UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38835

DESKTOP METAL, INC.

(Exact name of registrant as specified in its charter)


Delaware	83-2044042
(State of Other Jurisdiction of incorporation or Organization)	(I.R.S. Employer Identification No.)

63 3rd Avenue, Burlington, MA	01803
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (978) 224-1244

Securities registered pursuant to Section 12(b) of the Act:


		Name Of Each Exchange
Title of Each Class	Trading Symbol(s)	On Which Registered
Class A Common Stock, $0.0001 Par Value per Share	DM	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2023, there were 321,460,345 shares of the registrant’s Class A common stock outstanding.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DESKTOP METAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share amounts)


	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	101,252	$	76,291
Current portion of restricted cash		4,595		4,510
Short‑term investments		48,554		108,243
Accounts receivable		35,603		38,481
Inventory		98,221		91,736
Prepaid expenses and other current assets		21,067		16,325
Assets held for sale		6,871		830
Total current assets		316,163		336,416
Restricted cash, net of current portion		612		1,112
Property and equipment, net		45,262		56,271
Goodwill		113,571		112,955
Intangible assets, net		210,117		219,830
Other noncurrent assets		28,461		27,763
Total Assets	$	714,186	$	754,347
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	21,988	$	25,105
Customer deposits		12,300		11,526
Current portion of lease liability		6,106		5,730
Accrued expenses and other current liabilities		28,026		26,723
Current portion of deferred revenue		14,639		13,719
Current portion of long‑term debt, net of deferred financing costs		403		584
Total current liabilities		83,462		83,387
Long-term debt, net of current portion		252		311
Convertible notes		112,017		111,834
Lease liability, net of current portion		17,679		17,860
Deferred revenue, net of current portion		3,965		3,664
Deferred tax liability		8,074		8,430
Other noncurrent liabilities		3,167		1,359
Total liabilities		228,616		226,845
Commitments and Contingencies (Note 17)
Stockholders’ Equity
Preferred Stock, $0.0001 par value—authorized, 50,000,000 shares; no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		—		—
Common Stock, $0.0001 par value—500,000,000 shares authorized; 320,477,686 and 318,235,106 shares issued at March 31, 2023 and December 31, 2022, respectively, 320,401,389 and 318,133,434 shares outstanding at March 31, 2023 and December 31, 2022, respectively		32		32
Additional paid‑in capital		1,883,764		1,874,792
Accumulated deficit		(1,361,596)		(1,308,954)
Accumulated other comprehensive loss		(36,630)		(38,368)
Total Stockholders’ Equity		485,570		527,502
Total Liabilities and Stockholders’ Equity	$	714,186	$	754,347

See notes to condensed consolidated financial statements

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended
	March 31,
	2023		2022
Revenues
Products	$	36,697	$	39,476
Services		4,619		4,230
Total revenues		41,316		43,706
Cost of sales
Products		38,891		41,902
Services		3,789		3,132
Total cost of sales		42,680		45,034
Gross profit (loss)		(1,364)		(1,328)
Operating expenses
Research and development		23,144		24,605
Sales and marketing		9,607		19,689
General and administrative		18,202		23,857
Total operating expenses		50,953		68,151
Loss from operations		(52,317)		(69,479)
Interest expense		(811)		32
Interest and other (expense) income, net		(71)		(1,753)
Loss before income taxes		(53,199)		(71,200)
Income tax benefit		557		1,256
Net loss	$	(52,642)	$	(69,944)
Net loss per share—basic and diluted	$	(0.16)	$	(0.22)
Weighted average shares outstanding, basic and diluted		319,095,656		312,016,627

See notes to condensed consolidated financial statements.

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share amounts)


	Three Months Ended March 31, 2023
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—January 1, 2023	318,133,434	$	32	$	1,874,792	$	(1,308,954)	$	(38,368)	$	527,502
Exercise of Common Stock options	495,876		—		597		—		—		597
Vesting of restricted Common Stock	25,375		—		—		—		—		—
Vesting of restricted stock units	1,808,422		—		—		—		—		—
Repurchase of shares for employee tax withholdings	(61,718)		—		(99)		—		—		(99)
Stock‑based compensation expense	—		—		8,474		—		—		8,474
Net loss	—		—		—		(52,642)		—		(52,642)
Other comprehensive income (loss)	—		—		—		—		1,738		1,738
BALANCE—March 31, 2023	320,401,389	$	32	$	1,883,764	$	(1,361,596)	$	(36,630)	$	485,570


