Fathom Digital Manufacturing Corporation - Ordinary Shares (FATH) 15 Aug 222022 Q2 Earnings call transcript

Hello. My name is Charlie and I'll be the operator for this call this morning. I'd like to welcome everyone to Fathom Digital Manufacturing's Earnings Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation, there will be a Q&A session with the instructions to follow at the time. turn Investor over Relations. to Fathom’s Michael like of Director now the to call Cimini, I'd Michael, go please ahead.

Thanks, Charlie, XXXX Quarter to Fathom and good morning, earnings everyone. conference Welcome Second call.

and like website about Fathom’s fathommfg.com, our important SEC where find that begin, filings, available also at to will company. to we release are I'd today's Before information presentation links earnings you along press on other mention our with

Securities the forward-looking Exchange note that We business this contains meaning today, Turning of update read estimates Slide within understand and the them. taken with disclaims the to performance the statements uncertainties contained X, forward-looking we statements expectations The company you to of SEC, to be factors become and only in as represent of Act. and filings forward-looking encourage presentation in risk aware statements and any management's of future the risks are only the obligation should our such. that as our

note today's manage and We to reconciliations, we measures measures reconcile are and are business. We and Executive it Ryan over to GAAP the the found I the hand our to now Frost, Ryan. Officer. you today which will and both in which presentation these describe those our measure, financial also encouraged us to most in operate comparable way includes examine slide non-GAAP the Mark to Martin, press the With Officer; release presentation. Chief appendix are Fathom’s Chief Financial

we our highlights. my Conference I'd welcome, Michael, like to twoXXX provide to everyone begin QX where on X, and remarks Call. Fathom's Quarter Second Slide Thanks, will

to delivered as million, expectations. with we our revenue In results increase compared history of the $XX During the second consistent year Fathom earlier quarter, growth positive an period. XX% of and posted of QX, profitability representing its adjusted we EBITDA On manufacturing up to all increased in in and organic our technology industry-leading representing quarter, four an key of impact was of revenue margin. $X.X X.X% million, excluding acquisitions, including line, basis, the an the growth furthered XX.X%

from with services our benefit and solutions We customers traditional comprehensive continue across providing enterprise-level by value-added manufacturing to both additive manufacturing. manufacturing timely,

we we technology quarter, our and extension managed lend a million engineering $X.X multinational where serve and company, Fortune with the of entered a XX will as manufacturing services expertise During R&D into their teams. new an agreement

global We ancillary our large technology leveraging also produce just secured our a health for utilizing $X leader well. manufacturing additive care a with technologies under molding, million parts in model order and hybridized as to by injection

to well more Fathom end production for within efficiencies, to position quality believe our We supply the with solving meet control, Fortune approach, the We in remain greater supplier also two markets create saw their to low to their half rapid first robotics strategic technical to speed, mid-volume consolidating integrating through XXX problem additive technology-agnostic diversifying our and of key in customers speed million some prototyping additive orders continues Many world. in XXXX. the most growth EV of responsiveness partnerships market. and needs highly largest continued and and on orders placing than increased both the and companies and focused expertise onshore base companies innovative flexibility, $X

help customers a a and ahead rising number more We competitive the global sectors particularly trend seeking with to medical get seeing to against stay supply protect provides Fathom, At manufacturing continue iterate ahead. to companies industry the chain work product-driven our this edge accelerate are their and and for in ensuring them and innovation. to faster closely agile of we local uncertainties

below of consolidation of we the our approximately strategic of product platform-based effort point Outside always to impacted development the environment, industry. were quarter sales including it slightly will intact, supplier our second This build of best We've our be digitization team that on that building build factor a orders tremendous we our out cycles, life manufacturing, the to positive to we impacted manufacturing, U.S. the speed more the And were and condensing and secular was one sales key was continue tight team. build able the expectations. concise drivers of in orders Although is primarily reshoring to in progress labor business by partnerships markets. this, $XX and working macro very key made of the the million larger, remain team.

