FATH Fathom Digital Manufacturing Corporation

Fourth Quarter 2022 Highlights

• Revenue totaled $38.4 million
• Total orders were $36.8 million
• Net loss totaled $(114.9) million, which included a non-cash goodwill impairment charge of $123.0 million
• Adjusted net income1 was $1.7 million
• Adjusted EBITDA1 totaled $3.0 million, representing an Adjusted EBITDA margin1 of 7.9%

Full Year 2022 Highlights

• Revenue increased 5.9% to $161.1 million
• Total orders were $160.6 million
• Net loss totaled $(1,109.2) million, which included a non-cash goodwill impairment charge of $1,189.5 million
• Adjusted net loss1 totaled $(0.9) million
• Adjusted EBITDA1 was $24.9 million, representing an Adjusted EBITDA margin1 of 15.5%

 

Fathom Digital Manufacturing Corp. (NYSE: FATH), an industry leader in on-demand digital manufacturing services, today announced preliminary unaudited financial results for the fourth quarter and full year ended December 31, 2022.

 

Three Months Ended

 

Twelve Months Ended

($ in thousands)

12/31/2022

12/31/2021

 

12/31/2022

12/31/2021

Revenue

$38,402

$44,309

 

$161,141

$152,196

Net income (loss)

$(114,876)

$25,054

 

$(1,109,171)

$16,996

Adjusted net income (loss)1

$1,685

$(2,900)

 

$(859)

$(1,604)

Adjusted EBITDA1

$3,025

$10,531

 

$24,925

$34,351

Adjusted EBITDA margin1

7.9%

23.8%

 

15.5%

22.6%

1 See “Non-GAAP Financial Information.” Reconciliations of non-GAAP financial measures are included in the appendix.

“Our fourth quarter results were below our expectations and primarily reflect ongoing softness in the macro environment along with the continued ramp up of our new commercial activities,” said Ryan Martin, Fathom Chief Executive Officer. “In response, we have both accelerated and augmented our plan to drive greater efficiencies in the business and currently expect to generate approximately $19.5 million in annualized cost savings upon completion of our plan in Q2 2023. We also appointed a new Vice President of Sales with a proven track record in enterprise sales and strategic growth management as we remain focused on strengthening our go-to-market strategies. We are confident our new sales leadership and efficiency measures will support our efforts to increase the scalability of our broad on-demand platform and deliver profitable, long-term growth.”

Summary of Financial Results (preliminary unaudited)

Revenue for the fourth quarter of 2022 was $38.4 million compared to $44.3 million in the fourth quarter of 2021, a decrease of 13.3% primarily due to lower production volumes. For the year ended December 31, 2022, revenue increased 5.9% to $161.1 million from $152.2 million for the same period in 2021 with higher sales driven by acquisition-related activity and growth within Fathom’s strategic accounts.

Gross profit for the fourth quarter of 2022 totaled $10.0 million, or 26.0% of revenue, compared to $17.4 million, or 39.2% of revenue, in the fourth quarter of 2021. Gross profit for the year ended December 31, 2022 was $52.5 million, or 32.6% of revenue, which includes approximately $3.2 million in non-cash purchase accounting adjustments, compared to $59.2 million, or 38.9% of revenue, for the same period in 2021. Excluding the $3.2 million in non-cash purchase accounting adjustments, gross profit for the year ended December 31, 2022 was $55.8 million, or 34.6% of revenue.

Net loss for the fourth quarter of 2022 was $(114.9) million compared to net income of $25.1 million in the fourth quarter of 2021. Net loss for the fourth quarter of 2022 included a non-cash goodwill impairment charge of $123.0 million. The impairment charge has no impact on the company’s cash position, liquidity, or covenant tests under its credit agreement.

Excluding goodwill impairment as well as the revaluation of Fathom warrants and earnout shares, stock compensation expense, and other costs, Fathom reported adjusted net income in the fourth quarter of 2022 totaling $1.7 million compared to an adjusted net loss of $(2.9) million for the same period in 2021.

Net loss for the year ended December 31, 2022 was $(1,109.2) million, which included a non-cash goodwill impairment charge of $1,189.5 million. This compares to net income of $17.0 million for the same period in 2021. For the year ended December 31, 2022, Fathom reported an adjusted net loss of $(0.9) million compared to an adjusted net loss of $(1.6) million for the same period in 2021.

Adjusted EBITDA for the fourth quarter of 2022 totaled $3.0 million versus $10.5 million for the same period in 2021 primarily due to lower production volumes and related excess labor as well as the incurrence of public company expenses totaling approximately $1.8 million. The Adjusted EBITDA margin in the quarter was 7.9% compared to 23.8% in the fourth quarter of 2021.

