Nano Dimension Ltd (NNDM) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. (Operator Instructions) Welcome to today's conference call to discuss Nano Dimension's First Quarter 2021 Financial Results. On the call with us today are Yoav Stern, CEO; and Yael Sandler, CFO.

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 this call. If you have not received a copy of this press release, please view it in the Investors section of the company's website.

Yoav will begin the call with a business update, followed by a question-and-answer session. At which time, Yael will answer questions regarding the first quarter 2021 financial results. As a reminder, this conference is being recorded May 20, 2021.

I would now like to hand over the call to Mr. Yoav Stern. Mr. Stern. Would you like to begin?

Yes. Thank you very much, operator. Much appreciate it . Hi, everybody. Welcome to our Q1 results conference call. I will start by explaining to you the news release, pretty much it is awarded.

And if you have read it, you'll know what I'm talking about and I'll try to help, dig a little bit deeper in the details.

And of course, later, we'll have questions, and you can ask anything regarding what I said, what is written and regarding the results -- financial results between me and Yael, we'll try to help you.

So first of all, well, the Investor Relations people that work with us advise me that the description of the business is too complicated. I believe that all our shareholders are intelligent, can understand it, and this is how we work.

We work on 3 different axis nowadays. And axis are orthogonal to each other. Think about it as standing in a football field and one axis is going to your front all the way forward, one axis is going to your right, all the way to your right and one axis goes from where you are upside -- upstairs, above.

So you need to proceed them 3 axis at each one of them is orthogonal to each other, which means there's no influence between one to the other, which means there's no leverage.

So we are really active on all 3 of them moving forward. So there's enough movement and enough achievements on all 1 of these 3 axes. And then eventually, they start to merge with each other.

Once those 3 axes start to merge with each other, we start to have influence from one axis on the other, and that's when the leverage is coming and then when the accelerated growth is coming.

So as the axis over time emerging into one business direction, which is coherent and harmonic, then suddenly, you are seeing why and each axis that we are today, we have to push forward so there will be enough critical mass and enough advancement.

We are very well financed. So we will have enough fuel to go on those, and we are going to start to show results as the axis merge, we believe in the next few quarters.

So first axis is the efforts and the sales efforts on our traditional business. The DragonFly LDM, which is an early bird machines registered the market and moved forward by upgrades, obviously, were affected by all what happened in the world over the last year, but we are pushing forward on sales. And as part of that, we are building our sales and marketing in the different 3 locations that we have.

And we just achieved 1 sale of 1 machine a few days ago we announced it, but that's not necessarily so important as much as the importance of the market starting to slowly wake up, and we are starting to see customers in 3 geographies that's actually discussing and buying more machines with us.

Those are the traditional machines that we are selling since the last 12 months. Obviously, during the pandemic, we sold less. And now we're looking at accelerated growth in that area.

Those machines are going to be upgraded. And that's when we are moving into a second axis. The second axis is where the axis of the R&D and the product development.

On that one, we are investing a lot much more than just developing the existing machines into the next generation -- the next release, we are by now quadrupled our R&D and product development teams over the last 2 quarters in order to develop in parallel, 3 generations of machines.

One generation is the generation of the DragonFly, which are proof of concept and proto -- machines are prototyping, and those are going to be followed up by a new DragonFly, called DragonFly Pro, which will be in better set within the next quarter.

And over the early summer, we expect it to be the hands of our customers, it's exciting. Some of our customers depends on the agreements there with us will be upgraded as part of the existing agreement. Some of our customers will buy the upgraded DragonFly Pro.

And the difference between that machine and all the machines is in the performance, which I'm not going to get into details, but it is substantial difference.

But more importantly, on the second axis is, we're developing 2 new generations of machines, which are coming in the next 1.5 years and 2.5 years. And those machines are going to be the machines that will move us into production machines for fabrication of PCBs and hybrids.

The investment in those machines, which is material. A lot of the investment is in the development of inks and different materials for building the 3D printed parts.

And we expect to do not only the R&D internally, but we are buying companies that will merge into R&D efforts because they already have technologies that fit the 2 new generations of machines that will be coming in the next 2 months.

The third axis, naturally, the axis of the M&A efforts. Only recently, in April, which is actually after the first quarter, we announced 2 acquisitions, very successful ones.

