FATH Fathom Digital Manufacturing Corporation

First Quarter 2022 Highlights

• Revenue increased 32.8% to $40.5 million
• Total orders increased 17% to $43.8 million
• Net income totaled $17.8 million; adjusted net loss1 totaled $2.0 million
• Adjusted EBITDA1 was $6.2 million, representing an Adjusted EBITDA margin1 of 15.2%
• Reaffirmed financial guidance for full year 2022

Fathom Digital Manufacturing Corp. (NYSE: FATH), an industry leader in on-demand digital manufacturing services, today announced financial results for the three months ended March 31, 2022.

 

Three Months Ended

($ in thousands)

3/31/2022

3/31/2021

Revenue

$40,541

$30,534

Net income (loss)

$17,839

$(500)

Adjusted net income (loss)1

$(1,984)

$2,060

Adjusted EBITDA1

$6,178

$7,709

Adjusted EBITDA margin1

15.2%

25.2%

1

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

“Fathom delivered positive results in its first full quarter as a public company,” said Ryan Martin, Fathom Chief Executive Officer. “We are an industry pioneer with a history of profitability and cash generation, and extended this tradition in Q1 as we continue to benefit from the strong demand for our broad capabilities in the fast-growing digital manufacturing market. During the first quarter, which is typically our lowest quarter of the year, our order volumes increased 17% and contributed to revenue growth of approximately 33%. We also reported Adjusted EBITDA of $6.2 million consistent with our differentiated business model. As we have moved into the second quarter, we have seen increased quarter-over-quarter growth in-line with our full year forecast, which remains unchanged.”

Summary of Financial Results

Revenue for the first quarter of 2022 was $40.5 million compared to $30.5 million in the first quarter of 2021, an increase of 32.8%. The year-over-year growth was driven by an increase in the volume of customers served, primarily through acquisition-related activity, and growth within Fathom’s strategic accounts partially offset by lower sales due to production disruptions from the spread of the Omicron variant and Covid-related supply chain disruptions in the first quarter.

Gross profit for the first quarter of 2022 totaled $12.0 million, or 29.6% of revenue, compared to $13.4 million, or 43.9% of revenue, in the first quarter of 2021. Excluding approximately $3.5 million in non-cash purchase accounting adjustments following the completion of Fathom’s business combination on December 23, 2021, gross profit in the first quarter of 2022 would have been $15.5 million, or 38.2% of revenue.

Net income for the first quarter of 2022 was $17.8 million compared to a net loss of $0.5 million in the first quarter of 2021. Excluding acquisition costs, stock compensation expense, the revaluation of Fathom warrants and earnout shares, and other costs, Fathom reported an adjusted net loss in the first quarter of 2022 of $2.0 million compared to adjusted net income of $2.1 million for the same period in 2021.

Adjusted EBITDA for the first quarter of 2022 was $6.2 million versus $7.7 million for the same period in 2021 primarily due to the incurrence of public company expenses totaling approximately $3.6 million, of which approximately $1.3 million was non-recurring. The Adjusted EBITDA margin in the quarter was 15.2% compared to 25.2% in the first quarter of 2021.

2022 Outlook

Fathom reiterated its financial guidance for the full year 2022. The company expects revenue to range between $182 million and $192 million, representing year-over-year growth of approximately 20% to 26%. Fathom also expects Adjusted EBITDA to range between $40 million and $45 million, representing a year-over-year increase of approximately 16% to 31% and an implied Adjusted EBITDA margin of 22.0% to 23.4%. This outlook, as of May 16, 2022, reflects management’s current projections and macroeconomic outlook, and excludes the impact of any potential new acquisitions.

