Desktop Metal — Merger or Acquisition (September 2023)
28 slides from Desktop Metal's merger presentation, Sep 14, 2023
Slide 1: Protecting Value for Stratasys Shareholders
Protecting Value for Stratasys Shareholders S e p t e m b e r 2 0 2 3
Slide 2: Key reasons for rejection of DDD's proposal
2 Key reasons for rejection of DDD’s proposal 1 3D System’s (“DDD”) current proposal significantly undervalues Stratasys (“SSYS”) ⚫ The revised proposal reflects a nominal value of $15.26 per share for Stratasys, representing a premium of only 15% as of September 11, 2023, and only 3% premium to the
Slide 3: Key reasons for rejection of DDD's proposal
3 Key reasons for rejection of DDD’s proposal 4 Net synergy potential is materially lower than what DDD is broadcasting ⚫ DDD was unable to furnish any credible support backing its claim of cost synergies of more than $110M ⚫ Based on analysis performed by a leading consulting firm, we estimate cost
Slide 4: Key reasons for rejection of DDD's proposal
4 Key reasons for rejection of DDD’s proposal 6 Serious concerns regarding the ability of DDD’s management team to run a combined company ⚫ DDD management has repeatedly missed estimates and lowered guidance; SSYS’ management team, in contrast, has delivered superior performance ⚫ Skepticism regardi
Slide 5: Agenda
Agenda 5 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory c
Slide 6: Value of DDD's latest offer has decreased by ~35%
$5 $7 $9 $11 $15 $17 $19 $21 $23 $25 May - 24 Jun - 03 Jun - 13 Jun - 23 Jul - 03 Jul - 13 Jul - 23 Aug - 02 Aug - 12 Aug - 22 Sep - 01 Sep - 11 Jun - 1: DDD proposal: $7.50 +1.2507*DDD Value of DDD’s latest offer has decreased by ~35% 6 Source: FactSet as of 09/11/2023 Note: Offer prices calculated
Slide 7: SSYS continues to trade at a discount despite superior performance
SSYS continues to trade at a discount despite superior performance MARKET CAP ($M) Source: FactSet as of 09/11/2023, Company filings Note: 1 Estimates based on street consensus; 2 Based on 2023E midpoint guidance 7 2023E REVENUE GROWTH 2 2023E EV / REVENUE 1 2023E OPERATING INCOME ($M) 1 962 705 1.1
Slide 8: Agenda
Agenda 8 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory c
Slide 9: DDD's core businesses are losing share across the board
DDD’s core businesses are losing share across the board 9 DDD HARDWARE REVENUE SHARE BY TECHNOLOGY 1 Metal Powder Bed Fusion (DMLS) SLA SLS DLP 1 Polymer Jetting Wax Jetting 1 DLP share is calculated from 2018 when they entered the market (2017 had no sales); 3 DDD broker universe implies Align as i
Slide 10: DDD's Healthcare business continues to deteriorate
DDD’s Healthcare business continues to deteriorate Medical 2022A revenue 10 Dental 1 Source: Company filings, Management assessment; 1 Assumes similar split between medical and dental revenue. Per 10 - K one dental customer accounts for >20% of revenue; 2 DLP share of aligners is increasing: based o
Slide 11: DDD's Industrial business continues to be weak with only few bright spots
Metal 1 SLS 1 Other industrial Commentary 3 Revenue outlook DDD position 2 Lacks technology needed to succeed in ? metal mass production x Good position in unique medical applications Weak Outdated technology Weak CJP is aging technology SLA technology is losing share Strong in SLA and MJP jewelry D
Slide 12: Sales to Align Technologies (23% of DDD revenue) are at high risk
Sales to Align Technologies (23% of DDD revenue) 1 are at high risk $72 $135 $124 ~$75 2020A 2021A 2022A 2023E 3 $2,102 $3,247 $3,073 $3,717 2 2020A 2021A 2022A 2023E ALIGN’S TECHNOLOGY REVENUE ($M) DDD REVENUE FROM ALIGN 1 ($M) Align appears to be in the process of diversifying its suppliers, reduc
Slide 13: While bioprinting could be a growth area, its success remains unproven
While bioprinting could be a growth area, its success remains unproven with lengthy and uncertain regulatory approval processes ahead 13 Even after 12 years of focus on bioprinting, there have been no meaningful commercial results making it hard to attribute material value to the business Bioprintin
Slide 14: DDD's 2027 revenue target is highly ambitious
$413 $544 $538 $535 $553 $1bn 1 2020A 2021A 2022A 2023E 2024E 2027E DDD’s 2027 revenue target is highly ambitious given current business trends and lack of near - term growth drivers KEY DATA POINTS ORGANIC REVENUE (EXCLUDING DIVESTITURES) ($M) 14 % growth: ’24 - ’27 CAGR (1%) (1%) 3% 22% Nearly dou
