Fathom Digital Manufacturing Reports Fourth Quarter and Full

Fathom Digital Manufacturing Reports Fourth Quarter and Full Year 2021 Preliminary Unaudited Financial Results

Information reconciling forward-looking Adjusted EBITDA to GAAP financial measures is unavailable to Fathom without unreasonable effort. The company is not able to provide reconciliations of forward-looking Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliations are outside of Fathom's control and/or cannot be reasonably predicted, such as the provision for income taxes. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to Fathom without unreasonable effort. Fathom provides a range for its Adjusted EBITDA forecast that it believes will be achieved, however it cannot accurately predict all the components of the Adjusted EBITDA calculation. Fathom provides an Adjusted EBITDA forecast because it believes that Adjusted EBITDA, when viewed with the company's results under GAAP, provides useful information for the reasons noted above. However, Adjusted EBITDA is not a measure of financial performance or liquidity under GAAP and, accordingly, should not be considered as an alternative to net income or cash flow from operating activities as an indicator of operating performance or liquidity.

As described in the Proxy Statement/Prospectus, during 2020 Fathom completed the acquisitions of Incodema Holdings, Inc., Newchem, Inc., GPI Prototype and Manufacturing Services, LLC, Dahlquist Machine, Inc., Majestic Metals, LLC, and Mark Two Engineering, Inc. (the “2020 Acquisitions”). During 2021 we completed the acquisitions of Summit Tooling, Inc., Summit Plastics, LLC, Centex Machine and Welding, Inc., Laser Manufacturing, Inc. and Screenshot Precisions, LLC d/b/a Micropulse West and Precisions Process Corp. (the “2021 Acquisitions”). Pro forma revenue gives pro forma effect to the 2020 Acquisitions and 2021 Acquisitions, as though such transactions occurred on January 1, 2020.

Financial Disclosure Disclaimer
Fathom has not yet completed its reporting process for the three and twelve months ended December 31, 2021. Full financial statements for these periods will be filed on or before March 31, 2022. The preliminary unaudited results presented herein are based on Fathom’s reasonable estimates and the information available at this time. The amounts reported herein are subject to various adjustments that are still under review, including potential adjustments relating to changes in the estimated fair value of warrants and earnout shares, purchase accounting and provision for income taxes. Such adjustments may be material and could impact the results reported herein.


Q4 2021 U.S GAAP Income Statement (preliminary unaudited)

*($ in thousands)*

	Three Months Ended December 31,
	2021	2020
Net Sales	44,330	19,040
Cost of Revenue¹	26,290	10,178
Gross Profit	18,040	8,862
Operating expenses
Selling, general, and administrative (SG&A)¹	12,276	8,713
Depreciation and amortization	3,309	2,028
Total operating expenses	15,585	10,741
Operating income (loss)	2,455	(1,879)

Interest expense	3,536	1,330
Other expense (income)	9,387	3,811
Other income	(30,985)	(162)
Total other expense, net	(18,062)	4,979
Net income (loss) before income tax	20,517	(6,858)
Provision for income tax (benefit)	(464)
Net income (loss)	20,981	(6,858)
Net income (loss) attributable to noncontrolling interest	13,092	-
Net income (loss) attributable to Fathom Digital Manufacturing Corporation	7,889	(6,858)

¹ Fathom reclassified certain historically reported expenses within the statement of operations to reflect go-forward policy. Specifically, cost of revenue included a reclassification of certain expenses equal to 4.4% and 0.5% of revenue for the three months ended December 31, 2021, and December 31, 2020, respectively. Additionally, SG&A included a reclassification of certain expenses equal to 1.8% and 3.4% net of revenue for the three months ended December 31, 2021, and December 31, 2020, respectively. Prior to the Company’s ownership of applicable acquired entities, these expenses were recorded inconsistently. The accounting reclassification had no impact on net income (loss).


