Desktop Metal - Q1 2022

Transcript

Speaker 0

Good day, and welcome to the Desktop Metals First Quarter 2022 Earnings Conference Call. All participants will be in a listen only mode. In the interest of time, please limit yourselves to one question and one follow-up. Please note this event is being recorded. I would now like to turn the conference over to Jay Gensko.

Please go ahead.

Speaker 1

Good morning, and thank you for joining us as we discuss first Quarter 2022 Financial Results for Desktop Metal. With me today are Rick Fulop, Founder and CEO and James Haley, CFO. Please note that our financial results press release and presentation slides referred to on this call are available under the Events and Presentations section of our Investor Relations website. This call is also being webcast live with a link at the same website. The webcast and accompanying slides will be available for replay for 12 months following this call.

The content of today's call is the property of Desktop Metal. It cannot be reproduced or transcribed without our prior consent. Before we begin, I'd like to refer you to our Safe Harbor disclaimer on Slide 2 of the presentation. Today's call will include forward looking statements. These forward looking statements reflect Desktop Metal's views and expectations only as of today, May 10, 2022, and actual results may vary materially based on a number of risks and uncertainties.

For more information about the risks that may impact Desktop Metals' business and financial results, Please refer to the Risk Factors section of the Annual Report on Form 10 ks in addition to the company's other filings with the SEC. We assume no obligation to update the forward looking statements. Additionally, during this presentation and the following Q and A session, we may refer to our results on on non GAAP basis. Non GAAP measures are intended to supplement, but not substitute for performance measures calculated in accordance with GAAP. Our financial results release contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non GAAP measures.

With that, it's my pleasure to turn the call over to Rick Holt, Founder and CEO of Desktop Metal.

Speaker 2

Thank you, Jay. Hi, everyone. We're very excited to host you for Desktop Metals' Q1 2022 Financial Results Call. Today, start with highlights of our quarterly financials, review a few exciting developments in the business to start the year and spotlight some of the recent customer wins. I will then turn over the call to James to provide further color on the financial results of the quarter before closing with an update on our progress towards our key strategic priorities for 2022.

We'll then open the call for Q and A. I'll begin on Slide 3 with a financial results summary. Overall, I'm pleased with the Q1's performance as we experienced another quarter of exciting demand, resulting in top line growth. Consolidated revenue for the Q1 $22,000,000 representing a strong year over year growth of 2 86%. This was driven by a combination of broad based organic growth, including shipments of new products as well as contributions from acquisitions.

We're really excited about the quality of the product portfolio that we put together and the opportunity to drive consistent long term growth. Non GAAP gross margins were 17.1% for the Q1 2020 versus 5.5 percent in the Q1 of 2021. This is an increase of over 11.50 basis points year over year. While this does represent a decline from the Q4 of 2021, Q1 is seasonally the lowest revenue contributing quarter for our business and so overhead absorption is a key factor pulling down our margin structure. As we continue to grow revenue throughout 2022, we expect a meaningful expansion in gross margins compared to this quarter, and we anticipate a full year 2022 non GAAP gross margin to expand versus 2021 and it will exceed 30%.

We've been a strong start to the year and demand remains robust across all our full portfolio of AAM Technologies and Solutions. Therefore, we're reaffirming 2022 revenue expectations of approximately $260,000,000 representing 131% growth over 2021. We're also reaffirming adjusted EBITDA expectations of approximately negative $90,000,000 while maintaining our commitment to exit the calendar year 2023 Breakeven on an adjusted EBITDA basis. I'd like to take a moment to reflect on the significant progress we've made since going public and where we're today. Over the past 18 months, our team has worked diligently to develop and bring to market a range of AM 2.0 metal platforms, which includes our flagship production system P50.

Added to that, we utilized our strong balance sheet to acquire a wide breadth of capabilities and technologies Greatly broaden our AM 2.0 portfolio and now provide us with a sustainable technology depreciation across a range of applications. As a result of this purposeful strategic efforts, we believe we have built the undisputed leading portfolio of pure play AM 2.0 solutions. Today, we have 20 market leading print platforms with a focus on high volume production of end use parts. Our platforms support a compelling portfolio of diverse materials, including metals, polymers, composites, sands, woods and elastomers, amongst many others. These materials we have added help us address a growing array of end use applications and have increased our prices in key verticals adopting additive such as dental, healthcare, foundries and automotive to name a few.

