Desktop Metal‘s (NYSE: DM) third-quarter report shows a 3D printing leader facing tough financial challenges as it charts a new path under Nano Dimension‘s (Nasdaq: NNDM) ownership, with the acquisition expected to be finalized by the end of 2024. The metal printing company presented its third quarter 2024 financial results directly to the U.S. Securities and Exchange Commission (SEC) to guarantee transparency and align with regulatory standards amid its ongoing acquisition.

The SEC filing reveals that Desktop Metal posted a $35.4 million net loss for the third quarter, pushing its total losses to $191 million for 2024. What’s more, the report revealed that the company has only $30 million in cash on hand after burning through $15.4 million in Q3 alone, amid a drop in assets and continued restructuring challenges.

As it prepares to become a subsidiary of Nano Dimension, Desktop Metal has begun restructuring efforts, including divesting assets like its Aerosint subsidiary and an Ohio facility to cut costs and streamline operations. The company recorded $1.8 million in restructuring charges for Q3 and $3.9 million for the nine months ending September 30, 2024, covering severance payments made to employees laid off, benefits provided to affected employees, and costs related to closing, selling, or merging facilities.

Additionally, Desktop Metal is reconsidering its photopolymer business as part of a targeted cost-reduction effort called the Photopolymer Initiative. This initiative includes exploring options like selling parts of this segment or reducing investment, hoping to save money in the long run. As a result, the company recorded an $80.3 million accounting adjustment to reduce the reported value of certain photopolymer-related assets, showing their lower importance to Desktop Metal’s future strategy. This adjustment, plus $1.3 million in layoff and facility costs, could save money in the future if it helps Desktop Metal cut costs and shows its push to streamline operations and focus resources ahead of its merger with Nano Dimension.

The company is also facing legal proceedings, including class action lawsuits from shareholders and cases related to past mergers, adding complexity to an already challenging transition. These cases, along with the numbers, show the intense financial pressures and changes Desktop Metal is going through as it prepares to integrate with Nano Dimension.

Ric Fulop during the CEO Panel presentation at AMS 2024. Image courtesy of Ashley Alleyne, 3DPrint.com

Furthermore, Desktop Metal saw a decrease in revenue compared to last year. The company earned $36.4 million in total revenue, a year-over-year decline from $42.8 million. Despite attempts to improve margins, gross profit fell to $3.2 million from $1.9 million the year before. Operating expenses remained high, with R&D costs at $11.5 million and general and administrative expenses surging to $17.3 million. Combined with a shrinking gross margin, these high operational costs drove Desktop Metal to an operating loss of $33.7 million for Q3.

One of the primary reasons for Desktop Metal’s significant loss this quarter comes from ongoing costs associated with its restructuring plan. Desktop Metal’s total assets fell sharply from $458 million at the end of 2023 to $273 million by September 2024, mainly due to a substantial reduction in cash reserves. Cash and cash equivalents now stand at $30.6 million, down from $83.8 million, highlighting the impact of cash outflows on the company’s overall assets.

Desktop Metal’s debt was high in Q3, with $113.1 million in convertible notes due in 2027. The interest expense associated with these notes rose to $1.69 million for the quarter, adding to the financial burden. On the positive side, the company still has about $13.3 million in revenue, which it hasn’t counted yet, mostly from customer support and software licenses sold after the initial sale.

Desktop Metal’s Studio System 3D printers. Stifel recently participated in the sale of ExOne to Desktop Metal. Image courtesy of Desktop Metal

This third-quarter report arrives at a pivotal time for Desktop Metal. As it is prepping to become a Nano Dimension subsidiary, the company is refining its business model. It also marked a transition from public market obligations on the New York Stock Exchange, with the company planning to de-list and deregister under the Exchange Act as part of the acquisition’s completion. This strategic restructuring only shows Nano Dimension’s plan to absorb Desktop Metal into its larger operational framework.

By filing directly with the SEC instead of hosting an earnings call, Desktop Metal may take a more organized approach to keep things transparent and manage investor expectations during this transition. Desktop Metal’s Q3 SEC filing shows a company in transition, managing financial challenges with the opportunities of merging with a larger parent business. As the acquisition moves forward, the integration will aim to address the losses and streamline efficiencies for both companies. However, with Desktop Metal’s limited cash reserves and considerable debt, the timely completion of this merger could become vital for its financial stability. Given these pressures, the merger’s completion could be a key step in securing Desktop Metal’s stability as it faces growing financial pressures.