- Earnings call transcript Q3 2022

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Operator

Hello. My name is Emily, and I will be your operator this morning. I'd like to welcome everyone to the 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 will be a Q&A session with instructions to follow at that time. turn Investor over Relations to Fathom’s Michael like of Director to now the to call Cimini, I'd begin. Please go ahead.

Michael Cimini

Thank Welcome to conference good morning, quarter and earnings call. you, XXXX Fathom’s Emily, third everyone.

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

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

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

Ryan Martin

X, our begin welcome like quarter my on Michael, where XXXX Slide everyone highlights. and conference to third provide Fathom’s will QX we I'd Thanks, remarks to call.

operations million. orders we $XX.X expectations, our cash with generation, totaled core key QX, $X.X in adjusted was in million, of increase continue quarter of differentiator posted a while extending track the for revenue momentum, sales In while to line our as EBITDA profitability Fathom. management's and and we record performance Our our of

from resilient fundamentals manufacturing as product benefit more companies reshore positive to localized chain. in business supply driven We continue a their and ensure our to

Additionally, digital help with market. iterate time level we who customers to reduce faster partner to a and comprehensive work them enterprise closely seek manufacturing

As building have we team performance, high drive their the a steadily based strategic up call, during new important growth. members we made our previous strides to quarter ramped out discussed I'm second on help term platform commercial excited how long activities. team our sales

increasing During out the to encouraging and orders our quarter, both aim momentum. and with and growth growth as the improved close month we revenue year XXXX each enter sign

in for achieved fact, the performance September order month additive In of Fathom record technologies.

discuss will While our detail, Mark our million financials in QX. orders more $XX.X totaled in

we two During the secured additive the market notable fast $X.X million. customers growing new orders from EV quarter, in totaling

We semiconductor, advantage robotics XX process plus new our platform, needs. technology also taking customers' key allows agnostic which specific wins end robust defense, by and manufacturing achieved to and aerospace markets, in to including other us of adapt our our

an grown seen revenue stream with On increase with $X more an multiple them By key entrenched reoccurring companies, retention heard each year. you've of continued the Fathom customers, approximately Fathom contacts me given of one our world's the spending before, basis, customers than customers some our number large platform XXX is which talk Fortune with an XX%-plus. sites today, we strategic Fathom past provides strategic strengths LTM the with of XX relationships from in most partnering across annually XXXX As the within company, the to accounts of and developing of innovative have XX%. working million have with among extensive about over attractive XX of rate growth customers our we

our We believe land we within and $X customers demonstrate how our have XX% million level working. among since positive a plus approximately revenue model of accounts importantly, generated expand strategic XXXX. enterprise More trends CAGR is revenue these

demonstrate Valley we partner our center QX to and Silicon technologies facility customers for activities our we outlet fusion capabilities will open our have will and new cutting provide edge to OEMs in plan the adding continue delivery quarter new take early prospects. As our our leading proximity in the multi-jet customers the Most HP, opportunity This suited production progress unique leading ideally we advanced and showcase for to growth expanding low system. which providing for we provide additive Fathom with Throughout additive be ‘XX. technologies. our advancements an in hold, mid-volume a introduce ensure This latest new including first-hand, technologies, of have from strategic to strengthened manufacturing three industry continuous new to recently, machines environments. technology both and where platform took to made of to to our productivity better EVOLVE by commercial some advanced manufacturing, important XXXX, breakthrough hub considerably

to post the plastic produce. of and equipment made also our we enhance in the quality parts investments We efficiency additive processing

processes. reduces Regarding opportunity take Technology a advancement to EVOLVE, our traditional by additive expect manufacturing. This additive one in Center. for times XXXX Valley compared is to this we parts at kind early excited a of injection We're technology technology this additive which new lead of Silicon molding process, delivery by for dramatically this

and interest started this high. technology orders be continues We have extremely to receiving already for our first

our in same provide we for additive our large national engineering the thermoplastics. on focused operating followed I'm durable of consolidating new of our benefits At with use prototypes remain significant our time, the the end footprint in SLS capital with capabilities these printing and and increasing pleased efficiencies format previously in of XXXX line strategy investment expansion earlier the execution the this grade parts All the of XD on-demand platform will optimization plan. and beyond. creation continued technologies our year and disclosed this