As we look at Desktop Metal's roadmap over the next few years, we've established a foundation on top of which we can continue to rapidly scale as we're currently demonstrating. Importantly, we're also now well diversified and able to capitalize on growth drivers many industries accelerating the adoption of additive manufacturing. This adds durability to our trajectory and will enable us to grow across Industry cycles with better predictability and precision. We're starting to see our vision come together to be the dominant player in AM for mass production as we progress towards our goal Capture a double digit share of the over $100,000,000,000 added manufacturing market by the end of the decade. Moving down to a few business highlights.

I'm very proud of what the team accomplished to kick off 2022. We made solid progress in our production system platform as we continue to grow our installed base of customers, leveraging our patent pending single pass channel technology. This differentiated technology sets us apart in the industry in terms of speed and part costs, And the customer response has been fantastic. In the Q1, we commenced shipments of Production System P50 with our partners Stanley Black and Decker, and We can now report that we have production system P1 hardware installed in China as a step towards our goal of establishing and developing hyperscale applications. We also have made excellent progress expanding our digital casting business, including the launch of our all new Esmax Flex.

Flex is a one of a kind digital casting printer, which for the first time makes it affordable for any foundry to get into digital casting. The initial response in order book for this solution has been extremely encouraging. I will provide more color on the opportunity here in the following slides. Finally, the launch for our Einstein series of printers under is going extremely well and we're expanding production capacity to support demand. These are high performance systems designed for precision dental and healthcare applications The differentiated features in the Einstein series and our leading portfolio of Class 2 FDA cleared dental materials are driving increased demand in the market.

We're very happy with how this business is shaping up with terrific potential for growth in the balance of 2022. Turning to Slide 4, one of the biggest opportunities in front of us is the extraordinary benefits of additive manufacturing and what it brings to the supply chain. These benefits have long been associated with additive manufacturing and have now become more top of mind than ever as a result of COVID and the resulting disruptions across the global supply chain and logistic networks. But supply chain challenges cannot be solved through rapid prototyping. You need high volume 3 d printing capabilities in order to effectively and sustainably provide alternatives to conventional manufacturing.

Desktop Metal is a pure play on supply chain disruption. Our unique mass production capabilities unlock the ability to drive flexibility in global supply chains in a cost effective way, including decentralized borderless production, on demand inventory resiliency, on shoring and localized production and the ability to reduce dependencies on third party suppliers. We've seen a number of recent customer wins here where supply chain challenges are driving demand and purchase decisions. We have customers ranging from major manufacturers of electrical parts looking to print those components in the U. S.

Companies experiencing significant business disruption in overseas foundries, where we're helping those manufacturers restore production of those parts to the U. S. Through digital casting. And as President Biden indicated last Friday as part of his new AM Forward initiative, U. S.-based3dprinting enables cost effective production in our country.

Our hydro business has seen a significant uptick in orders for the 3 d printed hydraulic components as well as customers looking for alternatives to the current supplier network due to challenges and delays. And finally, our DeskoBlast platform is expanding its capacity as many U. S. Dental practices are looking to improve turnaround times and reduce cost amid disruptions to the traditional model of working with international parts suppliers, which are now facing steep supply chains and logistics network issues. In each case and around the world, our AM 2.0 solutions are enabling companies to sidestep supply chain issues, improve environmental footprint of their products and offer a path to flexible following production through additive manufacturing.

Even the Department of Defense recently awarded us a major award through the Defense Logistics Agency to address these issues. On the following slide, I'd like to briefly highlight one of our new print platforms offered under our Exmont brand. The S MAX Flex is a scalable large format binder jetting system for 3 d printed sand molds and cores. The S MAX Flex democratizes access of digital casting to foundries around the world, bringing them numerous benefits of AM 2.0. Foundries can use digital casting solutions to quickly cast complex metal designs for markets such as aerospace, automotive, energy among others.

