Desktop Metal - Q4 2022
March 1, 2023
Transcript
Speaker 0
And welcome to the Desktop Metal 4th Quarter and Full Year 2022 Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. I would now like to turn the conference over to your host, Mr. Jay Gensco, Vice President, Investor Relations.
Please go ahead.
Speaker 1
Thank you, operator. Good day, everyone, and thank you for joining today's call. With me are Rick Foll, Founder and CEO of Desktop Metal And Jason Cole, CFO of Desktop Metal. Please note, 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 site.
The webcast and accompanying slides will be available for replay for 12 months following this call. The content of today's call is property of Desktop Metal. It cannot be reproduced or transcribed without our prior consent. Before we begin, I'll refer you to our safe harbor disclaimer on Slide 3 of the presentation. Today's call will include forward looking statements.
These forward looking statements reflect Desktop Metals' views and expectations only as of today, March 1, 2023, and actual results may vary materially based on a number of risks and uncertainties. For more information about the risks that may impact Desktop Metal's 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 or revise the forward looking statements. Additionally, during this presentation and the following Q and A session, we may refer to our 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 the reconciliation of the GAAP to non GAAP measures.
With that, it's my pleasure to turn the call over to Rick Full, Founder and CEO of Desktop Metal.
Speaker 2
Thanks, Jay, and good afternoon, everyone. Thank you for joining the call. I'll begin today with the highlights of our Q4 and full year 2022 financial results as well as key accomplishments. I'll then provide a business update, strategic overview and focus areas for 2023. I'll then hand the call to Jason to go into more details on our quarterly and annual results.
We will conclude with our 2023 financial outlook before opening up the call for Q and A. Beginning with our financial results on Slide 4. We finished the year strong and I'm proud of the company's efforts to drive performance and adapt to what continues to be in a steady macro environment. Revenue for the Q4 was a record for the company, dollars 60,600,000 coming in towards the top of our revised guidance range, We had a fantastic quarter of customer adoption with many new and existing customers contributing to growth including Bayer, BMW, Carbon Motorsports, Cummins, Dixie Iron Works, Eaton, Fraunhofer, Google, Honeywell, Jacobs Institute, Matthews and Ontario Power, just to name a few. Non GAAP gross margins were 24.3 percent for the Q4 2022, a 4 40 basis points sequential improvement from Q3 2022.
We have a variety of gross margin improvements underway, some of which are linked to the $100,000,000 in annualized cost reductions we expanded on a few weeks ago. These actions are a reflection of our commitment on accelerating our path to profitability and reaching adjusted EBITDA breakeven before the end of 2023. Adjusted EBITDA for the Q4 2022 was negative $21,100,000 also coming in towards the top of our revised guidance range. Adjusted EBITDA improved across 2022 and will markedly improve in 2023 as cost reductions impact financial results. Highlighting full year 2022 results, on the right side of the slide, revenue was $209,000,000 in 2022, representing growth of 86% over 2021.
Non GAAP gross margins were 22.5% in 2022, Lower than our gross margins in 2021, but we expect ongoing efforts to improve our cost structure to drive gross margin expansion in 2023 and beyond. Adjusted EBITDA was negative $118,400,000 for the year, in what we expect to be a low watermark for the future of the company as combined $100,000,000 in annualized cost savings and operating leverage to deliver significant improvements to adjusted EBITDA going forward. Shifting towards a review of what the team accomplished this past year on Slide 5, I'm confident when we look back at 2022, it will mark a truly foundational period for Desktop Metal. To start, we gained significant scale in the additive manufacturing space, growing 86% year over year to $209,000,000 in revenue. We've earned the reputation of being at the forefront of 3 d printing innovation and that's now transitioning into a real tangible result As the 3rd largest additive manufacturing company by revenue, we're fully focused on mass production, which we believe has the largest addressable market and greatest growth potential.
We also surpassed 1100 metal additive manufacturing system installations as adoption of our differentiated AM solutions continues to expand. Completed the integration of ExOne last year, creating a binder jet powerhouse and cementing our leadership in additive manufacturing for mass production. And finally, we announced a strategic partnership with Align Technologies to offer the dental industry the 1st seamless solution for digital restorations We expect will be a significant growth driver for both companies. We also launched several new product releases in 2022, which we expect will be incremental growth opportunities for our business as we scale these offerings commercially in 2023 and beyond. After years of development and nearly $100,000,000 in investment, we started shipments in last year of our production system P50, a truly groundbreaking product that introduces Performance and speed characteristics unmatched in the binder jetting market.