company headquarters Oakland Hartland. innovation America capacity transition, North to of pave in in Hartland our our Our in to is our Hartland, will premier in this with to also close industry. expect set help January, the for optimize entire our unique the utilization Wisconsin. additive facility unrivaled facility throughout officially increase and With following new operations This existing to technologies in serve CNC scheduled facility our we way transition of the capabilities as the and product transfer

turn Fathom. DMLS performing will our SLS is two our addition I mentioned, recently X-axis technologies capabilities new that a our speed machines. of integrates In a help Mori high and dedicated MJF, delivery high margin DMG just to precision fastest within segment which Hartland and This facility dynamic, took growing expand and quick CNC and technology

greater experience will provide generating outsourced a manufacturing sites production valuable entire manufacturing a strategic supports that low solution on markets, volume, Consistent a we open our economies year. greenfield to one other to in national of key area data remain strategy of across while high the our create to across customization in Our Hartland platform. in footprint half for Texas as a centers next facility the first superior with stop track state-of-the-art enhance world our the MPI Austin, delivers while complement mix site manufacturing and scale class customer serving in

significant We with exhibitors. activities was providing while Technology on engagement, X,XXX manufacturing our the the expand week XX,XXX existing part in across to nearby of on for IMTS. high solution XXXX, over wide In at which opportunities relationships, believe best during the hybridized focused accelerate industries. leads we the we the event the achieve our This update marketing This with flexible, our Manufacturing our the redundancies, Mark. intend our With in-person sales International our and costs that so quality desired executing footprint, further our a since resonated approach attendees. of deliver eliminate We most efforts relationships held traditional first was exciting the and to America to customer since scalability. tier we turn outcome leading applying Show a increase our deep it and had we manufacturing biggest which By with entrenched remain XXX process significantly and strong And attendees and this a in in range existing effective will we expand our new forward number facilities, ramping and Texas customers first our As many additive penetration for further next achieved event, initiative as exploring our technologies. securing strategy, build to greater that, Fortune technologies progress our turnout or invest market companies event see and and reduce over look to now familiar to to North met manufacturing expand new will additional offerings. continue two expect quarterly and to with go-to-market long XXXX faces. I of call breadth our and consolidate time We new the of September represents to in to call. is

Mark Frost

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

$XX.X the for revenue of above third which three the midpoint $XX.X to slightly revenue In ‘XX, our million. stated totaled $XX million of guidance Our million. $XX previously totaled quarter was quarter million

increase throughout quarter momentum CNC build in front sales growth by sequential monthly positive the continue sheet was the and in machining, performance our a we driven precision Our quarter. and in posted third metal on to commercial the

line For of Additive million our $X.X as revenue. product quarter was revenue totaled follows. total X.X% or three, by manufacturing

further growth Valley are Technology prospects this new in our we investing Silicon new additive in and earlier, mentioned technologies segment. As believe will our Center strengthen

remain total our growth business. climbed previous XXXX. that order experienced molding improve new development the additive September opportunities of month fourth revenue, completed to in our million of we to growth in on positive molding Injection or XX.X% million quarter. CNC drive including future or for also chain, of the reflecting to revenue. of resources the $XX.X XX.X% first We to half impact capitalize the in cross-selling in We adding and record $X support overseas our to X.X% machining software acquisitions of a revenue have ability system supply on more ongoing expect the a total on focused was injection

metal We million Turn or XX.X% of to total X.X% CNC healthy. Precision revenue. also million our our which product as to technologies, X.X% this customer representing business in became remains finally, smallest line, ancillary revenue. $X.X operational to total sheet increased demand contributed sell, on X.X% rose And overall revenue $XX.X Quick

expanding as million the quarter. adjusted In X, three, XX.X%. year, adjusted margin we first existing performance our our provide our wallet on EBITDA revenue due For of reported XX.X%, acquisition within strategic year maintain and accounts. XX.X%. to Slide our third share growth with months $X.X of the nine we for of On EBITDA our adding corporate prior EBITDA activity the customers $X.X accounts of primarily new increased million adjusted for related period, of focus Fathom's strategic we and margin the totaled representing a quarter In

revenue quarter last as plan reduced XXX the and platform build On and adjustments demand focused part XX.X% and fully expands. mentioned reflects We performance by of Gross Our a ongoing by to on efficient basis steps our gross absorption. our a driven volumes leverage. improvements, offset from commercial the margin by upgrade pricing the broad taking our margin was points. remain and lower This evidenced cost basis, year-over-year by partially improved cost volume leveraging structure due XX on quarter our in points. strategic to primarily in up sequential cost related impact optimization was ensure out more basis team as lower