our stronger have I here our growth strengthened As expect be to targets. commercial achieve go-forward sit we and position a significantly today, to in team it

improve In of continuing our which value proposition. part supply is chain, overseas our to to addition a key

more are continue natural system, progression margins. business, to in These is have profitable of we our the the growth expect we which built sector. and process profitable software as optimize including In our resources most in will operations are investing our support our growth, and we aid further Slide steps a and outsourced increase Fathom's new platforms in We our improve digital manufacturing to recent largest our throughput, outlined X. in most efforts trajectory announcement sales the accelerate one on for to further

continue multipronged continually Our in Key we steps the our national operational inorganic pursue which currently facilities first, and four consolidate led plan increasing into efficiencies a aimed in square totaling over footprint leveraging our little creation to opportunities existing excellence promote opportunities. fully includes will the team our growth feet organization, in current Wisconsin. operations we plan of include as Oakland, following: is our California, corporate both XX,XXX evaluating our organic across to the Hartland, to footprint, at scale entire operational which and the optimizing

additive to entire in transfer lower by Hartland. capacity in Hartland, is technologies to year. our to CNC optimizing be This our we completed of existing Specifically, to the the By most state-of-the-art cost. we in improve of operations and facility utilization intend our the our expected end transition expect

us continue serve presence platform. our This by a West Valley-based our to Valley opening tech Importantly, as center other strong showcase our center. and IT The technology strategic sales, Coast new adding will allow to we hub and leadership, -- Silicon part to providing marketing, our opportunity functions. continue expand intend of a all to continue be that to proximity as customers our this while initiative, Silicon maintain also industry-leading for unique a of we're technologies will to

Second, Austin, we plan opening consolidate on a greenfield Texas facilities. and site locations larger near those

and while strategic which the laying expedited a this to combined In we Our square so, of current center. we expand through acquisitions market through doing expect about area, expand XXXX, our we XX,XXX eliminating Southwest the in new total integration an the capacity in and our acquisitions two presence in future in to for feet, assumed regional the ensure fashion. redundancies intend seamless to groundwork of

Austin area the We new the expect year end transition in the site secure and this to the first in XXXX. by complete Greater of half a of

intend and in objective as a one Third, organization we shared Fathom, to advancing of finance processes create operate to scale. to economies services streamline company-wide accounting our further and create

new coming our fully service intend end centers quarters. to and the expect by system over year, administrative we of be operational to functions the this We shared additional in other pursue

are generate efficiencies fully and cost million action to X% a based of this of implemented. As a workforce attrition. and a buyouts result the pretax items reduction on totaling once combination annualized savings expected approximately gained, expect all approximately of we In plan these $X.X

to a having end, the scalable in activities rent be Information background. most estimates which $X.X charges we and publicly Global $X reflect year. pretax over President, in Officer, CIO to these enterprise-level saw time revenues this our from related of our related the totaling with our over experience. our and will a thread attractive track these a multibillion-dollar Generac, which technology look over Fortin. we we in during update plan we note, platform of growth sharing an proven our million remains company strong, lease of to about expect and leadership while robust who In business go revenues. termination Dan the marketplace our for foundation, performance to appointed his He brings $XXX growth in implementing retired that, IT build member this the of Chief financial years our cash. tenure, to new with certain these in in retaining $X I and role, million, at entire quarters forward previous of enhance to Fathom's with more will to has now success. energy over position recently uniform based in To billion our approximately transformation this served strengthen a figures increase million the digital consolidate combined key as you of strategic earlier team the costs to driving vital IT remain Mark. experience competitiveness and his our incremental he to company, Additionally, than in the recently implementing and Vice Hartland, significant with potential to further the the the Dan where long-term more by of traded, early profile, XX experienced new industry, Texas succeeds paid responsible exclude With growth Fathom profitable to stages. progresses. attracting consolidation will We turn organization in continue a progress be We costs to incur intend as professionals as committed Also upgrade and expect we play solid plans the upon manner. Dan industry-leading systems IT optimization for a customer throughout Dan will details strategy, in coming built long-term efforts, supporting digital record role spearheading best-in-class Fathom’s call Fathom’s

my results Slide morning, and begin everyone. X. Thank remarks you, QX good Ryan, on I'll our on

a acquisitions. revenue XXXX, XX%, quarter quarter $X.X in the and completed totaled of million million four we acquisitions, Our which additional which the $X.X million was organic was of for second second focused from on machining. CNC increase $XX primarily of for Early year-over-year

main CNC metal our these revenue of in our approximately organic impact the achieved in technologies acquisitions, the mainly we to growth excluding four due all X.X% our activities. sheet cross-selling increased double-digit growth Now quarter both as second and of precision with in

