Hartland-based
Fathom Digital Manufacturing is one of many companies that have been affected by the country’s current state of macroeconomic uncertainty. While revenue was up overall for Fathom in 2022, the company saw a decline in the fourth quarter due to an ongoing slowdown in spending by its biggest customers.
In sharing the company’s fourth quarter and full year results for 2022,
Ryan Martin, Fathom’s chief executive officer, said they were below expectations and reflect “ongoing softness” in the macro environment.
Revenue for the fourth quarter of 2022 was $38.4 million compared to $44.3 million in the fourth quarter of 2021, a decrease of 13.3% primarily due to lower production volumes.
“When there were more challenges in the supply chain, (we saw some larger customers) really taking on as much inventory as they could because they were really worried about the supply. As the supply chain has started to normalize, some of those key customers looked at the fourth quarter and deleveraged some of their inventory,” said Martin. “What we saw was a temporary slowdown in orders for some of our larger production customers in the fourth quarter and we’re seeing a little bit of impact in the first impact as well.”
He expects to see a rebound in the second half of this year, based off conversations he’s had with some of Fathom’s larger customers, who have said they expect to spend less on capital expenditures on the manufacturing side this year. This could lead to more outsourcing opportunities for Fathom.
To better meet its customers’ needs, Fathom has made a multi-million-dollar investment at its Hartland headquarters to create a New Product Innovation (NPI) Center of Excellence. The company spent over $10 million on capital expenditures last year, with a “disproportional” amount of that $10 million being funneled into the Hartland headquarters, according to Martin.
Fathom has seen the most demand for CNC machine parts with a quick turnaround time and has added two machines to support that work. Fathom has also invested in newer additive solutions, such as Evolve technology, which uses a unique process to create thermoplastic parts within hours or days without compromising quality.
When it comes to what kinds of manufacturing are the biggest drivers of business for Fathom, additive manufacturing is actually at the bottom of the pack. In 2021, the company made $17 million in the additive manufacturing category, a number that decreased to $14 million in 2022. CNC machining brought in $43 million in 2021 and $58 million in 2022, a 35% increase. Despite additive manufacturing making up a smaller piece of the company’s revenue than more traditional manufacturing processes, Martin said he’s still “incredibly bullish” on 3D printing.
“I think for our company in particular, what I think is really unique about us is we’re technology agnostic,” said Martin. “We’re looking to understand what the customer is looking to achieve, so additive for us is just another tool in our toolbox. If a customer’s needs are better served by CNC machining or injection molding, we want to have all those levers we can pull.”
To further address the ongoing spending slowdown, Fathom has sped up its optimization plan in which the company plans to reduce costs by $19.5 million. This has been done through consolidation of physical locations – most recently Fathom consolidated two facilities it had near Austin into one – and additional plans to streamline business operations. The company also moved a portion of its operations in Oakland, California to the Hartland headquarters
in 2022.
“We’re really trying to streamline the cost structure of this business to be able to better drive not only profitability in 2023 but beyond,” said Martin.
That’s not the only financial challenge the company is looking to tackle this year. Earlier this month, Fathom received notice from the New York Stock Exchange that the price per share of the company’s stock had fallen below $1 for 30 consecutive days. Fathom has six months to work on boosting its stock price back above $1 to be able to keep trading on the NYSE.
“We’re evaluating the different options we have available to us. One of the key things that we’re focused on and one of the things that will help with that is all the (efficiency plan) we talked about and driving profitability,” said Martin. “If we do that, I’m confident we’ll be in a good position.”