Full Year 2021 US GAAP Income Statement (preliminary unaudited)

*($ in thousands)*

	Year Ended December 31,
	2021	2020
Net Sales	152,196	61,240
Cost of Revenue ¹	92,388	33,064
Gross Profit	59,808	28,176
Operating expenses
Selling, general, and administrative (SG&A) ¹	39,490	24,642
Depreciation and amortization	10,606	4,672
Total operating expenses	50,096	29,314
Operating income (loss)	9,712	(1,138)

Interest expense	12,318	3,635
Other expense	14,846	2,208
Other expense (income)	(30,872)	959
Total other expense, net	(3,707)	6,802
Net income (loss) before income tax	13,419	(7,940)
Provision for income tax	400	23
Net income (loss)	13,019	(7,963)
Net income (loss) attributable to noncontrolling interest	8,124	-
Net income (loss) attributable to Fathom Digital Manufacturing Corporation	4,895	(7,963)

¹ Fathom reclassified certain historically reported expenses within the statement of operations to reflect go-forward policy. Specifically, cost of revenue included a reclassification of certain expenses equal to 6.2% and 0.5% of revenue for the twelve months ended December 31, 2021, and December 31, 2020, respectively. Additionally, SG&A included a reclassification of certain expenses equal to 3.4% net of revenue for both the twelve months ended December 31, 2021, and December 31, 2020. Prior to the Company’s ownership of applicable acquired entities, these expenses were recorded inconsistently. The accounting reclassification had no impact on net income (loss).


Consolidated Balance Sheet (preliminary unaudited)

*($ in thousands)*

	December 31, 2021		December 31, 2020

Assets
Cash and cash equivalents	$	20,099	$	8,188
Account receivables, net		25,367		15,563
Inventory		10,539		6,325
Prepaid expenses and other current assets		1,980		2,598
Total current assets		57,985		32,674
Investments held in trust account		—		—
Property and equipment, net		42,377		26,386
Intangible & other		249,575		83,466
Goodwill		1,242,482		63,215
Other non-current assets		9,813		1,038
Total assets	$	1,602,232	$	206,779

Liabilities and Stockholders' Equity
Accounts payable	$	9,409	$	4,404
Accrued expenses		4,391		4,181
Other current liabilities		4,698		2,778
Contingent consideration		2,750		4,066
Current portion of debt		30,096		2,853
Total current liabilities		51,345		18,282

Long-term debt, net		120,913		90,486
Long-term contingent consideration		65,150		7,373
Deferred tax liability		—		—
Founders share liability		9,400		—
Other non-current liabilities		1,788		514
Warrant liability		16,608		—
Payable to related parties pursuant to tax receivable agreement		4,600		—
Total liabilities	$	269,804	$	116,655

Contingently Redeemable Preferred Equity
Class A Contingently Redeemable Preferred Units; $100 par value, authorized 1,167,418 units, issued and outstanding and 1,167,418 units as of December 31, 2021 and 2020, respectively	$	—	$	54,105
Equity:
Class A common stock		5		35,869
Class B common stock		8		14,450
Additional paid-in capital		491,050		—
Accumulated other comprehensive loss		—		(68)
Accumulated deficit		(1,585)		(14,232)
Non-controlling interest in subsidiaries		842,950		—
Total stockholders' equity		1,332,428		36,019
Total liabilities and stockholders' equity	$	1,602,232	$	206,779


Q4 2021 Revenue by Product Line (preliminary unaudited)

	Reported Revenue for Three Months Ended
($ in thousands)	12/31/2021	Percentage	12/31/2020	Percentage	$ Change
Additive manufacturing	$4,514	10.2%	$4,320	22.7%	$194
Injection molding	$9,032	20.4%	$4,905	25.8%	$4,127
CNC machining	$14,196	32.0%	$2,484	13.0%	$11,712
Precision sheet metal	$13,855	31.3%	$5,819	30.6%	$8,036
Other revenue	$2,733	6.2%	$1,512	7.9%	$1,173
Total	$44,330	100.0%	$19,040	100.0%	$25,241


Full Year 2021 Revenue by Product Line (preliminary unaudited)

	Reported Revenue for Twelve Months Ended
($ in thousands)	12/31/2021	Percentage	12/31/2020	Percentage	$ Change
Additive manufacturing	$17,830	11.7%	$17,075	27.9%	$755
Injection molding	$28,892	19.0%	$17,904	29.2%	$10,988
CNC machining	$43,149	28.4%	$10,380	16.9%	$32,769
Precision sheet metal	$53,445	35.1%	$10,166	16.6%	$43,279
Other revenue	$8,880	5.8%	$5,715	9.3%	$3,166
Total	$152,196	100.0%	$61,240	100.0%	$90,957


