Earnings Call Transcript - NNDM Q1 2021

Operator, Operator

Ladies and gentlemen thank you for standing by. All participants are present in listen-only mode. 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 Sander, 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 the press release, please view it in the investor relations 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 fourth quarter 2020 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?

Yoav Stern, CEO

Yes, thank you very much operator, much appreciated. Hi everybody, welcome to Q1 results conference call. I will start by explaining to you the news release pretty much as worded, and if you have read it, you will know what I'm talking about, and I'll try to help dig a little deeper into 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 financial results. First of all, while the Investor Relations people that work with us advised me that the description of our business is too complicated, I believe that all our shareholders are intelligent and can understand it. We work on three different axes nowadays. One axis is moving forward all the way; one axis goes to the right; and one axis goes back. You need to perceive in three axes, each one of them is a terminal to the other, which means there's no influence between one to the other, hence no leverage. We are really active on all three of them moving forward. There's enough movement and enough achievements on all three axes. When those axes start to merge, we begin to see influence and leverage, resulting in accelerated growth. We believe we will start showing results as these axes merge in the next few quarters. The first axis involves efforts and sales initiatives in our traditional business, the DragonFly LDM, which is an early bird machine released to the market and upgraded over time. Obviously, we were affected by the global events over the last year, but we are pushing forward on sales. We just achieved one sale of a machine a few days ago, which is somewhat important as it signals the market is slowly waking up, and customers in three geographies are discussing and buying more machines from us. Those are the traditional machines we have sold over the past year. During the pandemic, sales decreased, but we are anticipating accelerated growth now. The second axis focuses on R&D and product development. We are investing significantly to develop a new generation of machines. We’ve quadrupled our R&D and product development teams. Over the last two quarters, we plan to develop in parallel three generations of machines: one for proof of concept and machines for prototyping, another called DragonFly 4, expected to be in customer hands soon, and two more generations of machines for PCB and hybrid fabrication coming over the next couple of years. A significant part of our investment centers on developing inks and various materials for the 3D printed parts. Furthermore, we expect to acquire companies that have technologies suitable for the upcoming machines. The third axis revolves around our M&A efforts. Recently, we announced two successful acquisitions. They are just the beginning of further acquisitions we anticipate. We are currently negotiating with about four or five companies in Europe and the U.S. We are not proceeding with acquisitions until we can visit the companies to ensure we're making prudent investments. A crucial aspect is that some firms we aim to acquire are PCB manufacturers, necessitating environmental clearance and site visits. As we speak, things are improving, and I’m excited about the ongoing process. Regarding each axis, I am not completely satisfied with our advancements, particularly in marketing and sales, as I feel we should have accelerated building our sales and marketing organization sooner. We recently hired a new President, Mr. Zivi Nedivi, with 30 years of experience, including commercial activities and distribution channels globally. Since his arrival, we’re already seeing positive movement. I am more content with our R&D advancements, which we only began to leverage last year when we realized we had the funds for it. We profoundly changed our R&D management and hired talented individuals from reputable companies. On the M&A front, I remain optimistic; although results come in a binary fashion, we are experiencing enough activity in the right direction. Overall, I want to stress that we are being strategic in our approach, and while there may not be immediate quarterly changes, we are focused on long-term growth. We don’t need to raise more capital as we are well-financed. Our aim is to create meaningful returns over the next few years. In conclusion, we will see changes in the company's value over time, and we expect them to happen incrementally. The electronic publication industry will undergo significant transformation, transitioning from analog to a digital format just as various industries have. I appreciate your attention and will now open the floor to questions.

Operator, Operator

Thank you. The first question is from Jeff Rice of SmallCap Limited. Please go ahead.

Unidentified Analyst, Analyst

Hello sir, Mr. Stern. Great update. I appreciate that. We're very excited for the future and the 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 to acquire both a company in Europe and the United States, or could it be that these companies have locations both in Europe and the U.S.? And my second question is, can you explain how these companies, once acquired, expand growth for Nano Dimension? Is it for their supply chain infrastructure? Is it to turn their existing clients into the new technology? And my final question is, is the eventual goal for Nano Dimension to be bought out, as I’m personally hearing KLA is on your radar?

Yoav Stern, CEO

Okay. Let's start with the third question. No, absolutely not. Regarding the second question, the supply chain will be improved and the existing clients will be utilized by integrating our machinery. As for the first question, the answer is yes, we are looking at companies in both Europe and the United States, or a combination of both. Next question, please?