For the year ended December 31, 2022, Adjusted EBITDA totaled $24.9 million versus $34.4 million for the same period in 2021 primarily due to recurring public company expenses totaling approximately $7.0 million. The Adjusted EBITDA margin for the year ended December 31, 2022 was 15.5% compared to 22.6% for the same period in 2021.

Conference Call

Fathom will host a conference call on Friday, March 31, 2023 at 8:30 am Eastern Time to discuss the results for the fourth quarter and full year 2022 and provide the company’s outlook for the first quarter 2023. The dial-in number for callers in the U.S. is +1-844-200-6205 and the dial-in number for international callers is +1-929-526-1599. The access code for all callers is 105276. The conference call will be broadcast live over the Internet and include a slide presentation. To access the webcast and supporting materials, please visit the investor relations section of Fathom’s website at https://investors.fathommfg.com.

A replay of the conference call can be accessed through April 7, 2023, by dialing +1-866-813-9403 (US) or +1-226-828-7578 (international), and then entering the access code 997940. 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 North America, serving the comprehensive product development and low- to mid-volume manufacturing needs of some of the largest and most innovative companies in the world. With more than 25 quick turn manufacturing processes combined with an extensive national footprint, Fathom seamlessly blends in-house capabilities across plastic and metal additive technologies, CNC machining, injection molding and tooling, sheet metal fabrication, design and engineering, and more. Fathom has more than 35 years of industry experience and is at the forefront of the Industry 4.0 digital manufacturing revolution, serving clients in the technology, defense, aerospace, medical, automotive, IOT sectors, and others. Fathom's certifications include: ITAR Registered, ISO 9001:2015 Design Certified, ISO 9001:2015, ISO 13485:2016, AS9100:2016, and NIST 800-171. To learn more, visit https://fathommfg.com/.

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; 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, 2021, filed with the Securities and Exchange Commission (the “SEC”) on April 8, 2022 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, including with respect to the financial guidance for the first quarter 2023 contained herein, 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 U.S. GAAP. We believe Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA margin are useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA margin are not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

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, reorganization 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, reorganization 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 U.S. GAAP because they are non-recurring (for example, in the case of reorganization expenses), non-cash (for example, in the case of depreciation, amortization, goodwill impairment, and stock-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense). Adjusted EBITDA margin represents Adjusted EBITDA divided by total revenue. We include these non-GAAP financial measures because they are used by management to evaluate Fathom’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments.

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.

Financial Disclosure Disclaimer

Fathom has not yet completed its reporting process for the three and twelve months ended December 31, 2022. The company expects to submit a notification of late filing on Form 12b-25 with the SEC on March 31, 2023. The preliminary unaudited results presented herein are based on Fathom’s reasonable estimates and the information available at this time. The amounts reported herein are subject to various adjustments that are still under review and relate specifically to potential changes in the provision for income taxes. Such adjustments may be material and could impact the results reported herein.

Consolidated Balance Sheets (preliminary unaudited)

($ in thousands)

Period Ended

 

December 31, 2022

December 31, 2021

Assets

Current assets

Cash

$

10,713

$

20,357

Accounts receivable, net

 

28,641

 

25,367

Inventory

 

15,718

 

13,165

Prepaid expenses and other current assets

 

3,588

 

1,836

Total current assets

 

58,660

 

60,725

Property and equipment, net

 

47,703

 

44,527

ROU Lease Assets - operating

 

10,312

 

-

ROU Lease Assets - financing

 

2,253

Intangible assets, net

 

251,412

 

269,622

Goodwill

 

-

 

1,189,464

Other non-current assets

 

175

 

2,036

Total assets

$

370,515

$

1,566,374

Liabilities and Shareholders’ Equity

Current liabilities

Accounts payable

 

7,982

 

9,409

Accrued expenses

 

8,176

 

5,957

Current operating lease liability

 

2,174

 

-

Current finance lease liability

 

200

 

-

Other current liabilities

 

4,128

 

2,748

Contingent consideration

 

700

 

29,697

Current portion of debt

 

42,744

 

2,058

Total current liabilities

 

66,104

 

49,869

Long-term debt, net

 

114,327

 

120,491

Fathom earnout shares liability

 

5,960

 

64,300

Sponsor earnout shares liability

 

930

 

9,380

Warrant liability

 

2,780

 

33,900

Payable to related parties pursuant to the tax receivable agreement (includes $5,200 and $4,600 at fair value, respectively)

 

25,360

 

4,600

Long-term contingent consideration

 

-

 

850

Noncurrent operating lease liability

 

8,958

 

-

Noncurrent finance lease liability

 

2,125

Deferred tax liability

 

-

 

17,570

Other noncurrent liabilities

 

-

 