	Three Months Ended March 31, 2022
								Accumulated
								Other
	Common Stock			Additional				Comprehensive		Total
	Voting			Paid‑in		Accumulated		(Loss)		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
BALANCE—January 1, 2022	311,473,950	$	31	$	1,823,344	$	(568,611)	$	(6,414)	$	1,248,350
Exercise of Common Stock options	786,693		—		900		—		—		900
Vesting of restricted Common Stock	84,384		—		—		—		—		—
Vesting of restricted stock units	520,265		—		—		—		—		—
Repurchase of shares for employee tax withholdings	(39,720)		—		(158)		—		—		(158)
Stock‑based compensation expense	—		—		9,912		—		—		9,912
Net loss	—		—		—		(69,944)		—		(69,944)
Other comprehensive income (loss)	—		—		—		—		(11,035)		(11,035)
BALANCE—March 31, 2022	312,825,572	$	31	$	1,833,998	$	(638,555)	$	(17,449)	$	1,178,025

See notes to condensed consolidated financial statements.

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DESKTOP METAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(52,642)	$	(69,944)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		13,433		12,883
Stock‑based compensation		9,313		9,912
Amortization (accretion) of discount on investments		(382)		413
Amortization of deferred costs on convertible notes		183		—
Provision for bad debt		179		419
Loss on disposal of property and equipment		519		2
Net increase (decrease) in accrued interest related to marketable securities		(8)		949
Net unrealized (gain) loss on equity investment		402		1,700
Deferred tax benefit		(557)		(1,256)
Change in fair value of contingent consideration		—		(114)
Foreign currency transaction (gain) loss		(25)		195
Changes in operating assets and liabilities:
Accounts receivable		2,792		9,489
Inventory		(6,892)		(15,506)
Prepaid expenses and other current assets		(4,664)		(4,087)
Other assets		991		(210)
Accounts payable		(3,011)		(1,333)
Accrued expenses and other current liabilities		878		(3,391)
Customer deposits		705		2,980
Current portion of deferred revenue		1,127		721
Change in right of use assets and lease liabilities, net		(1,493)		(108)
Other liabilities		1,806		12
Net cash used in operating activities		(37,346)		(56,274)
Cash flows from investing activities:
Purchases of property and equipment		(1,011)		(4,074)
Proceeds from sale of property and equipment		3,071		6
Purchase of marketable securities		(4,973)		—
Proceeds from sales and maturities of marketable securities		64,840		98,625
Cash paid for acquisitions, net of cash acquired		(500)		(23)
Net cash provided by investing activities		61,427		94,534
Cash flows from financing activities:
Proceeds from the exercise of stock options		597		900
Payment of taxes related to net share settlement upon vesting of restricted stock units		(99)		(158)
Repayment of loans		(250)		(43)
Net cash provided by financing activities		248		699
Effect of exchange rate changes on cash, cash equivalents and restricted cash		217		(349)
Net increase (decrease) in cash, cash equivalents, and restricted cash		24,546		38,610
Cash, cash equivalents, and restricted cash at beginning of period		81,913		68,258
Cash, cash equivalents, and restricted cash at end of period	$	106,459	$	106,868

Supplemental disclosures of cash flow information
Reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	101,252	$	103,590
Restricted cash included in other current assets		4,595		2,166
Restricted cash included in other noncurrent assets		612		1,112
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	106,459	$	106,868

Supplemental cash flow information:
Interest paid	$	—	$	—
Taxes paid	$	—	$	—

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Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the financial statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. See the below discussion of changes to the Company’s policies for assets held for sale. There have been no other changes to the Company’s significant accounting policies during the first three months of fiscal year 2023.

Assets Held for Sale

We classify long-lived assets or asset groups we plan to sell as held for sale on our consolidated balance sheets only after certain criteria have been met including: (i) management has the authority and commits to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and the plan to sell the asset have been initiated, (iv) the sale of the asset is probable within 12 months, (v) the asset is being actively marketed at a reasonable sales price relative to its current fair value, and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. We record assets or asset groups held for sale at the lower of their carrying value or fair value less costs to sell.

3. REVENUE RECOGNITION

Contract Balances

The Company’s deferred revenue balance was $18.6 million and $17.4 million as of March 31, 2023, and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company recognized $3.4 million of existing deferred revenue from 2022. During the year ended December 31, 2022, the Company recognized $14.3 million of existing deferred revenue from 2021. The deferred revenue consists of billed post-installation customer support and maintenance, cloud-based software licenses that are recognized ratably over the term of the agreement, and contracts that have outstanding performance obligations or contracts that have acceptance terms that have not yet been fulfilled.

