Desktop Metal Intensifies Cost Reduction Plan and Ongoing Strategic Business Review to Accelerate Path to Profitability

Rhea-AI Summary

Desktop Metal, Inc. (NYSE: DM) announced a $50 million cost-reduction plan, including a 20% workforce reduction, to align its cost structure to current market dynamics. The company aims to generate positive cash flow and achieve sustainable profitability amidst a downturn in the additive manufacturing industry. The plan anticipates additional annualized cost savings of $50 million, with the majority to be realized by the end of this month. The effort is part of a broader strategic business review and other actions, including continued consolidation of facilities and product rationalization.

Positive

• Anticipated annualized cost savings of $50 million
• 20% workforce reduction to align cost structure
• Strategic business review and actions to accelerate path to profitability
• Commitment to achieving sustainable profitability amidst industry downturn

Negative

• Pre-tax restructuring charges of $24.3 million to $31.5 million
• Majority of estimated charges are non-cash
• Estimated $5.3 million to $7.5 million of charges coming from cash reserves

Insights

Financial Analyst

The announcement by Desktop Metal, Inc. (DM) of a $50 million cost-reduction plan, which includes a significant workforce reduction, is a strategic move to align the company's operational expenses with the current market conditions in the additive manufacturing industry. The action is a continuation of the company's efforts to achieve profitability, following $100 million in cost reductions already realized in 2023. The anticipation of positive cash flow as a result of these measures is a critical factor for investors, as it may signal improved financial health and operational efficiency.

This cost-saving initiative is expected to yield most of the savings by the end of the current quarter, which could lead to a favorable impact on the company's financial results in the short term. The pre-tax restructuring charges, predominantly non-cash, will affect the company's balance sheet, but the cash component of the restructuring charges is relatively small compared to the total anticipated savings. Investors should monitor the company's ability to manage these charges without significantly depleting cash reserves.

For long-term implications, the market will be looking at how these cost reductions translate into sustainable profitability and whether the company can maintain its competitive edge and innovation in Additive Manufacturing 2.0 technologies despite the workforce reduction. The strategic focus on products and operations that align with near-term revenue generation is a positive sign for the company's commitment to its financial goals.

Market Research Analyst

The additive manufacturing industry is experiencing a downturn, which is reflected in the softer demand environment that Desktop Metal is addressing with its cost-reduction plan. The workforce reduction by 20% is a significant measure that indicates the scale of the market challenges. Investors should consider the broader industry trends and potential for recovery when assessing the long-term prospects of DM.

Desktop Metal's focus on accelerating its path to profitability through facility consolidation and product rationalization suggests a shift towards optimizing its product lineup for core markets and applications. This could potentially lead to a stronger market position if executed effectively. However, the reduction in workforce raises concerns about the company's ability to innovate and grow in the future. The balance between cost-cutting and investment in innovation is a delicate one that could impact the company's market share and growth trajectory.

The company's positive long-term outlook and commitment to Additive Manufacturing 2.0 vision, despite current industry challenges, is an important consideration for stakeholders. As Desktop Metal navigates the transition to mass production, its success in adapting its business model and operations will be crucial in determining its competitive advantage in the evolving landscape of additive manufacturing.

Economist

Desktop Metal's cost-reduction initiative can be viewed within the larger context of economic cycles and industry-specific dynamics. The additive manufacturing sector is not immune to macroeconomic headwinds and the company's restructuring efforts reflect a response to these external pressures. The timing and scale of the cost-saving measures are particularly relevant given the current economic climate, where many industries are facing similar challenges.

The estimated pre-tax restructuring charges, while substantial, are a necessary investment for future stability. The non-cash nature of the majority of these charges suggests an accounting recognition of expenses such as asset impairments or write-offs, which do not affect the company's cash flow directly but do impact reported earnings. The cash expenses related to the restructuring will reduce cash reserves, but the expected annualized savings of $50 million could offset this impact if the company manages to realize these savings swiftly and effectively.

Investors and stakeholders should consider the potential ripple effects of these cost reductions on the broader economy, especially within the technology and manufacturing sectors. The reduction in workforce may have implications for consumer spending and could contribute to a feedback loop affecting overall economic activity. Conversely, if Desktop Metal's strategy leads to a more robust financial position, it could have a positive influence on investor confidence and industry investment.