Now our medical of to follows: our and from EV, total further blue-chip center to total to center revenue. line industrial area, Hartland Injection at grew innovative excellence XX.X% with large Valley Supporting of and for invest within or We robotics, molding the our by was we industries, quarter million of Manufacturing X.X% segment. were million in our product two, in the X.X% orders in will XX.X% or $X.X Additive this Silicon tech as reported continue additive growth growth enhance combined in $X.X revenue agricultural growth revenue. Additive equipment, prospects customers the new technologies. accelerated believe

to revenue, second CNC this our we continue which of CNC total By our business, in machining sales and further the are launched was by impacted but performance of as organic acquisitions million streamline our outsourced or a injection our growth. business in total for $X.X to million as included we that earlier. our subsequently to reflecting as facility our increase ancillary XX.X% an in to support segregating expectations related Ryan they processes expect to XX.X% to more market XX.X% Hartland below benefit $XX.X up steady Now our and $XX.X difficult well. molding scale, line, orders quarter mainly quick-turn continues total were the or as manufacturer invest in machine And due increasing metal the mentioned our dedicated from we improved CNC as business sheet recently softness turn revenue, overall Based on cell our production amidst with segment. quick-turn year-to-date, strong to double-digit technologies, to well XXXX quick to while rose was as discontinued. CNC higher-margin of of work this as XX% or finally, demand. results revenue well smallest perform of efficiencies a EV to accessory declined our share low X.X% comp the an mid-volume production, million to product capture Precision

believe of which building increasing recurring relationships, business remain provides success the on continued strategic we and customer year-over-year Now entrenched sound our among streams. revenue our fundamentals long-term in accounts our share growth, based wallet of

for manufacturing penetration additive technologies. focus our engagement accelerating achieving customer our Our and and market remains on traditional greater

driven the performance quarter. from second the the period, our on prior $X.X EBITDA our we Now with increased improvement year EBITDA million, adjusted QX, adjusted to $X.X Slide million, In EBITDA of EBITDA adjusted reported a XX.X% representing for XX.X%. higher volume. we margin X, provide primarily In of

mentioned increase in we of revenue served, an as During the customers I new experienced the through quarter, partially from volume acquisitions, earlier.

New As basis, the the York our our incurrence due expenses Exchange acquisitions public year-over-year our listed in Stock QX sequential the year in to mix of last in rate. not On to the These prior CNC primarily million, of sales quarter, a the compared SG&A decreased gross following XXXX. did period, to previous year. $XX.X company affected adversely SG&A margin costs impacting XX.X%. on December exist increased

public two second will our quarter albeit And XX% the these not $X.X basis costs the sequential costs, which on further in million, Excluding in half anticipated expect to year. $X.X stock approximately expenses another by including to repeat one-off of modestly we compensation, company declined XXXX. in as million drop a of

split discussed forward. operating Now we increase our generate improve optimization leverage beginning are The as believe and earlier, between two evenly will will cost as projected annualized almost and SG&A expected initiatives $X.X XXXX. volumes synergies in Ryan in our to be million significant going COGS our savings help we

with $XX.X liquidity $XX equivalents quarter Slide highlight We includes and $XX Now facility. credit and revolving million million of X, cash undrawn and million. second commitments the in under million flow. we liquidity our $XX.X of our This on cash cash available ended

As was in for debt, continue of to some of gross improved balance of $XXX.X The usage generated We excluding million not to of and flow. we as do term based future. the revolver by debt $X repeat the on total $XXX.X XX, nonoperational to move cash our charges offset June $X.X our operating totaled we cash, amortization million cash, an debt our increase in which pay forward deleverage we million. was in sheet expect expect to million, and net

Additive new as expenditures Now as to and single well boost offerings a million multiple ERP during capital integration two the quarter, to second of CNC scalable $X.X related in we technologies into technology the cloud-based invested in solution mainly productivity.

