Second Quarter 2022 Highlights

  • Revenue increased 17.0% to $42.0 million
  • Total orders were flat at $39.7 million
  • Net income totaled $34.0 million; adjusted net income1 totaled $1.2 million
  • Adjusted EBITDA1 increased to $8.7 million, representing an Adjusted EBITDA margin1 of 20.6%
  • Revised financial guidance for full year 2022

First Half 2022 Highlights

  • Revenue increased 24.3% to $82.5 million
  • Total orders increased approximately 8% to $83.5 million
  • Net income totaled $51.8 million; adjusted net loss1 totaled $0.8 million
  • Adjusted EBITDA1 was $14.8 million, representing an Adjusted EBITDA margin1 of 18.0%

Fathom Digital Manufacturing Corp. (NYSE: FATH), an industry leader in on-demand digital manufacturing services, today announced financial results for the three and six months ended June 30, 2022.

 

Three Months Ended

 

Six Months Ended

($ in thousands)

6/30/2022

6/30/2021

 

6/30/2022

6/30/2021

Revenue

$41,985

$35,872

 

$82,526

$66,406

Net income (loss)

$33,979

$(4,082)

 

$51,813

$(4,582)

Adjusted net income (loss)1

$1,192

$310

 

$(769)

$2,370

Adjusted EBITDA1

$8,668

$7,464

 

$14,846

$15,173

Adjusted EBITDA margin1

20.6%

20.8%

 

18.0%

22.8%

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

“In the second quarter, we built upon our proven history of growth and profitability as revenue rose 17% from continued growth in our strategic accounts and previous M&A activity while adjusted EBITDA increased 16.1% to $8.7 million, representing a leading industry margin,” said Ryan Martin, Fathom Chief Executive Officer. “We continue to benefit from our comprehensive manufacturing services by providing a diverse group of enterprise-level customers with timely, value-added solutions across both additive manufacturing and traditional manufacturing technologies. Our focus remains on investing in new technologies and expanding our breadth of leading offerings as we continue to take advantage of the positive long-term fundamentals of our business.”

Mr. Martin added, “For the full year, we have realigned our expectations with the current macro environment given the downshift in the broader economy. We continue to focus on strengthening our commercial team and expect to be in a strong position to achieve our go-forward growth target.”

Summary of Financial Results

Revenue for the second quarter of 2022 was $42.0 million compared to $35.9 million in the second quarter of 2021, an increase of $6.1 million, or 17.0%, of which approximately $3.6 million was organic and $2.5 was from acquisitions completed in Q2 2021. For the six months ended June 30, 2022, revenue increased 24.3% to $82.5 million from $66.4 million for the six months ended June 30, 2021.

Gross profit for the second quarter of 2022 totaled $15.5 million, or 37.0% of revenue, compared to $13.5 million, or 37.6% of revenue, in the second quarter of 2021. Gross profit for the six months ended June 30, 2022 was $27.5 million, or 33.4% of revenue, which includes approximately $3.7 million in non-cash purchase accounting adjustments, compared to $26.9 million, or 40.5% of revenue, for the same period in 2021.

Net income for the second quarter of 2022 was $34.0 million compared to a net loss of $4.1 million in the second quarter of 2021. Excluding acquisition costs, stock compensation expense, the revaluation of Fathom warrants and earnout shares, and other costs, Fathom reported adjusted net income in the second quarter of 2022 of $1.2 million compared to adjusted net income of $0.3 million for the same period in 2021.

Net income for the six months ended June 30, 2022 was $51.8 million compared to a net loss of $4.6 million for the same period in 2021. For the six months ended June 30, 2022, the adjusted net loss was $0.8 million compared to adjusted net income of $2.4 million for the same period in 2021.

Adjusted EBITDA for the second quarter of 2022 increased to $8.7 million from $7.5 million for the same period in 2021 primarily due to higher volumes partially offset by the incurrence of public company expenses totaling approximately $2.4 million. The Adjusted EBITDA margin in the quarter was 20.6% compared to 20.8% in the second quarter of 2021.

