Desktop Metal (DM 2.15%) reported fourth-quarter and full-year 2020 results before the market open on Monday.
The market's initial reaction was neutral. Shares of the 3D printing company, which went public in December via a reverse merger with a special purpose acquisition company (SPAC), edged up 0.8% on Monday. (This method of going public is faster and less expensive than the traditional initial public offering route.) The S&P 500 rose 0.7%.
In 2021, Desktop Metal stock has taken investors on a roller coaster ride. It soared through early February, nearly doubling, before significantly pulling back. Nonetheless, it's still up about 23% through March 15, compared with the S&P 500's 8% return.
Desktop Metal's key numbers
Given the company is small and this was its first release of results as a public company, the following chart presents its full-year 2020 results, rather than its fourth-quarter results.
|Revenue||$16.5 million||$26.4 million||(38%)|
|Operating income||($92.1 million)||($109.0 million)||Loss narrowed 16%|
|Net income||($90.4 million)||($103.6 million)||Loss narrowed 13%|
|Earnings per share||($0.57)||($0.69)||Loss narrowed 17%|
In 2020, products revenue dropped 40% year over year to $13.7 million and services revenue fell 25% to $2.8 million.
For 2020, Wall Street was looking for a loss per share of $0.41 on revenue of $18.1 million. So Desktop fell short on both counts. That said, investors should give even less weight than usual to the Street's expectations, given two factors: The company is newly public and only a few analysts provided projections for the top and bottom lines.
The company attributed the year-over-year revenue decline primarily to the COVID-19 pandemic, which caused some customers and potential customers to pause their ordering and resulted in longer sales cycles. Unfortunately, we have no way of teasing out the pandemic's effect.
In Q4, Desktop Metal generated revenue of $8.4 million and posted a net loss of $25.4 million. That revenue result was up significantly from the third quarter's revenue of $2.5 million. That's a positive sign, but investors shouldn't read too much into quarter-to-quarter revenue fluctuations. The company's small size means that revenue will likely be quite "lumpy."
For context, in Q4, the first movers in the 3D printing space, 3D Systems and Stratasys, generated revenue of $172.7 million and $142.4 million, respectively.
Desktop Metal ended the period with $595.4 million in cash, cash equivalents, and short-term investments.
What management had to say
Here's much of what CEO Ric Fulop said in the earnings release:
We achieved key milestones in our path to driving adoption of additive manufacturing with the [commencement of] global shipments of our Shop System and Production System P-1 solutions. Our acquisition of EnvisionTEC in February strengthens our market position by adding a compelling lineup of production-focused photopolymer printers and over 190 qualified materials to our portfolio. We are excited to continue building on our strong momentum by capitalizing on both high levels of customer interest and inorganic opportunities [potential acquisitions] in the space as we enter this next chapter of our growth story.
The two metal 3D printing systems Fulop mentioned began shipping in the fourth quarter. So, over the next few quarters, investors should be able to gauge demand for these systems.
Along with its financial results, the company also announced the launch of Desktop Health, a new business unit "dedicated to redefining patient-specific healthcare."
This business will pursue "current and future applications spanning dentistry, orthodontics, dermatology, orthopedics, cardiology, plastic surgery, and printed regenerative tissues and grafts," the press release said.
In the earnings presentation, management guided for 2021 revenue of more than $100 million. It expects modest sequential growth in the first quarter, with more substantial acceleration beginning in the second quarter. This dynamic is surely largely due to the fact that EnvisionTEC was acquired in February.
At this point, Desktop Metal stock is speculative. As is typical for companies early in their commercialization journeys, Desktop Metal is unprofitable. Its revenue decline of 38% year over year underscores that caution is warranted.
The company's metals 3D printing technology seems promising. But significant revenue growth and profitability in its metals business is likely quite a way off.
EnvisionTEC, however, is more established, and should not only rev up revenue growth, but could also help Desktop Metal achieve profitability sooner.