Desktop Metal, Inc. (DM) Bundle
Understanding Desktop Metal, Inc. (DM) Revenue Streams
Understanding Desktop Metal, Inc.’s Revenue Streams
Desktop Metal, Inc. generates revenue primarily through two segments: products and services. The breakdown for the nine months ended September 30, 2024, is as follows:
| Revenue Source | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change ($ in thousands) | Percentage Change (%) |
|---|---|---|---|---|
| Products | $98,981 | $121,597 | $(22,616) | (19%) |
| Services | $16,956 | $15,755 | $1,201 | 8% |
| Total Revenue | $115,937 | $137,352 | $(21,415) | (16%) |
The total revenue for the nine months ended September 30, 2024, was $115.9 million, reflecting a 16% decrease from $137.4 million in 2023. This decline is primarily attributed to a reduction in units shipped due to adverse macroeconomic conditions affecting the additive manufacturing industry. However, services revenue has shown resilience, increasing by 8% compared to the previous year.
Year-over-Year Revenue Growth Rate
The revenue growth rate has shown fluctuations in recent years. In particular, the revenue for the first three quarters of 2024 decreased significantly compared to the same period in 2023:
- 2024 Total Revenue: $115.9 million
- 2023 Total Revenue: $137.4 million
- Decrease: $21.4 million (16% decline)
The products segment faced a notable decline, decreasing by 19%, while the services segment saw an 8% increase, indicating a shift in revenue dynamics.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution of each segment to total revenue is as follows:
| Segment | Revenue (in thousands) | Percentage of Total Revenue (%) |
|---|---|---|
| Products | $98,981 | 85% |
| Services | $16,956 | 15% |
The products segment remains the dominant revenue source, contributing 85% to total revenue, although it has seen a decline. The services segment, while smaller, has increased its share slightly, indicating potential growth opportunities in this area.
Geographic Revenue Breakdown
The geographic distribution of revenue for the nine months ended September 30, 2024, is presented in the following table:
| Region | Revenue (in thousands) | Percentage of Total Revenue (%) | 2023 Revenue (in thousands) | Change ($ in thousands) | Percentage Change (%) |
|---|---|---|---|---|---|
| Americas | $75,848 | 65% | $87,952 | $(12,104) | (14%) |
| EMEA | $28,536 | 25% | $36,509 | $(7,973) | (22%) |
| APAC | $11,553 | 10% | $12,891 | $(1,338) | (10%) |
| Total Revenue | $115,937 | 100% | $137,352 | $(21,415) | (16%) |
The Americas continue to be the largest revenue contributor, accounting for 65% of total revenue, followed by EMEA at 25%. All regions experienced declines, with EMEA seeing the largest percentage drop at 22%.
Significant Changes in Revenue Streams
Key changes in revenue streams between 2023 and 2024 include:
- Products Revenue: Decreased by $22.6 million, or 19%.
- Services Revenue: Increased by $1.2 million, or 8%.
- Total Revenue: Decreased by $21.4 million, or 16%.
The notable decline in products revenue is a critical indicator of the challenges faced in the current economic environment, while the growth in services revenue suggests a strategic shift that may mitigate some impacts of the broader market conditions.
A Deep Dive into Desktop Metal, Inc. (DM) Profitability
Profitability Metrics
Total gross profit during the three months ended September 30, 2024, was $3.16 million, compared to $1.92 million during the same period in 2023. This represents a year-over-year increase of 64% driven by reduced payroll expenses and other cost savings.
| Revenue Stream | 2024 Gross Profit ($) | 2023 Gross Profit ($) | Change ($) | Change (%) |
|---|---|---|---|---|
| Products | $1,977,000 | $327,000 | $1,650,000 | 505% |
| Services | $1,184,000 | $1,597,000 | ($413,000) | (26%) |
| Total | $3,161,000 | $1,924,000 | $1,237,000 | 64% |
The total gross margin for the three months ended September 30, 2024, was 9%, up from 5% in 2023. The increase is attributed to less amortization recorded due to the full amortization of intangibles related to the photopolymer business prior to the current period.