We continue to see traction with automotive, Industrial and other major end markets. And now we have a master supply agreement with 1 of the largest consumer electronic companies in the world. We'll continue to scale the solution as the year progresses. We launched the S MAX Flex, a digital casting solution that leverages our single pass ginning technology In an affordable architecture, offering a larger and more scalable build volume with improved tolerances and higher speeds. We unveiled FreeFoam, a new family of photopolymer resins that for the first time produces dimensionally accurate flow cell foam parts We have tooling to reduce cost versus conventional manufactured foam parts.
We also launched the FIGR G15, The first commercial platform of its kind to fix standard sheet metal on demand directly from a digital design file, producing a fully formed part in less than an hour We've got major investment in time and money. Lastly, Desktop Health introduced the Einstein series of dental 3 d printers, designed for the production of end use dental parts, As well as 2 industry leading materials, Flexera and SmileGuard, maintaining a very strong momentum in the dental market. And finally, we took cash ins in the past year to significantly reduce our expense structure and prioritize our path to profitability. These efforts are ongoing, but we've already successfully completed $50,000,000 in annualized cost savings. And with the recent announcement of an additional $50,000,000 in cost reductions expected Just as important, the actions we took in the past year streamlined our operations and insulated our strategic priorities, creating a stronger, more resilient company.
Turning to slide 6, I'd like to take a step back and revisit the long term strategy and opportunity for Desktop Metal. As I detailed on the previous slide, it was a successful year in many fronts. But amidst a dynamic backlog, our long term mission remains the same, To enable mass production via AM 2.0 to cost effectively compete with conventional manufacturing. Globally, This still represents less than 1% penetration in overall manufacturing. We believe we're just scratching the surface for the market's potential.
As we disrupt the overall AM market with our unique mass production technologies, expect a large arc of multi decade growth for Desktop Metal. Importantly, mass production is the fastest growing segment in the additive manufacturing space because it unlocks benefits of lower cost production, on shoring and supply chain flexibility, Inventory of 1 and part design possibilities unavailable through traditional manufacturing among other benefits. Desktop metal is the pure play on the AM 2.0 Mass production opportunity just beginning to inflect. We're in a strong position in this space to drive outsized growth At scale, by leveraging our highly differentiated mass production technologies that are unmatched in the industry, our AM 2.0 portfolio has enabled us to gain rapid Scale in the market and we believe it will propel Desktop Metal towards our goal of double digit share of the additive manufacturing market by the end of the decade. Turning to the following slide.
We've made tremendous progress since going public, ascending to become the clear leader In market share, in the additive manufacturing for mass production technologies, including binder jet and DLP. We've demonstrated the success of our AM 2.0 strategy by growing revenue strength in the economics of our business model as high margin consumables, services and subscription revenue has grown to 24% of total revenue. We expect this Razer razorblade revenue contributions to expand over time, creating a tailwind for margins and profitability. We also own one of the industry's largest libraries of production materials with over 2 50 materials across metals, polymers, ceramics, Biocompatibles, sand, wood, forms and elastomers. This portfolio is a key enabler for end use part mass production and supports a broad range of applications across verticals, allowing us to diversify our end markets and customer base with common platforms.
We offer the industry's broadest array of production print platforms focused on High volume end use part applications. This is an unparalleled product portfolio across speed, materials and part Our integrated solution has led to rapid customer adoption. Today, our installed base includes over 7,000 customers Over a diverse set of end use markets with little or no customer concentration risk, providing us an expansive set of customers Call. At this time, all participants are in a listen only mode, through which we can drive both consumables revenue, upsell and cross sell of our platforms. We're also committed to protecting the competitive differentiation around Decile Metal Products.
We've built a robust and defensible intellectual property portfolio at over 950 issued patents and pending applications. It's one of the largest and most valuable IP portfolios in additive manufacturing. This is a snapshot of the company we've built today. We believe these early proof points serve as validation of our ability to quickly disrupt the added market again and quickly gain scale. We're building this business with a 20 year horizon.
We're just getting started and our best days are ahead of us. Turning to the following slide, I'd like to outline Desktop Metal's 4 strategic pillars. We believe these unique differentiators have enabled us to quickly gain leadership and share in the additive manufacturing market and will facilitate expanding that leadership going forward, Driving the next stage of our growth. 1st, our most important competitive advantage is our highly differentiated technology capability. We are the fastest print platforms in the market, focused on mass production and can support a step function improvement in throughput up to 100x of legacy AM Processes, delivering parts up to 1 20th the cost of laser based solutions.