I'm not going to get into details unless people were asking about those acquisitions because we had the conference call about those before. But the 2 acquisitions were early birds of many other acquisitions that we expect to come to fruition in the next while. We have explained to you in the past, the 3 types of acquisitions we're looking at Type A, B and C. All 3 of them are in action now.

We are negotiating both in Europe and United States with probably, I can say, carefully, 4, 5 companies in parallel. And as I explained in the write-up that we sent you in the news release, we are not going to do any acquisition unless we can visit the companies and 2 other facilities, which is something that was -- is only now starting to be enabled. They opened Europe just week ago, if I remember right, for visitors.

We managed to visit Europe before -- about 3, 4 weeks ago because we got a special permission from the European and German government.

But in practical terms, the acquisitions are only being held by us until we are able to visit the companies and see the sites and make sure that we are not neither overpaying nor going to be encountered with issues later because of not being able to visit moreover.

Part of the companies we're acquiring, which are PCB manufacturers, have -- we have the need to clear up issues of environmental cleanups and make sure there's no contamination of ground.

Obviously, that needs visitation. All this is in action as we speak. Things are actually opening up and moving forward. So I'm very excited about it and very excited to tell you about it.

So from the 3 axes that I described now, one may ask me, okay, you -- so are you totally happy with the investment on all fronts on all the 3 axes? Are we getting close to when those axes will be merging with each other and we leverage and we see the results?

So my answer is no, I'm not happy on all the 3 axes, I'm sorry. I'm a little bit unhappy about our development on the revenue, marketing and sales build up on the existing revenue axis because I think while we pushed forward during the end of the corona to build up our marketing and sales organization, we are not fast enough. I think we should have been faster, even though it was against an instinct because there was no customers at home.

Now that customers are starting to come back to their offices, we are accelerating our sales and marketing efforts, which, if it was up to me, I would have been happier quarter and half ago, we would have built up. But we didn't have 2, 3 quarters ago, the amount of money that we have today, and we know we can spend it.

So now we are spending it in an efficient manner, but without holding back because we want to be with sales and marketing organization all set and ready and effective within the next quarter.

We hired a new President of the company only 2 months ago, a bit less of even, and he took over Mr. Zivi Nedivi. He took over all the sales and marketing and other commercial activities of the company worldwide.

He is an executive that comes with 30 years experience in North America and in Europe in running companies with commercial activities and distribution channels across the world. And since he's joined, we're already seeing things moving forward.

I'm more excited or more content, I would say, about our advancement on the second axis, which is the R&D. We have changed the R&D dramatically. Remember, we could only start to do that in the third quarter of last year when we start to realize that we actually have the money, the fuel to do it.

So we started and we changed since then the total management of the R&D, middle management and top management. We have allocated my time senior executive under me, Mr. Ziki Peled to be dedicated full time to the technology side of the business.

We've hired senior people from companies like Orbotech, Verint and others. And we have a full stack of R&D personnel and researchers that I feel are well positioned to take us forward with the 3 generations that we are developing the existing 1 and the 2 new ones.

Actually, on the Third axis, I'm happier and more content than the other 2, which is the M&A efforts, because while the results of M&A are coming in a binary manner, which means it ain't happening and it ain't happening until overnight you announced 2 acquisitions. So it's difficult for you to follow-up how gradually quarter-by-quarter we see results from M&A. What I know is from what we are doing is that there's enough activity in the right direction.

And once an M&A effort is manifested it, as I said, binary, suddenly you announce it, and you will hear about it, it's coming, and it's coming based on the variables and the limitations that I described to you before, but now things are opening up. So I'm very content with what's happening there.

All-in-all, I always try to speak in front of you now know more than 16 minutes. So I'll give you time for questions, but I'll summarize by saying the following. It's a very, very unique company, Nano Dimension. It is well financed. We will perform what we're describing.

But you would not, if you expect to see a quarterly change, this is not where we are. We are looking in the long term, and there will be quarterly changes, but those are not important.

What's important is you look at it more like I mentioned to many of you, like a biotech company model, the investment is there. We don't need to raise more money. We don't need to have more dilution.

