Q3 2024 Nano Dimension Ltd Earnings Call

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Speaker Change: Good day, ladies and gentlemen. Welcome to Nanodimension's third quarter 2024 conference call. My name is Wyatt, and I'm your operator for today's event.

Speaker Change: On the call with us today are Yoav Stern, CEO and member of the Board of Directors, Tomer Pinchas, CFO and COO, and Julian Letterman, VP, Corporate Development.

Speaker Change: Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements. And the Safe Harbor Statement outlined in today's earnings press release also pertains to statements made on this call.

Speaker Change: Yoav will begin the call with a business update, followed by a question and answer session, at which time the management team will answer questions. I would now like to turn the call over to Nanodimension CEO and member of the Board of Directors, Yoav Stern. You may please go ahead.

Thank you very much, Roy.

Speaker Change: Ladies and gentlemen, thank you for participating this morning and this afternoon.

Speaker Change: I want to preempt and tell you that I am talking to you today from Frankfurt.

Speaker Change: which is the main, one of the main annual events of Formnext, which is the industry, LED manufacturing industry trade show. And it's the most successful one that I've ever seen. I've never seen so much interest.

Speaker Change: in Booth and what we're doing both in the existing nano and the excitement around the two acquisitions.

Speaker Change: Some of which are already having people from other companies coming and visiting other companies. Other companies means other acquisition targets that we mentioned coming and visiting us.

Speaker Change: So, with this excitement and looking forward to this excitement translated into numbers.

Speaker Change: I'll start by describing a little bit the slide of the numbers mentioned that 15 million dollars of revenue is the best third quarter ever and one of the best quarters ever we had.

is 22% over last year, same period.

Gross Margin is 48%

Speaker Change: which is up from $44,000 and adjusted gross margin which is without non-cash expenses.

is 51, up from 48. This is gentlemen and ladies.

Speaker Change: Extremely important, because the business model of all companies in our industry suffers from gross margins and therefore from lack of profits.

Speaker Change: Gentlemen and ladies, we turned around nano dimension from 16 million dollars burning per quarter last year to 3 million dollars in cash burn and we're close to break-even in cash burn and this is only nano without the two acquisitions.

small or nano, which we cut expenses by reducing headcount.

Speaker Change: and dramatically and still not harming the revenue and the growth.

Speaker Change: which comes to show you that the direction to profitability which we are committed to is well ahead.

Some business updates.

Speaker Change: closing Desktop Metal Acquisition, and right after that Mark Forge Acquisition, two of the main companies of this industry.

In parallel, we have notable sales.

Speaker Change: University of Dayton and the leading very well-known aerospace and defense company which we can't mention its name for obvious reasons.

Important to all this.

Speaker Change: We are in front of our annual general meeting, which will be held on December 6th. And yes, we are fighting descendant shareholders from...

I think Toronto

Speaker Change: which is trying to dismantle the company and we as a board recommend to everybody, don't vote.

Penny is on the doors.

The vote cutoff for this...

General meeting is December 1st.

Speaker Change: Next slide will show you a little bit of the graphic presentation of the numbers.

Speaker Change: Slide number five is showing that the revenue, the way it grew from last year, the gross margin growth.

Speaker Change: and the reduction in net cash burn from the same period last year.

Speaker Change: highlighting those for you because it means a lot to our growth of again I'm talking about

Thank you.

For more information, visit www.FEMA.gov

So those are not included here.

if you would want it.

Speaker Change: have a snapshot in slide number seven you will see what we did with Nano over the years that you gave since you gave us the cash.

Speaker Change: about three and a half years ago and we were a steward of the cash and promised you we are not going to spend it until we get into large acquisitions.

So we did spend it on smaller acquisitions.

Speaker Change: and for about two and a half years and as a result of that got attacked by...

Speaker Change: a kind of activist or whatever you call them, shareholders that were practically interested in the cash that the company has. But we got to the point where we did use the large cash that we raised from you, and we used it for the good reason and the right prices.

Speaker Change: And we acquired two large companies. And if you look how we moved from the left side of the slide to the right side of the slide,

Speaker Change: from one technology and one type of machine in early manufacturing electronics into technologies with dozens of types of machines.

Speaker Change: We have technologies nowadays that include inkjet, binderjet, DLP, FBM, ceramics, composites, electronics, metal, metal casting, polymer, and micro-polymer.

Speaker Change: We have only one technology that exists in this industry that we're still in look for and we have plans how to reach it and That's a technology that has to deal with Another technology for metals. We do believe very strongly in the metal business

Speaker Change: The next slide, slide number eight, shows you these two large acquisitions, why we waited for so long. Look, ladies and gentlemen. The next slide, ladies and gentlemen.