We're solely focused on area wide technologies that improving performance over time benefiting from Moore's Law, allowing us to continually increase our competitiveness versus This leadership in production technologies is underpinned by an extensive materials library with best in class properties and proprietary software and sintering solutions that make our systems easy to use and adopt. Our leadership in mass production has propelled us to rapid scale and will serve as a foundation to achieve our goal of double digit share in the additive manufacturing market by the end of the decade. 2nd, we have a deep customer engagement model, hyper focused on helping customers solve their manufacturing problems. We've experienced and continue to believe that if you know your customers and tailor solutions to fit their needs, growth will take care of itself. To that end, we've built the leading portfolio of platforms and materials focused on mass production to serve a diverse set of applications.
And we also have a robust team of materials development professionals, application engineers and process developers to support our growing installed base of customers. It is important to emphasize this end to end complete customer engagement model cannot be replicated. 2nd time, investment and focus to build out, and we consider it a critical differentiator for our business. 3rd, innovation is in our DNA. Since inception, our culture has been about reshaping the additive manufacturing industry By introducing solutions that push the performance capabilities of 3 d printing speeds and throughput in order to compete with conventional manufacturing, We've built a team of the smartest people in 3 d printing and have the premier destination for talent.
As a result, we believe we are the innovation leader in additive manufacturing. Talend is a key ingredient to our success and that's going to help us Continue to push the envelope and flywheel of innovation
Speaker 1
to set the stage for our
Speaker 2
next step function of growth. In addition, Our focus on innovation and engineering excellence has resulted in a robust portfolio of over 9.50 patents and pending applications that will defend our position in the market going forward. Finally, Desktop Metal has a massive long term growth opportunity that we're just beginning to scratch the surface of. Our market is expected to grow at a compounded annual growth rate of over 20% to reach approximately $100,000,000,000 by the end of the decade. And the trends supporting broad adoption of additive manufacturing remains solidly intact.
Importantly, we believe we are the leaders in the fastest growing segment of the AM market, Mass production. We remain focused on leveraging our differentiated technology for this massive opportunity in order to extend our leadership in this space and maximize our long term growth. Turning to Slide 9, I'd like to outline how we view our business in terms of 2 core technologies, Fine Injecting and Photopolymer Printing, both area wide technologies that improving performance over time benefiting from Moore's Law and both focused on mass production and used part applications versus prototype and tooling. We've established clear leadership positions In this large end market as a result of competitive advantages and expect these businesses to serve as a foundation for our continued scaling. First, Desktop Metal offers the world's leading portfolio of binder jetting systems, backed by the most experienced binder jet team in the industry with the largest installed base.
Binder jetting is one of the fastest growing segments in production applications, in large part because As the highest throughput process in 3 d printing, binder jetting unlocks mass production at higher volumes, lower cost with more materials flexibility. Hydrogenics are highly flexible technology that can be used to do castings and direct printed parts in mass production At a fraction of the cost of alternative additive solutions, it is the 1st additive technology being used at scale in high volume with metal products. For example, binder jetting today is the only technology being used at scale in automotive with many vehicle OEMs as customers, An example of which is our large deployments inside BMW, where they produce aluminum parts for 100 of 1000 of vehicles per year With better performance and lower cost than conventional manufacturing. Parts made with this process are also now flying in jet engines like the Rolls Royce Trent engine The dual stage gear pump housing is made with our binder jet systems. At the high end of automotive, if you order carbon ceramic brakes With the Lamborghini, McLaren or Porsche, these are now made through binder jetting with our systems.
We have countless of customer examples. Please refer to the appendix section of this quarter's earnings slides as well as our investor presentation for more examples. We have a strong competitive mode in the space with number 1 selling Dynojet products across the board with an array of end use applications that differentiate us from our competitors. Not only do we have the largest installed base in binder jet, we believe we have sold more binder jetting systems last year than all of our competitors combined. And with our superior product and materials portfolio, we expect to continue to grow our dominant position in this important segment.
