Fathom Digital Manufacturing Reports Third Quarter 2023 Financial Results
- Appointed a new CEO with significant global manufacturing experience and an extensive industrial background.
- Optimistic outlook for returning to revenue growth and sustainable profitability over time.
- Stable order rates seen in the third quarter, setting the company up for profitable growth in 2024.
- Lower revenue and order volumes impacted by lower order volumes, particularly in precision sheet metal and CNC product lines.
Third Quarter 2023 Highlights
-
Revenue totaled
$31.5 million -
Total orders were
$29.0 million -
Net loss totaled
; Adjusted net loss1 was$(8.6) million $(7.1) million -
Adjusted EBITDA1 totaled
, representing an Adjusted EBITDA margin1 of$3.1 million 9.8%
Year to Date 2023 Highlights
-
Revenue totaled
$100.9 million -
Total orders were
$104.4 million -
Net loss totaled
; Adjusted net loss1 totaled$(17.2) million $(18.3) million -
Adjusted EBITDA1 was
, representing an Adjusted EBITDA margin1 of$12.0 million 11.9%
|
Three Months Ended |
|
Nine Months Ended |
||
($ in thousands) |
9/30/2023 |
9/30/2022 |
|
9/30/2023 |
9/30/2022 |
Revenue |
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
Adjusted net income (loss)1 |
|
|
|
|
|
Adjusted EBITDA1 |
|
|
|
|
|
Adjusted EBITDA margin1 |
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|
|
|
|
1 See “Non-GAAP Financial Information.” Reconciliations of non-GAAP financial measures are included in the appendix. |
On October 23, 2023, Fathom appointed Carey Chen as Chief Executive Officer of the company succeeding Ryan Martin. Mr. Chen has significant global manufacturing experience and an extensive background in supporting companies across the industrial landscape. He has served as a member of Fathom’s Board of Directors since April 2021 and as a Director to Fathom’s predecessor companies since 2019.
“I am optimistic that there are opportunities to return to revenue growth and sustainable profitability over time. We’ve added new sales and operating leadership,” said Carey Chen, Fathom’s Chief Executive Officer. “Together with the valued employees throughout Fathom, we will move with urgency to optimize the performance of the company.”
In commenting on the third quarter financial results, Mark Frost, Chief Financial Officer, said, “Revenue in the quarter came in at the low-end of our expectations. We saw more stable order rates as the quarter progressed and believe we are set up to return to profitable growth in 2024 as we realize the full benefits of our cost optimization efforts.”
Year Over Year Summary of Financial Results – (Third Quarter and Nine Months)
Revenue for the third quarter of 2023 was
Gross profit for the third quarter of 2023 totaled
Net loss for the third quarter of 2023 was
Net loss for the nine months ended September 30, 2023, was
Adjusted EBITDA for the third quarter of 2023 was
For the nine months ended September 30, 2023, Adjusted EBITDA and Adjusted EBITDA margin were
Amendment to Credit Agreement
On November 13, 2023, the Company entered into a third amendment to its Credit Agreement. For additional information, please refer to Fathom’s Quarterly Report on Form 10-Q filed today, November 14, 2023, with the Securities and Exchange Commission.
Conference Call
Fathom will host a conference call on Tuesday, November 14, 2023, at 8:30 a.m. Eastern Time to discuss the results for the third quarter 2023 and provide the company’s outlook for the fourth quarter of 2023. The dial-in number for callers in the
A replay of the conference call can be accessed through November 28, 2023, by dialing +1-866-813-9403 (US) or +1-929-458-6194 (international), and then entering the access code 841973. The webcast will also be archived on Fathom’s website.
About Fathom Digital Manufacturing
Fathom is one of the largest on-demand digital manufacturing platforms in
Forward-Looking Statements
Certain statements made in this press release are “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “estimates,” “projects,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,” “should,” “future,” “propose,” “target,” “goal,” “objective,” “outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of Fathom Digital Manufacturing Corporation (“Fathom”) that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: the inability to recognize the anticipated benefits of our business combination with Altimar Acquisition Corp. II; changes in general economic conditions, including as a result of the COVID-19 pandemic or any future outbreaks of other highly infectious or contagious disease; the implementation of our optimization plan could result in greater costs and fewer benefits than we anticipate; the outcome of litigation related to or arising out of the business combination, or any adverse developments therein or delays or costs resulting therefrom; the ability to meet the New York Stock Exchange’s listing standards following the consummation of the business combination; costs related to the business combination and additional factors discussed in Fathom’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on April 7, 2023, as amended on May 1, 2023, as well as Fathom’s other filings with the SEC. If any of the risks described above materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by our forward-looking statements. There may be additional risks that Fathom does not presently know or that Fathom currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Fathom’s expectations, plans or forecasts of future events and views as of the date of this press release. These forward-looking statements should not be relied upon as representing Fathom’s assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements. Fathom undertakes no obligation to update or revise any forward-looking statements made by management or on its behalf whether as a result of future developments, subsequent events or circumstances or otherwise, except as required by law.