We have enough money to go to all the stages and to hit the inflection point where we're actually going to affect the industry of electronic fabrication by changing it and building the digital network of Industry 4.0, a neural network of machines of 3 kinds only by us.

And from the acquisitions, we are now planning, there'll be more machines of different kinds, serving the same market being part of the same neural network managed by artificial intelligence and deep learning with machine learning brains sitting both in the machines and on the cloud.

And we're going to see based on that valuation of us of the value of what we're doing, multiplying by order of magnitude. The changes are going to happen on a quarter-by-quarter basis.

But you are not necessarily going to be -- if you're going to be impatient as much as the revenue, the revenue will grow as well. A lot of it will come from acquisition, a lot of it will come from internally.

But what I would be looking at is how the value of the company is growing over those quarters and over those next 1 to 2 years. And that is where we are aiming as managers.

And as managers, I think I mentioned in the last call, all of us are shareholders in the company and all of us in all of our upsides is connected to the value we are creating.

So we are long-term players in marathon runners, and we expect -- and we see the science today where the 3 axes are merger -- are going to merge and leverage each activity that we are doing: R&D product development, marketing and sales and M&A merging together and leveraging. The industry is bound to change dramatically. I know that some of you follow what's happening in the semiconductors industry.

Worst things are going to happen as much as shortage and pricing on the PCB and general device -- electronic device industry.

And we are positioned to solve those problems as we move forward and to transform an industry from a total analog inefficient in a way dependent on the Far East into analog industry that is on demand digital as other industries are operate today industries that went to similar transformation.

Give you an example. A traditional printing industry before it was analog, and over the years, came the depth of publishing. And since then, we are now in an industry where inventory is digital. You don't print unless you need. And if you need to send, you send a PDF file.

The industry of printing trend into a digital industry. That's exactly what we are envisioning in the fabrication printing -- printed circuit boards and electronic device industry, converting it into digital industry and it's a revolution.

So I'll stop here. It's 20 minutes. And operator, I will be happy to hear questions if there are.

(Operator Instructions) The first question is from Jeff Rice of Small-Cap Limited.

Mr. Stern, great update. I appreciate that. We're very excited for the future and growth of Nano Dimension, we're big supporters and shareholders in the company.

I wanted to ask you a little more detailed questions on the Type A acquisitions. I know previously, you talked about both Europe and the United States. I was wondering if you are looking for both to acquire both the company in Europe and United States? Or could it be possible that these companies have locations both in Europe and the U.S.?

And then my second question is, can you explain how these companies once acquired will expand growth for Nano dimensions, is it for their supply chain infrastructure? Is it to turn their existing clients into the new technology to transition?

And my final question is, is the eventual goal for Nano Dimensions to be bought out? I'm personally hearing, KLA is on your radar. So I just wanted to share that with you.

Okay. Let's start from the third question. No bull(expletive). Second question, the supply chain will be used the existing clients will be used by populating those with our machines. So we have developed relationship with the existing clients through these companies. And yes, your question is aimed right, and the answer is yes. Regarding the first question, Europe or United States or combination of both, the answer is yes and yes. Next question, please.

(Operator Instructions) There are no further questions at this time. The next question is from Mr. Byron Mill.

I noticed there's a certain amount of funding for R&D and for administrative expenses. Is it too early to project profitability out into the future or breakeven status?

Sorry. I'm sorry, sir. Can you repeat the question? I didn't exactly understand it.

Is it too early to project breakeven status at this point?

Breakeven, you mean as much as a profit?

Well, I'm actually looking at cash flow.

Just in terms of operating cash flow, so that...

We are going to be breakeven for the next 2 years. We're not going to be breakeven on cash flow in the next 2 years.

Okay. Thank you.

Thank you. And just to add to this answer, since we have $1.4 billion, pushing this company to be breakeven in cash flow, which I can do, by the way, and we can, will be the biggest mistake, I believe, as much as shareholders are concerned because we did not give us the money, and I relate to the money you gave us as we raised it very, very seriously, there almost as a loan, it's not a loan, it's equity, it gave us the money, in order to triple -- between triple to quadruple to up to 8x return on your money, hopefully, over the next 3 to 5 years.