For the six months ended June 30, 2022, Adjusted EBITDA and Adjusted EBITDA margin were $14.8 million and 18.0%, respectively, compared to $15.2 million and 22.8%, respectively, for the same period in 2021.

Revised 2022 Outlook

For 2022, Fathom currently expects year-over-year revenue growth of approximately 8% to 12% for a range between $165 million and $171 million. Fathom also expects Adjusted EBITDA to range between $32 million and $36 million, representing year-over-year growth of approximately (7%) to 5% and an implied Adjusted EBITDA margin of 19.4% to 21.1%. Fathom’s current guidance, as of August 15, 2022, excludes the impact of any potential new acquisitions.

Conference Call

Fathom will host a conference call on Monday, August 15, 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 489270. 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 August 22, 2022, by dialing +1-866-813-9403 (US) or +1-226-828-7578 (international), and then entering the access code 896018. 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. 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. 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 revised financial guidance for full year 2022 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 increase or decrease in the estimated fair value of the company’s warrants or earnout shares. 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: 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, amortization 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.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

($ in thousands)

 

 

 

Three months ended

 

Six months ended

 

 

June 30, 2022 (Successor)

 

 

June 30, 2021 (Predecessor)

 

June 30, 2022 (Successor)

 

 

June 30, 2021 (Predecessor)

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

41,985

 

 

 

$

35,872

 

 

$

82,526

 

 

 

$

66,406

 

Cost of revenue

 

 

26,437

 

 

 

 

22,376

 

 

 

54,981

 

 

 

 

39,499

 

Gross profit

 

 

15,548

 

 

 

 

13,496

 

 

 

27,545

 

 

 

 

26,907

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

 

11,617

 

 

 

 

8,760

 

 

 

26,381

 

 

 

 

16,430

 

Depreciation and amortization

 

 

4,452

 

 

 

 

2,535

 

 

 

8,968

 

 

 

 

5,207

 

Total operating expenses

 

 

16,069

 

 

 

 

11,295

 

 

 

35,349

 

 

 

 

21,637

 

Operating (loss) income

 

 

(521

)

 

 

 

2,201

 

 

 

(7,804

)

 

 

 

5,270

 

Interest expense and other (income) expense

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,858

 

 

 

 

2,310

 

 

 

3,332

 

 

 

 

4,424

 

Other expense

 

 

129

 

 

 

 

7,110

 

 

 

195

 

 

 

 

8,650

 

Other income

 

 

(36,108

)

 

 

 

(3,206

)

 

 

(63,223

)

 

 

 

(3,300

)

Total interest expense and other (income) expense, net

 

 

(34,121

)

 

 

 

6,214

 

 

 

(59,696

)

 

 

 

9,774

 

Net income (loss) before income tax

 

$

33,601

 

 

 

$

(4,013

)

 

$

51,892

 

 

 

$

(4,504

)

Income tax (benefit) expense

 

 

(378

)

 

 

 

69

 

 

 

79

 

 

 

 

78

 

Net income (loss)

 

$

33,979

 

 

 

$

(4,082

)

 

$

51,813

 

 

 

$

(4,582

)

Net loss attributable to Fathom OpCo non-controlling interest

 

 

(442

)

 

 

 

-

 

 

 

(5,702

)

 

 

 

-

 

Net income attributable to controlling interest

 

 

34,421

 

 

 

 

(4,082

)

 

 

57,515

 

 

 

 

(4,582

)

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

Loss from foreign currency translation adjustments

 

 

-

 

 

 

 

2

 

 

 

(107

)

 

 

 

(105

)

Comprehensive income (loss), net of tax

 

$

34,421

 

 

 

$

(4,080

)

 

$

57,408

 

 

 

$

(4,687

)