2nd, photopolymer printing. We view the space in 2 segments, Healthcare and Dental and Industrial Photopolymers. Led by Desktop Health, we've grown to a leadership position in the dental space cemented by the launch of the Einstein, a best in class series of photopolymer printers With exceptional speeds, industry leading accuracy and innovative features designed for the production of end used parts, in addition, Desktop Hells The catalog of differentiated materials that set it apart in the market, including Class 2 FDA cleared Flexera and SmileGuard. Furthermore, we recently announced our partnership with Align Technology that will add a new growth vector to this business. Healthcare and dental are massive markets with over $90,000,000,000 in healthcare implants that will over time be patient specific In over $30,000,000,000 of annual current spend in restorative end use parts in the dental market, We believe these markets can reach at least 75% penetration of digital AM workflows by the end of the decade.
And desktop health owns the leading integrated solutions to support continued strong momentum in the space as these markets accelerate their transition to additive manufacturing. In the Industrial segment, we have the leading photopolymer platforms led by the Extreme 8 ks, the largest production grade DLP printer In the world for high volume production, our industrial print platforms have significant price performance benefits versus previous generation systems creating Similar differentiation for mass production that we experienced on the biogenic side. The industrial polymer market is quite large at a $70,000,000,000 market opportunity, And we are well positioned to grow our market share through a combination of our category leading photopolymer printers and broad industrial polymers materials portfolio. Turning to the following slide. As I referenced in our strategic pillars, innovation continues to be the core of our business model.
Through driving AM 2.0 mass production technology forward and looking for ways to disrupt the additive manufacturing industry, We have unlocked 3 new markets that bring additive manufacturing into new applications not traditionally accessible to legacy AM processes offered by our peers. Commercially, these opportunities are still early in their potential. But as a result of these efforts, we've expanded Desktop Metal's total addressable market And added incremental long term growth drivers to the business. 1st, we recently introduced what we believe is one of the more exciting new solutions in the industrial 3 d printing market. Our FreeFoam technology is an expandable 3 d printable foam for mass production that for the first time dimensionally accurate, closed cell foam parts without tooling.
The conventional polymer foam space is $170,000,000,000 total addressable market With very little penetration from traditional 3 d printing, we see many exciting opportunities for this unique materials family To disrupt current traditional foam applications, including automotive seating, mattresses and furnishing products, footwear, sporting goods and healthcare among others. As the only company in the world with mass production solutions for printed foams, the long term potential for this business is very exciting. We aim to make considerable progress scaling this opportunity in 2023. This is a market where we have very strong exposure property and barriers to entry. Next, we entered the sheet metal forming market with the recently launched FIGR G15.
For the first time in the space, FIGR offers a digital solution for standard sheet metal forming on demand that we believe will disrupt the $300,000,000,000 a year Sheet metal forming spend. Using patent pending technology, manufacturers in automotive, aerospace and appliances and other industries Can now purchase a system that gives them a competitive way to form sheet metal parts and products quickly without the high upfront costs associated With stamping dies and presses, while early in its commercialization, Fingerhfakes has little to no competition for digital solutions in the space, offering a true greenfield opportunity. We're very excited to explore the potential for FIGR. And finally, the global hydraulics market, The opportunity for printed hydraulics as well as manifolds, heat pumps and fluid power systems is ideal for additive approaches because of the complex part geometries required It has DNB certifications for 3 d printed hydraulic parts. We view printed hydraulics as a killer app for metallic printing We are in a position to lead in the space as we believe a substantial portion of the $50,000,000,000 in annual spend will tip towards 3 d printing over the next decade.
Today, our printed hydraulic parts are already being adopted by major customers like Saudi Aramco, Total Energies and Schlumberger. Moving to Slide 11. 2023 will be a pivotal year for Desktop Metal, a year requiring a sharp focus on execution. We have several initiatives in place that will drive our success for 2023 and position us for the long term. To start off, organic growth will be the number one focus in 2023.
Last year's growth was strong and regardless of macro conditions, we think there's a terrific opportunity to maintain our momentum We will be relentless in leveraging our differentiated mass production portfolio to drive adoption in the additive manufacturing market and position the business to capitalize on the next stage of this market's secular growth opportunity. 2nd, as we've communicated since the start of last year, we're committed to achieving adjusted EBITDA breakeven before the end of this year. We have a plan to achieve this goal regardless of macro conditions, primarily through the $100,000,000 in annualized cost savings As a result of these cost reduction plans, as well as optimizing inventory levels and overall working capital management, we're focused on dramatically lowering our cash burn this year. 3rd, amidst an uncertain macro environment and some operational changes, We do not want to lose sight of what drives success in our business, the customer. As we continue combining our differentiated portfolio of integrated solutions With our deep customer engagement model to deliver for our customers, we believe growth will follow.