Non-GAAP Financial Information
This press release includes Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures that we use to supplement our results presented in accordance with
We define and calculate Adjusted Net Income as net income (loss) before the impact of any change in the estimated fair value of the company’s warrants or earnout shares, tax receivable agreement liability, optimization plan expenses, goodwill impairment, stock-based compensation, and certain other non-cash and non-core items, as described in the reconciliation included in the appendix to this press release. We define and calculate Adjusted EBITDA as net income (loss) before the impact of interest income or expense, income tax expense and depreciation and amortization, and further adjusted for the following items: change in the estimated fair value of the company’s warrants or earnout shares, tax receivable agreement liability, optimization plan expenses, goodwill impairment, stock-based compensation, and certain other non-cash and non-core items, as described in the reconciliation included in the appendix to this press release. Adjusted EBITDA excludes certain expenses that are required in accordance with
Information reconciling forward-looking Adjusted EBITDA to GAAP financial measures is unavailable to Fathom without unreasonable effort. The company is not able to provide reconciliations of forward-looking Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of Fathom's control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to Fathom without unreasonable effort. Fathom provides a range for its Adjusted EBITDA forecast that it believes will be achieved, however it cannot accurately predict all the components of the Adjusted EBITDA calculation. Fathom provides an Adjusted EBITDA forecast because it believes that Adjusted EBITDA, when viewed with the company's results under GAAP, provides useful information for the reasons noted above. However, Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity.
Consolidated Balance Sheets |
||||||||
Period Ended | ||||||||
September 30, 2023 (Unaudited) |
December 31, 2022 |
|||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ |
7,821 |
|
$ |
10,713 |
|
||
Accounts receivable, net (1) |
|
22,040 |
|
|
28,641 |
|
||
Inventory |
|
16,779 |
|
|
15,718 |
|
||
Prepaid expenses and other current assets |
|
2,403 |
|
|
3,588 |
|
||
Total current assets |
|
49,043 |
|
|
58,660 |
|
||
Property and equipment, net |
|
47,164 |
|
|
47,703 |
|
||
Right-of-use lease assets, net |
|
11,469 |
|
|
12,565 |
|
||
Intangible assets, net |
|
237,807 |
|
|
251,412 |
|
||
Other non-current assets |
|
142 |
|
|
175 |
|
||
Total assets | $ |
345,625 |
|
$ |
370,515 |
|
||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ |
9,401 |
|
$ |
7,982 |
|
||
Accrued expenses |
|
7,691 |
|
|
8,176 |
|
||
Current lease liability |
|
2,143 |
|
|
2,374 |
|
||
Other current liabilities |
|
2,671 |
|
|
4,828 |
|
||
Current portion of debt, net |
|
157,321 |
|
|
42,744 |
|
||
Total current liabilities |
|
179,227 |
|
|
66,104 |
|
||
Long-term debt, net |
|
- |
|
|
114,327 |
|
||
Fathom earnout shares liability |
|
283 |
|
|
5,960 |
|
||
Sponsor earnout shares liability |
|
49 |
|
|
930 |
|
||
Warrant liability |
|
191 |
|
|
2,780 |
|
||
Payable to related parties pursuant to the tax receivable agreement (includes |
|
25,800 |
|
|
25,360 |
|
||
Noncurrent lease liability |