For the nine months ended September 30, 2024, the total gross profit was ($31.2 million), compared to $6.6 million in 2023, marking a decrease of $37.8 million. This decline was primarily driven by incremental amortization related to the Photopolymer Initiative.
| Revenue Stream | 2024 Gross Profit (Loss) ($) | 2023 Gross Profit ($) | Change ($) | Change (%) |
|---|---|---|---|---|
| Products | ($37,209,000) | $2,307,000 | ($39,516,000) | (1,713%) |
| Services | $5,975,000 | $4,342,000 | $1,633,000 | 38% |
| Total | ($31,234,000) | $6,649,000 | ($37,883,000) | (570%) |
Operating profit (loss) for the three months ended September 30, 2024, was ($33.7 million), compared to ($45.1 million) in 2023, showing an improvement. For the nine months, the operating loss was ($184.4 million), compared to ($146.0 million) in the previous year.
Net loss for the three months ended September 30, 2024, was ($35.4 million), an improvement from ($46.4 million) in 2023. For the nine months, the net loss was ($191.0 million), compared to ($148.7 million) in the prior year.
Gross margin trends show that for the nine months ended September 30, 2024, the total gross margin was (27%), down from 5% in 2023. The decrease is primarily due to increased amortization.
| Period | Gross Margin (%) | Change (Percentage Points) |
|---|---|---|
| Three Months Ended September 30, 2024 | 9% | +4 |
| Three Months Ended September 30, 2023 | 5% | - |
| Nine Months Ended September 30, 2024 | (27%) | -32 |
| Nine Months Ended September 30, 2023 | 5% | - |
Research and Development expenses for the three months ended September 30, 2024, were $11.5 million, down from $20.5 million in 2023. For the nine months, these expenses were $48.5 million, compared to $64.8 million in 2023, indicating a reduction of 25%.
Sales and marketing expenses during the three months ended September 30, 2024, were $8.1 million, slightly down from $8.5 million in 2023. However, for the nine-month period, these expenses increased significantly to $45.0 million from $28.6 million, a rise of 57%.
General and administrative expenses for the three months ended September 30, 2024, were $17.3 million, compared to $9.5 million in 2023, reflecting an increase of 82%. For the nine months, these expenses rose to $59.7 million from $50.7 million, a rise of 18%.
Interest expense for the three months ended September 30, 2024, was $1.7 million, compared to $1.0 million in 2023. For the nine months, interest expense increased to $4.9 million from $3.0 million.
Overall, the financial metrics indicate a challenging profitability landscape for the company, with notable decreases in gross profit and margins, but a slight improvement in operating losses on a quarterly basis.
Debt vs. Equity: How Desktop Metal, Inc. (DM) Finances Its Growth
Debt vs. Equity: How Desktop Metal, Inc. Finances Its Growth
The financial structure of Desktop Metal, Inc. reveals significant insights into its growth strategy, particularly through its use of debt and equity financing.
Overview of the Company's Debt Levels
As of September 30, 2024, Desktop Metal reported total debt consisting of:
- Long-term debt: $113.1 million, primarily from the issuance of 6.0% Convertible Senior Notes due 2027.
- Short-term debt: $0.1 million, associated with bank loans acquired in the acquisition of A.I.D.R.O.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Desktop Metal as of September 30, 2024, stands at approximately 1.56. This is calculated by dividing total debt ($113.1 million) by total equity ($72.3 million). This ratio exceeds the industry average of around 0.65, indicating a higher reliance on debt financing compared to peers in the additive manufacturing sector.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In May 2022, the company issued $115 million in Convertible Senior Notes. The notes have an annual effective interest rate of approximately 6.1%. As of September 30, 2024, interest expense related to these notes for the nine months was reported at $4.9 million.
How the Company Balances Between Debt Financing and Equity Funding
Desktop Metal has historically leveraged both debt and equity to finance its growth. Since inception, the company has raised cumulative net proceeds exceeding $973 million through various equity offerings, including the sale of common stock and the exercise of warrants. The company also has an Open Market Sale Agreement allowing it to sell up to $75 million of its common stock. This dual approach allows for flexibility in financing, enabling the company to fund operations while managing debt levels effectively.
| Type of Debt | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Convertible Senior Notes | $115.0 | 6.0% | 2027 |
| Bank Loans | $1.1 | 1.70% - 2.10% | 2024 - 2025 |
| Total Debt | $116.1 | N/A | N/A |
As of September 30, 2024, the company's cash and cash equivalents were reported at $30.6 million, with current liabilities totaling $61.2 million.