Conference Call

Fathom will host a conference call on Monday, May 16, 2022, at 8:30 am Eastern Time. 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 723631. 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 May 30, 2022, by dialing +1-866-813-9403 (US) or +1-226-828-7578 (international), and then entering the access code 819382. 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 unique manufacturing processes and a national footprint with nearly 450,000 square feet of manufacturing capacity across 12 facilities, Fathom seamlessly blends in-house capabilities across plastic and metal additive technologies, CNC machining, injection molding and tooling, sheet metal fabrication, and design and engineering. With more than 35 years of industry experience, Fathom is at the forefront of the Industry 4.0 digital manufacturing revolution, serving clients in the technology, defense, aerospace, medical, automotive and IOT sectors. 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 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. Although Fathom may elect to update these forward-looking statements at some point in the future, Fathom specifically disclaims any obligation to do so. 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.

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 increase or decrease in the estimated fair value of the company’s warrants or earnout shares. We define and calculate Adjusted EBITDA as net losses before the impact of interest income or expense, income tax expense and depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, 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 transaction-related costs), non-cash (for example, in the case of depreciation and amortization, 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.

Q1 2022 U.S GAAP Income Statement

 

($ in thousands)

 

 

 

Period ended

 

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

 

 

 

 

 

Revenue

 

$

40,541

 

 

$

30,534

 

Cost of revenue1

 

 

28,544

 

 

 

17,123

 

Gross profit

 

 

11,997

 

 

 

13,411

 

Operating expenses

 

 

 

 

 

 

Selling, general, and administrative

 

 

14,763

 

 

 

7,670

 

Depreciation and amortization

 

 

4,517

 

 

 

2,672

 

Total operating expenses

 

 

19,280

 

 

 

10,342

 

Operating (loss) income

 

 

(7,283)

 

 

 

3,069

 

Interest expense and other (income) expense

 

 

 

 

 

 

Interest expense

 

 

1,473

 

 

 

2,114

 

Other expense

 

 

116

 

 

 

1,480

 

Other income

 

 

(27,165)

 

 

 

(34)

 

Total interest expense and other (income) expense, net

 

 

(25,576)

 

 

 

3,560

 

Net income (loss) before income tax

 

$

18,293

 

 

$

(491)

 

Income tax expense

 

 

454

 

 

 

9

 

Net income (loss)

 

$

17,839

 

 

$

(500)

 

 

1 Cost of revenue for the three months ended March 31, 2022, includes approximately $3.5 million in amortization costs related to purchase accounting adjustments following the closing of Fathom’s business combination on December 23, 2021. Excluding these non-cash purchase accounting adjustments, the cost of revenue for the three months ended March 31, 2022, was $15.5 million, or 38.2% of revenue.

Q1 2022 Revenue by Product Line

 

 

Revenue for Three Months Ended

 

($ in thousands)

3/31/2022

Percentage

3/31/2021

Percentage

% Change

 

Additive manufacturing

$4,149

10.2%

$4,540

14.9%

-8.6%

 

Injection molding

$6,815

16.8%

$6,637

21.7%

2.7%

 

CNC machining

$13,326

32.9%

$4,831

15.8%

175.8%

 

Precision sheet metal

$14,683

36.2%

$13,117

43.0%

11.9%

 

Other revenue

$1,568

3.9%

$1,409

4.6%

11.4%

 

Total

$40,541

100.0%

$30,534

100.0%

32.8%

 

 

 

 

 

 

 

 

Consolidated Balance Sheets

($ in thousands)

Period Ended

 

March 31, 2022

 

December 31, 2021

Assets

(unaudited)

 

 

Current assets

 

 

 

Cash

$

11,993

 

$

20,357

Accounts receivable, net

 

28,157

 

 

25,367

Inventory

 

12,541

 

 

13,165

Prepaid expenses and other current assets

 

4,873

 

 

1,836

Total current assets

 

57,564

 

 

60,725

Property and equipment, net

 

46,248

 

 

44,527

Right-of-use operating lease assets, net

 

8,808

 

 

-

Right-of-use financing lease assets, net

2,417

 

-

Intangible assets, net

 

265,017

 

 

269,622

Goodwill

 

1,189,762

 

 

1,189,464

Other non-current assets

 

252

 

 

2,036

Total assets

$

1,570,068

 

$

1,566,374

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

 

13,860

 

 

9,409

Accrued expenses

 

6,806

 

 

5,957

Other current liabilities

 