Slide 15: Agenda
Agenda 15 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory
Slide 16: DDD also operates at materially discounted gross margins
DDD also operates at materially discounted gross margins 16 NON - GAAP GROSS MARGIN PERFORMANCE AND OUTLOOK Source: Company filings Challenges in Dental business likely to drive challenges in medium to longer term 48.5% 1H 2023A 1H 2023A 38.9% Significant risk to achieving 2023E GM target 2023E mid
Slide 17: Agenda
Agenda 17 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory
Slide 18: Cost synergies are substantially lower than DDD's estimate
Cost synergies are substantially lower than DDD’s estimate with significant concerns around revenue dis - synergies COST SYNERGIES ($M) ANNUAL REVENUE DIS - SYNERGIES $110 DDD claim SSYS view $74 - $88 + ($51M) / ($26M) Revenue impact EBITDA impact Total estimated 2025 cost synergies associated with
Slide 19: Agenda
Agenda 19 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory
Slide 20: Extended regulatory review could have adverse impact on both businesses
Extended regulatory review could have adverse impact on both businesses ⚫ There is a high risk of a lengthy and extensive regulatory review process for a transaction with DDD. If the transaction were to close, then it has potential to take 9 - 18 months ⚫ The significantly elongated timeline to clos
Slide 21: Agenda
Agenda 21 DDD’s current proposal significantly undervalues SSYS 1 Serious concerns about DDD’s short - to - medium - term growth prospects 2 Structural challenges to a path to attractive profitability 3 Net synergy potential is materially lower than what DDD is broadcasting 4 Significant regulatory
Slide 22: In the past years, SSYS outperformed DDD across the board
In the past 3 years, SSYS outperformed DDD across the board 2021 2022 Q2’23 48% 48% 49% +70bps $14 ($2) 2021 2022 2023E 3 $19 43% 40% 39% (410)bps $607 $651 2 $650 2021 2022 2023E 1 +3% $616 $538 $535 (7%) $574 $625 $650 2021 2022 2023E 1 +6% $544 $538 $535 (1%) 2021 2022 2023E 1 2021 2022 2023E 1 2
Slide 23: DDD has repeatedly missed consensus
DDD has repeatedly missed consensus 1 23 ACTUALS VS CONSENSUS EPS Adjusted EBITDA Revenue EPS Adjusted EBITDA Revenue Fiscal quarters (FYE 12/31) x x x x N/A x 3Q20 x x x X (18%) X (5%) x 4Q20 x x x x x x 1Q21 x x x x x x 2Q21 x x x x x x 3Q21 x x x x x x 4Q21 x x x X (1,100%) X (70%) x 1Q22 x x x X
Slide 24: DDD has history of reducing guidance
DDD has history of reducing guidance, including most recent Q2 ‘23, creating significant uncertainty for SSYS shareholders 24 $570 $580 $530 $535 $538 $630 $625 $570 $545 Feb 22 May 22 Aug 22 FY’22 guidance as of Nov 22 FY’22A DDD missed FY’22 mid - point guidance provided at Q1’22 by ~(11%) EVOLUTI
Slide 25: DDD failed to realize its own targeted cost optimization program
DDD failed to realize its own targeted cost optimization program Source: Company filings, Investor presentation, Earnings transcripts. Notes: 1 Represents Non - GAAP financials. 25 Announced $100M annualized cost reduction by Q4’21 ($M, Annualized 1 ) 160 140 68 77 $228 $217 Q2'20 Q4'21 DDD may have
Slide 26: The combined entity would have a weak pro forma balance sheet
The combined entity would have a weak pro forma balance sheet and may lead to future equity raises $205 ($509) ($33) ($15) ($50) ($44) $57 $492 Current combined cash balance (H1'23) Cash payment to SSYS shareholders ($7.00 p/s) DM break - up transaction Tax paid resulting from use Other transaction
Slide 27: Disclaimer: Forward-Looking Statements
HIGHLY PRELIMINARY DRAFT – SUBJECT TO REVISION Disclaimer 27 Forward - Looking Statements This document contains forward - looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the actual results of St
Slide 28: Disclaimer: Important Additional Information
HIGHLY PRELIMINARY DRAFT – SUBJECT TO REVISION Disclaimer 28 Important Additional Information In connection with the proposed transaction, Stratasys filed with the SEC a registration statement on Form F - 4 that includes a joint proxy statement of Stratasys and Desktop Metal and that also constitute
Desktop Metal — Merger or Acquisition (September 2023) on 6ix