We we the because add to process half of by more compared a complete year but focused anticipate full Fathom the ERP of as additive first our half into the of strategy XXXX. new in expect second CapEx slow the capabilities. to integration as part We of spend end our investment One the the timing, to space

to continue accretive tuck-in opportunistic and are past potential we remain long-term as our growth pursue proposition the customers to in we Now invest discussions many with acquisition and quarter. had our that with business, targets have the over our approach of expand in acquisitions value

updated to X, forecast Slide we'll XXXX. Now turn I'm going to for our and talk to

on the current an $XXX million revenue XX% based in half million, range Now year, we performance our quarter at now the anticipate a for second and year-to-date, representing XXXX combined approximately increase second for on our $XXX of midpoint outlook the between reported to with of basis. the and

of team earlier, the to sales For current million $XX the $XX third third quarter, backlog reflecting we mentioned we our which anticipate the quarter. build revenue impacted million, for

new quarter, stronger Now best as quarter digits. with growth our is we team gained members sales a year fourth the typically in the traction, which our expect mid-single of

customer deteriorated GDP XXXX downshift also current ago economy consideration a our indicators and sales our key Now start versus forecast led near inventories with the for realigned macroeconomic other broader This a in takes revised to year, have Accordingly, for expectations the new extended in as orders. latest into the cycles lower creating we the has uncertainty the more since and reports environment. of term. the year

large This focused we solution Now this as large-format strengthening on XD quarter, offerings. invest the business throughput. expand SLS the we our our is continue of printing growth breadth capacity. the we long-term parts remain manufacturing to high expanded second of for and of in Examples additive leading our during prospects provides with

enhance in two earlier, offering investments precision SLS up to quick machining in DMG quality took delivery we post equipment X-Axis Mori machines, ramping our We customers currency and in additive provide our processing dedicated capabilities parts in efficiency in that the we of to of days. plastic parts. mentioned also made latest additive to the And

the adjusted now optimization from savings cost $XX be as and full our roll into savings our we anticipated will EBITDA and expenses initiatives XX.X%. the generate expect plan year Now to an throughout the between of remainder for The our public been offset outlook from XX.X% in for XXXX this we will margin implied in by XXXX annualized for year. limited in higher-than-anticipated million has revised The gradually company of XXXX million as mostly in year to $X.X million earlier $XX out XXXX. be

three, million of quarter range For currently the $X EBITDA in $X adjusted million. anticipate we to

lower revised EBITDA and impact our temporary growth impact absorption Now the adjusted of our on revenue forecast reflects its profile.

We efficiency continue improvements fronts. operational driving on to on the focus both and G&A

reminder, fully our And platform. outlook the are as current leveraging We excludes a our for balancing to committed acquisitions. impact any and on-demand growth of remain future building broad

and We our pursuing markets capabilities, continue in our to strength in enhance presence selective expand customer strategic our our acquisitions that in be base.

next provide Ryan. Ryan? in earnings November. QX the back report will over our we call I'll our We now update turn when to

Thank will some you, provide comments Mark. I X. Slide closing on

for adjusted adjusted Our and to continued comprehensive Sequentially, a $X.X demand of manufacturing XX% QX EBITDA was that Fathom growth margin has customers. tailwinds experience the chain agnostic creating XX.X% secular platform enterprise supply differentiated delivers positive demonstrates leading the built resilient services technology while XX% XX.X%. quarter. revenue of our a our more our up and a million, representing increased EBITDA over in for customer a

our technical for solve in Fathom customers Fathom an have as think corporate to capabilities technologies, most see a for experience additive and continue challenges large along decades difficult of as solution provide we traditional continue on the extensive customers. their We index accelerate manufacturing manufacturing to additive with comprehensive of enterprise help manufacturing and R&D, to to lean their capabilities sector

market. profitable remain digital long-term the business, the full billion our highly within large, are and Although fragmented our year growth rate confident anticipated we opportunities in we for $XX manufacturing cash-generating moderated, has a

in transformation serve to integrate team growth world-class profitable plan new while results, anticipated and now commercial Fathom team in an we listed customers. place and our an support we QX, unified Furthermore, now accelerate $X.X our unveiled a breakthrough technologies company. savings lean, empower continue by our our more have the and million drive taking to strengthened are we proactive with digital annualized nimble significantly optimization to a have energized to We I'm we future measures to that

including the world extremely positions our growth previous customer environment end macro believe highlighted an downturns, and the markets uncertain While record most in has model, going December, more company companies by of since business the we base, diverse our proven extensive profitable become across of in innovative public track well. a in some