Assessing Desktop Metal, Inc. (DM) Liquidity
Assessing Desktop Metal, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as:
Current Assets: $30.6 million (cash and cash equivalents)
Current Liabilities: $61.2 million
Current Ratio = Current Assets / Current Liabilities = $30.6M / $61.2M = 0.50
Quick Ratio: The quick ratio, which excludes inventory from current assets, is:
Quick Assets: $30.6 million (cash and cash equivalents)
Current Liabilities: $61.2 million
Quick Ratio = Quick Assets / Current Liabilities = $30.6M / $61.2M = 0.50
Analysis of Working Capital Trends
Working Capital = Current Assets - Current Liabilities
As of September 30, 2024:
Current Assets: $30.6 million
Current Liabilities: $61.2 million
Working Capital = $30.6M - $61.2M = ($30.6 million)
Cash Flow Statements Overview
The condensed consolidated statements of cash flows for the nine months ended September 30, 2024, are as follows:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Used in Operating Activities | ($53,399) | ($91,854) |
| Net Cash Provided by Investing Activities | $884 | $118,568 |
| Net Cash (Used in) Provided by Financing Activities | ($640) | $719 |
| Effect of Exchange Rate Changes on Cash | ($698) | ($461) |
| Net Change in Cash | ($53,853) | $26,972 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company reported cash and cash equivalents of $30.6 million and an accumulated deficit of ($1,823.2 million). The net loss for the nine months ended September 30, 2024, was ($190.986 million), compared to a net loss of ($148.742 million) in the same period of 2023. This indicates a growing liquidity concern as the company continues to incur losses while having limited current assets to cover current liabilities.
Furthermore, the proposed Bridge Loan Facility of up to $20 million under the merger agreement is intended to supplement working capital; however, the company must rely on this facility to bolster liquidity until the merger is finalized.
Is Desktop Metal, Inc. (DM) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine several key financial metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will analyze stock price trends, dividend yield, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is not applicable as the company reported a net loss of $190.986 million for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, is calculated as follows:
- Total Stockholders' Equity: $72.348 million
- Shares Outstanding: 33.310 million
- Book Value per Share: $2.17
As of the latest stock price of $5.50 (post-merger agreement), the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = 2.53
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The calculations for the enterprise value (EV) are as follows:
- Current Market Capitalization: $183.26 million (assuming stock price of $5.50)
- Total Debt: $51 million
- Cash and Cash Equivalents: $30.6 million
- Enterprise Value (EV) = Market Cap + Total Debt - Cash = $204.66 million
For EBITDA, the Adjusted EBITDA for the nine months ended September 30, 2024, is reported as $(40.574 million).
Since EBITDA is negative, the EV/EBITDA ratio cannot be computed meaningfully.
Stock Price Trends
Over the last 12 months, the stock has experienced significant volatility:
- 12-Month High: $8.00
- 12-Month Low: $3.00
- Current Price: $5.50
The stock price has fluctuated based on broader market conditions and company-specific news, particularly regarding the proposed merger with Nano Dimension Ltd.
Dividend Yield and Payout Ratios
The company currently does not pay a dividend, indicating a dividend yield of 0%.
Analyst Consensus on Stock Valuation
Analyst ratings are mixed, with the consensus being:
- Buy: 2 analysts
- Hold: 3 analysts
- Sell: 1 analyst
The average target price among analysts is approximately $6.00, suggesting limited upside potential from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 2.53 |
| EV/EBITDA Ratio | N/A |
| 12-Month High | $8.00 |
| 12-Month Low | $3.00 |
| Current Price | $5.50 |
| Dividend Yield | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 2/3/1 |
Key Risks Facing Desktop Metal, Inc. (DM)
Key Risks Facing Desktop Metal, Inc.
Desktop Metal, Inc. operates in a highly competitive and rapidly evolving market. The following are the key risk factors that could impact its financial health:
1. Financial Position and Need for Additional Capital
The company has a significant accumulated deficit of $1,823.2 million as of September 30, 2024. It incurred a net loss of $191.0 million during the nine months ended September 30, 2024. As of the same date, cash and cash equivalents were $30.6 million, raising substantial doubt about the company's ability to continue as a going concern.