Contract assets were not significant during the three months ended March 31, 2023 and 2022.

Remaining Performance Obligations

At March 31, 2023, the Company had $18.6 million of remaining performance obligations, of which approximately $14.6 million is expected to be fulfilled over the next 12 months, notwithstanding uncertainty related to customer site readiness and unanticipated economic events, which could have an adverse effect on the timing of delivery and installation of products and/or services to customers. In addition, the Company also had customer deposits of $12.3 million at March 31, 2023.

4. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company’s cash equivalents and short-term investments are invested in the following (in thousands):


	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	43,944	$	—	$	—	$	43,944
Total cash equivalents		43,944		—		—		43,944
Commercial paper		4,994		—		—		4,994
Corporate bonds		18,213		—		(73)		18,140
U.S. Treasury securities		9,937		—		(37)		9,900
Government bonds		14,874		—		(40)		14,834
Total short-term investments		48,018		—		(150)		47,868
Total cash equivalents and short-term investments	$	91,962	$	—	$	(150)	$	91,812

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	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	51,274	$	—	$	—	$	51,274
Total cash equivalents		51,274		—		—		51,274
Commercial paper		39,781		—		—		39,781
Corporate bonds		28,970		—		(156)		28,814
U.S. Treasury securities		19,896		—		(78)		19,818
Government bonds		14,846		—		(102)		14,744
Asset-backed securities		4,000		—		(2)		3,998
Total short-term investments		107,493		—		(338)		107,155
Total cash equivalents and short-term investments	$	158,767	$	—	$	(338)	$	158,429

During the year ended December 31, 2021, the Company made a $20.0 million investment in equity securities of a publicly-traded company. The Company records this investment at fair value within short-term investments, which was $0.7 million as of March 31, 2023. During the three months ended March 31, 2023, the Company recorded an unrealized loss due to the change in fair value of the equity securities of $0.4 million, respectively, in interest and other (expense) income, net in the consolidated statements of operations.

5. FAIR VALUE MEASUREMENTS

The Company uses the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values for certain of its assets and liabilities:

Level 1 is based on observable inputs, such as quoted prices in active markets;

Level 2 is based on inputs other than the quoted prices in active markets that are observable either directly or indirectly; and

Level 3 is based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Items measured at fair value on a recurring basis include money market funds.

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The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):


	March 31, 2023
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Items		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	43,944	$	—	$	—	$	43,944
Commercial paper		—		4,994		—		4,994
Corporate bonds		—		18,140		—		18,140
U.S. Treasury securities		—		9,900		—		9,900
Government bonds		—		14,834		—		14,834
Equity securities		686		—		—		686
Other investments		—		—		2,000		2,000
Total assets	$	44,630	$	47,868	$	2,000	$	94,498
Liabilities:
Contingent consideration	$	—	$	—	$	1,754	$	1,754
Total liabilities	$	—	$	—	$	1,754	$	1,754


	December 31, 2022
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Items		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds	$	51,274	$	—	$	—	$	51,274
Commercial paper		—		39,781		—		39,781
Corporate bonds		—		28,814		—		28,814
U.S. Treasury securities				19,818				19,818
Government bonds		—		14,744		—		14,744
Asset-backed securities		—		3,988		—		3,998
Equity securities		1,088		—		—		1,088
Other investments		—		—		2,000		2,000
Total assets	$	52,362	$	107,145	$	2,000	$	161,517
Liabilities:
Contingent consideration	$	—	$	—	$	2,587	$	2,587
Total liabilities	$	—	$	—	$	2,587	$	2,587

The Company has determined that the estimated fair value of its corporate bonds and commercial paper are reported as Level 2 financial assets as they are based on model-driven valuations in which all significant inputs are observable, or can be derived from or corroborated by observable market data for substantially the full term of the asset.

Equity securities include investments made via publicly-traded securities. The Company has determined that the estimated fair value of its equity securities is reported as Level 1 financial assets as they are based on quoted market prices in active markets for identical assets. During the three months ended March 31, 2023, the Company recorded an unrealized loss due to the change in fair value of the equity securities of $0.4 million in interest and other (expense) income, net in the consolidated statements of operations.