Weighted average Class A common shares outstanding

 

 

 

 

 

 

 

 

 

 

Basic

 

 

52,259,885

 

 

 

 

 

 

51,530,961

 

 

 

 

Diluted

 

 

135,524,773

 

 

 

 

 

 

135,305,168

 

 

 

 

Q2 2022 Revenue by Product Line

 

 

Reported Three Months Ended

($ in thousands)

6/30/2022

% Revenue

6/30/2021

% Revenue

% Change

Revenue By Product Line

 

 

 

 

 

Additive manufacturing

$4,410

10.5%

$4,302

12.0%

2.5%

Injection molding

$7,093

16.9%

$6,492

18.1%

9.3%

CNC machining

$14,584

34.7%

$11,072

30.9%

31.7%

Precision sheet metal

$14,751

35.1%

$12,093

33.7%

22.0%

Other revenue

$1,147

2.7%

$1,913

5.3%

-40.0%

Total

$41,985

100%

$35,872

100%

17.0%

First Half 2022 Revenue by Product Line

 

 

Reported Six Months Ended

($ in thousands)

6/30/2022

% Revenue

6/30/2021

% Revenue

% Change

Revenue By Product Line

 

 

 

 

 

Additive manufacturing

$8,559

10.4%

$8,842

13.3%

-3.2%

Injection molding

$13,908

16.8%

$13,129

19.8%

5.9%

CNC machining

$27,910

33.8%

$15,903

23.9%

75.5%

Precision sheet metal

$29,434

35.7%

$25,210

38.0%

16.8%

Other revenue

$2,715

3.3%

$3,322

5.0%

-18.3%

Total

$82,526

100%

$66,406

100%

24.3%

Consolidated Balance Sheets

 

($ in thousands)

 

 

 

Period Ended

 

 

June 30, 2022

 

December 31, 2021

Assets

 

(unaudited)

 

 

Current assets

 

 

 

 

Cash

 

$

11,118

 

 

$

20,357

 

Accounts receivable, net

 

 

26,402

 

 

 

25,367

 

Inventory

 

 

14,100

 

 

 

13,165

 

Prepaid expenses and other current assets

 

 

3,802

 

 

 

1,836

 

Total current assets

 

 

55,422

 

 

 

60,725

 

Property and equipment, net

 

 

46,908

 

 

 

44,527

 

Right-of-use operating lease assets, net

 

 

8,081

 

 

 

-

 

Right-of-use financing lease assets, net

 

 

2,363

 

 

 

-

 

Intangible assets, net

 

 

260,483

 

 

 

269,622

 

Goodwill

 

 

1,188,441

 

 

 

1,189,464

 

Other non-current assets

 

 

1,415

 

 

 

2,036

 

Total assets

 

$

1,563,113

 

 

$

1,566,374

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

11,468

 

 

$

9,409

 

Accrued expenses

 

 

7,254

 

 

 

5,957

 

Current operating lease liability

 

 

2,976

 

 

 

-

 

Current financing lease liability

 

 

190

 

 

 

-

 

Contingent consideration

 

 

700

 

 

 

2,748

 

Current portion of debt

 

 

31,179

 

 

 

29,697

 

Other current liabilities

 

 

3,767

 

 

 

2,058

 

Total current liabilities

 

 

57,534

 

 

 

49,869

 

Long-term debt, net

 

 

117,677

 

 

 

120,491

 

Fathom earnout shares liability

 

 

27,690

 

 

 

64,300

 

Sponsor earnout shares liability

 

 

4,090

 

 

 

9,380

 

Warrant liability

 

 

13,300

 

 

 

33,900

 

Noncurrent contingent consideration

 

 

-

 

 

 

850

 

Noncurrent operating lease liability

 

 

5,160

 

 

 

-

 

Noncurrent financing lease liability

 

 

2,227

 

 

 

-

 

Deferred tax liability

 

 

