Mark Frost, the chief financial officer. I will now hand it over to Ryan.

Thanks, Michael, and welcome everyone to Fathom's third quarter 2022 conference call. I'd like to begin my remarks on slide three, where we will provide our Q3 highlights. Our performance for the quarter was in line with management's expectations as we continue to increase our orders and sales momentum while extending our track record of profitability in our core operations and cash generation, a key differentiator of Fathom. In Q3, we posted revenue of $40.2 million, while adjusted EBITDA totaled $7.1 million. We continue to benefit from positive fundamentals in our business, as product-driven companies localize and reshore their manufacturing to ensure a more resilient supply chain. Additionally, we work closely with enterprise-level customers who seek a comprehensive digital manufacturing partner to help them iterate faster and reduce time to market. As we discussed on our previous call, we made important strides during the second quarter, building out a high-performance, platform-based strategic sales team to help drive long-term growth. I'm excited how our new commercial team members have steadily ramped up their activities. During the quarter, both our orders growth and revenue growth improved each month, an encouraging sign as we aim to close out the year and enter 2023 with increasing momentum. In fact, Fathom achieved record order performance in the month of September for additive technologies. While Mark will discuss our financials in more detail, our orders totaled $40.3 million in Q3. During the quarter, we secured new additive orders from two notable customers in the fast-growing EV market, totaling $1.2 million. We also achieved new wins in other key end markets, including aerospace and defense, semiconductor, and robotics. by taking advantage of our robust technology-agnostic platform, which allows us to adapt our 25-plus manufacturing processes to our customers' specific needs. As you've heard me talk about before, one of the key strengths of the Fathom platform is our entrenched relationships with large strategic customers, which provides Fathom with an attractive, reoccurring revenue stream given our retention rate of 90-plus percent. By partnering with some of the world's most innovative Fortune 500 companies, working with them across multiple sites, and developing extensive contacts within each company, we have seen continued growth among our strategic accounts over the past year. On an LTM basis, we have grown the number of customers spending more than $1 million with Fathom annually from 26 customers in 2020 to 35 customers today, an increase of approximately 35%. More importantly, we have generated a revenue CAGR of approximately 20% within our million dollar plus revenue customers since 2020. We believe these positive trends demonstrate how our land and expand model among strategic enterprise level accounts is working. As our commercial activities continue to take hold, we plan to open our new Silicon Valley Technology Center in early Q1 23. This advanced hub will ensure continuous proximity to our strategic customers and provide a unique opportunity to demonstrate firsthand our cutting-edge technologies and provide an outlet for Fathom to better partner with leading OEMs to showcase new technologies. This facility will be where we introduce our customers to some of the latest advancements in additive and advanced manufacturing, including the Evolve system. Throughout 2022, we have made important progress expanding our industry-leading platform by adding new technologies, which have considerably strengthened both our capabilities and growth prospects. Most recently, we took delivery in the quarter of three new multi-jet fusion machines from HP, providing breakthrough productivity for additive manufacturing, ideally suited for low to mid-volume production environments. We also made investments in our post-processing equipment to enhance the quality and efficiency of the plastic additive parts we produce. Regarding Evolve, we expect to take delivery of this new additive technology by early 2023 at our Silicon Valley Technology Center. We're excited by this opportunity for this advancement in additive manufacturing. This technology is a one of a kind additive process which dramatically reduces lead times for parts compared to traditional injection molding processes. We have already started receiving our first orders for this technology and interest continues to be extremely high. All of these new additive technologies follow the expansion earlier this year of our large format SLS 3D printing capabilities for the creation of prototypes and end use parts in durable engineering grade thermoplastics. I'm pleased with the continued execution of our capital investment strategy and the significant benefits this will provide our on demand platform in 2023 and beyond. At the same time, we remain focused on consolidating our national footprint and increasing the operating efficiencies in line with our previously disclosed optimization plan. Our facility in Oakland is scheduled to officially close in January, following the transfer of our entire CNC operations and additive technologies to our company headquarters in Heartland, Wisconsin. With this transition, we expect to optimize our existing capacity and increase utilization in Heartland. This transition will also help pave the way for our Heartland facility to serve as the premier new product innovation facility throughout North America with a unique set of capabilities unrivaled in our industry. In addition to our new MJF, DMLS, and SLS technologies that I just mentioned, our Heartland facility recently took delivery of two DMG MORI 5-access machines. This dynamic, high performing technology integrates speed and precision and will help expand our dedicated quick turn CNC capabilities, which is a high margin and our fastest growing segment within Fathom. Our state of the art MPI facility in Heartland will enhance our national manufacturing footprint while serving as a valuable compliment across our other sites to provide a one-stop outsource solution for low-volume, high-mix production that supports customization and delivers a superior customer experience while generating greater economies of scale across the entire Fathom manufacturing platform. Consistent with our strategy to create world-class manufacturing centers in key strategic markets, We remain on track to open a greenfield site in the Austin, Texas area in the first half of next year. As part of this initiative to expand our Texas footprint, we intend to consolidate our two existing nearby facilities, which will eliminate redundancies, reduce costs, and further increase our scalability. And we look forward to providing an update on our progress during our next quarterly call. In furthering our efforts, To accelerate customer engagement, we had a strong turnout at the International Manufacturing Technology Show, or IMTS. This week-long event, which was held in September for the first time since 2018, represents the biggest manufacturing event in North America with over 85,000 attendees and 2,000 exhibitors. This was our first in-person event since 2019, and it was exciting to see so many new and familiar faces. We met with existing customers, exploring opportunities, to expand our relationships while securing a significant number of new, high-quality leads across a wide range of industries. We believe our flexible, hybridized approach, applying the best manufacturing process to deliver the most effective solution that achieves the desired outcome resonated significantly with the attendees. We remain focused on ramping our sales and marketing activities as we continue to invest in new technologies and expand our breadth of leading offerings. By executing our go-to-market strategy, we expect to build deep and entrenched relationships with additional Fortune 500 tier companies and achieve greater market penetration for our additive and traditional manufacturing technologies. With that, I will now turn the call over to Mark.