Operator, Operator

Thank you. There are no further questions at this time. The next question is from Mr. Byron Mayo. Please go ahead.

Unidentified Analyst, Analyst

Hi. 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?

Yoav Stern, CEO

Sorry. Could you please repeat your question? I didn't quite understand it.

Unidentified Analyst, Analyst

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

Yoav Stern, CEO

Breakeven you mean in terms of profits?

Unidentified Analyst, Analyst

I'm actually looking at cash flow.

Yoav Stern, CEO

In terms of operating cash flow, we're not expecting to reach breakeven for a couple of years. We will not be breakeven on cash flow in the next two years.

Unidentified Analyst, Analyst

Okay. Thank you.

Yoav Stern, CEO

Thank you. Just to add, since we have $1.4 billion, our goal is not to reach cash flow breakeven quickly. The intentions of our investors are to create value on your investment, ideally tripling or quadrupling your returns over the next three to five years. The worst thing we could do is constrain that potential by solely focusing on reaching breakeven sooner. We need to spend the funds wisely to facilitate growth.

Operator, Operator

The next question is from Gill Greenwald. Please go ahead.

Unidentified Analyst, Analyst

Thank you, Yoav. Thank you for your update and guidance. I would like to ask—last time you were asked about Sigma Lab. Did this come up on your radar since? If you look into the company, because you said you don't know anything about it.

Yoav Stern, CEO

I'm sorry, your line is a bit fuzzy. Can you please speak slowly? You mentioned I was asked about whom?

Unidentified Analyst, Analyst

Sigma Lab, Sigma Lab.

Yoav Stern, CEO

I don't recall and I'm not aware of any company by that name. I don’t remember being asked about it before.

Unidentified Analyst, Analyst

Okay. Thank you.

Operator, Operator

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

Yoav Stern, CEO

No, let’s wait thirty seconds. People may have further questions. And if you want specifics, you deserve an answer. Please reach out to our CFO and remind us of your name and question, and we will respond. If others are interested, we will pass it along. I’m sorry, I just don’t recall the exact timing, and I don’t want to mislead you.

Unidentified Analyst, Analyst

Okay, that sounds good.

Operator, Operator

The next question is from Jordan Star. Please go ahead.

Unidentified Analyst, Analyst

Hi. With the recent announcements, multi-billion-dollar investments Intel company released on Israel and obviously other companies throughout the world, management mentioned in being engaged or interested in working with these companies at all and helping shift the paradigm in high prices in PCB manufacturing?

Yoav Stern, CEO

No.

Unidentified Analyst, Analyst

All right.

Yoav Stern, CEO

Any further questions?

Operator, Operator

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

Yoav Stern, CEO

No, I can make the concluding statement.

Operator, Operator

Okay.

Yoav Stern, CEO

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

Operator, Operator

There is now another question. Would you like to answer it or conclude the conference?

Yoav Stern, CEO

Yes sure. Of course.

Operator, Operator

The next question is from Rakesh Jammula of AMFM. Please go ahead.

Unidentified Analyst, Analyst

So, you last time when you said like, we have a breakthrough with the insight, so did we get any new or material links with the new machine?

Yoav Stern, CEO

Breakthrough with what? I’m sorry?

Unidentified Analyst, Analyst

With the inks, conductive inks. Right now, we only use silver. You mentioned we have different material breakthroughs.

Yoav Stern, CEO

Yes, we do. And we’re not publishing it due to competitive issues, but the significant breakthroughs we are pursuing revolve around dielectric inks. The challenge is primarily with dielectric inks rather than conductive inks, which is we currently use silver. While the conductivity of silver is adequate, our efforts are focused on enhancing dielectric inks, where we have notable breakthroughs. We’ve also been exploring a combination of dielectric materials, including polymers, ceramics, and others that improve both electrical properties and overall strength.

Unidentified Analyst, Analyst

Thank you. Thanks for the answer.

Yoav Stern, CEO

Thank you for the question. It’s a very good question.

Operator, Operator

There are no further questions.

Yoav Stern, CEO

Okay, so I'll continue with my conclusion, operator?

Operator, Operator

Yes, please.

Yoav Stern, CEO

So again, everyone, please have a good workday. I appreciate your participation and support. I assure you we are progressing, and you will hear from me between quarterly news releases when something interesting arises. I expect significant developments in the near future. I look forward to that.

Operator, Operator

Thank you.

Yoav Stern, CEO

Thank you very much.

Operator, Operator

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.