Desktop Metal, Inc. (DM) Q4 2023 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: positive recurring revenue growth and cost reductions are offset by declining overall revenue and market penetration challenges. The Q&A reveals cautious optimism with growth areas in defense and aerospace but uncertainty in consumer electronics. The guidance for 2024 is broad, reflecting potential variability. These mixed signals suggest a neutral stock price reaction over the next two weeks.
Key Financial Performance
Total Revenue $190 million in 2023, down from $209 million in 2022, reflecting macroeconomic impacts on CapEx budgets.
Recurring Revenue $65 million in 2023, up 29% year-over-year from $50 million in 2022, now representing 34% of total revenue, up from 24% in 2022.
Printed Castings Revenue $73 million in 2023, up 27% year-over-year, driven by adoption in defense and aerospace sectors.
Adjusted EBITDA Loss (Q4 2023) Negative $9.2 million, improved by $11.9 million year-over-year from negative $21.1 million in Q4 2022.
Full Year Adjusted EBITDA Loss Negative $69.1 million in 2023, improved from negative $118.4 million in 2022, reflecting cost reduction efforts.
Non-GAAP Gross Margin (Q4 2023) 34%, improved by 970 basis points year-over-year from 24.1% in Q4 2022.
Full Year Non-GAAP Gross Margin 27% in 2023, a 450 basis point improvement over 22.5% in 2022.
Non-GAAP Operating Expenses (Q4 2023) $31.6 million, down 17% year-over-year from $37.9 million in Q4 2022.
Cash Consumption from Operations (Q1 2022) $56.3 million, down 62% compared to the first quarter of 2022.
Inventory at Year-End 2023 $82.6 million, positioned to execute on expected first half demand.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
ScanUp.org digital dentistry product: Signed over $32 million in total contract value in the first year, with growth compounding at over 25% quarter-over-quarter.
Flexcera Base Ultra+: Launched with gross margins approaching 70%, sold over 20 metric tons, enough for over 1 million dental products.
Printed castings business: Grew 27% in 2023 to a record $73 million, with over 80% market share and significant growth potential in global markets.
Additive Manufacturing market: Expected to grow from $18 billion to over $100 billion by 2031, with a projected 5x increase in market size.
Recurring revenue: Reached a record $65 million in 2023, representing 34% of total revenue, up from 24% in 2022.
Cost reduction measures: Announced $150 million in cumulative annualized cost reductions, with additional measures to exit underperforming business lines.
De-emphasizing photopolymer technologies: Decision to focus on more profitable product lines and exit cash-consuming businesses.
Focus on profitability: Aiming for adjusted EBITDA positive in the second half of 2024, with a commitment to cost-saving initiatives.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Competitive Pressures: The company faces competitive pressures in the Additive Manufacturing industry, particularly as it seeks to regain market share after losing access to the Stratasys channel partners, which impacted sales in the sub-$0.5 million segment.
Regulatory Issues: There are no specific regulatory issues mentioned, but the company acknowledges the impact of macroeconomic conditions on capital expenditure budgets, which may indirectly relate to regulatory environments affecting the industry.
Supply Chain Challenges: The company has experienced project delays due to higher costs of capital, which have affected new technology adoption and overall industry growth.
Economic Factors: The higher cost of capital has led to a flat growth year for the industry, impacting Desktop Metal's revenue and project timelines. The company is adjusting its strategies to navigate these economic challenges.
Cost Structure and Profitability: Desktop Metal is undergoing a restructuring to achieve profitability, having announced $150 million in annualized cost reductions. The company is de-emphasizing certain business lines that are not scaling effectively, which poses a risk to its overall growth strategy.
Market Growth Potential: While the company sees long-term growth potential in Additive Manufacturing, the current economic environment presents challenges that could delay the realization of this potential.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Cost Reduction Initiatives: Announced $150 million in cumulative annualized cost reductions, with $100 million in 1Q '23 and an additional $50 million in January '24.
Focus on Profitability: Aiming for adjusted EBITDA profitability in the second half of 2024, with a focus on cost-saving initiatives.
De-emphasizing Certain Business Lines: Intention to de-emphasize select business lines, particularly in photopolymer technologies, to streamline operations and focus on more profitable areas.