As headwinds, scaling for of our remains in our our you. of further Thank questions. benefit shareholders. up now potential our focus the open we and strategy, for continue our long-term business the navigate support concludes on to executing go-to-market macro near-term our our growth This call prepared and remarks, we'll company

first [Operator is Instructions] now & Our from line your Jim, Ricchiuti question Jim comes Co. of Needham open.

being of in the overall highlighting challenge, the questions, But platform. I you're sales first like to some also, you're the outlook start concerns. full the guess, up building but macro couple in two think, year I'd I I with change factors, because one contributing identifying, think, A

could I frame better little that first. wonder if you a perhaps So

Good Jim. on Well, Monday morning. early I Thanks well. Yes. all being for hope morning,

we've a great we We've talked got company. As about, company great got profitable. a growing

feel stuff the inflation, the Fed increasing at unprecedented XX S&P X months, years, you we by obviously, last last the so the worst when first of think Fed put really But the together rate. clearly, higher moves this And beginning, the at. we in if performance, the we're where year months about the and good about X

losing we've to of business. to the cycles, we're good slowing about long really so where commit. uncertainty orders, the growing this relates orders. still it a like as takes at, We're of actually profitable we yes, macro that, the it we're some business, seen fact how And that But the growth not feel

full we're seen that's their And the of seen conservative that. temporary be stock some think mentioned, thing customers then our some we've And to down as of We safety for year, so slowing as taken the of on just that inventories trying up. look larger we we that enterprise building Jim. were we've some saw, Mark They've and that. a

color verticals. Got you little what a just it. you're seeing And some on could, give in wondering bit of Ryan, the if more I'm maybe us

you think changes Where still in you conditions direction? talked hearing EV. pretty in We're cap. about I either in semi strength seeing some are demand strong in

would I say in Medical. Yes. the

space week the a back medical, saw of especially in down of July, orthopedics the our our business. last We surgeries semiconductor, lot year, was aerospace and I are almost coming customers Texas the versus doubled of visiting we some the in So in month certainly In demand places. side year-over-year medical our there saw orders of prior the key elective strong. very incredible

that's bridge that both in to we So area we're an EV demand. to a that see continuing through play the strong from extremely an area development production. really all is way well

in interior to we're areas, seeing seeing the two come the on continue of aerospace. those strong We're we aerospace some especially demand. So side of back, work do

I General So think as demand. doing be Fathom. seeing as to those well well strong seems we're industrial areas,

in Is it of about we anything Or cost of with gross a to a perhaps and guess, Okay. mindful I'll And Mark, you wondering, then I related? the just Mark, talk basis? jump just should back in go-forward just in a just pressures. pressure on quarter could question the to also versus, for on that some Obviously, margin expectations. is gross And respect talking margin mix the queue. perhaps be if there I'm some

slight though. Yes. mix challenge I a took mean we

see optimization XXXX. our XXXX half. which is were about as in If prior an a going is two. of the which expecting continue, We lower question that absorption more improved going and overall, be a strong what for was growth you look is obtain obviously, going second year in benefit do we margin you'll the will talking versus we see short revenue It quarter plan, I not though, than term we're because, be gross about we to benefit, more fully we to to the talked

lower benefit volume. won't in that moderation the we a expecting were message. more it's of the strong Jim, benefit, So as basic get we That's as absorption the the because second a half

thanks it, very Got much.