Therefore, We're as focused as ever in growing our total customer count as well as repeat customer count by maximizing the ability And finally, we're focused on streamlining our operations to position the business for the long term. Many of these initiatives were outlined in our cost reduction plans, but there are many everyday actions that will drive operational efficiencies as we mature as an organization. These improvements will create a stronger, more resilient company for the long term, as well as show up in the financial efficiency of the business. With that, I'll hand over the call to our wonderful CFO, Jason Call, to take a closer look at the numbers as well as our 2023 financial outlook.
Speaker 3
Take it away, Jason. Thanks, Rick. Beginning on Slide 13, you will see highlights of our financial performance for the 4th Quarter and Full Year 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 Q4 2022 was a record for the company at $60,600,000 up 6.8% year over year from $56,700,000 in the Q4 of 2021. Leading revenue drivers were industrial photopolymers, digital casting solutions and growth in consumables, services and subscription. On the right side of the slide, consolidated revenue was $209,000,000 for the full year 2022, representing 86% year over year growth Over $112,400,000 in 2021. Revenue growth was driven by broad based strength across all our offerings and contributions from acquisitions. Non GAAP gross margins were 24.3% for the Q4 2022.
Gross margins improved 4 40 basis points sequentially versus Q3 2022, driven by higher sales volumes, which drove improved absorption of fixed costs. Gross margins declined 7 10 basis points versus Q4 of 2021, impacted by weaker cost absorption and product mix. On the right side of the slide, full year 2022 non GAAP gross margins were 22.5 Representing a decline of 410 basis points from 2021, again impacted by weaker cost absorption across 2022. 3rd quarter demand volatility revealed areas where we could make meaningful improvement to our fixed cost challenges. While gross margins made a nice recovery in Q4 of 2022, you may recall we recently announced additional cost reductions rolling out over 2023, reflecting our commitment to continued gross margin improvements.
On the next slide, non GAAP operating expenses were $37,900,000 Call. Through actions under our initial 2022 cost optimization initiative, we reduced non GAAP operating expenses sequentially by $3,600,000 versus the Q3 of 2022 and a total of $14,200,000 since Q1 of 2022. 4th quarter 2022 non GAAP operating expenses as a percentage of revenue were 63%, We're showing good progress on improving our expense structure and expect the recent additional $50,000,000 in cost savings announced last month to continue the trend of reducing operating expenses on a sequential basis. Adjusted EBITDA for Q4 of 2022 Q4 of 2021. Adjusted EBITDA is trending in the right direction as the $50,000,000 in cost reduction actions undertaken last year Begin to positively impact adjusted EBITDA and we expect to realize continued improvements from these cuts in the coming quarters.
In addition, the incremental $50,000,000 in cost savings announced last month will create a further tailwind for adjusted EBITDA As results from those cuts contribute to financial results in the first half of twenty twenty three and then more meaningfully in the back half of twenty twenty three. The combined $100,000,000 in annualized cost reduction initiatives will put us in a strong position to fulfill our commitment to achieve adjusted EBITDA breakeven before year end, regardless of the macro environment. We remain well funded, ending the year with $184,500,000 in cash, cash equivalents and short term investments and have adequate financial flexibility based on our internal forecast. Managing cash The top priority in 2023, and we expect ongoing expense reduction efforts and prudence in our internal investment spend We'll drive significant cash flow improvements even if the current challenging macro environment persists. We also ended the quarter Shifting to our 2023 financial outlook on Slide 18.
A quick note on our current approach to financial expectations. As a management team, we are committed to creating a more predictable business model at Desktop Metal, and we expect to demonstrate that in 2023. However, we continue to operate in a challenging macro environment where our visibility is weaker than usual. With that said, we expect to generate revenue In the range of $210,000,000 to $260,000,000 for 2023, we have intentionally crafted a wider range Our customer engagement validates our growth thesis in 2023 and we are scaling several new revenue streams this year. Also, revenue guidance reflects the historical seasonality we see in the Q1, typically the lowest quarter of annual revenue contribution, and we expect that to be the case again in 2023.