|
9,709 |
|
|
11,083 |
|
||
Total liabilities |
|
215,259 |
|
|
226,544 |
|
||
Commitments and Contingencies: | ||||||||
Contingently Redeemable Preferred Equity: | ||||||||
Redeemable non-controlling interest in Fathom OpCo |
|
76,144 |
|
|
92,207 |
|
||
Shareholders' Equity: | ||||||||
Class A common stock, |
|
- |
|
|
7 |
|
||
Class B common stock, |
|
- |
|
|
7 |
|
||
Class C common stock, |
|
- |
|
|
- |
|
||
Preferred stock, |
|
- |
|
|
- |
|
||
Additional paid-in-capital |
|
595,785 |
|
|
587,941 |
|
||
Accumulated other comprehensive loss |
|
(107 |
) |
|
(107 |
) |
||
Accumulated deficit |
|
(541,456 |
) |
|
(536,084 |
) |
||
Shareholders’ equity attributable to Fathom Digital Manufacturing Corporation |
|
54,222 |
|
|
51,764 |
|
||
Total Liabilities, Shareholders’ Equity, and Redeemable Non-Controlling Interest | $ |
345,625 |
|
$ |
370,515 |
|
Consolidated Statements of Comprehensive Income (Loss) |
||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||
Revenue | $ |
31,458 |
|
$ |
40,210 |
|
$ |
100,939 |
|
$ |
122,737 |
|
||||||
Cost of revenue (1) (2) |
|
23,194 |
|
|
25,144 |
|
|
70,196 |
|
|
80,126 |
|
||||||
Gross profit |
|
8,264 |
|
|
15,066 |
|
|
30,743 |
|
|
42,611 |
|
||||||
Operating expenses | ||||||||||||||||||
Selling, general, and administrative |
|
8,117 |
|
|
11,960 |
|
|
28,335 |
|
|
38,341 |
|
||||||
Depreciation and amortization |
|
4,627 |
|
|
4,627 |
|
|
13,845 |
|
|
13,595 |
|
||||||
Restructuring |
|
718 |
|
|
996 |
|
|
2,774 |
|
|
996 |
|
||||||
Goodwill impairment |
|
- |
|
|
1,066,564 |
|
|
- |
|
|
1,066,564 |
|
||||||
Total operating expenses |
|
13,462 |
|
|
1,084,147 |
|
|
44,954 |
|
|
1,119,496 |
|
||||||
Operating loss |
|
(5,198 |
) |
|
(1,069,081 |
) |
|
(14,211 |
) |
|
(1,076,885 |
) |
||||||
Interest expense and other expense (income) | ||||||||||||||||||
Interest expense |
|
3,993 |
|
|
2,406 |
|
|
11,422 |
|
|
5,738 |
|
||||||
Other expense |
|
435 |
|
|
81 |
|
|
573 |
|
|
276 |
|
||||||
Other income |
|
(1,049 |
) |
|
(25,548 |
) |
|
(9,152 |
) |
|
(88,771 |
) |
||||||
Total interest expense and other expense (income), net |
|
3,379 |
|
|
(23,061 |
) |
|
2,843 |
|
|
(82,757 |
) |
||||||
Net loss before income tax |
|
(8,577 |
) |
|
(1,046,020 |
) |
|
(17,054 |
) |
|
(994,128 |
) |
||||||
Income tax expense (benefit) |
|
(9 |
) |
|
(7,050 |
) |
|
110 |
|
|
(8,435 |
) |
||||||
Net loss |
|
(8,568 |
) |
|
(1,038,970 |
) |
|
(17,164 |
) |
|
(985,693 |
) |
||||||
Net loss attributable to Fathom OpCo non-controlling interest (Note 14) |
|
(4,206 |
) |
|
(556,027 |
) |
|
(11,792 |
) |
|
(561,728 |
) |
||||||
Net loss attributable to controlling interest |
|
(4,362 |
) |
|
(482,943 |
) |
|
(5,372 |
) |
|
(423,965 |
) |
||||||
Comprehensive loss: | ||||||||||||||||||
Loss from foreign currency translation adjustments |
|
- |
|
|
- |
|
|
- |
|
|
(107 |
) |
||||||
Comprehensive loss, net of tax | $ |
(4,362 |
) |
$ |
(482,943 |
) |
$ |
(5,372 |
) |
$ |
(424,072 |
) |
||||||
Earnings per Share: | ||||||||||||||||||
Net loss per share attributable to shares of Class A common stock | ||||||||||||||||||
Basic (4) | $ |
(1.24 |
) |
$ |
(0.05 |
) |
$ |
(1.56 |
) |
$ |
(153.20 |
) |
||||||
Diluted (4) | $ |
(1.24 |
) |
$ |
(0.05 |
) |
$ |
(1.56 |
) |
$ |
(153.20 |
) |
||||||
Weighted average Class A common shares outstanding | ||||||||||||||||||
Basic (4) |
|
3,504,859 |
|
|
3,140,809 |
|
|
3,448,030 |
