On-demand manufacturing service provider Fathom Digital Manufacturing (FTHM) has reported its revenue grew by 33% in Q1 2022.
Over the course of the period, which marked the first full quarter as a public company on the NYSE, the firm generated $40.5 million, $10 million more than the $30.5 million it reported in Q1 2021. According to CEO Ryan Martin, the revenue rise is a result of securing several significant multimillion-dollar contracts during the quarter, a “strong orders volume”, and expanding its backlog of new business.
“Fathom delivered positive results in its first full quarter as a public company,” he said. “We are an industry pioneer with a history of profitability and cash generation, and extended this tradition in Q1 as we continue to benefit from the strong demand for our broad capabilities in the fast-growing digital manufacturing market.”
Fathom’s Q1 2022 financial results
Fathom generally reports its revenue across five key product segments: Additive Manufacturing, Injection Molding, CNC Machining, Precision Sheet Metal, and ‘Other Revenue.’
Over the course of Q1 2022, the firm’s best-performing division was Precision Sheet Metal, which brought in $14.6 million and accounted for 36% of total revenue generated during the period. This increase was largely driven by entering into a new multimillion-dollar agreement with a global semiconductor company to provide low volume sheet metal production, which followed previous work with the customer regarding CNC machining.
The company’s next highest revenue generator was its CNC Machining division, which brought in $13.3 million in Q1 2022, 11.9% more than it did in Q1 2021. Following this was Injection Molding at $6.8 million, Additive Manufacturing at $4.1 million, and Other Revenue at $1.6 million.
On the earnings call, Fathom’s CFO Mark Frost said that while its Additive Manufacturing segment was down 8.6% compared to Q1 2021, the firm maintained its pricing discipline during the quarter and is continuing to invest in new additive technologies, remaining “bullish” on the long-term growth of its additive platform.
“In addition to seasonal factors, our Q1 revenue was impacted by a domestic slowdown in early January due to the spread of the Omicron variant, which reduced additive revenue,” he said. “We also experienced a reduction in our outsource business stemming from the COVID lockdowns in Asia, which impacted particularly our injection molding shipments.”
Frost also added that Q1 tends to be its lowest revenue-generating quarter based on its ‘customer and commercial behaviors’, and although its organic revenue grew 6% during Q1 2022, $7.7 million of the firm’s Q1 revenue was the result of five acquisitions completed during the period; one domestic injection molding firm and four additional acquisitions focused on CNC machining.
Regarding profitability, Martin said the firm delivered a “profitable quarter” as a result of adjusted EBITDA during the quarter totaling $6.2 million, representing a 15.2% margin. Frost added that while Fathom incurred a dilution impact from the CNC acquisitions on its gross margin compared to the prior year, which reduced the adjusted EBITDA of benefit, this had been built into the company’s EBITDA expectations for the quarter. Meanwhile, the firm’s gross margin for Q1 2022 was 38.2%.
| Financials ($) | Q1 2021 | Q1 2022 | Difference (%) |
| Total Revenue | 30.5m | 40.5m | +32.8 |
| Additive Manufacturing | 4.5m | 4.1m | -8.6 |
| Injection Molding | 6.6m | 6.8m | +2.7 |
| CNC Machining | 4.8m | 13.3m | +175.8 |
| Precision Sheet Metal | 13.1m | 14.7m | +11.9 |
| Other Revenue | 1.4m | 1.6m | +11.4 |
| Net Income/Loss | -0.5m | 17.8m | +3660 |
| Adjusted EBITDA | 7.7m | 6.2m | -19.4 |
Expanding key verticals
On Fathom’s earnings call, Martin provided several examples of how the firm successfully accelerated manufacturing innovation throughout Q1 2022, and helped several of its larger enterprise customers to transform their supply chains.
During Q1, Fathom worked with an unnamed existing customer, described as a global leader in gas measurement, instruments, and technologies, to ramp up production of its product from 25 units per month to nearly 75, leveraging its CNC machining and Wire EDM offerings.
“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,” Martin said.
Fathom also worked with customers across the robotics, consumer electronics, semiconductor, and agricultural equipment industries to reduce significantly reduce their time-to-market and transform their supply chains.
Throughout Q1 2022, Fathom worked with two firms, one in the consumer electronics vertical and the other within agricultural equipment, to increase their adoption of additive manufacturing. For the consumer electronics firm, Fathom solved its customer labor shortage by leveraging a Manufacturing As A Service (MAAS) agreement with its 3D printing technologies, while Fathom’s additive manufacturing prevented a “down line situation” expected to last five days at the agricultural equipment firm with its additive manufacturing offering.
Projecting growth ahead of Evolve Step launch
Off the back of its Q1 2022 financials, Fathom has reiterated its previously stated guidance of revenue between $182 million and $192 million for FY 2022. If achieved, this would represent an increase of around 23%.
The firm’s full year outlook for adjusted EBITDA is also unchanged, as it expects to generate between $40 million and $45 million in 2022 for an implied margin of 22% to 23.4%.
Looking ahead to Q2 2022, the firm predicts revenue growth of between 17-25%, of which organic growth is anticipated to be 10% or higher. On the earnings call, Frost said Fathom anticipates to leverage its higher revenue growth through stronger cost absorption and the ramp up of lean manufacturing activities during Q2 2022.
Frost also repeated the firm’s intention to further strengthen its additive manufacturing capabilities throughout the rest of 2022 with the commercial launch of its new Evolve Step technology midway through the year.
“This advancement in additive manufacturing is another example of Fathom leading the transition from prototyping into additive production as this technology dramatically reduces lead times for parts compared to traditional injection molding tools and parts,” he said. “In addition, we recently installed a new laser sintering system with two high-powered lasers for Polymer 3D printing, enabling the rapid production of parts.
“This is a major step up from predecessor systems leading to greater efficiencies, and productivity.”
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Featured image shows a selection of 3D printers in Fathom’s expansive technology offering. Photo via Fathom Digital Manufacturing.