Next, we expect adjusted EBITDA in the range of negative $50,000,000 EBITDA will significantly outstrip the first half. As we've reiterated, we are focused on driving significant continued improvements to our expense structure On our way to reaching adjusted EBITDA breakeven before the end of 2023. And with that, I'll turn the call back over to Rick for his closing remarks.
Speaker 2
Thanks, Jason. In summary, we've got a challenging macro environment in the second half of the year. Our business performed well to the end of 2022, which is a testament to the team's consistent execution in a dynamic operating environment. We're well positioned for another year of growth as we leverage our superior portfolio of AM 2.0 Mass Production Solutions to continue taking share in the large and growing additive manufacturing market. And we've taken swift actions at the organization given the current circumstances in order to reach profitability on our committed timeframe and be in a position to take advantage of the next stage of growth and deliver value to all stakeholders.
While 2022 underperformed original expectations, we seize the opportunity to make the company stronger and more resilient. As a result, Desktop Metal is in a solid position to get profitable and grow faster than our competitors. We look forward to updating you on our progress throughout this year. With that, let's open it up for questions. Operator?
Speaker 0
Thank you. And at this time, we will be conducting a question and answer session. Our first question comes from the line of Paul Chug with JPMorgan. Please proceed with your question.
Speaker 2
Hi. Thanks for taking my questions. So can you talk about some of the momentum you're seeing in The P50, how many shipments have been made year to date? And what your expectations for shipments this year kind of based on And the order interest you're getting and how is the pricing also trended as of late? And can this product Become more meaningful impact on margins and top line throughout the year?
And I have a follow-up. Thank you, Paul. We continue to see great interest in the product. We just had a fantastic Open house with customers have got to see the machine, the systems running and you're going to get further updates in the year as we continue to ship machines. This is a very high end system that fully configured is a couple of $1,000,000 So the type of companies that acquire it are larger companies.
We've got many programs with vehicle OEMs, industrial customers, consumer electronic companies, several. I think we highlighted that we have a large consumer electronic company that we have a master agreement with and it's a significant opportunity for that business. I think it's the opportunity for that product is just as big now as it always has been. And you're going to see us talk more about it with actual customer names as the year progresses. So we remain very bullish on it.
Great. And then just on gross margins, can you expand on some of the restructuring benefits you'll see On gross margins and then any kind of potential scale benefits you get throughout the year, maybe And benefits from lower component inflation and how do we think about gross margin levels as we exit 4th quarter? And can we start to see more material contribution from the materials and services side as well? Thank you.
Speaker 3
Yes. Thanks, Paul. This is Jason. I'll take that one. Both the first $50,000,000 announced in 'twenty two and the $50,000,000 we announced last month, Both have an element that touch on cost of sales.
The second tranche is a little bit more biased towards cost of sales, and that's a reflection of what we saw in 3Q when we saw a little bit of a revenue dip We saw our gross margins lower. We put a lot of focus into the fixed cost base and those we're going to be rolling out pretty quickly across the 1st part of 2023. So you should expect to see gross margins model higher in 2Q over 1Q and certainly in the back half of twenty twenty three, which is consistent with The remarks that were made in the call, I think We'll probably stop sort of giving you a number on what portion of the 50%, but you should certainly expect to see north of 30% gross margins as the year progresses.
Speaker 2
And we'll be growing consumer and all of that is accretive to margins as well. Like the relationship we have aligned Should have a positive impact on margins. Okay, great. Thank you.
Speaker 0
Our next question comes from the line of Troy Jensen with Lake Street Capital Markets. Please proceed with your question.
Speaker 4
Hey, gentlemen. Thanks for the time. Congrats on the quarter. Maybe first for you, Rick, given kind of one of your peers reported this morning and talked about weakness in dental. I mean, So you guys aren't seeing it.
So can you expand a little bit on Einstein? And then specific to Align, can you just help us out with the application you're doing with those guys?
Speaker 2
Absolutely. Well, I think we are not seeing that weakness. We actually are seeing significant growth in our dental. We have the most competitive material portfolio on the dental space. We've got best in class products, Both in the chair side and a new product just introduced, the dental show last week, called it ProXL that has Also best in class price performance.
We continue to see growth. I just saw the numbers today. Our dental business is strong and we you could look at the quote from Joe Hogan On the CEO of Align on his last earnings call referring to us, so we have a growing partnership with them. And one of the great things about Desktop Metal is we have no account concentration in our business. We have a large Group of customers, but we have many hyperscalers in our business online as a hyperscaler opportunity that is significant, Looking to take advantage of more advanced technology and then we have that also with other large customers like BMW It's hyperscaling with us.