Latest cost-saving program anticipates additional annualized cost savings of $50 million, with the majority of those savings to be realized by the end of this month

BOSTON--(BUSINESS WIRE)-- Desktop Metal, Inc. (NYSE: DM), a global leader in Additive Manufacturing 2.0 technologies for mass production, today announced an additional $50 million cost-reduction plan that includes a 20% workforce reduction designed to align its cost structure to current market dynamics.

The effort is part of a broader strategic business review and other actions, including continued consolidation of facilities and product rationalization, aimed at accelerating DM’s path to profitability in the midst of a downturn in the additive manufacturing industry.

“The cost-reduction plans announced today, in addition to the $100 million in cost reductions realized in 2023, will help us generate positive cash flow in light of a softer demand environment,” said Ric Fulop, Founder and CEO of Desktop Metal. “We are committed to getting profitable during this challenging period. The vast majority of the cuts will be completed this quarter, resulting in sequential cost reductions across the first half of 2024.

“While our industry is working through a challenging period, Desktop Metal’s commitment to its Additive Manufacturing 2.0 vision has not changed. We continue to have a positive long-term outlook for this industry as it transitions to mass production.”

Desktop Metal is notifying U.S.-based employees impacted by the cuts today. The Company is continuing to review international workforce changes, the timing of which will vary according to local regulatory requirements.

This latest action is expected to result in pre-tax restructuring charges of $24.3 million to $31.5 million. The majority of those estimated charges are non-cash, with an estimated $5.3 million to $7.5 million of the restructuring charges coming from cash reserves.

DM continues to invest in products and operations in line with near-term revenue generation, positioning the company to achieve its long-term financial goal of sustainable profitability.

The Company will provide further details about this cost-reduction effort in its regulatory filings and end-of-year earnings release and conference call, which is expected to be executed by the end of March 2024.

About Desktop Metal

Desktop Metal (NYSE:DM) is driving Additive Manufacturing 2.0, a new era of on-demand, digital mass production of industrial, medical, and consumer products. Our innovative 3D printers, materials, and software deliver the speed, cost, and part quality required for this transformation. We’re the original inventors and world leaders of the 3D printing methods we believe will empower this shift, binder jetting and digital light processing. Today, our systems print metal, polymer, sand and other ceramics, as well as foam and recycled wood. Manufacturers use our technology worldwide to save time and money, reduce waste, increase flexibility, and produce designs that solve the world’s toughest problems and enable once-impossible innovations. Learn more about Desktop Metal and our #TeamDM brands at www.desktopmetal.com.

Forward-looking Statements

This press release contains certain forward-looking statements within the meaning of the federal securities laws, including statements about Desktop Metal’s strategic integration and cost savings initiatives, expected restructuring charges, anticipated cost savings, long-term growth, market share, liquidity and profitability, are forward-looking statements. Forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including but not limited to, the risks and uncertainties set forth in Desktop Metal, Inc.'s filings with the U.S. Securities and Exchange Commission. There is no guarantee Desktop Metal will achieve the cost savings it expects. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Desktop Metal, Inc. assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240124837079/en/

Investor Relations:

(857) 504-1084

DesktopMetalIR@icrinc.com

Media Relations:

Sarah Webster

sarahwebster@desktopmetal.com

(313) 715-6988

Source: Desktop Metal, Inc.

FAQ

What is the ticker symbol for Desktop Metal, Inc.?

The ticker symbol for Desktop Metal, Inc. is DM.

What is the purpose of the $50 million cost-reduction plan announced by Desktop Metal, Inc.?

The cost-reduction plan aims to align the company's cost structure to current market dynamics and generate positive cash flow amidst a downturn in the additive manufacturing industry.

What is the expected result of the cost-reduction plan?

The plan anticipates additional annualized cost savings of $50 million, with the majority to be realized by the end of this month.

What are the negative aspects of the cost-reduction plan?

The plan is expected to result in pre-tax restructuring charges of $24.3 million to $31.5 million, with the majority of estimated charges being non-cash.

What is the CEO's statement regarding the cost-reduction plan?

Ric Fulop, Founder and CEO of Desktop Metal, stated that the company is committed to achieving sustainable profitability amidst the challenging period and aims to generate positive cash flow.

What are the company's long-term financial goals?

The company aims to achieve sustainable profitability and continues to invest in products and operations in line with near-term revenue generation.