Fathom Digital Manufacturing Corporation Class A

Ladies and gentlemen, my name is Glenn and I'll be your operator this morning. I would like to welcome everyone to the Fandom 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, Fandom's Director of Investor Relations.

Thank you, Glenn, and good morning, everyone. Welcome to Fathom's first quarter 2023 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 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 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 risks and uncertainties in our business, and understand that forward-looking statements are only estimates. We also note today's presentation includes non-GAAP financial measures to describe the way in which we manage and operate our business. We reconcile these measures to the most comparable gap measure, and you are encouraged to examine those reconciliations. With us today are Ryan Martin, Fathom's CEO, and Mark Frost, the CFO. I will now hand it over to Ryan.

Thanks, Michael, and welcome everyone to Fathom's first quarter 2023 conference call. Our performance for the quarter was above management's expectations. as we extended Fathom's track record of profitability and cash generation. During the quarter, we executed well against our expanded optimization plan while taking active measures to strengthen our go-to-market strategies. As discussed on our previous call, we took advantage of the temporary softness in the macro environment in Q1 to expand our original optimization plan and further right-size our business. Of the current $19.5 million in projected annualized cost savings, we realized approximately $3.5 million in the first quarter, bringing the cumulative amount to $5.3 million. In Q1, we continued to optimize our national footprint with the integration of our two Texas-based facilities that we acquired prior to going public. This follows the consolidation of our Oakland facility in Q4 2022. We also reduced our workforce by an additional 14% while prioritizing our investments and operations in line with the near-term revenue generation. We expect to complete our cost reduction initiatives in the current second quarter and realize the benefits of the remaining $14.2 million in savings throughout the remainder of 2023. While Mark will discuss our financials in more detail, The ongoing execution of our restructuring efforts contributed to a Q1 gross margin improvement of 810 basis points on a sequential basis. We remain committed to ensuring an efficient cost structure and will take additional steps as appropriate so that our production levels match our customer commitments. During the first quarter, we also opened our new Silicon Valley Technology Center in Fremont, California. This state-of-the-art hub provides a unique opportunity to introduce corporate enterprise customers to some of the latest advancements in additive and traditional manufacturing, while enabling Fathom to maintain a strategic presence in the Bay Area. Our new Evolve additive solution is among the innovative technologies currently featured at the new tech center. We are now producing customer parts of the new STEP technology while continuing to build the pipeline. The feedback we've received to date from customers reaffirms how Evolve is poised to lead the transition from prototyping to additive production by dramatically reducing lead times for parts across various applications without compromising quality, throughput, scalability, or cost. In maintaining our focus on accelerating customer engagement, We bolstered our commercial leadership in Q1 with the appointment of Kurt Bork as Fathom's vice president of sales and marketing. We believe his considerable experience in enterprise sales and strategic growth management will add considerable value in this newly created position as we renew our efforts to expand our share of wallet with strategic customers and add new corporate accounts. In the brief period since Kurt joined Fathom, we have built positive momentum advancing these critical objectives. Recently, we received formal approval as a production supplier for a leading semiconductor capital equipment provider and a manufacturer of thermal solutions for the EV industry that we believe has the potential to deliver $10 to $15 million annually in aggregate incremental new business for Fathom. With these two large strategic customers, we expect to strengthen our pipeline with more stable and predictable revenue streams while further enhancing our ability to leverage our extensive low to mid-volume production capabilities. Notably, the approval to become an approved production supplier for the semiconductor company took over a year to secure and creates a significant barrier to entry for competitors and underscores the importance of Fathom as a critical supplier to our customers in the current market. Additionally, we continue to optimize our commercial structure with our new product innovation or MPI teams and our production teams, while also implementing other initiatives aimed at taking greater advantage of our expansive manufacturing platform to boost new orders and provide a more streamlined customer experience. And finally on this slide, we took steps during the quarter to increase our financial flexibility. Specifically, we amended our existing credit facility under favorable terms, providing for extended covenant relief through Q1 2024. These modifications strengthened our ability to withstand the ongoing uncertainty in the global economy as we maintain our focus on preserving Fathom's long-term financial health while investing in the growth of our business. Additionally, the execution of our $19.5 million optimization plan contributed to notable improvements in our net cash provided by operations, adjusted EBITDA, and adjusted EBITDA margin on a sequential basis. By actively managing our cost structure and preserving capital, we expect to further improve our profitability and leading margin profile over the remainder of the year and generate positive free cash flow in 2023. I'm pleased by our company's ability to adapt to persisting macroeconomic headwinds and believe our resilient workforce combined with our diverse enterprise-level customer base and comprehensive manufacturing services and deep technical expertise positions our company well to not only navigate the near-term macro challenges but benefit from our increased scalability as market conditions continue to improve. I will now turn the call over to Mark.