approximately annualized quarter Now mid-‘XX generate plan, optimization early completion of remains savings Upon million. cost stages. initiatives, savings the in from our our which the we of various the realized expect totaling in in limited to $X.X we execution

waste achieve We listing New our objective Miami of incremental the public year. our additional organization. continuous enhance productivity, Hartland, due By following foster at identifying Arizona to opportunities improvement events in workshop culture Exchange. York XX% also earlier our initial million, to and expenses to lean a held following our year-over-year increased the our to Tempe, location company facilities a remove this incurrence at in to in Stock we SG&A $XX.X intend truly by primarily becoming of Kaizen on

as three basis Now XX% by on a excluding to stock declined costs $X.X sequential approximately quarter in public anticipated compensation, million. company our

fourth XX% company current infrastructure. by as to our We public further the we quarter expenses seek normalize expect an downward these to trend additional in

facility. end also finance We our centers flow. of our in while accounting and scaling the quarter help with year quarters. We under quarter we administrative regarding cash additional processes accounting cash credit pursue remain by business. coming plan streamline $XX center revolving over On ended the track We cash million, new our of X, million liquidity shared by transaction Slide further one other commitments this $X on $XX million to highlight activities functions ’XX service includes $XX and million with third the in company-wide undrawn equivalents, liquidity to available for completed and and and be to

of net timing gross as December debt our excluding generated is with million XXXX. the a cash totaled in which was spending million totaled in debt $XXX.X notable current September We XX, cash before $XXX.X and debt total $X.X quarter. to million we As million, operating fourth our due expect higher do CapEx maturities CapEx decline in no and mainly $X.X

spending CapEx slightly ahead Our of of payments plan, commitments our for that CapEx XXXX. the but year our were made at the reflects is also end from year-to-date previous

capital unmatched generating Now enhance we CNC capabilities throughput increase beginning positive returns in deployment earlier, as our machining mentioned strategy investments with our to additive expect Ryan these on in and key XXXX. begin to and investments further continue execute to we

solution boost into single ERP to our the improve business productivity, multiple integrate complete overall our scalable the digital efforts based to and to our process end with cloud to ERP by continue threat of the also technologies expect year. of next We line in a

a slide, subsequent existing third on note quarter, interest leverage as coverage. credit our the Now to both and agreement, relief final providing end covenant for amended for this the we of

December Specifically, X.X the our with XXXX increased of through flexibility the investment XX, times June into XX, ratio growth a a step for X.XX to increase net through continued leverage modifications down financial XXXX. to Fathom. These maximum times

which revenue midpoint to just million on for we for XX.X%. $XX EBITDA been market. Slide now between million in we reported also in implies quarter $XXX million the remains $XXX annual $XX the XXXX approximately This of for as to at generate implied turning left million million and revised margin of be a X% our approximately basis. Now XX outperforming XXXX. overall X, to an to our digital expected expect $XX current on year, updated days increase range fourth provide range for focus now forecast to $XX for XX.X% as revenue, between we manufacturing With million revised the an under the for The has our and adjusted of is

we to to of higher four, margin expect million XX.X%. quarter For of adjusted million representing XX% $X $XX a EBITDA

focus efficiencies. and are marketing operating and on We sales ramping activities our increasing continuing our

economic which continue At call conditions will provide four guidance issuing with We monitor the indicative aligned quarterly to quarter late early next March. global that we'll impact time, earnings or and our on in of outlook basis more we XX our only. our results. time typically days This is XX, extends intend to future of is begin a on frame our February backlog,

of industry. a back as Ryan? acquisitions Now impact and remains finally, fragmented reminder, an to turn M&A any growth acquisitions. in Ryan. an opportunistic approach as of excludes our our consolidator to remain part role accretive and large and our we future in the highly outlook important pursuing tuck-in strategy overall I'll our current now call the active our maintaining over