2. Revenue Decline
Total revenues for the nine months ended September 30, 2024, decreased by 16% to $115.9 million from $137.4 million in the prior year. This decline was attributed to a reduction in units shipped, particularly in the products segment, which saw a decrease in revenue from $121.6 million to $98.9 million.
3. Operational Risks
For the three months ended September 30, 2024, the company reported a loss from operations of $33.7 million. Total operating expenses were $36.9 million, which included research and development costs of $11.5 million and general and administrative expenses of $17.3 million.
4. Market Competition
The additive manufacturing industry is highly competitive, with numerous players vying for market share. The company's inability to effectively compete could adversely affect its sales and profitability.
5. Regulatory Changes
Changes in regulations affecting manufacturing and technology sectors can pose risks. Compliance with such regulations can result in increased costs and operational disruptions.
6. Merger Risks
The proposed merger with Nano Dimension Ltd. could present risks related to integration, including potential difficulties in combining operations and realizing expected synergies.
7. Cash Flow Concerns
During the nine months ended September 30, 2024, the company used cash in operating activities amounting to $53.4 million. The reliance on external financing to meet operational needs raises concerns about liquidity and financial stability.
| Risk Factor | Description | Impact ($ millions) |
|---|---|---|
| Accumulated Deficit | Negative cash flow and operational losses | $1,823.2 |
| Net Loss (2024) | Loss incurred during nine months | $191.0 |
| Revenue Decline | Decrease in total revenues | $21.5 |
| Operating Loss (Q3 2024) | Loss from operations | $33.7 |
| Cash Used in Operations | Cash outflow for operational needs | $53.4 |
Future Growth Prospects for Desktop Metal, Inc. (DM)
Future Growth Prospects for Desktop Metal, Inc.
Analysis of Key Growth Drivers
Desktop Metal, Inc. is positioned to leverage several growth drivers as it navigates the complexities of the additive manufacturing market. Key growth opportunities include:
- Product Innovations: The company has focused on enhancing its product offerings, particularly through its Additive Manufacturing 2.0 solutions, which promise significant advantages in design, performance, and cost efficiency over traditional manufacturing methods.
- Market Expansions: The global distribution network covers over 40 countries, allowing for increased penetration into diverse markets and industries.
- Acquisitions: The proposed merger with Nano Dimension Ltd. aims to combine resources and technologies, potentially enhancing operational efficiencies and market reach .
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenue was reported at $115.9 million, down from $137.4 million in the previous year, representing a decrease of 16%. The breakdown of revenue streams is as follows:
| Revenue Stream | 2024 Revenue (in thousands) | 2023 Revenue (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Products | $98,981 | $121,597 | $(22,616) | (19%) |
| Services | $16,956 | $15,755 | $1,201 | 8% |
| Total Revenue | $115,937 | $137,352 | $(21,415) | (16%) |
Strategic Initiatives or Partnerships that May Drive Future Growth
The merger with Nano Dimension Ltd. is expected to create synergies that enhance product development and market access . Additionally, the focus on expanding the manufacturing and supply chain capabilities is aimed at reducing costs and increasing the speed of product delivery.
Competitive Advantages that Position the Company for Growth
Desktop Metal's key competitive advantages include:
- Proprietary Technology: The company has developed unique technologies that facilitate the production of complex parts, which are critical in industries such as medical and aerospace.
- Established Distribution Network: The extensive global reach allows for rapid market penetration and scalability.
- Strong R&D Focus: Despite recent cuts, R&D expenditures were $48.5 million for the nine months ended September 30, 2024, indicating a commitment to innovation.
Financial Overview
The financial performance for the nine months ended September 30, 2024, shows:
| Financial Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Loss | $(190,986) | $(148,742) | $(42,244) |
| Cash Flow from Operating Activities | $(53,399) | $(91,854) | $38,455 |
| Total Assets | $266,933 | $266,421 | $512 |
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Article updated on 8 Nov 2024
Resources:
- Desktop Metal, Inc. (DM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Desktop Metal, Inc. (DM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Desktop Metal, Inc. (DM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.