5,014

 

 

2,058

Current operating lease liability

 

2,937

 

 

-

Current financing lease liability

 

185

 

 

-

Contingent consideration

 

2,748

 

 

2,748

Current portion of debt

 

25,423

 

 

29,697

Total current liabilities

 

56,973

 

 

49,869

Long-term debt, net

 

119,083

 

 

120,491

Fathom earnout shares liability

 

47,690

 

 

64,300

Sponsor earnout shares liability

 

7,020

 

 

9,380

Long-term contingent consideration

 

850

 

 

850

Noncurrent operating lease liability

 

5,917

 

 

-

Noncurrent financing lease liability

 

2,278

 

 

-

Deferred tax liability

 

17,546

 

 

17,570

Other noncurrent liabilities

 

1,608

 

 

4,655

Warrant liability

 

25,800

 

 

33,900

Payable to related parties pursuant to the tax receivable agreement

 

4,600

 

 

4,600

Total liabilities

 

289,365

 

 

305,615

Commitments and Contingencies:

 

 

 

Redeemable non-controlling interest

 

836,723

 

 

841,982

Shareholders' Equity:

 

 

 

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

 

5

 

 

5

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

 

8

 

 

8

Class C common stock, $.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2021 and December 31, 2021

 

-

 

 

-

Preferred Stock, $.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2021 and December 31, 2021

 

-

 

 

-

Additional paid-in-capital

 

468,475

 

 

466,345

Accumulated other comprehensive loss

 

 

 

Accumulated deficit

 

(24,508)

 

 

(47,581)

Shareholders’ equity attributable to Fathom Digital Manufacturing Corporation

 

443,980

 

 

418,777

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

$

1,570,068

 

$

1,566,374

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

 

 

March 31, 2022

 

March 31, 2021

 

Net income (loss)

 

$

17,839

 

$

(500)

 

Acquisition expenses1

 

 

-

 

 

1,169

 

Stock compensation

 

 

2,128

 

 

-

 

Inventory step-up amortization

 

 

3,241

 

 

277

 

Change in fair value of warrant liability2

 

 

(8,100)

 

 

-

 

Change in fair value of earnout share liabilities2

 

 

(18,970)

 

 

-

 

Integration, non-recurring, non-operating, cash, and non-cash costs3

 

 

1,878

 

 

1,114

 

Adjusted net income (loss)

 

$

(1,984)

 

$

2,060

         

1Represents expenses incurred related to business acquisitions; 2Represents the impacts from the change in fair value related to both the earnout share liability and the warrant liability associated with the business combination completed on December 23, 2021; 3Represents adjustments for other integration, non-recurring, non-operating, cash, and non-cash costs related primarily to integration costs for new acquisitions, severance, and management fees paid to our principal owner.

 

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

     

 

 

 

 

 

 

March 31, 2022

 

March 31, 2021

 

Net income (loss)

 

$

17,839

 

$

(500)

 

Depreciation and amortization

 

 

6,208

 

 

3,526

 

Interest expense, net

 

 

1,500

 

 

2,114

 

Income tax expense

 

 

454

 

 

9

 

Acquisition expenses1

 

 

-

 

 

1,169

 

Inventory step-up amortization

 

 

3,241

 

 

277

 

Stock compensation

 

 

2,128

 

 

-

 

Change in fair value of warrant liability2

 

 

(8,100)

 

 

-

 

Change in fair value of earnout share liabilities2

 

 

(18,970)

 

 

-

 

Integration, non-recurring, non-operating, cash, and non-cash costs3

 

 

1,878

 

 

1,114

 

Adjusted EBITDA

 

$

6,178

 

$

7,709

     

1Represents expenses incurred related to business acquisitions; 2Represents the impacts from the change in fair value related to both the earnout share liability and the warrant liability associated with the business combination completed on December 23, 2021; 3Represents adjustments for other integration, non-recurring, non-operating, cash, and non-cash costs related primarily to integration costs for new acquisitions, severance, and management fees paid to our principal owner.

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220515005036/en/

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