This innovative system is a result of integration efforts from our ExOne acquisition like last year. The S MAX Flex combines ExOne's market leading sand printing expertise in process and materials with desktop metals, single pass gating technology in an affordable architecture to deliver value to foundries that have long awaited an S MAX PRO, but found the premium price out of reach. This new solution leverages industrial robotics to bring a new level of affordability, reliability and productivity to large format Bynergetic offering a larger and more scalable build volume with improved tolerances and higher speeds. It's rare that you go from a product launch and customers are signing contracts for equipment on the spot. We have a growing order book for the S MAX Flex since its debut at Cast Expo in April and we're also expanding production of this new product to meet demand.

I wouldn't be surprised if the Flex becomes the world's best selling digital casting printer by the year end. We're extremely excited about the opportunity for this class of system. With this new level of affordability, this technology is applicable to over 40,000 foundries globally, turning it into another growth driver for the company. Turning to Slide 6, we had a fantastic quarter of customer adoption across our brands, adding lots of new accounts as well as expanding within our existing customer base. We continue to see progress with marquee customers, an example of which are displayed on the left side of the slide, including Rolls Royce, Microsoft, Schlumberger and Collins Aerospace.

On the right side, I want to highlight one of the customers, A really outstanding SME company called PrinterPress. They have been using our SHOP system as well as other products like our P1s for Etech Printers to combine benefits of metal 3 d printing with their proprietary nanotechnology coatings to address the needs of medical device market, including spinal and orthopedic medical devices. The SHOP system's Spiner Genning technology enables printer press to meet their customer demands for high volume of printed embracing the benefits of additive manufacturing 2.0. I will now turn the call over to James, our CFO, to cover some financial highlights. James?

Speaker 3

Thanks, Rick. Beginning on Slide 8, you will see highlights of our financial performance for the Q1 of 2022. Please note, we will be referring to several financial metrics on a non GAAP basis. Reconciliation to GAAP data is included in the filed appendix. Consolidated revenue for the quarter was $43,700,000 up 286 percent year over year from $11,300,000 in the first in Q1.

In addition to contributions from acquisitions, we saw modest growth across our portfolio of AM Technologies and particularly in our metal and dental offerings. This was offset by slightly weaker than anticipated performance from photopolymer solutions As we revamped our portfolio in Q1 with the launch of the Einstein series and began commercial shipments. With the broad demand we're seeing across the portfolio and in particular recently launched products we are ramping this year such as the Einstein series, S Max, Flex and Extreme 8 ks. We're confident at the growth potential of the business across the balance of 2022. Non GAAP gross margin increased over 11 50 basis points year over year to 17.1 percent from 5.5% in the Q1 of 2021.

While we expect the gross margin to come down sequentially as a result of seasonally lower Q1 revenues and additional overhead from acquisitions, We did underperform relative to our internal forecast due to several factors, including a lower margin mix, Increased one time costs related to product launches for the Production System P50 and Einstein series and impacts from continued global supply chain and logistics disruptions, most notably higher than anticipated freight expenses. Looking ahead to the balance of 2022, there are a number of factors that give us confidence on our expectation of meaningful gross margin expansion for including higher expected sales volumes resulting in improved overhead absorption, a more favorable product mix and recent product launches scaling into more mature margin profiles. In addition, we expect pricing updates on certain products Made towards the end of Q1 will have more of an effect as we progress into Q2 in the back half of the year. As a result, we anticipate Continued gross margin expansion in 2022 on an annual basis versus 2021, with non GAAP Gross margins exceeding 30% for the full year of 2022. On the next slide, non GAAP operating expenses were $52,100,000 for the Q1 of 2022, representing 119% as revenue versus 193% in the Q1 of 2021.

In the quarter, operating expenses were higher than planned due to one professional fees and costs associated with Q1 product launches of the production system P50 and Einstein Series. Overall, we continue to see operating expenses moderate with ongoing efforts to optimize our expense structure across the company. We're also executing on previously discussed initiatives to reduce expenses, including rationalizing the product portfolio, Driving efficiencies in manufacturing, supply chain and logistics and consolidating our global facilities footprint. And we are focused on driving cost synergies across the portfolio of companies we have acquired through the balance of the year. We are in the early stages of these initiatives and expect continued focus and execution to have a durable impact on our expense structure.

