Yahoo Finance Nano Dimension Ltd. (NASDAQ:NNDM) Q1 2024 Earnings Call Transcript
Nano Dimension Ltd. (NASDAQ:NNDM) Q1 2024 Earnings Call Transcript June 3, 2024
Operator: Good day, ladies and gentlemen. Welcome to Nano Dimension’s First Quarter 2024 Conference Call. My name is Betsy and I'm your operator for today's event. On the call with us today are Yoav Stern, CEO and Member of the Board of Directors, Tomer Pinchas, CFO and COO; and Julien Lederman, VP of Corporate Development. 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. If you have not received a copy of the press release, please view it at the Investor Relations section of the company's website. A replay of today's call will also be available on 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 the management team will answer questions. I would now like to turn the call over to Nano Dimensions CEO and Member of the Board of Directors, Yoav Stern. Please go ahead.
Yoav Stern: Thank you very much, Betsy and good day to everybody. Good morning, good afternoon, good middle of the day. We are going to speak today about the first quarter of 2024 and some reflection from before and after. And I would not read you the news release. You hopefully read it or you will be able to read it later. I'm going to speak into the presentation and give as much as possible time for your questions, so we can lead it toward what's more interesting for you. To start with, we had a great quarter with total fitting, which was totally fitting the reshaping Nano initiative, which we started the last quarter. And it was a very important initiative, because it's basically embarked us on a direction of emphasizing profits and adjusting the business model toward profitability eventually EBITDA positive et cetera.
Rather than just either to internal growth or organic growth or acquisitions just focusing on the top line. Of course, the top line is first. By the way, the top line here [Technical Difficulty]
CHECK OUT: 9 Best Gene Therapy Stocks To Buy Now and 10 Best Dividend Stocks Yielding At Least 7%
Operator: Pardon me, it appears we've lost connection with our speakers. Please wait while we reconnect. We've reconnected with our speaker line.
Yoav Stern: Okay, I'm sorry, ladies and gentlemen, something technology is not perfect in spite of everything. I guess we dropped off or you dropped off. I don't know where, but I'll continue from where I was, and if there'll be questions, I'll get back. We had an amazing quarter of improving profitability according to our reshaping Nano initiative. We went up to [Technical Difficulty] is another important, I'm just trying to adjust the presentation. New customers partnering with us is another important factor in this order. RF, for everybody that doesn't know it is radio frequency. This is one of the major applications for AME, Additive Manufacturing Electronics. We have a proof-of-concept that new customers are wanting to use it.
A lot of it is in defense. We have repeat sales to Western Defense Agency, we have new customers in advanced electronics. Some of the names you appear here, obviously the name does not appear. We have two leaders in the new space industry. You can guess what kind of industry is that. And we have repeat defense sales, repeat sale to a defense contractor. This is just small part of the achievements of this quarter. Innovation and securing the competitive advantage relate to how we develop our products and what achievements we reached, while developing and investing in R&D. AI services is a starting business where DeepCube is actually starting to make money by itself. Not that we intended ever for our AI technology for an industry to be a profit or a revenue center, because we bought it and we're using it mostly to advance our machines in their AI for industrial accuracy and maintenance.
But we have enough customers that requested us to potentially do business with them just with the AI capability and to install them in their machine as long as they're not competing with us we're doing it. On the robotics side, we increase the speed of our robotics additive electronics by a factor of 300%, and mostly it is also used beside component mounting. It's used for solder paste spreading, and this is a very, very important competitive edge comparing to a competition. And not less important is our digital solution in software. We partner, we just announced it with Esko and Fiery and to become a one-stop shop for digital printing solutions. Highly important achievement. The reshaping Nano that I mentioned before is all about numbers, obviously.
READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.
If you look back with the reflection on the -- starting from the left side of the slide, since 2021 we had 150% compounded annual growth. Since 2022, we have 36% expansion of our gross margins, that's 36 actual percentage from 10% to 46%. Our gross margin grew by 4.6 times. Our operating expenses in 2023 and ahead were reduced by about a third comparing to Q1 of 2023. And the most important point that we are so proud of is our cash burn was reduced from $27 million a quarter to $7 million a quarter. And we're still moving ahead in the reduction of this to the point that the year-end, on a quarterly basis, will be close to break even, assuming the company is as is without acquisitions. Last but not least, and actually one before last, the industry situation.
The industry situation is very well reflected by this graph. It shows you the following. The left side blue is the combined revenue of the four industry leaders in 2012, and the combined profits EBIT or EBIT to be accurate. On the right is the situation in 2022, a 1.5 ago, two years ago. Actually, it's a year and a half. The combined revenue grew from $650 million to over $1.5 billion. And the combined profit grew from positive to deeply negative. I wouldn't say grew, but shrunk, probably a better name. This is a indication, a manifestation of a market that is growing, but poor business strategies and business models that destroyed otherwise good businesses. Meanwhile, the demand for additive manufacturing is existing in the market, because all those service providers, which are using multiple additive machines from different suppliers, which they're buying cheaply, are making money by supplying parts, which means the demand is there.
It's just somebody in our industry, which I would say including all of us, is not running our strategy right. And we intend to try our best to change it because of two reasons. A, we have the theory and the analysis of what to do. B, we have the practical ability to do it and C, we have the capital to effectuate the consolidation of this industry. Now it's last but not least, the buyback program that some of you recommended for us to do a 1.5 year ago and we listened. As proven to be successful, we bought shares much below the cash value of the share between $2 to $3 a share. We reduced our share count by 15% and we have more inventory for this activity. If you're buying a share today of Nano at $2.7 a share, beyond the excellent performance that we just spoke about, and beyond what we are discussing and promising regarding acquisitions, you're buying a share at $2.7, which is a discount even over the cash of $4.1, and not considering the value of the business above it.
So as I think I've mentioned in the past, certain people see a problem in every opportunity, “problem” being the share still at the lower price than it should be by far, and certain other people see opportunity in the problem. When the share is below cash, that's the opportunity. I don't think you have a lot of companies with performance like that and yet the share is below cash, so this is my bottom line. At this point, Betsy, I would like to open up the session for questions-and-answers.
While we acknowledge the potential of NNDM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
To continue reading the Q&A session, please click here.