Speaker Change: Since September 21, when we had the money and raised it,

Speaker Change: Those companies that we now acquired were traded at between 15 to 35 times their revenue. 15 to 35 times revenue.

Speaker Change: And in this whole period, May, September 21, to May 22, to January 23, as the

outliers from the different countries here tried to

Speaker Change: attack us for not spending the cash and for trying to distribute the cash to themselves.

Speaker Change: We waited. We waited as those large transactions started to lose value and lost it steadily over two years until we got to the NR24 and we bought them both at less than one time.

1 left. Average 1 times multiple. 1 times sales multiple.

And we believe we paid the right price.

Speaker Change: And we bought them at the right time because if they were to proceed forward they would be in trouble which we

Speaker Change: believe they wouldn't be able to withstand by saying stand-alone independent, now that we've brought them together, all three of us together, we're creating an industry leader which you see in the next slide, number nine.

on the left

You see how we build ourselves.

Speaker Change: organic growth. I'm emphasizing the 56 from 22 to 23 grew 29% not from acquisitions from organic growth and if you read different numbers in the material that the foreign company from

Blah, huh?

Speaker Change: So we grew organically. Then we added and we're adding $190 million. All numbers here are based on 2023 performance numbers.

Speaker Change: that's Desktop Metal and we're adding 94 million dollars of Mark Forge together to create a new 340 million dollars business based on 2023 and I'm telling you right now

Speaker Change: And the right side of the slide, you see kind of analysis of five, six companies in the industry.

Publix

Speaker Change: On the left, the small Vauxhall Jet Velo broadways, which are...

Smaller companies that were public, two of them,

Speaker Change: But off Nasdaq, Velo is on its way from $77 million revenue per year to $3 million revenue per year.

Speaker Change: And Broadway is going down from closer to 100 to less than what it shows here. And that's rated, by the way, in the Paris Stock Exchange.

Speaker Change: In parallel, you see the three biggest companies in the industry on the right side, Stratasys,

Speaker Change: Tweet this system. And yes, us, with $240M. But look at the difference in the amount of cash that each one of us has. We will be $240M with $470M of cash on the balance sheet. And the other two, you can see the numbers.

Revenue

Speaker Change: Revenue growing by acquisition otherwise, but no profits the focus of this company moving forward from into 25 and Forward is going to be Gross margin and profits in the bottom line and the cash that we have

Speaker Change: will be used as less as possible to cover losses and as more as possible to create and generate even more profits.

For more information, visit www.FEMA.gov

Last slide which is slide number 10

Summarize everything.

One.

Promises we made, promises we delivered.

For more information visit www.FEMA.gov

Two, we're executing a focused value creation strategy.

Speaker Change: Value creation, not value destruction. Value creation above what we have today, not liquidation. We are not going to close the company if it's up to us and distribute $2 a share, which is what's left to the shareholders.

Speaker Change: 3. Nano-leadership and the Board of Directors are driving our progress.

Speaker Change: and amateurish group from somewhere outside the border that is trying to liquidate, to find companies they can liquidate. This is a very serious board and a very serious management, which is now combined from three companies management soon.

Speaker Change: And last but not least, Merchantson. Merchantson is the name of these Canadians, has no strategy and seeks to deprive shareholders of long-term value creation opportunity. Those Merchantsons are the guys that...

Speaker Change: During the two years that we were stewards of the cash

Speaker Change: Our share was traded lower, I agree, like the rest of the industry.

Speaker Change: So they bought for two and a half dollars a share

Speaker Change: at their shares and they think that now they'll distribute the cash and make money. But most of your shareholders, including myself,

Speaker Change: We vote for more than two and a half dollars a share.

Speaker Change: that will have a return on what our costs and the cost of a lot of our retail shareholders, 150,000 in numbers, is not two and a half like Merchants' Zone. It's four, like mine for instance, four and a half, five, six. We need to create higher value than that and we shall.

Last but not least, we remind you to vote please.

Speaker Change: Vote for what our board recommends for you to vote, and we're not recommending

Thank you very much.

Speaker Change: in drawing the share to the numbers we spoke, not to the Murchison numbers of $2.50 a share.

Speaker Change: And we are hoping that you will join us in this important vote.

Speaker Change: Thank you very much and I'm very happy if we can open this up for questions now.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press Star, then 2.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: And our first question comes from Katherine Thompson with Edison. Please go ahead.

Katherine Thompson: Secondly just a quick update from a regulatory perspective of where you are with both of the acquisitions and just to confirm that you still expect to complete Desktop Metal in Q4 and Markforged in Q1 of next year.

