Desktop Metal, Inc. (DM)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 revenue was $38.9M, down 26.9% year over year and down 4.2% sequentially; GAAP gross margin was (83)% due to large non-cash accelerated amortization/depreciation, while non-GAAP gross margin was 29.2% .
• Adjusted EBITDA improved year over year to $(13.2)M from $(15.0)M, and non-GAAP operating expenses fell to $27.0M (down 22% YoY), reflecting continued execution on ~$150M annualized cost reductions .
• Management withdrew FY24 guidance due to the pending all-cash merger with Nano Dimension; CEO cited customer hesitancy to close deals given DM’s weakening financial outlook as a key demand headwind late in the quarter .
• Balance sheet: cash & equivalents were $45.9M at Q2-end; CFO noted Q2 cash burn was elevated by deal-related costs and interest payments, and reiterated that cost actions remain on track .
• Near-term stock narrative likely pivots to deal certainty, balance sheet de-risking, and the impact of guidance removal; operational catalysts include services growth (+27% YoY) and continued cost discipline .

What Went Well and What Went Wrong

What Went Well

• Non-GAAP operating expenses were reduced to $27.0M, a 22% YoY improvement; management emphasized nine quarters of non-GAAP OpEx reduction through Q1 and continued sequential reductions into Q2 .
• Adjusted EBITDA improved year over year to $(13.2)M (vs. $(15.0)M in Q2 2023); CFO highlighted ~$150M executed annualized cost savings since 2022 and ongoing optimization .
• Services revenue rose 27% YoY to $7.5M reflecting higher utilization and customer support activity; “Services revenue … increased 27% to $7.5 million” .

Management quotes:

• “By the end of Q1 we had delivered nine quarters of non-GAAP opex reduction and brought our cash burn down dramatically.” — Ric Fulop, CEO .
• “Non-GAAP operating expenses were $27.0 million … improving … 22.2% year-over-year.” — Jason Cole, CFO .

What Went Wrong

• Revenue fell to $38.9M (from $53.3M YoY and $40.6M QoQ), with hardware weakness and late-quarter deal hesitancy tied to the company’s balance sheet .
• GAAP gross margin of (83)% and GAAP operating expenses of $69.1M were heavily impacted by one-time noncash accelerated amortization/depreciation and restructuring from discontinued operations .
• Management removed FY24 guidance due to the pending merger; CEO disclosed customers “becoming hesitant to engage in closing deals due to our weakening financial outlook,” pressuring Q2 performance .

Financial Results

Segment revenue breakdown:

Selected KPIs and balance sheet:

Notes:

• GAAP results were significantly impacted by accelerated amortization/depreciation tied to restructuring/discontinued operations; management provides non-GAAP reconciliation detail .
• CFO commentary confirms non-GAAP GM compression YoY on lower absorption and sequential decline vs Q1 2024 on lower revenue .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We began to notice a concerning trend towards the end of this quarter with customers becoming hesitant to engage in closing deals due to our weakening financial outlook … The proposed combination with Nano Dimension represents the best path forward.” — Ric Fulop, CEO .
• “Non-GAAP gross margins were 29.2% … Sequentially … decreased from 30.5% in the first quarter of 2024 on lower revenues … Non-GAAP operating expenses were $27.0 million … Adjusted EBITDA … negative $13.2 million, improving year-over-year.” — Jason Cole, CFO .
• “We are no longer providing guidance for the remainder of 2024 due to the pending acquisition with Nano Dimension.” — Jason Cole, CFO .

Q&A Highlights

• Demand vs balance sheet: Analyst probed the mix of macro vs balance sheet impact; CEO confirmed late-quarter customer hesitation and indicated large-ticket (> $1M) systems face heightened scrutiny; detailed mix not quantified .
• Cash burn: Q2 burn was elevated due to deal-related legal/transaction costs and scheduled interest payments; management expects continued focus on reducing burn .
• Operating expenses: Despite targeted go-to-market investments, CFO reiterated more OpEx reduction ahead beyond Q1 levels .

Estimates Context

• We attempted to retrieve Wall Street consensus (S&P Global/Capital IQ) for DM but the SPGI CIQ mapping for DM was unavailable at the time of query (tool error: missing mapping). As a result, consensus EPS/revenue/EBITDA estimates for Q2 2024 and FY 2024 could not be validated via S&P Global. If required, we can re-attempt once mapping is updated.
• Without validated S&P Global consensus, we cannot definitively flag beats/misses versus Street. Management’s commentary indicates performance was pressured by customer hesitancy and lower hardware sales .

Key Takeaways for Investors

• Near-term narrative hinges on merger certainty and balance sheet de-risking; the withdrawal of FY24 guidance and customer deal hesitancy are likely overhangs until the Nano transaction closes .
• Operational discipline remains intact: non-GAAP OpEx fell to $27.0M and adjusted EBITDA improved YoY to $(13.2)M despite revenue pressure, supporting medium-term leverage if demand stabilizes .
• Services and recurring activity are positive indicators (+27% YoY services revenue), suggesting continued utilization among installed base and potential for margin mix benefit .
• Sequential revenue decline in a seasonally stronger quarter (Q2) is a negative surprise relative to typical cadence; management directly tied softness to balance sheet-driven hesitancy, not project cancellations .
• GAAP metrics are distorted by large non-cash amortization/depreciation and restructuring; non-GAAP margin and expense trends better reflect underlying operations but visibility is curtailed by guidance removal .
• Focus areas to monitor: merger milestones/proxy filing, customer purchasing behavior resumption post-deal, hardware demand normalization, and continued cost reduction execution .

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