Q4 2022 Nano Dimension Ltd Earnings Call
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Speaker 2: Good day, ladies and gentlemen. Welcome to today's conference to discuss Manable Dimensions' fourth quarter and full year 2020 conference call. My name is Nick, and I'm your operator for today's event. On the call with us today are Yav Stern, Chairman and CEO .
Speaker 2: Yael Sandler, CFO , and Julian Letterman, Head of Corporate Development. Before we begin, a reminder to listeners that certain information provided on this column may contain forward-looking statements. And the safe harbor statement outlined in today's earned press lease also pertains to this column.
Speaker 2: If you have not received a copy of the press release, please view it on the investor relations section of the company's website. You have to begin the call with a business update, followed by a question and answer the session, at which time the hour will answer questions.
Speaker 2: I would like to turn the call over to now dimensions CEO and CEO , Chairman Jarvis Stern. Well, please go ahead.
Speaker 3: Thank you very much, Nick. Hi everybody.
Speaker 3: Hopefully some of you have seen me lately. I wish I could see you today, but I'm trying to visualize you. I will go to the business description. I hope you have a presentation in front of you.
Speaker 3: So I will try not to read the presentation, just to scan through it. And if you have questions regarding the business, please write them down and we'll be happy to answer later.
Speaker 3: So we had an excellent year, excellent fourth quarter.
Speaker 3: the best fourth quarter we ever, actually the best quarter we ever had, $12.1 million, and the best year.
Speaker 3: It's not so great, it's not so difficult to have the best year for the four...
Speaker 3: It would take $44 million because the years before were hundreds of percent less.
Speaker 3: Now, it's really the challenge going forward and continue to grow in very high rates, which we intend to.
Speaker 3: So still it's good to tell and to let the employees and shareholders know that it was a good year and we had notable advancements with customers and relationships.
Speaker 3: We sold to very, very serious players all our products, including...
Speaker 3: and manufacturing electronics electronics and manufacturing as if electronics
Speaker 3: people, organizations like NASA, Western Defense Forces, all kinds of institutions, research institutions, etc. A partnership with Hanzhold, which is a...
Speaker 3: German-owned or German-partly-owned public defense company. Personal relationship between the CEOs and the management team. And partnership, James, is growing and doing very well. 50-50 partnership.
Speaker 3: And we got into engagement with the government of Bavaria, which is considering putting a grant in our operation in Germany. So it's very exciting. On the technology and the business side, we did two acquisitions this year.
Speaker 3: One in the beginning, one in mid-year. And we launched a product in ceramics and metal printers.
Speaker 3: which are manufactured in Europe , in the Netherlands, and we are now in the process of merging. Actually, those technologies are very, very exciting. We are merging the technologies that we acquired with the technologies of Fabrica, which we have, and we're going to have new products and technologies which are merged.
Speaker 3: Not so simple, not so obvious, but justifies the acquisitions because it creates growth engines.
Speaker 3: with patents in the AI and cloud manufacturing.
Speaker 3: etc. Everything else is on the list. Actually, one of the most important that people may overlook is the last point. Progress and standardization of protocols with IPC. IPC is the organization that does protocols for electronic engineering.
Speaker 3: everything else is on the list. And actually one of the most important that people may overlook is the last point. Progress and standardization of protocols with IPC. IPC is the organization that does protocols for electronic engineering. And we work with them. It's kind of a...
Speaker 3: together with other companies, but we are leading. And the fact that they will set special criteria for additive manufacturing electronics means that our materials.
Speaker 3: our products.
Speaker 3: will fit the IPC criteria because it's going to be not the same criteria like for regular electronics because it's very very new technologies. That by itself...
Speaker 3: will enable companies to buy and...
Speaker 3: integrate the product that our machines are making into their own products because they're going to be IPC approved. Extremely, extremely important and people understand what does it mean you know if you compare it to the business of medical it's like FDA approval.
