Desktop Metal Inc - Ordinary Shares (DM) Q2 Earnings call transcript Jul 31, 2024
AInvestWednesday, Jul 31, 2024 9:22 pm ET
2min read
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In Desktop Metal's second quarter 2024 earnings call, the company announced a proposed business combination with Nano Dimension, a move that aims to bolster its position in the additive manufacturing sector and create significant long-term shareholder value. The rationale behind the merger and the anticipated benefits are discussed in detail, highlighting the company's strategic realignment and its efforts to navigate a challenging macroeconomic environment.

Strategic Cost Reduction and Financial Challenges

Desktop Metal's CEO, Ric Fulop, began the call by discussing the company's strategic efforts to align its cost structure with macroeconomic realities, including a 48% reduction in non-GAAP operating expenses since the first quarter of 2022. This reduction, coupled with a strengthened non-GAAP gross margin, has enabled the company to reduce its cash burn and position itself for a lower growth environment. However, despite these efforts, the company has faced financial challenges due to rising interest rates, slowing capital expenditures, and other macroeconomic pressures. These challenges have impacted the company's balance sheet, limiting its ability to invest in growth and innovation.

The Need for a Bold Move

Given the challenging business environment and the industry-wide struggles to achieve profitability, Desktop Metal explored various options to strengthen its financial position. However, the company found that raising additional capital would either result in significant dilution to shareholders or a loss of control. In light of these challenges, Desktop Metal deemed the proposed business combination with Nano Dimension as the best path forward for its shareholders.

Benefits of the Merger

The merger with Nano Dimension is expected to establish a true leader in the additive manufacturing space, combining complementary product portfolios and technologies to create a more complete portfolio and stronger balance sheet. This combined entity will be better positioned to drive innovation and develop products for customers, accelerating the industry's transition into mass production. Moreover, the merger will create a well-capitalized company, enabling operational efficiencies and supporting customers with a clear path to profitability.

Financial Performance and Guidance

Desktop Metal reported a decline in consolidated revenue for the second quarter of 2024, primarily driven by weaker hardware sales due to macroeconomic conditions. The company also noted that customers were hesitant to engage in closing deals due to its weakening financial outlook. In light of the pending merger with Nano Dimension, Desktop Metal is no longer providing guidance for the remainder of 2024.

Conclusion

Desktop Metal's second quarter 2024 earnings call underscores the company's strategic efforts to navigate a challenging business environment and the rationale behind the proposed merger with Nano Dimension. The combination is expected to create a strong, well-capitalized entity in the additive manufacturing sector, positioning it for long-term success and maximizing shareholder value. As the company moves forward with the merger, investors and stakeholders will closely monitor its progress and the impact on its financial performance.

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