Growth in Recurring Revenue: Recurring revenue reached a record $65 million in 2023, growing 29% year-over-year, representing 34% of total revenue.
Expansion in Key Markets: Plans to expand into global markets, particularly in defense, aerospace, and healthcare sectors.
New Product Launches: Launched ScanUp.org in partnership with Align Technologies, with $32 million in total contract value in the first year.
2024 Revenue Guidance: Anticipating revenue in the range of $175 million to $215 million for 2024.
2024 Adjusted EBITDA Guidance: Expecting adjusted EBITDA to be negative $30 million to negative $10 million for the full year 2024, with positive adjusted EBITDA anticipated in the second half.
Long-term Market Growth: Analysts project a 5x increase in the size of the additive manufacturing market by the end of the decade, potentially reaching over $100 billion by 2031.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Cost Reduction Initiatives: Announced $100 million in annualized cost reductions in Q1 2023, followed by an additional $50 million in January 2024, totaling $150 million in cumulative annualized reductions.
Adjusted EBITDA: Full year 2023 adjusted EBITDA loss decreased from negative $118 million in 2022 to negative $69 million in 2023. Expected to be adjusted EBITDA positive in the second half of 2024.
Recurring Revenue Growth: Recurring revenue grew by 29% year-over-year, reaching $65 million in 2023, representing 34% of total revenue.
Inventory Management: Finished the year with $82.6 million in inventory, positioned to execute on expected first half demand.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Can you give us some color or maybe assumptions on top end versus low end of the guidance range for fiscal '24?
A:The guidance range is plus or minus $20 million, about 10%. We think we can perform in the top half of that range, but we have been surprised before.
Q:Any expectations for the cadence of revenue for the year?
A:The seasonality curves will follow the same structure, with 1Q being softer. We have a late-breaking product revenue cycle, so there's variability. We will provide an update in mid-May.
Q:What are you seeing in the consumer electronics end market specifically?
A:Consumer electronics is still a huge opportunity, but we go at the pace of our customers. Some areas are growing well, while others are challenging. It's hard to predict growth in this segment.
Q:Can you speak more specifically about the products that you guys are shedding here in photopolymers?
A:We're not shedding a product but looking at options to grow our business in photopolymers. We're a market share leader in permanent restoration.
Q:Can you give us an update on the P-50 and if you think you'll recognize as much revenue for it this year?
A:The P-50 hasn't become a significant part of our business yet, but it is the highest performance fine powder system in the market.
Q:Where do you think operating expenses will bottom out?
A:We're definitely not at the bottom yet. We announced a fresh cut of $50 million, and we expect operating expenses to decrease further.
Q:Can you help me understand the foundry opportunity?
A:Foundries need patterns and molds, and with Additive Manufacturing, we can create complex shapes with superior tolerances. This technology is being adopted faster in the industry.
Q:What initial steps have you taken in the Latin American market?
A:We have started hiring go-to-market resources for those areas and are excited to support companies in emerging economies.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific growth potential in the consumer electronics segment, stating it is hard to predict and that it hasn't become the largest part of revenue yet.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Additive Manufacturing
Live
South America
SpaceX
Tesla
access
action cost
activity
actuator
adoption
aerospace
analyst
beginning
business
casting process
centimeter
channel
color
competitor
constellation
curve
day
decade
defense
digit
engine
foundry
hand
intelligence
limb
pace
part moon
partner
portion
powder
program
record
robot
segment
shape
technology part
tool
vehicle
DM Transcript
Desktop Metal, Inc. (DM) Q1 2024 Earnings Call Transcript
Neutral5-9
Desktop Metal, Inc. (DM) Q4 2023 Earnings Call Transcript
Unknown3-18
The earnings call presents a mixed picture: positive recurring revenue growth and cost reductions are offset by declining overall revenue and market penetration challenges. The Q&A reveals cautious optimism with growth areas in defense and aerospace but uncertainty in consumer electronics. The guidance for 2024 is broad, reflecting potential variability. These mixed signals suggest a neutral stock price reaction over the next two weeks.
Desktop Metal, Inc. (DM) Q3 2023 Earnings Call Transcript
Neutral11-9
Desktop Metal, Inc. (DM) Q2 2023 Earnings Call Transcript
Neutral8-4
DM Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