Speaker Change: And then thirdly, just to also confirm, it sounds as if what you're saying is that you get to break even EBITDA, which I think you've referenced as being in Q4 of 2026.

Speaker Change: that that's going to be more through a process of cost synergies rather than revenue synergies. That's the three questions.

Speaker Change: Yes, first question, the reaction of customers is, and you're asking me as I said earlier in the right time because I'm in the...

Speaker Change: Frankfurt FOMNIX show, so I'm meeting a lot of customers, is extremely excited.

Speaker Change: I am speaking not only of customers of Nano, existing customers that are happy to have an ability to have an expanded product line, but I am not talking to customers of Nano.

This is the most...

Thank you.

Speaker Change: We finished with the vote, the proxy and the vote of Desktop Metal, which all voted for the deal. We are finishing the work with Cepheus.

And expect...

Speaker Change: the transaction with Desktop Metal to close before the end of the year.

Speaker Change: Expect and hope and and so much as a Mark Forge we are a bit behind on that because we started later the Transaction but KBR is sorry how to go to the you know

HSR is pretty much done.

Speaker Change: The shareholder vote of Mark Ford is supposed to occur in the beginning of March, I'm sorry, in the beginning of

Speaker Change: December. Hence, we're still hoping to close the deal with them in the first quarter of 2020.

5. And so much is profitability.

Speaker Change: You will see profitability and especially cash flow that's improving the best the worst cash flow obviously will be in the month sorry or in the quarter when we will merge the three companies together because

Speaker Change: We, Nano itself, we are already in a very, very good case.

Speaker Change: So, the first quarter will be combined cash burn, but the minute we get control over the companies and we are already in plan and discussion with their management, we intend to start to cut expenses dramatically.

Speaker Change: So, when you get to the beginning of 2026, we want to either show profitability or show cash flow positive, or both.

Right, thank you.

Thank you.

Speaker Change: And the next question comes from Sol Zelman with Jerry Care. Please go ahead.

Good morning. Thank you, operators. Thank you, Yoav.

Speaker Change: Yoav, you spoke about the various aspects that, you know, closing the desktop metal merger, the next step with Mark Forge, which, again, the elephant in the room is the fact that there's an AGM right now, and you speak about it, asking everybody to vote, but the big question is,

Speaker Change: If, with this, the activists right now, if they're successful, installing two directors into the board, is there any concern of them derailing, killing these transactions?

Speaker Change: Obviously this is a big consideration for every shareholder in this AGM. I'd love to hear your feedback on that and you also mentioned the aspects of the CTOs. What is that process, what does it mean for us as shareholders and where is that process going to take us?

answered most of the questions we expect.

They told us they don't have more questions.

Thank you for your time.

Speaker Change: It relates to Mark Forge and rather to Desto Metal, so they have to do, CIFIS has to do the checks on Mark Forge, but the checks on Nano Dimension, they already have done it.

Speaker Change: So, it's a typical process that all the companies that are foreign are going through that. It may take between a month and a half to six months. We are hoping that it will be closer to a year.

Speaker Change: to three months rather than to six months and it seems like it's moving in the right direction.

Speaker Change: As much as the elephant in the room, the elephant in the room is not an elephant, it's a cat.

Speaker Change: The elephant in the room is a cat that wants to invest, wants to dismantle the company, but all it is demanding in this AGM,

Speaker Change: is to insert two directors which are directors if you look at their backgrounds and I know one of them very well from the past

Speaker Change: As I told you, I noticed one of his directors, while he is checkered past, is an honest person. I don't see these directors coming in and destroying the company. First of all, there will be other six directors that will be...

Speaker Change: a majority and the whole company is eight directors. I hope that they don't get into this this board but even if they will get in the board it's a minority.

decisions of the board.

Speaker Change: by vote because they are a minority, plus once they get into the board, I believe that they will be thinking and worrying about the company, not about the elephant or the cat that got them into the board.

So, uh...

Speaker Change: Assuming you could by having majority of the board, which they won't have, then it's total interference in...

Speaker Change: contract that was signed by the company already, committed by the company, so I don't see this being derailed at all.

And that should be a conclusion.

Speaker Change: They can also say that they plan to attack Iran and solve the problem of the Middle East. They can claim lots of things.

Speaker Change: You're at the helm. We're following that guidance and we'd like to understand that that's not a concern when we're making our decisions so I appreciate that feedback.

I'll tell you the truth and the fairness.