A little bit of the numbers you have now, the numbers highlighted in front of you.
Let me focus on the...
but let's look at the full year. Focus on the fact that we, this shows the quarter, we have improvements of gross margins, and we have the negative EBITDA, which is mostly affected by the R&D expenses. So if you move for the next one, which shows, actually where is the full year? For you on the right side, sorry, in the bottom part of the slide, you will see that the gross margin are up.
from last year, which is a manifestation of the fact that
mostly are products that are higher margin and being sold more so it's product mix.
and we didn't even start improving the gross margins of the product by reducing the cost of manufacturing. That's going to be the next step because we're still in the stage of products penetrating into the market. So, most important for us is to put products to customers and even if we reduce the price a little bit.
or even if we didn't finish maximizing the value engineering at the cost of goods sold. But that's the next step. So I expect in the longer term gross margins to grow because new products with our advanced technology when it goes out to the market has to have 65% gross margin.
Another thing to pay attention again on the full year on the bottom is the fact that the negative EBITDA of $88 million, out of that $55 million is an investment in R&D. And as I said to people who were listening to me two years ago, a year and a half ago, a year ago, half a year ago and now.
manufacturing electronics and we are actually seeing the investments
starting to slow down because we are getting closer to the performance we need. And I expect the investment in R&D.
to slow down in the next year or two. Unrelated to acquisitions. Once we do an acquisition, then of course, investing in R&D there is ready to do the acquisition specifically. So the next slide again shows you what I just described in graphic form.
get into details, but you see between the year 21 and 22, the very large growth and you see it in a very nice way. Thank you, Yael and Julian. The difference between the IFRS and the adjusted non-IFRS, like the similar to GAP, non-GAP.
In a way, I'm always thinking why should we show the non-GAAP , but there are certain funny things with the IFRS.
including non-cash expenses that we need to take out in order to show the real operation of the business. The next slide is an interesting slide that I've been asked a lot about.
people including people who I wouldn't mention their names but they're not call it shareholders that have real interest in the company growth.
that wrote lies and false information all over the place.
that claim that we don't have organic growth. So we decided to show you the organic growth, which is combined 24% from the acquisitions that are mentioned here. And it's broken down here between three acquisitions and you see.
Each acquisition has a different growth rate after we acquire them, comparing to the year before, which means this is called organic growth.
Not to speak about the organic growth.
of our own products before the acquisitions.
which is also substantial. And by the way...
We are now close to the first quarter of 2023 and I can tell you that in the first quarter this organic growth is continuing.
close to the first quarter of 2023. And I can tell you that in the first quarter, this organic growth is continuing strongly.
Next slide speaks about improving operational efficiencies. Not good enough to my taste.
Yael is sitting here, I'm looking at her eyes, and I want, you know, when the operational expenses are high, it's easy to reduce.
high percentages, but the next stage will be to reducing those percentages even more toward profitability and that comes in two ways. One, increasing revenue without increasing operational expenses because we build an infrastructure guys.
We have a round rate of 50 last year, $44 million this year, projected to grow dramatically. So a round rate of above $50 million.
company with operating expenses that I believe will fit the next acquisition. So we'll have a huge saving in operating expenses once we do the next acquisition.
with operating expenses that I believe will fit the next acquisition. So we will have a huge saving in operating expenses once we do the next acquisition.
that I believe will fit the next acquisition. So we will have a huge saving in operating expenses once we do the next acquisition. Next slide.
relates to a subject that, again, some of the small shareholders that
eyeing the cash and don't care about all your shareholders that are looking for an upside.
take it as a negative, we see it as a positive. The positive thing is,
The positive item here is that we have theoretically, of course, 12 and a half years
on the run rate, cash run rate we have today. Of course we're not going to continue the cash run rate negative for the next 12 and a half years. We have to be profitable very soon, at least by cash flow. I can tell you that the...
