Industrial 3D printer maker Desktop Metal has announced a strategic integration and cost optimization initiative that will generate at least $100 million in overall savings over the next 24 months.
As part of the move, the company plans to lay off around 12% of its global workforce, citing productivity gains from integrating businesses it acquired last year.
“In 2021, we demonstrated significant growth, expanding our product portfolio into new markets and innovative materials,” said Ric Fulop, Founder and CEO of Desktop Metal. “While the acquisitions we made in 2021 contributed to this growth and our total market opportunities as we initially focused on harvesting product and go-to-market synergies, they also increased our base of sales. costs and the footprint of our global facilities.
“Today’s announcement of our strategic integration and cost optimization initiative is the result of a comprehensive portfolio and business operations review conducted across all functions of Desktop Metal.”
The rapid expansion of Desktop Metal
Since going public on the NYSE in December 2020, Desktop Metal has established a foundation on which it can “move rapidly,” Fulop said when announcing the company’s first quarter 2022 financials.
In addition to expanding its medical portfolio with the creation of its Desktop Health subsidiary and the creation of its wood 3D printing subsidiary Forust, the company has made several acquisitions over the past 18 months. The company acquired DLP systems and materials producer EnvisionTEC in January 2021, which it recently renamed ETEC, before buying resin supplier Adaptive3D, coating systems developer Aerosint and hydraulics and hydraulics developer Aidro a few months later.
In August 2021, Desktop Metal announced that it had reached an agreement to acquire fellow binder-jet 3D printer OEM ExOne for $575 million, a deal which, when approved in November, saw two of the largest manufacturers of 3D printing binder jet systems join forces.
Although the company appears to be sticking to its outlook for fiscal 2022 and is starting the year strong with a 286% increase in revenue in the first quarter of 2022, shares of Desktop Metal fell 65%, potentially reflecting investors’ reaction to the company’s current high cash ratio. burn. Operating losses soared to $69.5 million during the period, likely a key factor in the announcement of the company’s new cost optimization initiative.
The cost optimization approach
Desktop Metal essentially hopes its new cost optimization initiative will pave the way to profitability, delivering a simplified operating structure, consolidated global footprint and reduced expenses, which will support the company’s continued revenue growth over the next two coming years.
Broken down, the initiative is expected to result in $40 million in annualized non-GAAP cost savings, of which $20 million will be realized in the second half of 2022. In total, the initiative will result in at least $100 million overall cost savings over the next 24 months.
As of March 31, 2022, the company had more than $317 million in cash, with the cost optimization initiative expected to incur some $14 million before being completed by the end of 2023. This cash balance , combined with the expected impact of the initiative, would put the company in a “strong liquidity position” to break even on an adjusted EBITDA basis and fund its long-term growth trajectory.
“As noted on previous earnings calls, we have been focused on identifying opportunities to optimize our spend structure while maintaining our growth opportunities,” Fulop said. “We believe this initiative, which builds on the steps we began taking in the second half of 2021 to integrate our teams, positions Desktop Metal to meet our short- and long-term financial commitments and supports our path to profitability. .”
Shrinking Global Workforce
One casualty of this initiative, however, is Desktop Metal’s global workforce, which is expected to be reduced by 12% as the company strives to consolidate its facilities and streamline its product development programs. A key part of the initiative is to align the company’s operating structure and its acquired brands, consolidating all engineering, manufacturing, marketing, finance, legal, human resources and customer service functions. customers under the Desktop Metal umbrella.
In particular, the company will focus on prioritizing near-term revenue and margin expansion on high-growth applications in an effort to provide a “more effective and efficient” operating model. The company told employees yesterday about the impact on its US workforce and said it would continue to review international workforce changes.
“We look forward to combining cutting-edge innovation with disciplined cost management to drive shareholder value as we pursue our mission to achieve double-digit share of the rapidly growing additive manufacturing market. end of the decade,” Fulop added.
“We appreciate the dedicated team at Desktop Metal, including our deceased colleagues, for all of their hard work and contributions to this goal.”
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Featured image shows The new ExOne S-Max Flex 3D printer from Desktop Metal. Photo via Desktop Metal.