Ryan Martin

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

as with results profitable We generate flow. cash continue which are positive the consistent we quarter, for expectations and our pleased with performance third was our deliver to

and our accounts. our growth traction most with within throughout monthly expanding commercial bodes also well further We're gained our our strategic which continued orders increasing and XXXX. our the into large quarter, for productivity, strong sales and actions improvement solid encouraged QX segment in important We of by from

our invest particularly technologies, addition as of successfully we to based the optimization execution the numerous expect Fathom by scalable steps term, year a benefit building profitable date prospects platform our in is XXXX, continue have we platform of to just commercial position of a company leverage plan, In we team, With the in the bolstered new growth to our our ongoing taking public than CNC and for in in to we we delivery ability strategic taken stronger a long And business. additive fully and our to when ago. went growth much enhance with under drive shareholders. to

has business driven macro extensive progress advance of proud encountered headwinds. customer record team more. in in environment York as we our well what in transitioning near comprehensive the customers New our any company when are by downturns services end to term I'm yet what our markets, company, achieved to us the come This the believe remains is companies and positions to and across and and the prepared we during highlighted leaned of entrenched chip creating on as we macro our a call remarks This I'm our such questions. March previous for base for open Exchange Although, listed confident a Stock best the supply of on we mission the all XXXX, world, we differentiated track control responsive and while innovation even product growth most profitable diverse blue a uncertain, to manufacturing our up chain. can navigate key focused agile now manufacturing more concludes in and we'll accelerate model,

Operator

first go with Palm Thank Group. Greg you. [Operator Our question from ahead, Instructions] Greg. today Craig-Hallum comes Capital Please

Greg Palm

Yes. morning, guess outlook Thanks seem the with as what seeing the follow quarter. really you're kind year to I maybe normal just trends everyone. this start you're setting questions more guidance based fourth the I for on and to October here. wanted of my taking Good for it specifically seasonality in

maybe what So start? would just be a intra bit helpful you're more quarter to seeing little on

Ryan Martin

orders continue that progression third the We're same growth the every of saw that about our Greg. through the the we month for we see We talked Good far. here. this I you, quarter about and Ryan joining morning. second path we morning would in to month we on saw prepared Yeah. addition in remarks, in October talked seeing that Thanks resources quarter. to the them ramp. in so the commercial September say, and Yes. our -- as of saw we

we cautiously growth as throughout the optimistic the we're year. see So

the end customer out the our technologies, very of diversification the there. market the is around obviously the think we have. markets, really value It's a different base that I platform large entrenched

to And I this out demand we there. look so think And we're year. capture exists we're trying that continuing into to focus the optimistic the remaining as of part on cautiously

Greg Palm

some the prototyping longer about the or you maybe shorter of what you're the programs? on differentiate of could or strategic term projects time of if seeing Turn between And some stuff activity lead kind Quick

Ryan Martin

Yeah.

to even more differentiated quarter, value seen see in about started and have the specifically a the turn think -- of bit some we commoditized we've got the in to saw I offerings additive relates lot we technologies where third it before quick on As talked really to that, additive. the being different pressure beginning more quarter second we've especially little on leverage as have. We we a of into multiple the that we the that able so and

And so additive from was quick record kind side the value September the why in month and where additive It of to leveraging processing related the It of post and things. saw we things. just really of orders side that's the of an wasn't we commoditized ship. print saw

strong And so we're continuing to there. demand see

go somewhere I their good as those is the really to of reason we to for market. to those. three We're by to way phases helping of may injection that reduce between to space, we're think in casting XD seeing to lot of -- XX% manufacturing that they're mid-production. all being a prototype able bridge -- about through customer a cases, especially the printing opportunity seeing molding lot seeing, earlier initial different through I entire time all of urethane us demand development or talked XX% maybe the EV we're looking the some In where the of different and processes still handle leveraging larger able that production we're we're the call be projects four in from a on the

Greg Palm

of just then, little And the Mark, that help savings to the facility good. in cost the consolidation on line? of That's bit that? terms And program. COGS on in mostly then going Is Okay. a be just modeling

Mark Frost

Good question. Yeah.

Greg Palm

you I'll ahead. go Yes, let start.

Mark Frost

Greg. Good Yes. No, question.

