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Desktop Metal Earnings: What to Watch on Nov. 15

Desktop Metal (NYSE: DM) is slated to report its third-quarter 2021 results after the market close on Monday, Nov. 15. An analyst conference call is scheduled for the same day at 4:30 p.m. EST.

The 3D printing company's report will follow those of two early movers in the industry, 3D Systems and Stratasys. The latter plans to announce its results for the quarter before the market open on Thursday, Nov. 4, as outlined in this earnings preview, and 3D Systems release is on deck for Monday, Nov. 8, as discussed in this earnings preview.

Last quarter, Desktop's top and bottom lines met Wall Street's expectations. Its release of its results, however, was overshadowed by its announcement that it was acquiring The ExOne Company (NASDAQ: XONE), which is focused on metal 3D printing. This topic is discussed below.

Desktop Metal's management has not been providing organic revenue growth, which excludes contributions from acquisitions made within the last year. And the company has been making many acquisitions since going public last December via a special purpose acquisition company. Therefore, investors don't have quantitative data about how the company's internally developed metal 3D printing product portfolio is performing in the market.

In 2021 to date (Oct. 27), Desktop Metal stock is down 59%. The S&P 500 index has returned 22.6%, and 3D Systems and Stratasys stocks are up 158% and 47.1%, respectively, so far this year.

With this background in mind, here's what to watch in Desktop's upcoming report.

Image source: Getty Images.

Key numbers

Following are Wall Street's estimates and the company's results for the prior quarter to use as benchmarks. (This chart would typically provide year-ago results rather than prior-quarter ones, but Desktop Metal wasn't publicly traded at that time.)

Metric

Q2 2021 Result

Q3 2021 Wall Street Consensus Estimate

Projected Sequential Change

Revenue

$19.0 million

$28.6 million

51%

Adjusted earnings per share (EPS)

($0.08) ($0.09) N/A. Adjusted loss per share expected to widen 11%.

Data sources: Desktop Metal and Yahoo! Finance.

For some context, in the second quarter, the company's revenue surged 767% year over year to $19 million. This result (which includes an undisclosed contribution from acquisitions) was in line with Wall Street's expectation of $19.1 million.

Adjusted for one-time items, last quarter's net loss narrowed 5% year over year to $21.4 million. This translated to loss per share narrowing 43% from $0.14 to $0.08, about in line with the loss per share of $0.09 that analysts had anticipated. (The share count increased substantially when the company went public, which explains the percentage change differences between the net loss and the net loss per share.)

P-50 launch status

In last quarter's earnings release, the company said that its "Production System P-50 [is] on track to begin shipments in [the] fourth quarter of 2021." The P-50 is the company's reportedly very speedy flagship metal 3D printing system geared to higher-volume manufacturing applications. It uses the company's proprietary single-pass binder-jetting technology.

Management has been saying since at least early this year that this system would launch in the latter part of 2021. So, it seems probable that investors will punish the stock if the launch is delayed.

The ExOne acquisition

For Desktop shareholders, a key positive of the acquisition of ExOne, which is expected to close in the fourth quarter of this year, is that buying out a competitor eliminates them as a competitor. ExOne is probably Desktop's most direct competitor in metal 3D printing, as the companies both use binder-jetting technology. However, their specific technologies are different, with the CEOs of both companies emphasizing on Desktop's Q2 earnings call that the companies have complementary technologies, materials, and go-to-market strategies.

A drawback for Desktop shareholders is that the acquisition will dilute their ownership percentage because the company plans to finance about two-thirds of the approximately $575 million acquisition price through the issuance of new shares.

Guidance

Any material changes to guidance will probably move the stock.

Last quarter, management again reiterated its revenue outlook issued earlier in the year, which excludes the impact of the ExOne acquisition. For 2021, it still expects revenue of over $100 million and projects that it will exit the year with an annualized revenue run rate of $160 million, again, excluding the contribution from ExOne.

It also guided for 2021 earnings before interest, taxes, depreciation, and amortization in the range of negative $80 million to negative $70 million, excluding the effects of the ExOne acquisition.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends 3D Systems. The Motley Fool has a disclosure policy.


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