In combination with continued revenue growth, this plan will drive operating leverage and improve margins throughout the balance of 2022 and beyond. Adjusted EBITDA for the Q1 of 2022 was negative $41,600,000 Adjusted EBITDA did underperform relative to our internal forecast driven primarily by the factors that impacted gross margins, including seasonally lower Q1 sales volumes, Product mix and one time product launch expenses as well as higher than expected operating expenses. We remain focused on the previously detailed strategic initiatives to optimize operating expenses in order to meet our commitment on adjusted EBITDA and achieve our path to profitability. As we make progress on these initiatives as well as continued revenue growth Through the balance of 2022, we expect to realize improved absorption and operating leverage, which will lead to significant improvement and adjusted EBITDA through the end of the year. We ended the quarter with $206,500,000 in cash, cash equivalents and short term investments As of March 31, 2022, we also made proof of civil efforts to raise our inventory balance in the Q1 of 2022, which came in at $81,900,000 up from $65,400,000 in the Q4 of 2021.

We were proactive in managing inventory levels to mitigate potential ongoing supply chain risk and ensure we have enough products to meet our quarterly targets. And finally, moving to guidance. As Rick detailed, with strong first quarter revenue contributions and robust demand across our portfolio, We are reaffirming our revenue expectations of approximately $260,000,000 for the full year 2022, which represents 131 percent year over year growth. We also continue to expect adjusted EBITDA of approximately negative $90,000,000 as we anticipate a combination of increased revenue, improved gross margins, operating expense moderation and operating leverage to drive significant improvements in adjusted EBITDA throughout the balance of 2022. With that, I will turn the call back over to Rick.

Speaker 2

Thank you, James. I'll wrap up on Slide 11. We remain focused on our strategic priorities for 2022 and driving the business to meet these commitments. Revenue was strong in the Q1 as we continue to grow the business at scale. We gained continuous market penetration in key verticals with outsized durable growth opportunities, specifically With respect to hyperscale accounts, we're engaged with several key players that we believe represents a large opportunity for our business and Deliver significant growth, and we made important technical and commercial strides with those accounts in the Q1.

The one area where we fell short is expense spend in the quarter. We're making an effort between now and the end of the year to contain cost and gain cost synergies from the acquisitions we made last year. It's very important for us to make progress on our path to profitability, As you saw in the previous slide from James, as a percentage of revenue, expenses are decreasing demonstrating the operating leverage in the business And you'll continue to see that through the rest of the year as growing revenues are paired with several proactive efforts to reduce expenses and the improvement to our gross margins take effect. We remain committed to reaching adjusted EBITDA breakeven by the end of 2023 and are confident in our path to get there. Managing our cash flow and working capital remains an Important focus and we expect to demonstrate progress throughout this year on specific initiatives of disciplined capital allocation, inventory management and supply chain synergies.

Overall, it was a great start to 2022. Revenue growth was at the top of our market and we're confident with the demand we're seeing across a broad product portfolio to deliver Top line growth and margin expansion throughout the balance of 2022. With that, let's open it up for questions. Operator?

Speaker 0

Thank you. We will now begin the question and answer session. The first question comes from Josh Sullivan with The Benchmark Company, please go ahead.

Speaker 2

Good morning.

Speaker 4

Hey, John.

Speaker 5

As far as the guidance for 2022, just given the Q1 results, can you just help us with the revenue cadence through

Speaker 6

the rest of the year? How should

Speaker 5

we think about the various product launches driving quarter to quarter growth?

Speaker 2

I think it's going to be similar to what we described in the previous quarter And it's ramping up that way. We have you launch a product and then you Start to scale capacity after that. We had launch of Einstein in Q1 and now in Q2 we're making much more of that product as we go through a ramp. But we feel very good about the I don't know if this answers your question, but

Speaker 3

So I think the other part, Josh, is that we've talked about typically we see about 15 Percentage of the revenues in Q1, Q2 and Q3 tends to be in the low 20s. Q3 tends to be down given the European shutdown, if you will, slightly sequentially and then the balance of the revenue will be in Q4. So a similar pattern to what we saw last year

Speaker 7

as well.

Speaker 5

Okay. And then just as we think of the overhead absorption factor, where are you going to have a finer edge on expenses? Do you feel you have the Salesforce and channels in place you want for the long term, just where does that discipline going to emanate from?