SG&A. much between pretty to COGS and it split expect evenly We be

We're bit it Oakland good in a will and cutting of little shape we shut of in facility. in. start it -- of most but start most As quarter, We'll the incurring to one-one. down should fourth get it

I finish leadership Greg. on is transitions SG&A on of accounting Finance As more almost my remarks, will actually said and prepared the was which we the side, other sites, some at complete the

So COGS that's why XX-XX it's for split about SG&A savings 'XX. and between equally

Greg Palm

started savings second rate run of 'XX? in full in And the half

Mark Frost

handicap, of quarter two start I first if and the say, of say end XXX% will I’d I'd next XX% by year. XX%, quarter it

Greg Palm

Perfect.

there. All Best Okay. luck. it leave right. Thanks. of I'll

Ryan Martin

Thank you, Greg.

Operator

Our next comes with Needham & Ricchiuti from Co. question ahead. Jim Please go

Jim Ricchiuti

morning. Good Hi.

Maybe questions. -- sequential highlighted, then business. of a the see, the could to revenue side of you additive part first wanted that And couple could recognize a if talking the that smaller reconcile on decline. through I But any your us of increased you it's I intake order you're So that? and walk

Ryan Martin

Yes, absolutely.

-- we which fully turnover is team biggest to be about the additive team place have staffed team to to in the this the right the So we're excited that that we probably saw the sales in able platform, area grow get the really place. in we're and

the You revenues would additive gotten third lag orders of the be you that We saw the XX see in about there. the would on would day the time usually about size June, per May, July a and the because have impact depending period. in -- project, quarter -- that revenues the

the of really September. strong orders history month the for company of So record the we in saw

seeing we're so ramping in the sales really we And quickly. resources that brought

of revenues going benefit in October. from you'll an so that additive to We And perspective that quarter. in in orders the the the saw fourth of month see keep momentum the continue

an I we Those machines fusion have non-stop. third Just running much the since example, machines about pretty in X we've twenty HP the added multi-jet XX/X as been added them talked that quarter.

strong there, running well. for with see aerospace our of And there We're customers so some and continuing there demand especially defense pretty much strong to side we're continuing XX/X see demand on things. DMLS to as

the ramp next the the into into of orders QX into seeing quarter which fourth we're and from will revenues So Jim. translate year, up

Jim Ricchiuti

Got it. Hey, Ryan.

way line been quarter. orders And wonder with you market I mix month. any it you Nice either the given Just if might business in to of a could and just broader have hear that might seeing for verticals on changes each in talk that the the your sequentially question Has was demand be in margins growing implications seeing? the expectations? about where that you're

Ryan Martin

Yeah.

think they're process, the margin about they think similar the the margins in why challenge we perspective, what's best from is agnostic the to as have. best all technology and material, I manufacturing to look trying customer the to our really approach a the understand relatively best across what's which different we what's manufacturing process solve technology,

of think about markets the in If the robotics technologies that see I strong the space. lot especially really to we're they're areas leveraging customers space that from think And We've for interesting there. amount some end do technologies. you we're seeing right strong work different leveraging. us of four what's They're that is continuing growth five that space, typically We got the to are strong in now, there. really a medical multiple

as So well. metal, our it's We're Instrumentation additive, both machining. injection good plastic business in Precision growth and seeing CNC molding,

mandate for molding. have injection started for an we've from new production XD $X.X to as a that, Just customer machining have of high to they well an of kind And of of $X done area. we mid-volume printing XX% CNC them. Typically, of Jim, in new components they've example their internal leveraging generate million us large Minneapolis the now revenues products. And about precision as million

to provide they're allow is faster their all new leveraging to It's us able all is to our we're And (ph) so those them add. solution why ramp under their ability key processes And to guise a company. are for a initiative speed. that new which products, ancillary the it's

across that so to breadth value about million that we of -- customers And proposition I resonating lends we're over and multiple industries. an with spending with entrenched those that us just on I customers. the these growing different basis $X are have itself large how the think that is relationships annualized And it talked

kind different of we and broad we're where of markets a think to market people environment examples to see from talk different gain lot grow. seeing of spite it couple that the still macro maybe in that's we of so And that of there's of share industries in a lot about, opportunities and continue a

Jim Ricchiuti

very company Mark. Got about costs public in Mark, a Maybe talked it. you QX. decline one for in quick sequential

just about wondering, on think we general Just levels? expense thoughts QX, that SG&A in might any how in

Mark Frost

would would probably I I we say the be improve say, down on as our get X% quarter and will more What roughly public to continue it costs. -- company three Yes. is, managing normalize to from efficient,

that's I what fourth in would Jim So quarter. the expect

Jim Ricchiuti

you. Thank it. Got

Mark Frost

Yeah.