12,335

 

 

 

17,570

 

Other noncurrent liabilities

 

 

-

 

 

 

4,655

 

Payable to related parties pursuant to the tax receivable agreement (includes $4,440 and $4,600 at fair value, respectively)

 

 

9,400

 

 

 

4,600

 

Total liabilities

 

 

249,413

 

 

 

305,615

 

Commitments and Contingencies:

 

 

 

 

Redeemable non-controlling interest in Fathom OpCo

 

 

749,615

 

 

 

841,982

 

Shareholders' Equity:

 

 

 

 

Class A common stock, $0.0001 par value; 300,000,000 shares authorized; 61,596,519 issued and outstanding as of June 30, 2022 and 50,785,656 issued and outstanding as of December 31, 2021

 

 

6

 

 

 

5

 

Class B common stock, $0.0001 par value; 180,000,000 shares authorized; 74,014,640 shares issued and outstanding as of June 30, 2022 and 84,294,971 shares issued and outstanding as of December 31, 2021

 

 

7

 

 

 

8

 

Class C common stock, $.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Preferred Stock, $.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Treasury stock, at cost; 301,302 and 0 shares as of June 30, 2022 and December 31, 2021, respectively

 

 

(2,258

)

 

 

-

 

Additional paid-in-capital

 

 

556,417

 

 

 

466,345

 

Accumulated other comprehensive loss

 

 

 

 

-

 

Retained earnings (Accumulated deficit)

 

 

9,913

 

 

 

(47,581

)

Shareholders’ equity attributable to Fathom Digital Manufacturing Corporation

 

 

564,085

 

 

 

418,777

 

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

 

$

1,563,113

 

 

$

1,566,374

 

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

 

($ in thousands)

Q2 2022

Q2 2021

1H 2022

1H 2021

Net income (loss)

$33,979

($4,082)

 

$51,813

($4,582)

Acquisition expenses1

-

2,876

 

-

4,045

Stock compensation

1,796

-

 

3,926

-

Inventory step-up amortization

-

-

 

3,241

277

Change in fair value of warrant liability2

(12,500)

-

 

(20,600)

-

Change in fair value of earnout share liability2

(22,930)

-

 

(41,900)

-

Change in fair value of tax receivable agreement (TRA)

(200)

-

 

(200)

-

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

1,047

1,516

 

2,951

2,630

Adjusted net income (loss)

$1,192

$310

 

($769)

$2,370

1 Represents expenses incurred related to business acquisitions; 2 Represents 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; 3 Represents 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

 

($ in thousands)

Q2 2022

Q2 2021

 

1H 2022

1H 2021

Net income (loss)

$33,979

($4,082)

 

$51,813

($4,582)

Depreciation and amortization

5,996

4,099

 

12,204

7,625

Interest expense, net

1,858

2,310

 

3,332

4,424

Income tax expense

(378)

69

 

79

78

Acquisition expenses1

-

2,876

 

-

4,045

Inventory step-up amortization

-

-

 

3,241

277

Stock compensation

1,796

-

 

3,926

-

Change in fair value of warrant liability2

(12,500)

-

 

(20,600)

-

Change in fair value of earnout share liability2

(22,930)

-

 

(41,900)

-

Change in fair value of tax receivable agreement (TRA)

(200)

-

 

(200)

-

Contingent consideration3

-

(1,355)

 

-

(1,355)

Loss on extinguishment of debt4

-

2,031

 

-

2,031

Integration, non-recurring, non-operating, cash, and non-cash costs5

1,047

1,516

 

2,951

2,630

Adjusted EBITDA

$8,668

$7,464

 

$14,846

$15,173

 

1 Represents expenses incurred related to business acquisitions; 2 Represents 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; 3 Represents the change in fair value of contingent consideration payable to former owners of acquired businesses; 4 Represents amounts paid to refinance debt in April of 2021; 5 Represents 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.

 

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

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