Speaker 3

Certainly, as it relates to Q1, quite a few factors working against us, the seasonality of it all, But also to your point on the mix, so both in terms of products and direct indirect sales channels with lower margins. So we do see that balancing out over the course of the year, and margin will be improving dramatically We have as revenue scale. We did also have a number of one time items as we're launching products. And again, Sort of the global supply chain issues and the logistics expenses as we're trying to launch those products.

Speaker 2

Thank you for your time.

Speaker 0

The next question comes from Greg Tom with Craig Hallum Capital Group. Please go ahead.

Speaker 4

Yes. Good morning, everyone. Thanks for taking the questions here.

Speaker 2

My pleasure.

Speaker 4

So you mentioned the uptick in demand to support These on shoring projects, I thought that was an interesting comment. Can you talk about maybe Certain end markets or geographies that you're most excited about and which of your product lines do you think are best suited to capitalize on this, Call it growing need.

Speaker 2

It's pretty broad based both in polymer and metal. We've got and even in the healthcare side, on the dental side, And everything from people having difficulty sourcing components that are All of them are down to folks that produce high volume parts and different metal materials that basically would like to have more control of their Supply chain and input costs, and I think that's shaping up quite well. A lot of stuff in automotive and consumer electronics and It's across the board on it's, I would say one area where we're benefiting. We are definitely You probably saw what President Biden announced last week and we think there's going to be significant benefit to our industry, specifically to Company is focused on mass production via additive, which is really our core business where we're the leader and versus or tooling, which was sort of what people used to do without it before. So there's a significant tailwind that we didn't have a year ago in this area.

And I think it's once you move supply chain from 1 place to another, I think that becomes a durable thing. So I think our sales folks are busy supporting those customers.

Speaker 4

Yes, that's good. Makes sense. And then I guess just looking back on X1, it's been, I don't know, 6 months Since the close, can you talk a little bit more about the development of the S MAX FLAX and just kind of thinking more broadly in terms of synergies. What else are you sort of most excited about in terms of the kind of co development of new projects, etcetera?

Speaker 2

I mean, we're really excited about the fact that we're now OnexOne and it's a fantastic company. I think we've got Combined some really good things in development, first one of which is F MAX Flex, which makes it affordable for the first time for any foundry to Be able to use this class of product, which before used to be quite expensive. There's over 40,000 foundries globally. They can benefit from this. So Definitely a very nice product.

We've got great demand and people have been buying them on the spot So we're really excited and happy about that product. I would say that we plan to Over time, we'll continue to make our products more integrated and continue to we've taken the revenue synergies for a lot of these transactions that we've done. And I think over time, we will especially in the second half of the year, we'll take the cost synergies benefits of really becoming a more efficient organization as a whole. But I'm very happy with the transaction so far. ExOne benefits significantly from some of the software capabilities that DM has, which make these products on the metal side more turnkey and easier to install.

And we will continue to make Our product is best in class. We're the market share leader by any way that you slice the data on the binder jet market and We plan to continue to grow our position in the market.

Speaker 4

All right. Appreciate the color. Best of luck going forward.

Speaker 2

Thank you.

Speaker 0

The next question comes from Martin Yang with Oppenheimer and Company. Please go ahead.

Speaker 2

Hey, Martin.

Speaker 6

Hi, good morning. Thank you for taking my question, Rick. So first question is around P50. Can you maybe give us Update on customer engagement activities and the pipeline and if there's any early customer feedback, If you're comfortable, please share with us.

Speaker 2

Yes. I think we're very happy with that program and continue to see significant demand. And We are going to be making announcements in the future as the year progresses and we make Good morning, Susan. I don't know if every customer will let us talk about our program the way that Stanley has because usually this goes to very large companies. Large companies Tend to keep their plans confidential, but we'll definitely have systems in the field that we'll be able to reference.

And I think we are As you know, P50 is a game changing product with incredible economics and allows you to really to disrupt the market, but we're going to have a judicious rollout as it's a pretty large platform and scale it appropriately.

Speaker 6

Got it. My follow-up question is regarding your inventory. Is there any certain product you want to highlight that That contributed to that increase in inventory?