Operator

comes Our Mohan ahead. of next question with from Wamsi go Bank America. Please

Wamsi Mohan

Thank Yes. your by go was back if and look Hi. performances morning. Good wondering, you. technology. I market you to end at historically

You're product seeing by different categories line. bifurcation and the real across performance some

there either or or And given work so any a I just customers at curious, with lead any signaling is be associated doing this lag negatively point are sort time on of how what these based could in positively And inflection? follow-up. will

Ryan Martin

Yes. to Wamsi. you Good morning

on through CNC of you the side an The tends technologies business. to the the the and having sheet molding, the little would of more lag of right little we manufacturing if more look talked we're see mid really of those. injection be in our tends additive performance I revenues machining production team and sales precision that in in months QX more different transactional. the related be QX, volume project low really about is as the first-nine a within to is getting driven revenues in say, our a the to additive and more the place. to That impact NPI growth can the about talking you're kind which So metal, and you at

a from injection experience. we're I team. months to people about excited, sales an in brought fully which additive our industry the sales side certainly in commercial of quarter, quarter, the second saw specifically experienced, transitioned so to impact within the And more in six platform staffed from impacted lot of a of molding industry the talked deep our we third sales before, takes a business. and orders as team. kind about you ramp. Like a legacy really the in as We team our with we're growth of momentum We in based a Typically strategic rep then

in And them to. that but a can those the three faster this we and reps industry lead at still lot point, will ramp are think because we we believe of of so months, experience

that. see into think into into on perspective. improvement momentum some that building that But that QX I from see the XXXX You'll you'll impact really of

so feel made still Wamsi. why additive ramp. we've to the very remarks, in very, orders from is about still which to we perspective we're And support investments a talked as able my bullish, the I we about especially prepared be capital with talked --

Wamsi Mohan

we Yes. help No, for think quarter the guidance March as given here normal would you thank implied of thought about in us know point can your what we getting you, if I you just specific a seasonality right that follow-up be or into Thank you Ryan. as jump maybe or guidance? That's fourth with helpful. now Mark, could sort look worse, into seasonality you. better the And should say off quarter,

Mark Frost

don't of fourth the little as see our customer on pushing historically quarter little first reps we from because impact commercial a seasonality, a We to year. that business impact and quarter much are the stronger tend commercial see impact there your end but for do the is weaker an related of on that how

move matter. trying be Wamsi, we Wamsi. years. forward, in in the seasonality not as I'll So quarter is business we're now That's in we be that's to behave, we but that which the to cautious prior similar And potentially, be but could We're see what to guiding upside it's are how customer significant. four, normally here going expecting honest, an

Wamsi Mohan

much. so you Thank Okay.

Mark Frost

Yeah.

Operator

Chung comes [Operator your with JPMorgan. the open. next Instructions] question line from of is Our Paul line Paul,

Paul Chung

taking Hi. question. my Thanks for

last revenues increase kind of similar drivers. So rate also run expand year kind here in like on from and here, you point XXX of sequentially up kind gross just kind of of margins, on saw with the XQ basis of

higher we pricing margin mentioned should You some But do scale expansion ‘XX? of gross you CNC about how find we kind expect and of kind benefits. think as next into as year? some look of And hopefully pace we margins

Ryan Martin

really back. particularly pushed raised some and on previous that gotten talked calls low gone production mid we business, Yes. haven't of back on about Paul, to we've pricing relationships certain selectively, been we've on and our

in margins. our that of So we're seeing some benefit

the efficiencies how all we we operate beginning started the at standardizing from the Secondly, sites. year looking -- of for

The and as get from XX we finally probably of as So of didn't bit the can took level. coming move But little from get the end quarter in lower we a absorption. as and XXXX. expect why $X.X And revenue the really that with into key we're in back benefits actually XX%, we we a nice we're also benefit, XXs one to That's of that improve that wasn't three we're half hit. gross EBITDA level starting move that. do million, much margin that's pretty go think significantly some of and plan positive. margins at improvement as forward, a ability We optimization the pretty get which towards why leverage ingredients higher is the that to obviously we XX% low our that's to improvement support the us of can will our

a does better give little that color, So Paul? you

Paul Chung

material would the on kind drove you can then And that? expand that. for of here? details Thanks Any impairment goodwill Yes.