Our cash flow improvement from 2022 to 2023 is going to be huge. We're going to be much less.
in cash burnout and again the profitability
will follow, it depends on the acquisitions as well. And if you compare yourself to three other companies.
It was based on their last year results. I know Markforged, Desktop Metal, and Velo very, very well. They don't have 2.3 years.
Markforged and Desktop Metal don't have one year and Velo maybe have half a year, but those guys have less than a year to survive unless they go raise money. And their share price is lower than us both in numbers and is also lower than us in so much as $2.
losing value over the last year and a half. So the strength of our business is we don't need to raise money. And they, I don't know what they'll do, but you obviously can guess behind the scenes.
If I tell you I know them, what is happening? Next slide will speak about our intention to become a market leader.
We are the best positioned company to become the market leader. This market is $16 billion going according to industry reports to $105 billion in five, six years.
So, forget five, six years, let's say $16 billion today, let's say it's going to $20 billion in year two.
And there is no 800 pounds gorilla. There is no large company. The largest company is two, which is a Stratasys and 3D.
and they are not too large for a market at 16 billion. They are only half a million, 600 million each give or take.
They are not doing the right things in order to consolidate the market, plus they are not capitalized properly. We do, and we are.
and we intend to do it based on synergies.
and based on technologies and based on running a business that is focused on the bottom line, not on the top line.
We're not looking to be…
It's a one and a half billion dollar business that's losing 200 million dollars a year. We prefer to be half a billion dollar business that's making.
100 million dollars a year. And that's our aim. Our aim is
EBITDA or eventually profit per share. And we're going to do it both by growing organically as you saw and by acquisition.
and strata cyst in so much as
saying no to the first proposal, and now the second proposal since yesterday or so is out.
They better hurry.
They better hurry because we have three others.
that we're looking at and talking.
at different stages and we are not committed to buy services at any price.
We are not committed to buy services at any price, but we will
at the price we're offering, we're going to go all the way to get them. And if eventually the shareholders will say no, of course, shareholders are shareholders.
That was my presentation or kind of points I want to speak about.
I took my
10-15 minutes of your time and I'll be happy to answer your questions. Thank you.
Thank you.
We'll now begin the question and answer session. To ask a question, you may press star, the one on your telephone keypad.
For using a speakerphone, please pick up your handset before pressing the keys.
So, to answer all your questions, please press star then 2. This time we'll pause momentarily to assemble the roster.
Thank you.
The first question comes from Ann-Margaret Crowe, Edison Group. Please go ahead.
Hello, thank you for taking my questions. I've got three. The first is could you please restate your target gross margin? Thank you.
Then the second one is...
can you provide a little bit more detail on what you're doing with respect to merging the technologies you acquire? You mentioned Fabrica in that context.
So it would be really helpful to hear a bit more about that. And then the third question was about the impairment. My question is, is this purely to bring down the value of the balance sheet?
so it's closer to the market cap. Have you looked at the underlying...
closer to the market cap, have you looked at the underlying cash generative?
nature of.
the businesses that you've acquired to get to that reduction or if it's simply to get the balance sheet in the right kind of That's great, excellent quickness. Thank you very much. I'll start with the first two and if I'll be able to hold myself
I'll answer the third one.
target gross margin. A target gross margin for new machines in additive manufacturing and in
electronics is above 60%. When it's totally new it should be 65-68. When it's a little bit older it tends to slide down to 60. Our target for systems and electronics that go into the machine and we sell them.
as subsystems is about 55 to 60 percent and our target gross margin for additive electronics is 40 percent give or take because this is a more mature market and while we're using a lot of artificial intelligence and robotics the competition is a bit stronger in that area and therefore speaks to social perspectives and then has a better understanding of the user experience
product line sales and revenue. Second question, emerging technologies, that's a very, very interesting question. Let me start.
where the use of the technology is required. We acquired a company called Global Ink Systems, for instance, which has
the software and hardware they're managing the injections and the sorry the ink injection heads
extremely important technology. We started by already using those technologies because they were suppliers to our machines.
Now we're integrating their technologies into our other machines.
that were acquired, for instance, in Netherlands, the additive manufacturing machines. So we're integrating those technologies and the software. Secondly, we're integrating our software.
and artificial intelligence, the deep learning, with the Atlas software package that is made and developed by GIS.
to make it a combined software both for user experience and designers, and software that operates the printing heads together, and there is a connection between the two. So we are combining it across the board in all the company departments. Another example...
We have a company called, used to call, Fabrica, now it's the name of a product line, that's using DLP technology, direct light processing, or direct light projections, better. We acquired another company in Netherlands called Admatik, which also has DLP technology.
The Fabrica machines are using DOP technologies for very, very high accuracy polymer, specialty polymer products. The Fabrica machines are using DOP technologies for very, very high accuracy polymer products.
The fabric machines in Netherlands are using DLP similar technology for very high precision ceramic and metal products.
The fabric machines in Netherlands are using DLP similar technology for very high precision ceramic and metal products. Now we are combining the two technologies.
which are using different factors and different form factors and different sub-technologies and we are applying certain technologies from Fabrica in the ceramic machines and metal machines coming out of our Netherlands facilities and vice versa. We are actually almost merging the two RMDs.
teams because the technologies are very similar and complementing each other.
Another example, of course, is the technology we purchased two and a half years ago in deep learning. The deep learning is going into almost all our machines in order to improve the performance of the machine in as much as throughput and yield. And now we're...
speaking about even using it for predictive maintenance, the artificial intelligence, and you can take it across the board in both additive manufacturing, additive electronics, and additive manufacturing electronics.
The Deep Learning, Deep Cube technology is now going into each one of the product lines.
Last but not least, the impairment. Thank you. So regarding the impairment, because at the end of the year our market cap compares to our book value of the assets, less the liabilities, there was a difference there obviously because our market cap was lower.
And because we have intangibles on our book, we needed to check for impairment for the intangibles. So we did the impairment test and it's not based on a specific value of any acquisition that we did.
placed, you know, on the total company as a combined. And because of this difference, basically we had no choice but to do the impairment. So we wrote down approximately $40 million, some intangibles and also some fixed assets. So.
It's important to know that it's not related to any specific acquisition, so it's not any indication that the goodwill of technology for any specific acquisition is not good. Quite the opposite. It's a very technically accounting issue.
I hope it answers your question. Yes it does, thank you very much.
Okay, next question please. Thank you. Again, if you have a question please press star then 1.
Next question will be from Ram Brady, private investor. Go ahead Mr. Ruddy.
All right, he's no longer on the line with us.
All right, he's no longer on the line with us. Next question will be from Eric Marcus.
Private investor, please go ahead sir.
Thank you very much. Can you hear me? Yes, please. Okay. First, Mr. Stern, thank you very much for taking our questions, and thank you for your presentation.
In your recent videos and communications, you have said that you believe that the direction that you're taking the company represents the majority of shareholders.
As a shareholder who respectfully disagrees with that assessment, I'm asking why will you not call a shareholders meeting and put your chairmanship to a vote of confidence letting those of us who own the company weigh in.
First of all, I didn't say that I believe I represent the majority of the shoulders. I only said that I propose to the shoulders what I think is the right direction. Secondly, in the next Shoulders meeting, the shoulders can make a decision and vote me down and I will let
leave the board or leave the company or whatever the shoulder. I work for the shoulder so no problems I agree with him.
When will that shareholders meeting be held to have that vote? As we usually have the shareholders meeting after we publish the F20, we have annual shareholders a couple of months later once we finish preparing all the paperwork. So I don't expect more than a couple of months from now.
Look at the time we did it last year, we'll do it this year again, and you'll be more than welcome to vote me out. And if most of you will, then I'll step down. That's not a problem at all.
Thank you.
Thank you. Our next question will be from Ram Reedy, Private Investor. Please go ahead.
Hello? Yes please, when? Yes, I have a couple of questions. The first one is,
Last year you said you are going to get analyst coverage within the next couple of quarters. It is more than a year. I do not see any analyst coverage. Question 1 is what was the interest you had in the last quarter?
Sorry, the second question again.
What is the interest you got for the quarter to…
I mean you have more than a billion dollars sitting in your bank account. I understand. I understand.
Yes, please. First question I'll answer and the second question I'll let Yale answer.
Yeah, you're right I was speaking to
You're right. I was speaking to at least one analyst.
from a small outfit in Midwest that is following other companies in this industry.
He promised and said that he is very interested to write a research report about us.
which I spoke about, it was exactly, it was the third quarter of 2022.
I spoke about it was exactly, I think it was the third quarter of 2022. And the guy
I didn't do it and I don't understand why. And you're right, it's my failure. I'm still of course doing the same thing, but as much as I'm looking at myself, the fact that we don't have analysts writing about us.
It is disappointing to me and I am disappointed myself, but I can tell you one thing. And what the two, three acquisitions we are looking at.
disappointing to me and I am disappointed myself, but I can tell you one thing and what the two three acquisitions we are looking at And we will call the analystubogrid Democratic party edge attracted to the
to start to write reports about us. That's for sure, I already spoke with them. And the fact that we are employing two banks now, both Greenhill and Lazar,
is in a roundabout way and people who work in Wall Street know it.
because they are going to become part of the upside of closing a deal, is going to cause analysts, I hope, and that's the way it works, to write reports.
And in terms of the interest revenues, so in 2022 we had interest revenues of around $18.5 million. Obviously, most of it is towards the second half and very heavily even in the fourth quarter because of the rising interest rates. And in this quarter, the first quarter of 2023, we are at a run rate of more than $11 million a quarter. Thank you.
from interest revenues, so assuming the interest will continue to be as much as they are today, you can multiply it by four and see where we project our interest revenues will be. And as you have mentioned earlier in the call, it is expected to influence our total cash balance significantly this year.
the interest will continue to be as much as they are today. You can multiply by four and see where we project our interest revenues will be. And as you have mentioned earlier in the call, it is expected to influence our total cash burn significantly this year. Thank you very much.
Thank you, Remy. Thank you. Thank you. This concludes our question and answer session. I'd like to throw the call back over to management for any calls and remarks.
I'll say a few more words in case other people want to ask. I want to relate back to the question that the person before the last person asked. And he said, and I want to re-emphasize my answer to him. He said,
Mr. Stern, you claim in your videos that most of the shareholders support your business plan for the company. I never claimed it in the videos. I don't know if most of the shareholders support.
what I propose to lead the company toward. The only thing I know, that 90% of the shareholders don't include these two entities on the shore of Lake Ontario. I don't remember exactly the names.
So other than those two, 90% of the shareholders don't.
support their way of wanting to dismantle the company and pay for all the shares. That's the only thing I said. The other side of it is I'm trying to convince shareholders.
in the sense of moving along the business we are proceeding with. And I'm totally at the mercy of shareholders. This is a business democracy. I'm voting down if they vote me out.
I have many many things to do with my life other than working 18 hours a day. The only thing I won't be happy if I will step down is to be able to help you make money but I'll definitely...
respect any directive that I will get from shareholders. So that was just to reemphasize this point and to gain some time to let you guys maybe have more questions, but I see that you don't. So as we always do by now, I'm much more involved with the.
shareholders are writing me and I'm writing back. And it's actually a pleasure. So, and it's a pleasure to speak with you today. And I thank you very much for the opportunity.
me and I'm writing back and it's actually a pleasure so and it's a pleasure to speak with you today and I thank you very much for the opportunity. Thank you.