Desktop Metal Announces Third Quarter 2023 Financial Results

Non-GAAP Financial Information

This press release contains non-GAAP financial measures, including non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP operating expense, EBITDA and Adjusted EBITDA.

We define non-GAAP gross margin as GAAP gross margin excluding the effect of stock-based compensation, amortization of acquired intangible assets, restructuring, acquisition-related and integration costs, and inventory step-up adjustments
We define non-GAAP operating loss as GAAP operating loss excluding the effect of stock-based compensation, amortization of acquired intangible assets, restructuring, inventory step-up adjustments, and acquisition-related and integration costs
We define non-GAAP net loss as GAAP net loss excluding the effect of stock-based compensation, amortization of acquired intangible assets, restructuring, inventory step-up adjustments, acquisition-related and integration costs, and change in fair value of investments
We define non-GAAP operating expense as GAAP operating expense excluding the effect of stock-based compensation, amortization of acquired intangible assets, restructuring, and acquisition-related and integration costs including in operating expenses
We define EBITDA as GAAP net income (loss) excluding interest, income taxes, and depreciation and amortization expense
We define Adjusted EBITDA as EBITDA excluding change in fair value of investments, inventory step-up adjustments, stock-based compensation, restructuring, and acquisition-related and integration costs

In addition to Desktop Metal’s results determined in accordance with GAAP, Desktop Metal’s management uses this non-GAAP financial information to evaluate the Company’s ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial information, when taken collectively, may be helpful to investors in assessing Desktop Metal’s operating performance.

We believe that the use of Non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP operating expense, EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing, capital expenditures, and non-cash expenses such as stock-based compensation and warrants, and provides investors with a means to compare Desktop Metal’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, investors should be aware that when evaluating non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP operating expense, EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of these measures may not be comparable to other similarly titled measures computed by other companies because not all companies calculate these measures in the same fashion.

Because of these limitations, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP operating expense, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP operating expense, EBITDA and Adjusted EBITDA on a supplemental basis. Management uses, and investors should consider, our non-GAAP financial measures only in conjunction with our GAAP results. Desktop Metal has not provided a reconciliation of its Adjusted EBITDA outlook to net income because estimates of all of the reconciling items cannot be provided without unreasonable efforts.

Set forth below is a reconciliation of each non-GAAP financial measure used in this press release to its most directly comparable GAAP financial measure.


DESKTOP METAL, INC.
NON-GAAP RECONCILIATION TABLE
(in thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2023			2022			2023			2022
GAAP gross margin	$	1,924		$	(309	)	$	6,649		$	6,760
Stock-based compensation included in cost of sales ⁽¹⁾		517			734			1,787			1,892
Amortization of acquired intangible assets included in cost of sales		6,889			5,877			20,744			17,817
Restructuring expense in cost of sales		16			3,085			3,221			3,126
Acquisition-related and integration costs included in cost of sales		—			—			913			1,148
Inventory step-up adjustment in cost of sales		—			—			—			1,496
Non-GAAP gross margin	$	9,346		$	9,387		$	33,314		$	32,239

GAAP operating loss	$	(45,120	)	$	(57,819	)	$	(145,954	)	$	(419,868	)
Stock-based compensation ^(2),(3)		7,683			12,040			26,699			41,170
Amortization of acquired intangible assets		10,398			9,069			31,297			28,522
Restructuring expense		142			3,085			6,610			5,086
Inventory step-up adjustment in cost of sales		—			—			—			1,496
Acquisition-related and integration costs ⁽⁴⁾		(5,452	)		1,476			3,313			6,633
Goodwill impairment		2,450			—			2,450			229,500
Impairment charges		6,062			—			6,062			—
Non-GAAP operating loss	$	(23,837	)	$	(32,149	)	$	(69,523	)	$	(107,461	)

GAAP net loss	$	(46,373	)	$	(60,774	)	$	(148,742	)	$	(427,990	)
Stock-based compensation ^(2),(3)		7,683			12,040			26,699			41,170
Amortization of acquired intangible assets		10,398			9,069			31,297			28,522
Restructuring expense		142			3,085			6,610			5,469
Inventory step-up adjustment in cost of sales		—			—			—			1,496
Acquisition-related and integration costs ⁽⁴⁾		(5,452	)		1,476			3,313			6,633
Goodwill impairment		2,450			—			2,450			229,500
Impairment charges		6,062			—			6,062			—
Change in fair value of investments		775			2,052			1,061			8,493
Non-GAAP net loss	$	(24,315	)	$	(33,052	)	$	(71,250	)	$	(106,707	)

⁽¹⁾ Includes $(0.1) million and $0.3 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. Includes $0.1 million and $0.2 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

⁽²⁾ Includes $(0.7) million and $2.2 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. Includes $1.2 million and $3.4 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

⁽³⁾ Includes $7.3 million of stock-based compensation expense associated with the restructuring initiative for the nine months ended September 30, 2022.

