Fathom Digital Manufacturing Corporation (FATH) on Q1 2022 Results - Earnings Call Transcript
Operator: Hello and welcome everyone to Fathom Digital Manufacturing Earnings Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation there'll be a Q&A session with instructions to follow at the time. For now let me turn the call over to Michael Cimini, Fathom’s Director of Investor Relations to begin. Michael, please go ahead.
Michael Cimini: Thank you, Charlie. And good morning, everyone. Welcome to Fathom’s First Quarter 2022 Earnings Conference Call. Before we begin, I'd like to mention that today's presentation and earnings press release are available on Fathom’s website at fathommfg.com, where you will also find links to our SEC filings along with other important information about our company. Turning the Slide 2, we note that this presentation contains forward looking statements within the meaning of the Securities Exchange Act. We encourage you to read the risk factors contained in our filings with the SEC to become aware of the risks and uncertainties in our business. And understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements represent management's expectations only as of today, and the company disclaims any obligation to update them. We also note today's presentation includes non-GAAP financial measures to describe the way in which we manage and operate our business. We reconcile these measures to the most comparable GAAP measure. And you are encouraged to examine those reconciliations which are found in the appendix to both the press release and the slide presentation. With us today are Ryan Martin, Fathom’s Chief Executive Officer; and Mark Frost, the Chief Financial Officer. I will now hand it over to Ryan.
Ryan Martin: Thanks, Michael. And welcome everyone to Fathom’s First Quarter 2022 Conference Call. I'm excited to share our progress with you this morning. And we'll begin my remarks on Slide 3. Fathom delivered positive results in the first full quarter as a public company following our successful listing on the New York Stock Exchange in December of 2021. Our performance in the first quarter builds upon our long-standing history of profitability and cash generation as we continue to focus on delivering not just growth, but profitable growth a key differentiator for our company. Our broad on demand capabilities within the fast-growing rapid prototyping and low to mid volume manufacturing market remain in high demand fueled by companies actively seeking to modernize their supply chain and ensuring these supply chains are built on a resilient foundation and continuing to accelerate the pace of their manufacturing innovation. By leveraging our expansive national footprint and extensive expertise in both additive and traditional manufacturing technologies, our customers who are some of the largest and most innovative companies in the world, can iterate faster and reduce their time to market. This provides an important competitive advantage for them as they become more agile in bringing their new products to market faster, and ultimately enabling them to capture more market share. More broadly, the condensing of product development for life cycles has also contributed to a consolidation and reshoring of supplier partnerships, enabling companies to increase efficiencies and better respond to an increasing number of unanticipated high impact events. Whether it's a global health crisis, geopolitical conflicts, trade tensions, climate change, port congestion, electrical components shortages, logistics and other inflationary pressures. And all of these and many more. All of these are factors at both a macro and a micro level that have motivated companies to rethink their production and supply chain networks away from just a pure cost minimization, and now are looking to utilize new technologies to digitize their supply chains. The acceleration of the gold global supply chain transformation has also enabled companies to realize more eco-friendly benefits, such as lower energy consumption and waste, along with lighter weight, higher strength parts that preserve their functionality. At Fathom, we continue to capitalize on this increasing adoption of next generation industry 4.0 practices by working closely with Fortune 500 tier companies to help them create a more efficient and responsive supply chain. We address the complex manufacturing challenges and we promote sustainability. We remain at the forefront at the forefront in delivering timely hybridized solutions across are more than 25 Quick Turn manufacturing processes, including plastic and metal additive manufacturing, CNC machining, injection molding, precision sheet metal fabrication, and many other ancillary technologies that we leverage to serve our customers and we've brought them all together with our unmatched service with a unified software suite that acts as a key enablement tool for us. As we have stated in the FATH in the past, we believe our integrated technology agnostic approach uniquely positioned Fathom to apply the best manufacturing process to achieve a desired outcome. Our value proposition resonates by combining speed, flexibility, quality control, technical ingenuity, and problem solving to enterprise level customers within the low volume high mix production that supports customization. But we also accomplish this at scale. While Mark will discuss our quarterly results in more detail, our Q1 revenue performance was in line with management's expectations. Total orders in the quarter increased year over year by approximately 17% to $43.8 million as we maintain our focus on accelerating customer engagement. During the first quarter, we secured a two-year $10 million agreement with a Fortune 50 Global Health Care company continuing to expand mid volume production of an existing program with this customer. We also entered into a new multimillion dollar agreement in the quarter with a global semiconductor company to provide low volume sheet metal production for them. This is an expanded offering following previous work we've done with this customer focus mainly on CNC machining. That continued execution of our go to market strategy utilizing a land and expand approach has enabled Fathom to build a deep and entrenched partnerships with some of the top product driven companies across a very diverse end markets that we serve. Based on our strong orders volume, we increase revenue in the first quarter by approximately 33% while expanding our backlog of new business. As a reminder, shipments for new orders often extend beyond a quarter or two depending on the size and order type. Additionally, we delivered a profitable quarter consistent with our differentiated business model as adjusted EBITDA in the quarter totaled $6.2 million, representing a margin of 15.2%. Turning now to Slide 4. We provide some more examples of Fathom success in accelerating manufacturing innovation, and transforming the supply chain for some of our larger enterprise customers. As you can see on this slide, the application of our breadth of offering spans across multiple fast growing end markets. During the first quarter, we worked closely with an existing customer who is a global leader in gas measurement, instruments and technologies as noted on the right side of this page. We help them consolidate their supplier partnerships. In this case, the customer is looking to ramp production of their product from 25 units per month to nearly 75 units. But their existing supplier could not ramp to meet the demand or hit the necessary quality requirements. So the customer reached out to Fathom with this challenge and we stepped in immediately. And given our numerous certifications, which validate not only our capabilities, but we're able to combine them with our extensive national footprint. This customer made the strategic decision to redirect the parts production to Fathom. By sourcing through a unit unified supplier to meet their various needs, this company has been able to meet the higher demand and more than double their output, allowing the customer to accelerate tens of millions of dollars of revenue, while also benefiting from considerable efficiencies and superior service by working with Fathom. This is yet just another example of how Fathom is able to identify and capitalize on new organic growth opportunities that expand our share of wallet, build entrenched, long-lasting partnerships with enterprise customers and generate attractive reoccurring revenue streams that benefit not only our company, but our shareholders. Fathom has built a proven track record of strong performance with significant growth potential. And we're confident in our ability to further build upon our solid foundation and drive long term success. With that, I will now turn the call over to Mark.
End of Q&A:
