Partner Integration Momentum Driving Path for Software Scale

Management to Host Conference Call Today at 4:30 P.M. ET

SANTA FE, N.M. — (BUSINESS WIRE) — March 30, 2023 — Sigma Additive Solutions, Inc. (NASDAQ: SASI) ("Sigma", "we," "our," or the "Company"), a leading provider of quality assurance software to the commercial 3D printing industry, has reported its financial and operational results for the fourth quarter and full year ended December 31, 2022.

Key Fourth Quarter and Subsequent 2022 Highlights and Business Update

• Expanded collaborations for connected software solutions with:
  • Materialise, a global leader in 3D printing software and service solutions, to provide additive manufacturing (AM) users automated quality control by integrating the PrintRite3D® quality assurance solution into the new software solution Materialise Process Control on their Co-AM platform
  • Dyndrite, providers of the GPU-accelerated computation engine used to create next generation digital manufacturing hardware and software, allowing connection of Dyndrite-generated tool paths to in-process quality data for the first time
• Expanded collaborations for connecting market hardware to PrintRite3D software with:
  • DyeMansion, the global leader in connected & integrated post-processing solutions for industrial polymer 3D-printing, to add an integrated hardware/software solution option that offers extra quality assurance for DyeMansion’s post-processing solutions, expanding Sigma’s quality product coverage beyond just the 3D printer space
  • Expanded OEM footprint by connecting Sigma PrintRite3D software and analytics to EOS and SLM application programming interfaces (APIs) through the EOS Developer Network (EDN) and SLM’s open architecture SLM.Quality API
  • Novanta, a premier global supplier of laser photonics, to pioneer the first fully integrated scan head with quality assurance – agnostic of original equipment manufacturer (OEM) printer
• Reduced operating expenses to align with a quicker path to profitability, including our largest cost, salary expense, by 40% from April 2022, while retaining key employees and better aligning the business to our software scaling model
• Continued development of the Company’s intellectual property and patent portfolio, adding IP beyond just hardware into critical analytics and machine learning reaching a total number of granted patents to 29 with an additional 40 patent applications in-process by the end of 2022, providing options to explore licensing structures for the market
• We continue to evaluate options to fortify our balance sheet including the previously announced retention of Lake Street Capital Markets as Sigma’s financial advisor in connection with the Company's consideration of a range of strategic alternatives designed to enhance shareholder value, including a possible strategic investment, acquisition, merger, business combination, or similar transaction

“We continue to track key performance indicators (KPIs) to monitor the progress and execution of our new business plan. During the quarter, we established key relationships that are important to our path to grow our software-only solutions targeted for release in Q2 2023. These collaborations are opening paths to market and increasing total addressable market, two things that drive the growth potential of the company. We see our focus on this and other KPIs as critical to achieving our business plan over the next two years. During the quarter we continued to make progress on our subscription model and transition to software-only product options to support the additive industry as a whole, making Sigma accessible at scale for supporting qualification and production across thousands of machines at hundreds of customer sites,” stated Jacob Brunsberg, President and Chief Executive Officer of Sigma.

KPIs to Monitor Progress:

• Revenue of $154 thousand in Q4 2022, tracking with a shift to subscription pricing as we continue to work towards our full software-only offering suite in 2023, mixed with operating cost reductions aligning to current strategy
• Order backlog, defined as firm orders received but not yet shipped, currently totals $125 thousand of both perpetual and subscription sales. Total additional revenue to be recognized from transactions closed in previous quarters totals $370 thousand, yielding a combined total of $495 thousand of revenue to be recognized in future periods
• Pipeline opportunity is opening with OEM collaborations providing the ability to connect via APIs with software-only products, which increases Sigma’s addressable market while lowering barriers to entry that existed in prior product
• Deal cycle time continues to track with switch to subscription models as well, which sets up Sigma’s software-only products targeted for Q2, 2023
• Partner additions increased ahead of plan, including 8 OEM/hardware partners (Novanta, Additive Industries, DMG Mori, Aconity, amace, EOS, DyeMansion, and SLM Solutions) and 4 ISV partners (Materialise, AMFG, Sentient Science, and Dyndrite) with more pending

Management Commentary

Brunsberg continued, “We have listened to the market and our customers. The prior business model that depended on hardware retrofits did not meet the cost needs of the market and did not provide a scalable structure for Sigma. We have moved quickly to provide more cost effective integrated and software-only solutions that we believe significantly lower our barriers to entry and provide a faster path to scalability of connected quality solutions for the market.

“Years ago, this may have not been possible. With the recent opening of system architectures and API connectivity, we have a path to provide critical software-only quality solutions that connect more broadly and uniformly to the industry. We continue to work with standards organizations and have formalized collaborations with OEMs, scanner manufacturers, and synergistic software providers to provide channels to deliver these solutions.

“Aligning around our future product path, we have added a space customer that is contributing to our product council feedback, added our first automotive customer, and have planned multi-site expansion at a key aerospace customer that connects us to another OEM. This OEM integration work is bearing fruit as we have our first customer targeted to implement a software-only OEM API connected suite in Q2 aligning with our software-only product launch schedule.

“Looking ahead, we continue to move with urgency in our business transition to put ourselves in position to be the home for connected digital quality to support qualification and production across thousands of machines at hundreds of customer sites.”

Fourth Quarter and Full Year 2022 Financial Results

Revenue for the full year of 2022 totaled $0.63 million, compared to revenue of $1.7 million for the full year of 2021. The decrease was primarily due to fewer perpetual license PrintRite3D® unit sales, and a decrease in contract additive manufacturing. Partially offsetting these decreases were an increase in revenues from the subscription-based pricing program, the legacy Rapid Test and Evaluation (“RTE”) program, on-site installation and support, consulting services, and annual maintenance contracts.

Gross profit for the full year of 2022 was $0.3 million, compared to gross profit for the full year of 2021 of $1.1 million. Gross margin for the full year of 2022 was 44% compared to gross margin of 66% for the full year 2021. The gross margin decrease was primarily driven by an increase in the price of certain PrintRite3D system components as a result of configuration changes and discounted sales to universities and research institutions as members of our AcGovDustrial Network.

Total operating expenses for 2022 were $9.0 million, compared to $9.6 million in 2021, a decrease of 5.7%. The decrease was primarily attributable to a decrease in stock-based compensation, a decrease in operating and research and development costs, partially offset by increases in salary and benefits, office expenses, and increased business travel.

Cash used in operating and financing activities for the year ended December 31, 2022 totaled $8.6 million as compared to $6.6 million in the year ended December 31, 2021. Average monthly cash usage in the fourth quarter of 2022 was approximately $652 thousand, down from an average of $711 thousand for the third quarter of 2022 and $717 thousand for the full year of 2022.