Desktop Metal (DM 6.84%) is slated to report its first-quarter 2022 results before the market open on Tuesday, May 10. An analyst conference call is scheduled for the same day at 8 a.m. ET.
The 3D printing company's quarterly report will follow that of well-established industry player 3D Systems, which is on deck for Monday, May 9, after the market close. (Read 3D Systems' earnings preview.) And it will precede the report from the industry's other long-established player, Stratasys, which plans to release its results on Monday, May 16, after the closing bell. (Read Stratasys' earnings preview.)
Investors will probably be approaching Desktop Metal's first-quarter report with a fair dose of caution. Last quarter's report had some positives, including "a continuation of strong revenue growth and gross margin moving in the right direction, and the P-50 entering the commercialization stage," as I wrote at the time. However, there were also reasons for concern, the main one being that the company's "revenue growth has come at a substantial cost, as it's been burning through a lot of cash and issuing new shares to make acquisitions."
Here's what to watch in Desktop's upcoming Q1 report.
Desktop Metal's key numbers
|Metric||Q1 2021 Result||Q1 2022 Wall Street Consensus Estimate||Projected Change|
|Revenue||$11.3 million||$41.6 million||268%|
|Adjusted earnings per share (EPS)||$0.03||($0.13)||Result expected to flip to negative from positive|
Revenue is poised to get a sizable boost from Desktop Metal's acquisition of ExOne in mid-November. The quarter to be reported will be the first quarter in which the company has owned ExOne for the entire period. In addition, the year-over-year revenue comparison will also benefit from acquisitions made over the last year. Investors will likely not learn the magnitude of this latter benefit, as the company has not been providing organic revenue results on a quarterly basis.
For context, in the fourth quarter, Desktop's revenue soared 577% year over year to $56.7 million. This result included a half quarter of contribution from ExOne that amounted to $15.5 million. It also included an undisclosed amount from other acquisitions made over the preceding year.
In 2022, investors need to keep close tabs on Desktop Metal's cash-burn rate, as the company's cash outflow last year presents some concerns. Growth-oriented companies, such as Desktop, justify spending cash as an "investment" in future growth. This argument often makes solid sense -- but only to a degree.
Companies need adequate cash reserves, or they could be forced to borrow cash at times when terms are relatively unfavorable. They can also issue more shares to raise funds, but this action dilutes existing shareholders. Moreover, issuing new shares is a more attractive way to pay for acquisitions when the share price is rising -- and Desktop shares have been steadily declining since peaking in February 2021.
As for the numbers, Desktop ended 2021 with $271.7 million in cash, cash equivalents, and short-term investments. In 2021, the company used cash of $155 million running its operations. In addition, it used cash of $287.6 million on acquisitions, of which $191 million went toward the $561.3 million ExOne deal.
In February, Desktop shipped its first P-50, its flagship 3D printing system for mass production of end-use metal parts. This system went to Stanley Black & Decker, which makes industrial tools and other industrial and household products.
These are large and pricey systems. So investors should keep in mind what I wrote last quarter: "It probably won't be until at least the second quarter that the company has data of value about the early progress of the commercialization stage."
Last quarter, management released its outlook for full-year 2022. Any notable change in this outlook will likely move the stock, but it seems improbable management would revise its full-year guidance this early in the year.
For full-year 2022, management guided for the following:
- Revenue of about $260 million, representing 131% annual growth.
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately negative $90 million. In 2021, adjusted EBITDA was negative $96.1 million, so management expects this loss to narrow by about 6%.
CEO Ric Fulop said on last quarter's earnings call that this guidance was for the business as it stood at the time.