Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nano Dimension Ltd (NNDM, Financial) reported its best quarter ever, with revenues up 2% compared to the same quarter last year.
- Gross margins increased to 45%, indicating improved profitability.
- Cash burn was significantly reduced by 54%, from $31 million to $11 million, due to a successful turnaround and expense reduction plan.
- The company announced the acquisition of Desktop Metal, which is expected to enhance its product portfolio and market position.
- NNDM is focusing on integrating its product lines into the wider Industry 4.0, aiming for digital transformation and higher efficiency.
Negative Points
- Adjusted gross margins were slightly down on a quarterly basis, although the decline was negligible.
- The additive manufacturing industry is fragmented, with many companies not making money, indicating a challenging market environment.
- The acquisition of Desktop Metal, while strategic, involves complexities and risks associated with integration.
- The company's share price is considered undervalued, which could impact future financing and shareholder value.
- Regulatory approvals for the Desktop Metal acquisition are still pending, which could delay the expected benefits from the merger.
Q & A Highlights
Q: It's felt like the message this quarter was much more robotics and AI and software driven than it has been in the past. Is that correct? Did I felt there was a kind of notable tone change and kind of the direction of the consolidation that you guys want to pursue?
A: Yes. We believe that what will sell all of our machines and I'm talking now about all including Desktop Metal and others that we are negotiating, is the software. The analogy, if you wish, Troy, is think about you and developing your product, which is the paper, the analysis with the (inaudible) you're totally focused on the software than the (inaudible) I don't think you know the name of the printer you have in your office. The software is driving your tool to manufacture our products, not the hardware.
Q: How about just like your thoughts on the growth in Additive versus growth in kind of the robotics market when you think about in the next 12 months in front of you is robotics, the area that's driving growth and assuming less in Additive?
A: I believe that in robotics automation and what we call Industry 4.0 and be it electronic -- Additive electronics or even be it other -- I'm sorry, that's the signal -- in other segments, we believe the growth there is not dramatic. Because it's established industries, but the growth exists, especially towards the digitalization of it. So it's 10%, 15% a year. It's much more established, and we like it that way. The growth in additive manufacturing is now and would be and should be specific to segments of the additive manufacturing.
Q: Do you think you're going to just be more focused on the integration of Desktop Metal? Or do you think we will hear a couple of more acquisition tuck-ins?
A: I think in the next 12 to 24 months, we will be focusing on both integration of the Desktop Metal and adding more acquisitions within the limit of our management capability to swallow it because one of the things you have to remember and just to make sure you're not becoming a bit junky is the acquisition is exciting, but the merger is what makes it profitable. So we are carefully negotiating with three, four other companies. We're not going to do all of them, again, depending on their size, if they are very small and we just acquired them because of specific, okay. But if the larger and the size of the Desktop Metal, will be very careful, but we are talking to some of them.
Q: I believe that you've got teams already working with Desktop Metal to pull together integration plans for post completion. Is there anything you can say about that process and how that's been going?
A: Yes. The process is called what we're calling it PMI, post-merger integration. And the way we run this process is we have teams of both companies working on a daily basis, both meeting in the same location, both headquarters are in Boston. So it's going to be actively straightforward to merge. But the teams are working together, (inaudible) teams and on all management levels to plan why do I say to plan because formally, we can start to run the combined company one day after -- sorry, one day after the closing of the transaction. So before that, we cannot run Desktop Metal -- Desktop Metal management team, but I want to tell you something. We discovered as we get to know each other that the management team in Desktop Metal is excellent. They are going to be integrated with our management team and are going to make decisions together starting the day after the day of closing. And meanwhile, the PMI, the merger integration process is a planning process, very, very, very detailed. So when we hit the ground upon closing, we hit the ground running, and it works very, very well with between the two teams.
Q: Could you just give us a little bit more detail on kind of the rough timing for the different regulatory approvals?
A: Yes. There's two [later] approvals traditionally that are taking some time. One is [Coordina], which is the regulatory agencies that make sure that in any merger, you don't have a monopoly creates (technical difficulty). We don't have -- while we do have overlapping products -- so there's no -- and noncompeting products. So there's no issue more -- we believe it's more formality. And then the CFIUS, which is the agency that look at every merger and acquisition nowadays between American company and a foreign company to make sure the emerging industries are not taken over by unfriendly, call it, national industries from all kind of places. That's not including us, we have from Israel, which is very close and very friendly. So we believe this will be passing as well without the major issues.
Q: I see that you bought back, I think, about $8 million worth of shares in the quarter. Are you still continuing to buy back shares for the rest of the year?
A: We have additional -- close to $150 million allocated and approved by the court in Israel and by our board to buy more shares. We are buying or not buying based on a decision that is partly connected to the price of the share, partly connected to not having inside information because that prevents us from buying when there's certain important events happening in the public doesn't know about it. So there's many variables affecting the buying and selling -- sorry, the buying of shares. But we do have a location, and we don't have the permission to buy, and we'll do it as we see fit in the next few quarters.
Q: What kind of gross margin would indicate dynamic change in the business and provide sustainability for the future of the 3D industry?
A: For a few products. And as I told you, when we get into Industry 4.0 and we're dealing with for instance, robotics, electronic additive and construction. Those are more traditional industries, they can live with 45% easy, even with 40% gross margins. If you're dealing with new technologies like we have in our electronics manufacturing of electronics and now with all of Desktop Metal, we must have, and you're right getting close as possible to 60%. And as you see, our gross margin is improving, and we have now a very, very big and serious work on the acquisition of Desktop Metal to increase their gross margins. So the combined -- not for the whole company, but for whatever we have 15% to 18% investment in R&D, we must have 60% gross margin because otherwise, we will not have enough margin for profit. So your number was right.
Q: Is there still interest in pursuing the Stratasys buyout?
A: Investment in Stratasys is strategic. I announced it when we did it in June, if I remember right, of 2022,
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
