Executive Summary

Mixed Q1: Revenue of $40.6M declined less than 2% YoY as macro CapEx pressures persisted; GAAP gross margin was -5.4% due to accelerated amortization/depreciation, but non-GAAP gross margin expanded to 30.5% and adjusted EBITDA loss improved 44% YoY to $(13.6)M .
Cost actions continue to flow through: non-GAAP OpEx fell to $28.6M (nine straight quarters down); management reiterated confidence in reaching positive adjusted EBITDA in H2’24 .
Strategy pivot: adding ~30 sales reps while exploring strategic alternatives for photopolymer assets to accelerate the path to profitability; recurring revenue mix hit a record 43% in Q1, underscoring installed base utilization .
Guidance maintained: FY24 revenue $175–$215M and adjusted EBITDA $(30)M to $(10)M; H2 adjusted EBITDA positive reiterated—key potential stock catalyst as execution de-risks the profitability milestone .

What Went Well and What Went Wrong

What Went Well

Non-GAAP gross margin inflected to 30.5% (record Q1), up ~1,200 bps YoY; adjusted EBITDA loss improved to $(13.6)M, a $10.8M YoY improvement, reflecting cost discipline and mix benefits .
Recurring revenue mix reached a record 43% of revenues, indicating rising utilization and stickier, higher-margin streams .
Strategic focus: Management reaffirmed plan to be adjusted EBITDA positive in H2’24 and is reinvesting in go-to-market to drive double-digit growth as cycles normalize. “We are confident in achieving positive adjusted EBITDA in the second half of 2024” .

What Went Wrong

Top line softness persisted: revenue fell slightly YoY to $40.6M, with GAAP gross margin negative due to one-time noncash charges tied to accelerated amortization/depreciation on certain intangible and fixed assets .
Macro headwinds and elongated sales cycles continued to delay larger industrial purchases; management cited high cost of capital and lengthened cycles as demand friction .
Cash draw continued (though improving): cash, cash equivalents and ST investments ended Q1 at $66.3M; operating cash outflow was $(17.4)M (improved vs $(37.3)M in Q1’23) .

Financial Results

Headline KPIs by quarter

Metric	Q3 2023	Q4 2023	Q1 2024	YoY/Seq Commentary	Vs Estimates
Revenue ($M)	$42.8	$52.3	$40.6	YoY: down <2% in Q1’24 ; Seq: Q1 down from Q4 on seasonality	N/A (SPGI unavailable)
GAAP EPS	$(0.14)	N/A	$(0.16)	Q1’24 flat YoY at $(0.16)	N/A (SPGI unavailable)
GAAP Gross Margin %	4.5%	(32)%	(5.4)%	Q1 GM pressured by noncash amort./depr.	N/A
Non-GAAP Gross Margin %	21.9%	34%	30.5%	Sustained expansion YoY; Seq dip on lower revenue	N/A
Adjusted EBITDA ($M)	$(20.5)	$(9.2)	$(13.6)	YoY improvement; Q4 bulletin omitted minus sign; reconciliation confirms negative	N/A
Non-GAAP OpEx ($M)	$33.18	$31.6	$28.64	Nine consecutive quarterly declines	N/A
Cash + ST Investments ($M)	$108.2	$84.5	$66.3	Continued draw as cost programs ramp and demand stabilizes	N/A

Notes: Q4’23 press release bullet listed “Adjusted EBITDA of $9.2M” but reconciliation shows $(9.195)M; we rely on reconciliation .

Q1 year-over-year detail

Metric	Q1 2023	Q1 2024	YoY
Total Revenues ($M)	$41.316	$40.600	-1.7%
GAAP Net Loss ($M)	$(52.642)	$(52.098)	+$0.544M
GAAP EPS	$(0.16)	$(0.16)	Flat
GAAP Gross Profit (Loss) ($M)	$(1.364)	$(2.206)	More negative on noncash charges
Adjusted EBITDA ($M)	$(24.439)	$(13.618)	+$10.821M

Revenue mix (products vs services)

Metric ($M)	Q1 2023	Q1 2024
Products	$36.697	$35.631
Services	$4.619	$4.969
Total	$41.316	$40.600

Cash flow and working capital (Q1)

Metric	Q1 2023	Q1 2024
Cash from Operations ($M)	$(37.346)	$(17.409)
Inventory ($M) (end of period)	N/A	$83.097 ; CFO commentary: $83.1
Accounts Receivable ($M) (end of period)	N/A	$35.420 ; CFO commentary: ~$35.4 with expected conversion in next 2 quarters
Cash, Cash Equivalents + ST Investments ($M)	N/A	$66.3

Non-GAAP drivers: Q1 non-GAAP gross margin excludes stock comp, amortization of acquired intangibles, restructuring, and acquisition/integration costs; the period had significant amortization ($14.34M in cost of sales) and restructuring adjustments .