⁽⁴⁾ For the three months ended September 30, 2023, the Company incurred an additional $4.3 million in merger expenses related to the Stratasys transaction and recognized a $10.0 million reduction in expenses as a result of the reimbursement from Stratasys. The net gain of $5.6 million is included in the adjustment for Acquisition-related and integration costs for the three months ended September 30, 2023. For the nine months ended September 30, 2023, we incurred $10.0 million in merger expenses related to the Stratasys transaction and recognized a $10.0 million reduction in expenses as a result of the reimbursement from Stratasys, with no net impact to the adjustment for Acquisition-related and integration costs for the nine months ended September 30, 2023.


DESKTOP METAL, INC.
NON-GAAP OPERATING EXPENSE RECONCILIATION TABLE
(in thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2023			2022			2023			2022
GAAP operating expenses	$	47,044		$	57,510		$	152,603		$	426,628
Stock-based compensation included in operating expenses ^(1),(2)		(7,166	)		(11,306	)		(24,912	)		(39,278	)
Amortization of acquired intangible assets included in operating expenses		(3,509	)		(3,192	)		(10,553	)		(10,705	)
Restructuring expense included in operating expenses		(126	)		—			(3,389	)		(1,960	)
Acquisition-related and integration costs included in operating expenses ⁽³⁾		5,452			(1,476	)		(2,400	)		(5,485	)
Goodwill impairment		(2,450	)		—			(2,450	)		(229,500	)
Impairment charges		(6,062	)		—			(6,062	)		—
Non-GAAP operating expenses	$	33,183		$	41,536		$	102,837		$	139,700

⁽¹⁾ Includes $(0.6) million and $1.9 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2023, respectively. Includes $1.1 million and $3.2 million of liability-award stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

⁽²⁾ Includes $7.3 million of stock-based compensation expense associated with the Initiative for the nine months ended September 30, 2022.

⁽³⁾ For the three months ended September 30, 2023, the Company incurred an additional $4.3 million in merger expenses related to the Stratasys transaction and recognized a $10.0 million reduction in expenses as a result of the reimbursement from Stratasys. The net gain of $5.6 million is included in the adjustment for Acquisition-related and integration costs for the three months ended September 30, 2023. For the nine months ended September 30, 2023, we incurred $10.0 million in merger expenses related to the Stratasys transaction and recognized a $10.0 million reduction in expenses as a result of the reimbursement from Stratasys, with no net impact to the adjustment for Acquisition-related and integration costs for the nine months ended September 30, 2023.


DESKTOP METAL, INC.
NON-GAAP ADJUSTED EBITDA RECONCILIATION TABLE
(in thousands)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2023			2022			2023			2022
Net loss attributable to common stockholders	$	(46,373	)	$	(60,774	)	$	(148,742	)	$	(427,990	)
Interest (income) expense, net		1,045			680			2,965			1,281
Income tax expense (benefit)		(141	)		598			(675	)		(1,602	)
Depreciation and amortization		13,357			12,692			40,322			38,294
EBITDA		(32,112	)		(46,804	)		(106,130	)		(390,017	)
Change in fair value of investments		775			2,052			1,061			8,493
Inventory step-up adjustment		—			—			—			1,496
Stock-based compensation expense ^(1),(2)		7,683			12,040			26,699			41,170
Restructuring expense		142			3,085			6,610			5,469
Goodwill impairment		2,450			—			2,450			229,500
Impairment charges		6,062			—			6,062			—
Acquisition-related and integration costs ⁽³⁾		(5,452	)		1,476			3,313			6,633
Adjusted EBITDA	$	(20,452	)	$	(28,151	)	$	(59,935	)	$	(97,256	)

⁽¹⁾ Includes $7.3 million of stock-based compensation expense associated with the Initiative for the nine months ended September 30, 2022.

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