So the worst thing we can do is keep the money on the balance sheet and make the company breakeven and cash flow and generate cash. That's not why you gave us the money. And there is a need to spend the money smartly on what I described you were spending it. So we create value that is the multiples on the money we perceived. So no, we are not planning to be cash flow breakeven because if we did, then we basically betrayed the trust and the intention of our investors, which are you. Thank you. Next question.

The next question is from Gil Greenwald.

Thank you for your update and guidance on the company. I would like to just ask, last time, you were asked about Sigma Labs. Did you come up on your radar since? Or did you look into the company? Because you said you don't know anything about it. And that...

(technical difficulty)

I'm sorry, sir, your line is a little bit fuzzy. Can you speak slower. You said the last time I was asked about whom?

Sigma Labs. Sigma Labs.

I don't remember -- I don't know about any company with that name, and I don't remember that being asked about it.

There are no further questions at this time. Mr. Stern, would you like to make your concluding statement?

Let's wait 30 seconds. People may have something comes up, so 30, 40 seconds, and then we'll conclude.

I'll read the question again. Mr. Jim Brown is the next question.

I was just wondering, when do you expect your results back from the ISS mission?

I'm sorry, the result back from where?

The International Space Station that you're working with peers.

Thank you very much for the question. Frankly, I do not know next few months, but I'm sorry, it's a very fair question. Very interesting actually. I don't want to tell you 30 or 45 or 60 days. I can check it out.

And if you want to know this specifically, you deserve an answer, please write-up to our CFO, which is on the line and remind her, please, on your name and the question, and we will send you the answer.

And if other people are interested, we will publish it. I'm really sorry, I just don't remember the exact time, and I don't want to be misleading.

Okay. That sounds good.

Any more questions, please?

The next question is from Jordan Star.

With the recent announcement of multibillion-dollar investments by Intel -- companies with Intel in Israel and obviously, other companies throughout the world. Is Nano Dimension being engaged or interested in working with these companies at all and helping shift the paradigm in iPads and PCB manufacturing?

No. Any further questions?

There are no further questions. Would you like me to read the instructions or a concluding statement.

No, I can go on to the concluding statements, please.

Okay.

So ladies and gentlemen, thank you again very much for participating. It's now 30 minutes. The market is opening in a minute, and I'm sure all of you are now focused on your work ahead. I wish you success today and the days in moving forward.

Mr. Stern, there is now another question. Would you like to answer it? Or conclude the call?

Yes, sure. Sure. Sure. Of course. Of course.

The next question is from Rakesh Jammula of AMFM.

So Yoav, last time when you said like we have a breakthrough with the inks, right? So did we get any new material inks with the new machine?

Sorry, breakthrough with what? I'm sorry.

With the inks -- conductive inks. Right now, we only use silver, right? You said like we have different material breakthroughs.

Yes. Yes. Yes, we do, and we are not publishing it because of competitive issues. But the major breakthroughs that we are looking and investing in is actually not necessarily on the conductive ink is much more on the dielectric ink.

The dielectric ink is the challenge, Rakesh, because dielectric -- the conductive ink, which is silver, and we are now looking at other conductive inks.

The conductivity is good and the ability of it to deliver the specification that we need with -- the specification we need for it to deliver a pretty good.

The real efforts are on the dielectric inks, and there, we have breakthroughs, and we have a combination of dielectric inks that are now adding more than just polymers with ceramics and other supporting materials that are both improving the electrical characteristics of the dielectric as well as the strength.

So it gets closer and closer to the industrial spec, commercial spec and eventually military spec. And we can't obviously disclose what kind of materials for competitive reasons. But yes, we're moving forward with it. And our investment in R&D, I would say, at least 1/3 of it is in material.

Thanks, Yoav.. Thanks for the answer.

Thank you for the question. It is a very good question.

There are no further questions.

Okay. So I'll continue with my conclusion, operator?

Yes, please.

Okay. So again, guys, please have a good day of work. Thank you very much for participating and listening and supporting us.

And I promise you that we are moving forward, and you will hear from me on an ongoing basis in between these quarterly news releases on any thing interesting that is happening, and I expect interesting things to happen in the next short while. So I'm looking forward to that.

Thank you.

Thank you very much.

Thank you. This concludes the Nano Dimension's First Quarter 2021 Financial Results Call. Thank you for your participation. You may go ahead and disconnect.