Jim. worries, No

line is now Noelle, Noelle from comes question next open. of your Dilts Stifel. Our

trends seeing. comment could I you're was order maybe you on that that hoping

the quarter your kind there if through that's could of help as of how guidance... sort second that the into went third any notable you informing just even was and quarter trends understand So us

Yes, so the orders the $XX nearly million. as second for were mentioned, quarter we

As and quarter, macro a build as lot this in a sales our optimization control team, in third what some tremendous business, about the the we which on we're made good We on the times into commercial plan. strengthening orders will controlling which talked that which of year. what the we've momentum pickup a the environment can we we've can, can't through of there's from we feel second sign of progress can control. in quarter, cost the experience. is of mentioned customer structure second which we we half the seen is call, the But And we is control then our the focused

to across team And be have so to manufacturing into be not just able solutions different as able sell technical single more sell the we've invested this to resources commercial organization in those we that evolved in to solutions.

an procedures pickup, seeing demand very I from that space, of we're well. it space orders from talked about seeing orthopedic where other perspective we're customers, certainly defense, the especially doing strong relates orders, coming As aerospace elective the and specific end demand to implants strong medical continued seeing the back strong, EV where as some are there or we're like in areas

look to and first think back anything quarter of as Okay. we third the that quarter, into you When second got that on the could environment? provide sort quarter, comments that? the Great. And how improved about any you kind we should then of competitive

Yes.

competitiveness that we're the key I I for we've to And think working our we're think differentiate to continues thing be where agnostic. the in that additive that's really but platform phase, seen space. focused technology why on

to we're the whatever so is find trying solution customer. the best for And

the and you've able business, through been we've And both differentiate machining more as side so our to there. sheet growth of CNC seen in metal strong double-digit our

designations our orthopedic in the medical with think I space. some of XXXX

We there. have a offering differentiated

better get And the that try -- provide where even -- commoditization talked can about, making able larger more where the past to EVOLVE additive in things, that's that's on with that parts faster post additive, other as and technology and be the areas in be of focus to be of so as we making drive some a what around in really of also manufacturing. to we're the formats. differentiated in to making won't driven we we've efficient the from our side technology, differentiate think investment is processing price investments, and which in the investments away talked that We're in we're we additive in commoditized plastic why customers will Mark the

up and usually Okay. making about then And talked progress those you on to of how take be? kind improvements know start And today expanding sort you think you where to it where kind stand additional it last making becoming commentary impact? an just question I of ramp one me. or for want do to then sales relative does of on about sales folks productive? any but them long your How force, you

Yes.

at full going our we're now. as place So to strength. earlier, good continue have I sales we right we sales really about ways look improve that to mentioned to We're in at force. feel force the always We're basically always,

looking folks the opportunities really went because for from is more part strategic at going at back just X of the of a quarter, sales customers to because see add of the as X always strength changes And bring it ramp We single of technology company in the selling have good typically full made second and So there. we them on we hire force evolve focus We evolution that. a we condensed to those think for us, was doing that the the industry. really us good. as a customer, talent to sales but had platform. we're Typically, new we the the we're months, maybe and to feel I talented had that at being we from larger importance we're enterprise especially on of people in of front this we that

why is FAD. had that people industry from feel in hit which the brought really that and And go-forward really running, opportunity we've about presents and the we for so that team the can we've the so good built ground

Thank you.

Our of Group. next question comes Craig-Hallum from Greg Palm Capital

Egerton progress I land-and-expand on, will gaining guess guess, of kind percentage start What's for I getting of Danny and I examples wallet repeat appreciate is orders there. This order maybe been with them strategy just them? share on kind and the the Greg with [ph] I enterprise today. overall customers. like the of

Yes.

to our represents business, continue the side that there. which across we our enterprise about of growth strong double-digit So customers, see within XXX customers strategic across so growth strong or