4,655

Total liabilities

 

226,544

 

305,615

Commitments and Contingencies:

Redeemable non-controlling interest in Fathom OpCo

 

101,911

 

841,982

Shareholders' Equity:

Class A common stock, $0.0001 par value; 300,000,000 shares authorized; issued and outstanding 65,808,764 and 50,785,656 shares as of December 31, 2022 and December 31, 2021, respectively

 

7

 

5

Class B common stock, $0.0001 par value; 180,000,000 shares authorized; issued and outstanding 70,153,051 and 84,294,971 shares as of December 31, 2022 and December 31, 2021, respectively

 

7

 

8

Additional paid-in-capital

 

577,599

 

466,345

Accumulated other comprehensive loss

 

(107)

 

-

Accumulated deficit

 

(535,446)

 

(47,581)

Shareholders’ equity attributable to Fathom Digital Manufacturing Corporation

 

42,060

 

418,777

Total Liabilities, Shareholders’ Equity, and Redeemable Non-Controlling Interest

$

370,515

$

1,566,374

Consolidated Statements of Comprehensive Income (Loss) (preliminary unaudited)

 

Three Months Ended

Twelve Months Ended

($ in thousands)

December 31, 2022

December 31, 2021

December 31, 2022

December 31, 2021

 

 

Revenue

$

38,402

 

$

44,309

$

161,141

 

$

152,196

Cost of revenue

 

28,417

 

 

26,923

 

108,623

 

 

93,003

Gross profit

 

9,985

 

 

17,386

 

52,518

 

 

59,193

Operating expenses

 

 

Selling, general, and administrative

 

11,528

 

 

13,529

 

49,869

 

 

40,640

Depreciation and amortization

 

4,584

 

 

3,418

 

18,179

 

 

10,773

Restructuring

 

926

 

 

-

 

1,897

 

 

-

Goodwill Impairment

 

122,954

 

 

-

 

1,189,518

 

 

-

Total operating expenses

 

139,992

 

 

16,947

 

1,259,463

 

 

51,413

Operating (loss) income

 

(130,007)

 

 

439

 

(1,206,945)

 

 

7,780

Interest expense and other (income) expense

 

 

Interest expense

 

3,355

 

 

4,514

 

9,015

 

 

13,314

Other expense

 

50

 

 

12,308

 

350

 

 

21,315

Other income

 

(10,389)

 

 

(37,419)

 

(99,160)

 

 

(40,634)

Total interest expense and other (income) expense, net

 

(6,984)

 

 

(20,597)

 

(89,795)

 

 

(6,005)

Net income (loss) before income tax

 

(123,023)

 

 

21,036

 

(1,117,150)

 

 

13,785

Income tax (benefit) expense

 

(8,147)

 

 

(4,018)

 

(7,979)

 

 

(3,211)

Net income (loss)

 

(114,876)

 

 

25,054

 

(1,109,171)

 

 

16,996

Q4 2022 Revenue by Product Line (preliminary unaudited)

 

 

Reported Three Months Ended

($ in thousands)

12/31/2022

Percentage

12/31/2021

Percentage

% Change

Revenue By Product Line

 

 

 

 

 

Additive manufacturing

$3,204

8.3%

$4,514

10.2%

-29.0%

Injection molding

$5,318

13.8%

$9,032

20.4%

-41.1%

CNC machining

$14,947

38.9%

$14,196

32.0%

5.3%

Precision sheet metal

$12,154

31.6%

$13,855

31.3%

-12.3%

Other revenue

$2,779

7.2%

$2,712

6.1%

2.5%

Total

$38,402

100.0%

$44,309

100.0%

-13.3%

Full Year 2022 Revenue by Product Line (preliminary unaudited)

 

 

Reported Twelve Months Ended

($ in thousands)

12/31/2022

Percentage

12/31/2021

Percentage

% Change

Revenue By Product Line

 

 

 

 

 

Additive manufacturing

$14,917

9.3%

$17,830

11.7%

-16.3%

Injection molding

$25,210

15.6%

$28,892

19.0%

-12.7%

CNC machining

$58,388

36.2%

$43,149

28.4%

35.3%

Precision sheet metal

$55,307

34.3%

$53,445

35.1%

3.5%

Other revenue

$7,319

4.5%

$8,880

5.8%

-17.6%

Total

$161,141

100.0%

$152,196

100.0%

5.9%

Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss) (preliminary unaudited)

 

 

Three Months Ended

 

 

Twelve Months Ended

($ in thousands)

12/31/2022

 

12/31/2021

 

 

12/31/2022

 

12/31/2022

Net income (loss)

$

(114,876)

 

$

25,054

 

 

$

(1,109,171)

 

$

16,996

Acquisition expenses(1)