We have companies in the consumer electronics space that are doing that as well. So we will you're going to be pleasantly surprised. We don't have any weakness whatsoever. We actually see significant growth. And if you look at the Restorative market and dental, the $30,000,000,000 opportunity that will completely migrate this decade or mostly migrate this decade to printed.
So it's an area where we're leading and we expect significant growth As the year progresses and the decade continues to the long term plan. Hey, Rick, if I can
Speaker 4
just interject. So specific with Align, are they doing a chairside consistent with your Dental Lab acquisitions that you guys did last year. Could you just dive into exactly what they're going to be doing
Speaker 2
with What we've announced to date is our first line, which is a full service digital that we're doing in the rest of the space. It has a significant recurring revenue subscription business that puts together products that Go with the line together with products from DM, but we have this is just the beginning. We have Many things under development at DM in the dental space and that's all I can say at the moment.
Speaker 4
Okay, perfect. And then maybe I just want to just kind of the seasonality. I think last year you guys provided us some kind of color on how you thought the year was going to go. If I remember correctly, it might have been like 20% in Q1 and then 25% in Q2 and Q3 and then 30% in Q4. So Are you expecting to see a normal or a consistent type of distribution across the year for your revenue guidance?
Speaker 2
Yes. Go ahead, Jason, why don't you take this one?
Speaker 3
Yes. I think it's certainly north of 20% in 1Q, but maybe not by much. So 1Q is certainly the weakest Historically, that's been the case. I do think 1Q also will be the period where our visibility we expect to be the weakest. Consistent with the remarks in the call, We are going to navigate this with a lot of caution.
We're doing that on the expense side. We believe we have a lot of growth drivers and we expect to see that. But 1Q is closer to baked than the rest. So there's more growth that we believe will unfold in 2Q and the second half. But yes, I think it's fair to
Speaker 4
say it's going to be
Speaker 3
a little less than 25%.
Speaker 4
Okay. All right, guys. Well, good luck going forward.
Speaker 2
Thank you.
Speaker 0
Our next question comes from the line of Greg Palm with Craig Hallum. Please proceed with your question.
Speaker 5
Yes. Good afternoon, everybody. Thanks for taking the questions here. I wanted to follow-up on That master supply agreement and not sure what you can or can't say, but what exactly does a master supply Agreement mean and can you confirm whether orders have been placed to date?
Speaker 2
I can't. We're not that's as much as we can say about This particular customer, we have several companies we work with in consumer electronics, but we're not at liberty to talk in more detail than this. Okay.
Speaker 5
You mentioned go ahead.
Speaker 2
No, I mean, we have sold 1,000,000 of dollars of equipment into the consumer electronics space. We have machines around the world that had plants that make these types of products today. But it's an industry where secrecy is important and we have agreements that don't allow us to discuss it in any more detail.
Speaker 5
You did mention, I think, on an earlier question around P50 that we Might actually hear actual customer names as we progress throughout the year. Were you alluding to this specific opportunity? Or is that more of a general comment?
Speaker 2
Yes, we have several large customers. I've got a I can think of 2 automotive opportunities where I think we'll be able to talk about the customer when it ships and We have other things in development, thermal management opportunity also where it could be possible to perhaps discuss it. We'll see. I think we'll let our customers do the marketing or I would definitely like to do it. So let's see how the year goes and How much we can say as we make progress?
Speaker 5
And the last question around this topic, can you
Speaker 2
Just on expanding on that, we have 1100 metal installations. We have The largest installed base at scale in Vitrajet, the number one selling products across different categories, whether it's research, Machine shops, production, you name it. And so we I know there's a lot of interest in what we do particularly MP50 because it's a system that's Many times faster than anything else that's out there. But we have a full portfolio of products. And If you look at our run rate, that's like a $250,000,000 worth of lots of stuff, of which a significant portion is binder jet.
So We are the de facto leader in the Biogen space, and I am very happy with Our progress in it and I think that we have technology in this area that nobody else has. We have more engineers working on it than all of our competitors combined. This is a segment that we have complete leadership in.
Speaker 5
Yes. Appreciate that color. And then maybe if I can follow-up on some of the comments around cost cuts. Maybe a little bit more color on the progression of that as we go throughout the year, When you might see the full run rate of those cuts? And then is there a specific level Of revenue that you think you can reach EBITDA breakeven at?