Guidance Changes

Metric	Period	Previous Guidance (as of Mar 15, 2024)	Current Guidance (as of May 9, 2024)	Change
Revenue	FY 2024	$175–$215M	$175–$215M	Maintained
Adjusted EBITDA	FY 2024	$(30)M to $(10)M	$(30)M to $(10)M	Maintained
Adjusted EBITDA trajectory	H2 2024	Positive in H2’24	Positive in H2’24	Maintained

Desktop Metal did not provide non-GAAP gross margin guidance; CFO reiterated mid-30s non-GAAP gross margin potential at ~$50M quarterly revenue and cited 34% achieved on $52M in Q4 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’23 and Q4’23)	Current Period (Q1’24)	Trend
Cost reductions / OpEx	$150M program; seven consecutive OpEx reductions; target adj. EBITDA breakeven (Q4’23)	Nine straight non-GAAP OpEx declines to $28.6M; adj. EBITDA loss narrows YoY	Improving
Gross margin trajectory	Non-GAAP GM 21.9% in Q3; 34% in Q4; mid-30s achievable at ~$50M revenue (CFO)	30.5% non-GAAP in Q1; sequential dip on lower revenue; reiterated framework	Stable to improving with revenue
Demand / Sales cycles	Lengthened cycles in 2023; pipeline healthy; macro a headwind	Not demand-constrained; plan to add ~30 sales reps globally to drive growth	Expanding GTM
Photopolymer strategic alternatives	Initiated review to exit/de-emphasize select lines (Q4’23)	Process underway; aim to accelerate path to cash flow positive	Portfolio refocus
Digital casting / binder jet	Printed casting grew 27% in 2023; 80%+ share; under 5% penetration	Continued strength in sand/ceramics; strong pipeline and applications; recurring revenue at record	Positive adoption
Dental (Flexcera, ScanUp)	Record recurring revenue; Flexcera expansion; ScanUp ramp (Q4)	Flexcera Base Ultra+ launch; Asiga validation; ScanUp partnership with Align continues; dental TAM highlighted	Building ecosystem
Seasonality / Outlook	Expect stronger Q2 and Q4; cautious on highs	Reiterated seasonality (Q2 up, Q3 muted, biggest Q4)	Consistent
Government/Defense	Multiple programs in aerospace/defense; parts in engines, space	Ongoing support for DoD/DoE; several defense applications cited	Sustained momentum

Management Commentary

CEO on margin and profitability: “We have a record Q1 margin of 30.5%... We’re looking forward to crossing the adjusted EBITDA profitability threshold this year” .
CEO on demand and GTM: “We’re not demand constrained... we’re adding an additional 30 reps around the world over the next few quarters” .
CEO on recurring revenue: “Recurring revenues... reached a record 43% of revenues” .
CFO on gross margin framework: “At ~$50M+ per quarter, we can be in the mid-30s non-GAAP gross margin” .
CFO on guidance: “We are reiterating FY24 revenue of $175–$215M and adjusted EBITDA of $(30)M to $(10)M; H2’24 positive adjusted EBITDA” .

Q&A Highlights

Gross margin trajectory: Management avoided explicit GM guidance but reiterated mid-30s potential at ~$50M quarterly revenue and referenced 34% in Q4 on $52M .
OpEx path: Non-GAAP OpEx has not bottomed; more reductions expected even with targeted GTM investments .
Metal powder bed and product portfolio: Direct metal/powder bed up ~9% in Q1; realigned sales resources by product; strong materials breadth (incl. reactives, refractories) and installed base .
Go-to-market vs cost cuts: Adding capacity to offset longer cycles; aiming to return to double-digit growth as new hires mature .
Seasonality: Expect Q2 > Q1, muted Q3, strongest Q4; cautious on magnitude given macro .

Estimates Context

Wall Street consensus (S&P Global) for Q1’24 revenue/EPS/EBITDA was unavailable via our S&P Global tool for this ticker at this time; therefore, we cannot present vs-consensus comparisons. Management did not provide quarterly guidance and avoided non-GAAP GM guidance, though reiterated the framework discussed above .

Key Takeaways for Investors

Margin quality improving: Non-GAAP gross margin at 30.5% and nine quarters of OpEx declines de-risk the H2’24 adjusted EBITDA positive target; upside levered to revenue acceleration back toward the ~$50M/quarter level .
Reaffirmed FY24 outlook limits downside: Maintaining revenue and adjusted EBITDA ranges despite macro suggests cost discipline and visibility on cost-out benefits; execution on H2 profitability is the near-term catalyst .
Mix shift to recurring: Record 43% recurring revenue indicates installed base health and higher-margin mix; this supports gross margin durability through cycles .
Sales capacity adds: Hiring ~30 reps globally should expand coverage and shorten the time to close deals as cycles normalize, particularly in binder jet and digital casting—potential medium-term growth accelerant .
Portfolio optimization: Ongoing strategic alternatives for photopolymers could streamline cash usage and sharpen focus on IP-centric, higher-margin production platforms—monitor for asset sales/partnerships .
Watch cash runway and working capital conversion: Q1 operating cash outflow improved to $(17.4)M; inventory ($83.1M) and receivables ($35.4M) are targeted to convert over H1/H2; sustained improvement would extend runway .
Trading implications: Near term, the stock should be sensitive to signs of Q2 sequential growth, incremental GM expansion, and tangible updates on photopolymer asset actions; H2 profitability confirmation is the main re-rating trigger .

Appendix: Non-GAAP Adjustments (Q1 2024)

Notable non-GAAP add-backs include amortization of acquired intangibles ($21.0M total; $14.34M in cost of sales), restructuring ($3.0M), acquisition-related costs ($1.26M), and stock-based compensation ($7.84M). Management also noted incremental depreciation ($0.4M) and amortization ($11.2M) within restructuring for the Photopolymer Initiative .

Desktop Metal, Inc. (DM)·Q1 2024 Earnings Summary