Speaker Change: I'm a warrior, not from warrior from being a fighter, I'm a warrior from being worried. I'm always worried from the unexpected. I'm always getting up in the morning after not sleeping half a night because I'm thinking what could have happened that I didn't take into consideration.

I'm worried about...

Thank you for your time.

Great, thank you.

Thank you.

Speaker Change: And the next question comes from Felix Ziegler with Felix Investments. Please go ahead.

Speaker Change: Hi, thank you for taking the question. I wanted to get a better understanding of the M&A rationale here. The past five acquisitions for DeepCube, Nanofabrica,

Speaker Change: Ascentech, Global Inkjet, and Formatech, they don't seem to have been integrated very well, even their revenue growth has really deteriorated under Nano's leadership.

So for Mark Forged and Desktop Metal,

Speaker Change: I think right now they're experiencing negative revenue growth and they have a gross margin profile that is actually below what Nano currently has.

Speaker Change: and they continue to burn astronomical amounts of investor cash and are therefore on the verge of bankruptcy.

So

Speaker Change: How does it make any sense to be acquiring these businesses?

Speaker Change: In addition to that, I think you're defining cash burn as... Sir, sir, sir, sir, sir, sir, sir, sir, sir, what's the question?

de

Yeah, so the question here is, you know,

Speaker Change: How is Nano doing what's best for shareholders? This stock hasn't provided any return for shareholders and it continues to trade below cash at a negative enterprise value. So there's the question?

Speaker Change: So why do you continue employing a strategy that isn't working well for shareholders and why are you defining your net cash burn in a way that makes it look better than it actually is in an effort to almost confuse shareholders?

Speaker Change: Okay, so I'll answer you. First of all, everything you said about the six acquisitions of Fernando in the beginning was wrong, false, lack information, not understanding financial statement, not being able to be sophisticated investor. Those companies had lower gross margins when we bought them, had lower revenue when we bought them,

Speaker Change: And the combined revenue, I said 10 times, we grew 29% in organic growth from the first seven acquisitions. So that's first point where you don't know what you're talking about. Point number two.

Not performing well.

Speaker Change: But, the business of mergers and acquisitions, which is my personal business for the last 30 years, is knowing what really you're acquiring and can you create synergies and acquisitions by that improving the performance of the company you're acquiring.

Thank you.

Thank you.

Thank you.

Speaker Change: Is the way you create value for shareholders because by now you in spite of the fact that you paid low

and I'll tell you something else.

First of all, before I tell you this,

Speaker Change: The gross margins, you mentioned, of the companies do not fit the gross margin of nano. A minute before, you said the gross margin of nano didn't grow. Now, you said the gross margin of nano is higher than those companies. This is not true either. Mark Ford is the gross margin, which is close to 50%, which is exactly like the gross margin of nano, and we're going to take it higher.

Speaker Change: It is true that the debt of metal, with the average gross margin that they have, is lower because they have different kinds of businesses, some of them with too low gross margins. Those are the businesses that we're going to stop.

Thank you.

Speaker Change: Last example you gave me, Spirit Airlines was losing or whatever, I don't even know how you get to an airline from an industrial business. Let me tell you something, Continental Airlines were not performing so well.

Speaker Change: Continental Airlines, you remember them? They merged with the United. After the merger, the combined performed very well. The reason is when you combine company, change the management, change the...

Thank you very much, next question.

Speaker Change: Again, if you have a question, please press star, then 1.

Speaker Change: With no further questions, this concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.

Speaker Change: In closing, I want to thank you again for participating in the conference today.

Speaker Change: Thank you for your questions, very interesting questions. Some of them gave me, especially the last one, an opportunity to go to a business school and basic business principles of how mergers and acquisitions can add value to shareholders. So thank you very much for the last question. This was very helpful for me and I promise you

Speaker Change: I have been working for the last year without a salary.

Speaker Change: actually it's a year and a quarter because my salary was not approved by the people north some some of this north of the border activists that

Speaker Change: refused to approve my salary. So I work with no salary. My upside is holding shares and being a shareholder like all of you. And I trust and convinced.

that the right to work on acquisitions...

Speaker Change: By taking companies that have assets and values but are not performing well necessarily because of performance of management

together and doing the right thing.

Speaker Change: will add value to you as shareholders more than what you or somebody thinks the share value or the cash under the share, which is by now two and a half dollars when the share is traded at 2.1 or 2.2 so we actually have a business coming into being $340 million business

Speaker Change: and I did not receive from the company any free equity and I hope that you, shareholders, will join us in this...

trail and travel towards success. Thank you very much.

Speaker Change: The conference is now concluded. Thank you for attending Nano Dimension's quarterly earnings conference call. You may now disconnect.