Speaker 3
Yes. Thanks for that. So I think I would think about the Kotlin, trying to take the first part first. We should have a very meaningful portion of the full 100 in hand mid year, but there are elements of it that will roll out across 2nd half, but you should see consistent with our opening remarks, pretty strong improvement entering the second half of the year. And that's a pretty Rapid deployment given the fact we just announced it a month ago, and we're pretty proud of that.
But really, there was a sense of urgency for us around really trying to make sure we can control our own destiny. In terms of breakeven, we're positioned to breakeven we believe we're positioned to breakeven in anywhere across the range we guided by the end of the year. We believe there are growth drivers and we believe we'll outperform the bottom end of that range. But nevertheless, we put it wide because There is uncertainty out there, but we are committed to delivering breakeven results by the end of the year.
Speaker 5
But is there I guess what I'm getting at, is there a level of revenue, Quarterly revenue that after you've reached the full run rate of the cost cuts that you feel comfortable breaking even at?
Speaker 3
Yes. Maybe I don't think we're not really prepared to kind of give it by quarter, but I think you can see from Precuts, right, we just did a we just announced another big tranche, but you can see that the improvement let's get it out there. I think if we get to 60,000,000 That's a pretty critical level, right? Sub $60,000,000 a quarter, it will be pretty tough for us to probably deliver that, but I still think it's possible. But, if you need a number, I'd say model it over $60,000,000 a quarter and we'll be doing it.
Speaker 2
Perfect. Okay, great.
Speaker 5
Yes. Got it. Okay. I will leave it there. Thanks.
Speaker 2
Awesome.
Speaker 0
Our next question comes from the line of Noelle Dilts with Stifel. Please proceed with your question.
Speaker 6
Hi, thanks. This is sort of tied to the last line of questioning. But I was hoping you could expand a little bit on how you're thinking about cash management. As we look into 2023, how do we think about Cash burn through the year and maybe you could touch on how you're thinking about R and D and how you're choosing What to invest in and your priorities? Thanks.
Speaker 3
Yes. Thanks, Noelle. I appreciate the question. So, directionally, cash Earn and adjusted EBITDA will trend together, but they're not a perfect proxy for another, and we don't give guidance on cash, but I can still speak about it directionally. What I think you should expect to see consistent with the comments on EBITDA, just in the opening remarks and the answers to some of these questions, is that you're going to see cash burn dramatically reduced in the second half of this year.
We've I think we're not concerned about we're concerned to manage cash very, very carefully, but we're not concerned The current environment of running out of cash. We think that's because we took dramatic action. We did it swiftly and we're getting these results really, really quickly in the 1st part of the year. So, You're going to see cash burn drop dramatically in 3Q and we expect it to be even more dramatic in 4Q.
Speaker 6
Okay, great. And then just a housekeeping question. On the 86% Growth that you all highlighted for 2022, could you give a kind of a sense of the organic Gross number and how we should think about how organic growth is trending?
Speaker 2
Yes. We still feel like the business is growing at a very healthy pace organically. In Q4 of last year, if you remember, we had a large account with Shapeways. If you take that out, it's still Like north of and that was a one time thing. It's per quarter, it's north of 30%.
So
Speaker 3
This is
Speaker 2
in the backdrop of all the people in this industry that are shrinking, that are more focused on prototyping or tooling Or that are legacy companies that need a total portfolio refresh, we are in our portfolio number 1 share and dominant in Technologies that benefit from Moore's Law that have benefiting of having a Significant percentage of their usage for mass production, which is a faster growing segment than all areas of the industry. So we're very well positioned For continued growth and with very innovative technology, if you look at our spend in R and D versus our competitors, We spend more as a percentage of revenue in R and D than most of the other companies in our market. And so we despite these cuts, we have Very healthy innovation pipeline and we've modulated things between Horizon 1, Horizon 2,
Speaker 6
Okay. Thanks very much. Appreciate it.
Speaker 0
And we have reached the end of the question and answer session. I'll now turn the call back over Rick for closing remarks.
Speaker 2
Wonderful. Well, I really would like to thank everyone again for joining our call today and your interest in Dust Off Metal. I especially want to extend my gratitude to all of Team DM across the globe, including all of our sales partners in over 65 countries for their relentless efforts and dedication. And I look forward to speaking to you again on the Q1 earnings call. So thank you.
Speaker 0
And this concludes today's conference and you may disconnect