 

-

 

 

-

 

 

 

-

 

 

4,045

Transaction costs(2)

 

-

 

 

12,515

 

 

 

-

 

 

12,515

Stock compensation

 

1,699

 

 

-

 

 

 

7,386

 

 

-

Inventory step-up amortization

 

-

 

 

-

 

 

 

3,241

 

 

-

Goodwill impairment

 

122,954

 

 

-

 

 

 

1,189,518

 

 

-

Restructuring

 

901

 

 

-

 

 

 

1,897

 

 

-

Change in fair value of warrant liability(3)

 

(3,120)

 

 

(8,200)

 

 

 

(31,120)

 

 

(8,200)

Change in fair value of earnout shares liabilities(3)

 

(6,810)

 

 

(27,260)

 

 

 

(66,790)

 

 

(27,260)

Change in fair value of tax receivable agreement (TRA) liability (3)

 

(400)

 

 

300

 

 

 

(600)

 

 

300

Integration, non-recurring, non-operating, cash, and non-cash costs(4)

 

1,337

 

 

(5,309)

 

 

 

4,780

 

 

-

Adjusted net income (loss)

$

1,685

 

$

(2,900)

 

 

$

(859)

 

$

(1,604)

1 Represents expenses incurred related to business acquisitions; 2 Represents legal, consulting, and auditing costs associated with the business combination completed on December 23, 2021; 3 Represents the impacts from the change in fair value related to the earnout shares liability, the warrant liability and the tax receivable agreement associated with the business combination; 4 Represents adjustments for other integration, non-recurring, non-operating, cash, and non-cash costs related primarily to integration costs for new acquisitions, severance, charges for the increase of fair value of inventory related to acquisitions, and management fees paid to our principal owner during the predecessor period.

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA (preliminary unaudited)

 

 

Three Months Ended

 

 

Twelve Months Ended

($ in thousands)

 

12/31/2022

 

 

12/31/2021

 

 

 

12/31/2022

 

 

12/31/2021

Net income (loss)

$

(114,876)

 

$

25,054

 

 

$

(1,109,171)

 

$

16,996

Depreciation and amortization

 

6,357

 

 

4,612

 

 

 

24,896

 

 

16,618

Interest expense, net

 

3,277

 

 

4,514

 

 

 

9,015

 

 

13,314

Income tax expense (benefit)

 

(8,146)

 

 

(4,018)

 

 

 

(7,979)

 

 

(3,211)

Acquisition expenses(1)

 

-

 

 

-

 

 

 

-

 

 

4,045

Transaction costs(2)

 

-

 

 

12,515

 

 

 

-

 

 

12,515

Stock compensation

 

1,699

 

 

-

 

 

 

7,386

 

 

-

Inventory step-up amortization

 

-

 

 

-

 

 

 

3,241

 

 

-

Goodwill impairment

 

122,954

 

 

-

 

 

 

1,189,518

 

 

-

Restructuring

 

901

 

 

-

 

 

 

1,897

 

 

-

Change in fair value of warrant liability(3)

 

(3,120)

 

 

(8,200)

 

 

 

(31,120)

 

 

(8,200)

Change in fair value of earnout shares liability(3)

 

(6,810)

 

 

(27,260)

 

 

 

(66,790)

 

 

(27,260)

Change in fair value of tax receivable agreement (TRA) liability(3)

 

(400)

 

 

300

 

 

 

(600)

 

 

300

Loss on extinguishment of debt(4)

 

-

 

 

-

 

 

 

-

 

 

2,031

Contingent consideration(5)

 

(148)

 

 

(2,430)

 

 

 

(148)

 

 

(3,550)

Integration, non-recurring, non-operating, cash, and non-cash costs(6)

 

1,337

 

 

5,444

 

 

 

4,780

 

 

10,753

Adjusted EBITDA

$

3,025

 

$

10,531

 

 

$

24,925

 

$

34,351

1 Represents expenses incurred related to business acquisitions; 2 Represents legal, consulting, and auditing costs associated with the business combination completed on December 23, 2021; 3 Represents the impacts from the change in fair value related to the earnout shares liability, the warrant liability and the tax receivable agreement associated with the business combination; 4 Represents amounts paid to refinance debt in April of 2021; 5 Represents the change in fair value of contingent consideration payable to former owners of acquired businesses; 6 Represents adjustments for other integration, non-recurring, non-operating, cash, and non-cash costs related primarily to integration costs for new acquisitions, severance, charges for the increase of fair value of inventory related to acquisitions, and management fees paid to our principal owner during the predecessor period.

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230330005873/en/

Michael Cimini Director, Investor Relations Fathom Digital Manufacturing (262) 563-5575 michael.cimini@fathommfg.com