Speaker 2

Well, I think that our strategy on inventory has been that We don't want to have a situation like we had in Q3 last year where we were trying to balanced things and ended up short of parts to be able to ship product before the end of the quarter. And so we have been trying to run our supply chain and our operations in a way that we're able to have the capacity for the next quarter and ship the products that need to be shipped. So I would say that it's You can have a just in time inventory or you can have a just in case inventory. And we're leaning more towards the just in case inventories to make sure that we can meet our revenue targets and market share targets. And then it's for select products.

So we're being judicious as we're executing it. But I think that it's the more prudent way to run A company in a very complex environment like today with lockdowns in China and inability for people to get parts, we're fortunate that we don't have A significant manufacturing exposure to China. We have our production all our machines are made Outside of China, however, we may have suppliers that have components that are made there. So we've been pretty strategic about how we do our sourcing, having gotten bitten last Q3, so that we can make our revenue targets. And so it is a We called it out because it is a proactive move on our part to be able to continue to make our numbers for the balance of the year.

Speaker 3

Martin, I would add to that roughly 2 thirds of the increase in inventory is in finished goods as well. So again, to Rick's point about being able to satisfy the demand over the next quarter or 2 is key for us.

Speaker 6

Got it. Thank

Speaker 2

Thank you, Troy.

Speaker 7

Hey, guys. So I guess, I'd like to talk a little bit about backlog entering Q2, Kind of a multi part question here. I'm assuming there is a lot of business you couldn't ship, right, just because of supply chain constraints. But then also, Safeway has had a statement in their 10 ks that they placed like a $10,000,000 order with you guys in Q1 and $5,000,000 order with you in Q2. So curious whether you're 10% customer in the quarter and what does kind of backlog look like entering Q2?

Speaker 3

Sure. So just for clarity, first off, Cheapwave is a key customer of ours. We have a great relationship. We generally don't like to talk about any one individual customer, but I think the disclosure you're referring to, Troy, is that actually cash paid per Shapeways filings? In terms of Q1 revenue from Shapeways, It was minimal.

It was under $1,000,000 so when you're reading their footnotes, if you look at language closely, I think Their notice about what was actually paid. So oftentimes when you're paying for shipments that are in arrears. But again, the relationship is great. We continue to have a lot of exciting business.

Speaker 2

I would say building on what James You are pushing your sales force to hit numbers larger than your targets and usually supply chain related that Hold you from getting another $5,000,000 to $10,000,000 that quarter. So I think that the benefit of that is that you end up going to the next quarter with some level of momentum that as you're building those components and finishing those products, you then end up Catching up and then that rolls on to the next product. We've got definitely very significant backlog on X1. That's just they run their business versus a forecast driven business and part of what we're trying to do over time is going to be to turn that into Go to forecast business. Also on we continue to have backlog on the Einstein products, which are selling extremely well, better than We expect that and we're increasing capacity to support that demand.

And then we also continue to have backlog on Xstream 8 ks, but we're trying to Close those gaps and it just happens to be that those products are selling quite well.

Speaker 7

Okay. And then my follow-up, if we go back 6, 7 years ago, the Obama administration had initiatives for additives. And I I think, yeah, even 3 d printing was part of his State of the Union address 1 year. I don't know if we saw much benefit from that. So What's the Biden administration doing differently here with their initiatives and their incentives or and how can we kind of monitor that this is having an effect?

Speaker 2

Yes, I think that those are great questions. I think that I mean the I don't want to speak for the administration, but I think as you know, we have significant supply chain context that's very different today than it used to be. And I think they're looking at this as a solution To address some of the reassuring that needs to happen as you come back from China, if you look at the bipartisan innovation bill, there are significant Line items dedicated to helping the industry do this and different types of financing and other things that are going to help SMEs. There's commitments from defense contractors to adopt a greater percentage of goods made through mode of additives that are designed for production. Those traditionally tend to be metal or more recently Some advanced polymer components, but it is as you know, it has been happening in aerospace and In the actual space industry for some time and now it's permeating to a broader section of the economy.