They're strategy continuing is working customer there ago, a meeting weeks to I $X that they're the about of up well. to an this with. down that looking consolidate done And million. double we've will key see really annual basis. $X.X between in with that we to million with think historically, opportunity customer good so on opportunities. working that for a And they amount really X that the suppliers We're us there's Minnesota amount was spend

top to expertise have consistently make to And that sheet consolidate can work amount continuing consistently, with, the we're of -- hearing want they for to we so they at be or with we the serve because want list is suppliers. now to whether suppliers may roughly of they're strategic conversations or investments to do And the X Fathomrication, that or to them. them, from XX and down we're it's metal that we're And accounts. X CMC so their right is they what those able that hear things go the we we're of looking having those XXX and what have they across

is the more strategy relates that. so quarters going to in working. it lot And to we're But have as the a about future to talk

in our leader large that on enterprise clear continue market going to the strategy, to customers, when down to we're and double comes we're think Danny. it I

Makes to guess in Hartland? maybe it. along? Got one on maybe -- for you're demand a sense. mean, like is that more into update in move And any just coming technology? I I the more, in how What's Evolve. make dig said there you investment little technology? the that into that bit continuing

Yes.

create and real point thermal foundation parts, cost that that do technology. fact it in it sense that interest incredible can price you to I goes in I do thousands. So hundreds, that mean plastic not the makes but a at can really can think it you the you the

I We're Joe bring because incredible really And had he that. through the recent familiar into leadership to ultimately technology the with a are Fathom leadership, excited provider Evolve takes with he Industry for you that veteran, company. it understands went so think know commercialize about him. vision the background, I how company transition. from and is for Allison what of don't And his it a like CEO and you conversations we've now they interest evolves effectively. multiple comes service really

we're can about North so And the America. There in like that's and technology breakthrough Obviously, we a or the that first delays EVault, technology along be really feel really some being good this. to way. any new with person hiccups commercialize

really third by we quarter, it's hopefully technology So taken that had little but planned year, a about fourth go initially basis feel from technology on early longer the we've of of right based now. anticipated, Hartland And the as customers. we quarter, end the we on if all end feedback that things than our a hopefully, long-term having the that good anticipate in before

Good I'll it Yes. Thanks. there. leave stuff.

Dan. Thanks,

next from Thank question America. you. Mohan of comes Instructions] of Bank Our Wamsi [Operator

order In here down the issue weaker guidance, versus how to in also your trends said were quarter. third attribute of reorg in the improving know sales orders the demand? And was revenues. XQ, would quarter-on-quarter you're I you below much in expectations slightly I your you slightly that the were but wondering XQ guiding that

call of this if curious execution an sort So broader a macro. you'd what issue versus is just

trends, called lot that own seen it have in might orders. your out not a macro you a but of also broader of headwinds, sounds lot You like

be could give on follow-up. a some color helpful. that us that, And would if So you I have

Yes, Wamsi.

So enterprise the I sales would It's I basis. team from platform to a it not to as really want a team. the say legacy broader restructure as strengthening with of would sales a we reorganization or the go evolved company we where on sales categorize

be we grow orders on really place basis. the so before, And as in a that go-forward mentioned feel team, I able about we to the have good to

on. think focus our lot that's right especially I environment you from on the customers a when we the now, enterprise going environment, think with key of is, of macro obviously, business the that large a there's uncertainty with

second If types which get back years. from typically those the are the quarter the second performance the where S&P quarter, you stock to third you're companies going think in revenues -- to that to in XX perspective the worst last you're the in the quarter, see going a orders the in are that had XXX the

in to had a was companies market. the hesitation on what little going those So

weren't I like said, orders. So losing we

business. really about have. that the visibility really have as historically is it us. build back. thing can Just we turn would right? taking can XX-day cycles a for longer then seeing to start really And about momentum, we place. that fast, have the team come feel We it the way fast about were turn commercial And good in to business in the sales So than we great we into that a our positive We're

to EBITDA a strong, got continuing And so great grow margins. we've industry-leading business, profitable with

EBITDA follow actions that is for EBITDA right? If inflationary maybe headwinds? how lack could from specific that revenue that versus the taking your through of lower point, Or half of any going are seeing you Okay. the incremental And year, you're I costs just margin up pricing the as year? leverage much of you're back for on adjusted

on requoting say lower quick lot based would I business prototype constantly latest Wamsi. costs. material our Yes, the of is of challenge we're turn, the more because volume a revenue is the

prototyping, production have have you limited can very some on But we issue So exposure. orders. kind of timing in

growth. Jim So our more indicated challenge I not earlier, as of term. short the in to we're strong revenue is getting, because

a turning think temporary Now to as and start that's we situation, it's discussed, around. we going

other Lonza plan. operating about think I are actions. the at We talked optimization looking we