|
|
2,767,401 |
|
||||||
Diluted (4) |
|
3,504,859 |
|
|
3,140,809 |
|
|
3,448,030 |
|
|
2,767,401 |
|
Three Months 2023 Revenue by Product Line |
|||||
|
|
|
|
|
|
|
Three Months Ended |
||||
($ in thousands) |
9/30/2023 |
% Revenue |
9/30/2022 |
% Revenue |
% Change |
Revenue By Product Line |
|
|
|
|
|
Additive manufacturing |
|
|
|
|
- |
Injection molding |
|
|
|
|
- |
CNC machining |
|
|
|
|
- |
Precision sheet metal |
|
|
|
|
- |
Other revenue |
|
|
|
|
|
Total |
|
|
|
|
- |
|
|
|
|
|
|
|
Nine Months Ended |
||||
($ in thousands) |
9/30/2023 |
% Revenue |
9/30/2022 |
% Revenue |
% Change |
Revenue By Product Line |
|
|
|
|
|
Additive manufacturing |
|
|
|
|
- |
Injection molding |
|
|
|
|
- |
CNC machining |
|
|
|
|
- |
Precision sheet metal |
|
|
|
|
- |
Other revenue |
|
|
|
|
|
Total |
|
|
|
|
- |
|
|
|
|
|
|
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss) |
||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
Net loss | $ |
(8,568 |
) |
$ |
(1,038,970 |
) |
$ |
(17,164 |
) |
$ |
(985,694 |
) |
||||
Stock compensation |
|
1,139 |
|
|
1,762 |
|
|
3,471 |
|
|
5,687 |
|
||||
Inventory step-up amortization(1) |
|
- |
|
|
- |
|
|
- |
|
|
3,241 |
|
||||
Goodwill impairment |
|
- |
|
|
1,066,564 |
|
|
- |
|
|
1,066,564 |
|
||||
Restructuring expense |
|
718 |
|
|
996 |
|
|
2,774 |
|
|
996 |
|
||||
Change in fair value of warrant liability (2) |
|
(409 |
) |
|
(7,400 |
) |
|
(2,589 |
) |
|
(28,000 |
) |
||||
Change in fair value of earnout share liabilities(2) |
|
(613 |
) |
|
(18,080 |
) |
|
(6,558 |
) |
|
(59,980 |
) |
||||
Change in fair value of TRA liability (2) |
|
392 |
|
|
- |
|
|
442 |
|
|
(200 |
) |
||||
Integration, non-recurring, non-operating, cash, and non-cash costs(3) |
|
203 |
|
|
492 |
|
|
1,315 |
|
|
3,443 |
|
||||
Adjusted net loss | $ |
(7,138 |
) |
$ |
5,364 |
|
$ |
(18,309 |
) |
$ |
6,057 |
|
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA |
||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
Net loss | $ |
(8,568 |
) |
$ |
(1,038,970 |
) |
$ |
(17,164 |
) |
$ |
(985,694 |
) |
||||
Depreciation and amortization |
|
6,248 |
|
|
6,335 |
|
|
18,792 |
|
|
18,539 |
|
||||
Interest expense, net |
|
3,993 |
|
|
2,406 |
|
|
11,422 |
|
|
5,738 |
|
||||
Income tax expense (benefit) |
|
(9 |
) |
|
(7,050 |
) |
|
110 |
|
|
(8,434 |
) |
||||
Stock compensation |
|
1,139 |
|
|
1,762 |
|
|
3,471 |
|
|
5,687 |
|
||||
Goodwill impairment |
|
- |
|
|
1,066,564 |
|
|
- |
|
|
1,066,564 |
|
||||
Inventory step-up amortization(1) |
|
- |
|
|
- |
|
|
- |
|
|
3,241 |
|
||||
Restructuring expense |
|
718 |
|
|
996 |
|
|
2,774 |
|
|
996 |
|
||||
Change in fair value of warrant liability(2) |
|
(409 |
) |
|
(7,400 |
) |
|
(2,589 |
) |
|
(28,000 |
) |
||||
Change in fair value of earnout share liabilities(2) |
|
(613 |
) |
|
(18,080 |
) |
|
(6,558 |
) |
|
(59,980 |
) |
||||
Change in fair value of TRA (2) |
|
392 |
|
|
- |
|
|
442 |
|
|
(200 |
) |
||||
Integration, non-recurring, non-operating, cash, and non-cash costs(3) |
|
203 |
|
|
492 |
|
|
1,315 |
|
|
3,443 |
|
||||
Adjusted EBITDA | $ |
3,094 |
|
$ |
7,055 |
|
$ |
12,015 |
|
$ |
21,900 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20231113752760/en/
Vanessa Winter, Vice President, Ellipsis
Investor Relations
Fathom Digital Manufacturing
investors@fathommfg.com
Source: Fathom Digital Manufacturing Corporation
FAQ
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