Pro Forma Revenue Calculation (preliminary unaudited)

*($ in thousands)*	Q4 2021	Q4 2020	Full Year 2021	Full Year 2020
GAAP reported revenue	$44,330	$19,040	$152,196	$61,240
2020 Acquisitions adjusted revenue ¹	-	9,328	-	49,294
2021 Acquisitions adjusted revenue ²	-	9,087	10,380	38,866
Pro forma revenue	$44,330	$37,455	$162,576	$149,400

¹ As described in the Proxy Statement/Prospectus, during 2020 Fathom completed the acquisitions of Incodema Holdings, Inc., Newchem, Inc., GPI Prototype and Manufacturing Services, LLC, Dahlquist Machine, Inc., Majestic Metals, LLC, and Mark Two Engineering, Inc. (the “2020 Acquisitions”). During 2021, we completed the acquisitions of Summit Tooling, Inc., Summit Plastics, LLC, Centex Machine and Welding, Inc., Laser Manufacturing, Inc. and Screenshot Precisions, LLC d/b/a Micropulse West and Precisions Process Corp. (the “2021 Acquisitions”). Information gives pro forma effect to the 2020 Acquisitions, as though such transactions occurred on January 1, 2020. ² Information gives pro forma effect the 2021 Acquisitions, as though such transactions occurred on January 1, 2020.


Reconciliation of GAAP Net Income to Adjusted Net Loss (preliminary unaudited)

*($ in thousands)*	Q4 2021	Q4 2020	FY 2021	FY 2020
Net income (loss)	$20,981	($6,858)	$13,019	$(7,963)
Acquisition expenses ¹	-	1,840	4,236	3,765
Transaction costs	8,000	-	8,000	-
Change in fair value of tax receivable agreement (TRA)	300	-	300	-
Change in fair value of warrant liability ²	(4,103)	-	(4,103)	-
Change in fair value of earnout share payable ²	(26,860)	-	(26,860)	-
Adjusted net income (loss)	($1,682)	($5,018)	($5,408)	($4,198)

¹ Represents expenses incurred related to business acquisitions; 2Represents the income statement impacts from the change in fair value related to both the earnout liability and the warrant liability associated with the business combination completed on December 23, 2021.


Reconciliation of GAAP Net Income to Adjusted EBITDA (preliminary unaudited)

*($ in thousands)*	Q4 2021	Q4 2020	FY 2021	FY 2020
Net income (loss)	$20,981	($6,858)	$13,019	$(7,963)
Depreciation and amortization	4,428	2,399	16,452	7,390
Interest expense, net	3,536	1,330	12,318	3,635
Income tax expense	(465)	-	400	23
Contingent consideration ¹	-	1,055	(1,120)	1,055
Acquisition expenses ²	-	1,840	4,236	3,765
Loss on extinguishment of debt ³	996	-	4,491	-
Transaction costs	8,000	-	8,000	-
Change in fair value of tax receivable agreement (TRA)	300	-	300	-
Change in fair value of warrant liability ⁴	(4,103)	-	(4,103)	-
Change in fair value of earnout share payable ⁴	(26,860)	-	(26,860)	-
Non-recurring and non-cash costs ⁵	3,721	1,744	7,220	3,289
Adjusted EBITDA	$10,534	$1,510	$34,353	$11,194


¹ Represents the change in fair value of contingent consideration payable to former owners of acquired businesses; ² Represents expenses incurred related to business acquisitions; ³ Represents amounts paid to refinance debt in April of 2021; ⁴ Represents the impacts from the change in fair value related to both the earnout liability and the warrant liability associated with the business combination completed on December 23, 2021; ⁵ Represents adjustments for other non-recurring, non-operating, and non-cash costs related primarily to integration costs for new acquisitions, severance, and charges for the increase of fair value of inventory related to acquisitions, and management fees paid to Fathom’s principal owner.

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