We as a leader in what we call AM 2.0, which is Ability to mass produce with additive cost effectively versus commercial manufacturing think will be a disproportionate Beneficiary of some of these efforts and actually at Rapid, we're going to be showcasing over 300 production parts as examples of things that you can do with additive. So this is very much not prototyping, which is what we were doing back in the Obama days Toolink, this is really mass production of parts with additive and really in new applications. So I think I'm really excited to see what they do. I mean, I think the government is somebody that can help. It's not the end all solution for all our problems, but definitely I think they are trying to do something here with good intentions to help the country.

And we'll see if this bipartisan innovation bill passes, which I think is going to help us solve not just additive issues, but also issues with semiconductor industry Resiliency in other segments that I think are critical to national security and competitiveness of our economy. So we'll see.

Speaker 7

Okay. Well, good luck. Hey, if I could sneak one more in, Rick. Just curious on the convertible announcement. Just on the convertible you guys announced today, Why now, I guess, would be my question.

It seems like if you guys do $260,000,000 in revenue and have this massive ramp at the end of the year and Just hopefully sentiment would be better than 2. Why now, I guess is the question.

Speaker 3

So Troy, unfortunately, because Because the securities law restrictions, we cannot comment on the offering.

Speaker 7

Okay. All right. Understood, guys. Congrats and good luck. Thank you.

Speaker 0

The next question comes from Noelle Dilts with Stifel. Please go ahead.

Speaker 8

Hi, guys. Good morning. Just on the hyperscale customer in China, I was hoping you could kind of expand Basically what the pipeline looks like in terms of adding additional hyperscale customers, how you think you may be able With the customer, we have the one machine installed. If you could just expand on how you're thinking about that piece, that would be great. Thank you.

Speaker 2

Absolutely no. We're actually working with all of them. So you will see our stuff in lots of products. And I think it's progressing at a pretty good clip considering the pace at which some of these things need to move with this class of companies. And I think you're going to see additive in lots of auto and consumer electronic products in the future.

Yes, they are super confidential. These companies don't want to we're probably At the most that we can say right now with the disclosures.

Speaker 8

Okay, got it. And then same idea, could you just expand a little bit on dental sort of what you're seeing on Lab side of things, how you're thinking about, just kind of the how to think about growth and opportunities this year and if they might accelerate into 2023, as we continue to gain traction. Absolutely.

Speaker 5

Yes, I

Speaker 2

mean, I couldn't be more excited about our market than what's happening in dental because If you know, the additive world has already adopted it in orthodontics for tooling for aligners and other products. But what we're talking about here is very different. It's really the Restorative parts, which is a $30,000,000,000 segment, and these are parts that are permanently in your mouth once after you go to the dentist. So it's a new area of dental for printing. It's putting something that stays there for a very long time.

And these are FDA Class 2 products, which are more regulatory barriers and are much more sophisticated from a chemistry and technology point of view and the Required to make the numbers work. And so we are super, super excited about that segment. Our view is that all $30,000,000,000 in the Demand is growing faster than we can make the products and we are developing lots of new applications In that space, we have several materials launches over the next year. Our product Flexera is doing extremely well and has best in class properties, 3 times the fracture resistance of Previous generation products has got half the moisture resistance, has got dramatically better Abrasion resistance and the customers love it. So it looks the products look very, very good in your mouth.

So It's a segment that we are excited to be part of and continue See a significant growth for the foreseeable future and we are excited to have our Thousand Plus Labs that use our technology and thousands of dental practices that we sell Parts are all components to we're excited to partner with them to move the industry forward.

Speaker 8

Great. Thank

Speaker 0

you. The next question Josh Sullivan with The Benchmark Company. Please go ahead.

Speaker 5

Yes. Just on the Defense Logistics Award, can you provide any specific Is there size, duration, where potentially to go long term?

Speaker 2

Not yet, but we will provide it in the future. And we're excited. This is going to enable our government to do to have more flexibility by having printing In primarily metal components.

Speaker 7

Okay. Thank you.

Speaker 0

This concludes our question and answer session. I would like to turn the conference back over to Rick Fulop for any closing remarks.

Speaker 2

Wonderful. I really would like to thank everybody for joining this call this morning and everyone at Destin Metal as well for your interest in the company. And really, again, I want to thank all Team DM across the world is helping us build this great company on tremendous work to the start of the year. We're looking forward to speaking to all of you again in the Q2 call. Thank you.

Speaker 0

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.