Ryan Martin

Sure.

it's Two, the higher us forecast to have valuation and a being discount model And cost year. price. through the One, We affect wasn't conditions go driven applied of technical you couple to then to the It's non-cash, of covenants issues. a early the a our or that year. factors. liquidity lower once factors stock triggered of because macroeconomic equity also was it or was some So test quarter for one contributed those -- anything. that higher our debt doesn't by and of lowering macroeconomic cost

one All had to those to we factors valuation time, the one contributed goodwill impairment not take. the time, the of and

both said, non-cash. I added and see income as gets it's adjusted you for as It EBITDA. back, can So

market process technical to. unfortunately companies a the with particularly that all accounting And it's what subject stock are it. that's So triggered

Paul Chung

And you. lastly and then upon I do kind cash term? a know ‘XX we on in line top dependent But flow, more Thank with restructuring and scale. lot moving how cash think of of and pieces about normalized conversion flow longer very there's

Ryan Martin

And cash we are good No, this running question. yeah, lower year flow. on Yeah.

Some of profile. due is lower to it the revenue

one-off taxes was that's related an we pay some which to charges is, we cash to million. an of almost earn other million related $X had. out, We The vesting almost taken to had usage shares $X

repeat Paul. that were next items year, So those won't

we capital, which $X working are million cash working had that's So We've improvement. higher slightly of on. also

we right that So to now go lot effort and flow plan is to There's a our higher. improve much expect performance. rate the would of up conversion cash

right running we're to think ability I XXXX. XX% XX% by and in range to XX% the XX%, on for now the improve we're that is something working

Paul Chung

Great. Thank you.

Ryan Martin

You're welcome.

Operator

ahead. comes Our Capital Stephan Lake Please Street from with Jacob next question go Markets.

Jacob Stephan

a a the progress you sense headcount just Thanks Maybe about Maybe out. on kind the give give sense sales the and good Hey, rep general could us talk for efforts? morning. of of of platform potential Yeah. just build questions. taking

Ryan Martin

Yeah.

-- fully to I mentioned And good commercial this morning in we're staffed. point, the I prepared -- we're remarks, As perspective, Jake. from a you, mentioned at as

And our sales strategic our leads sales our generate accounts which is that so related the regional, then back through and the XX% well roughly support, end team, commercial got of have. our well. regional then any accounts And so that resources marketplaces then And on top generation XX inside our to about business of in our corporate focused are of team on turnover sales, the with front others marketing inside roughly about are sales organization strategic our or of and come half we've We've between that. revenues. roughly sales, working that as covers added of about overall there's the team, that's as our as lead we associated that, more those XXX between of digital

really well. and position as over point the in into a So throughout orders third to that and saw fully staffed great we continue quarter at to this momentum the

Jacob Stephan

maybe those kind you outline have And with for you is ramp Got what far? period and up sales Okay. could again, reps the they thus it. of how long just been typical

Ryan Martin

Yes.

six -- in typically ramp we a between about see So up. XX our anywhere to six a industry month

is testament we're both selling we're And the able some the of XX folks manufacturing were different at that hire around different manufacturing and a experienced to Fathom, and value facilities from processes. it's the I excellence through internal different proposition benefit we have our what to doing the real industry. centers think Now capabilities that we

to a team. want our So industry to desire within folks join strong there's been the from

the they able we've their people relationships come some can sell And opinion in of do they my with that to weren't can previous to and really been at they best wanted in customers their the work take industry able to employer. because so to have they here know add it their solution them a

it's we what on. people that we've bring So the we're real value to to been the able have proposition building, think a and testament

said, So a ramp it's three six the role about to new the to XX month I as is within last team of half normally, about their months.

and them we the Mcalibur the We because really So ramp get think we're through we the year see of think that's (ph), hired of quarter and where we're first next still this experience even the so people should of that of in faster and we into But can in really types that fully end year. period. ramped ramping them excited. we

Jacob Stephan

of covers great. Well, here. forward That my luck questions. Best going

Ryan Martin

Appreciate so much. Thanks it.

Operator

the are we have all questions today. Those for

joining you, Thank for So everyone, this call. us. our concludes

day, lines. everyone. your disconnect lovely Have a now may You

Fathom Digital Manufacturing Corporation - Ordinary Shares (FATH) 14 Nov 222022 Q3 Earnings call transcript