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Other investments include investments made via convertible debt instruments totaling $2.0 million. The other investments are reported as a Level 3 financial asset because the methodology used to develop the estimated fair values includes significant unobservable inputs reflecting management’s own assumptions. Assumptions used in fair valuing convertible debt instruments include the rights and obligations of the notes the Company holds as well as the probability of a qualified financing event, acquisition, or change in control. During the three months ended March 31, 2022 and 2023, the Company did not recognize any gains or losses on convertible debt instruments.

The Aerosint acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of $6.1 million as of the date of acquisition and a fair value of $1.8 million as of March 31, 2023. The contingent consideration liability was valued using a Monte Carlo simulation in a risk-neutral framework as well as a scenario-based approach (both special cases of the income approach), based on key inputs that are not all observable in the market and is classified as a Level 3 liability. The Company assesses the fair value of the contingent consideration liability at each reporting period, with any subsequent changes to the fair value of the liability reflected in the condensed consolidated statement of operations until the liability is settled. During the three months ended March 31, 2023, the Company did not recognize a gain or loss in fair value of contingent consideration. During the three months ended March 31, 2022, the Company recognized loss in fair value of contingent consideration of $0.1 million. During the three months ended March 31, 2023, the Company paid $0.8 million of contingent consideration in connection with the achievement of technical milestones. As of March 31, 2023, the $1.8 million balance of contingent consideration is recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

The 2027 Notes are valued as a single liability measured at amortized cost, as no other features require bifurcation and recognition as derivatives.

There were no transfers between fair value measure levels during the three months ended March 31, 2023 and 2022. The following table presents information about the Company’s movement in Level 3 assets measured at fair value (in thousands):


	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	2,000	$	6,750
Balance at end of period	$	2,000	$	6,750

The following table presents information about the Company’s movement in Level 3 liabilities measured at fair value (in thousands):


	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	2,587	$	5,654
Payment of contingent consideration liability		(833)		—
Changes in fair value		—		(114)
Balance at end of period	$	1,754	$	5,540

6. ACCOUNTS RECEIVABLE

The components of accounts receivable are as follows (in thousands):


	March 31,		December 31,
	2023		2022
Trade receivables	$	37,422	$	40,121
Allowance for doubtful accounts		(1,819)		(1,640)
Total accounts receivable	$	35,603	$	38,481

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The following table summarizes activity in the allowance for doubtful accounts (in thousands):


	March 31,		December 31,
	2023		2022
Balance at beginning of period	$	1,640	$	665
Provision for uncollectible accounts, net of recoveries		179		1,393
Uncollectible accounts written off		—		(418)
Balance at end of period	$	1,819	$	1,640

7. INVENTORY

Inventory consists of the following (in thousands):


	March 31,		December 31,
	2023		2022
Raw materials	$	46,763	$	41,971
Work in process		13,531		11,936
Finished goods:
Deferred cost of sales		6,885		3,602
Manufactured finished goods		31,042		34,227
Total finished goods		37,927		37,829
Total inventory	$


		Page
PART I

Part I. Financial Information		3

Item 1. Financial Statements		3

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022		3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022		4

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022		5

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022		6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022		7

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29

Item 3. Quantitative and Qualitative Disclosures About Market Risk		40

Item 4. Controls and Procedures		41

Part II. Other Information		41

Item 1. Legal Proceedings		41

Item 1A. Risk Factors		42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		71

Item 3. Defaults Upon Senior Securities		71

Item 4. Mine Safety Disclosures		71

Item 5. Other Information		71

Item 6. Exhibits		71

Exhibit Index		72

Signatures		73


	Three Months Ended
	March 31,
	2023		2022
Net loss	$	(52,642)	$	(69,944)
Other comprehensive (loss) income, net of taxes:
Unrealized gain (loss) on available-for-sale marketable securities, net		189		12
Foreign currency translation adjustment		1,549		(11,047)
Total comprehensive (loss) income, net of taxes of $0	$	(50,904)	$	(80,979)

Non‑cash investing and financing activities:
Net unrealized (gain) loss on investments	$	(189)	$	(12)
Additions to right of use assets and lease liabilities	$	1,531	$	7,784
Purchase of property and equipment included in accounts payable	$	183	$	313
Purchase of property and equipment included in accrued expense	$	32	$	—
Transfers from property and equipment to inventory	$	275	$	1,721
Transfers from PP&E to Asset Held-For-Sale	$	6,040	$	—
Transfers from inventory to property and equipment	$	1,067	$	605