We at will we bring looking operational which in further that are actually, activities, plan, and centralizing on as to indicated G&A the side. benefit both

of in place improve our So to number there margins. are actions a

the expecting still over improvement fact have growth moderated year we've targets. margin we're despite prior that revenue So our to

Good luck.

you. Thank

Street question Lake you, Jensen of Troy comes at final our from today Wamsi. Thank And Capital Markets.

Maybe a couple of quick questions here for Ryan.

guess you belief that based that for whatnot. service talk supply and smack you But of middle machine probably my it's cross-selling? was Ryan, range your SPACs. organic I guys is acquisitions on and you growth. and that But So in just shops industry growth -- the the a given that guys to dab reissuing guess efforts the guys key constraints about right the and to can X% XX% strategy in all have for I are with I thought you done prior bureaus

Yes. Troy. Absolutely,

to be So key strategy. continues a that

CNC a example his Mark seen talked growth an Texas and sheet has we've from the comments, worked of as looking growth we legacy about a lot through the As able past, been semiconductor in lot significant significantly And region done well where them into very company we down to machining we'd there. sheet that need only them brought they in metal as the we with as a a down of went at in We CNC that, we've with had the forum. grow in have for primarily that where platform, areas. as metal were

about we're Minnesota. Historically, as talked And earlier, done Right so perfect sales well that our only we're we've that an molding, for CNC looking as multiple prototype example. area the production opportunities at both for them. team. I focused continued -- area, now, as injection as on, up strengthen in an company another very company. we'd machining to that's That's

continue So to be that. bring as opportunities, to the able only to the across those the grow able do organization and to sales team that identify not dots able the to continue to to is be different evolve to in areas connect be within we to right going to but

example aerospace just Historically, with done SLS. a only down seating working in region. company we've Another the mostly prototype FDM, form, was Texas

injection Now molding as well as looking production machines. we're CNC at

prototype companies them in to partner production enterprise mid-volume development partner of from for as through we're So a these making that large well. transition lot just a being

But So really long-term going in the grab as doesn't I ever continue significant being overnight. market large an of leader customers, about business and enterprise you we're stronger being extension customers. be for of this feel the that that R&D think share than manufacturing creation to teams the happen market the to and in to with able value enterprise that these now

doing of your you touched some And right. this in process. how All position acquisitions. like it and when based tuck-ins. the just started on $XX debt you've just was like currency balance you to really currency, kind to thought sheet, be, back curious where you I feel on cash stock it and got then, in now, is position. it if the guys you're going kind of guess little And net million on Perfect. to I'm a do right, not I you about know know

going to and think just it core business right? guys thoughts kind to you Do the that, on guys of acquisitions? are on likely quick how and So you grow do you focus now some

Yes.

have talked at Mark as looked few there. So so quite out about, we a acquisitions

market. think acquisitions. maybe to opportunity We we smaller able a there's We X, as maybe to tuck-in a valuable from play be continue obviously X still consolidation flexibility this the do have talk within about to

go one we business cash. generate our forward, to positive continue things the we of is As about that

and cash to going to well the continue onto delever sheet. balance generate we're So as more as put cash

be looked at opportunities We've accretive platform. for that they think the standpoint the make to going opportunities. to to going it where opportunities look didn't seen will We've where be company. deals We're it only us. can valuation believe add to So sense going selective. really -- to we're create at of I lot just we're from But to a we a

we about what presents And have we and we that today, good itself. with to be feel continue platform so opportunistic really we'll we grow that have as the today can M&A

in quarters? want quick that think December give the number September right. All just and/or the for you Mark, a do be us one you And SG&A will to just like Perfect. a here Mark.

would expect What say the kind to of we previous quarter? it say, I level X% Troy. to I X% from modest would what would maybe is So is reduce decline the

Therefore, At concludes Thank call. time, Troy. Thank further this joining. this questions. for you, currently have today's we you no

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