Nano Dimension Announces Record 2023 Revenue of $56.3 Million and Organic Growth of 29%

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Nano Dimension Ltd., a leading supplier of Additively Manufactured Electronics (“AME”) and multi-dimensional polymer, metal & ceramic Additive Manufacturing (AM), today announced financial results for the fourth quarter and full year ended December 31st, 2023.

Revenue

• Q4/2023: $14.5 million, up 19% compared to Q4/ 2022
• FY 2023: $56.3 million, up 29% compared to FY 2022
• Gross Margin (“GM”)
• FY 2023: 45%; up 41% from 32% in FY 2022
• Adjusted1 Gross Margin (“Adjusted GM”)

FY 2023: 48%; vs. 46% in FY 2022

• Net Cash Burn² down 42% from 2022 to 2023:
• FY 2022: $146 million
• FY 2023: $84 million
• FY 2024: $12-20 million EXPECTED, as a result of Q4/22 Reshaping Nano Initiative (the “Initiative”)
• Details regarding Adjusted EBITDA and adjusted gross margin can be found below in this press release under “Non-IFRS Measures.”

CEO MESSAGE TO SHAREHOLDERS:

We would like to update you - our shareholders and prospective shareholders - with additional perspective on our continued record performance, organizational changes, and an outlook on exciting times to come.

To start with – we want to emphasize that in contrast to many hi-tech corporations’ reporting results, especially industries like AM / 3D printing where no public company is profitable and most are shrinking in revenues – we relate to this document as well as to our “results” conference calls, as their name indicates: Update on Financial Results, with minimal “cosmetics” such as pictures and graphics of exciting products and the machines that manufacture them. Most of those can be found on our website: www.nano-di.com, which all of you are invited to visit and see. Nano Dimension has a breadth of technologies and products assortment, yet narrow and focused span of synergistic vertical markets. Both of those characteristics are critical to our success and major differentiators from many other AM/3D Printing players.

“Reshaping Nano” Beyond Revenue and Gross Margin

After much focus on revenue over the last 2-4 years, the market is returning to some element of reasonableness in the realigning of attention around the bottom-line. In this spirit, the Initiative was launched in mid-Q4/2023 and is critical as we reorient our financial objectives. It is specifically designed to enable Nano Dimension to become operating income positive in 2025, and potentially cash flow positive earlier. We have thought and will continue to think highly critically about our operating expenses across R&D, sales & marketing, and general & administrative costs. We made some notable changes in Q4/2023, including reducing the Company’s workforce worldwide by approximately 25% and shrinking the Executive Management group by 25%.

This Initiative has produced an estimated annualized savings of $30 million, which we expect to start reflecting in our Q1/2024 results.

It is important to note that while we are not yet delivering a positive bottom-line now, it is a choice based on our capital allocation to secure R&D innovation and establish go-to-market channels and customer relationships. We are positioning ourselves with a sharp focus on gross margin. It grew to 45%. This improvement indicates our clear direction toward a goal of over 50% gross margin, preferably close to 60%. At that level, we expect to be profitable. From there onward, we expect to see savings in operating expenses.

Customer and R&D Successes

In 2023, we saw numerous customer success stories. These are evident in new relationships with customers such as:

• Sales to NASA,
• Repeat sales to the Fraunhofer Institute,
• Sales to one of the world’s largest computer hardware companies,
• Sales to Western Armies,
• Sales to Western Secret Services,
• Sales to other defense establishments,
• Multi-system sale that resulted in our largest single order ever.
• Moreover, we are seeing these customer success stories across our product portfolio – from our systems for AME to micro-AM to AE robotics.

We are hearing from our customers more frequently with excitement relating to our deep learning-based AI capabilities. This is especially on the back of our announced efforts to develop our industrial AI solution from our DeepCube Group, which was originally developed for our proprietary manufacturing systems, but is now ramping up as a separate offering for third-party customers in their own, non-AM industrial systems. As part of this, several patents were granted, or applications filed.

Comparable to the importance of our AI work are our breakthroughs in material science, specifically relating to our INSU™ 200 dielectric material for AME, which was announced in the end of 2023 and a patent application has been filed in 2024. This material is critical for use to AME as it enables the printed PCB to go through critical processes that ultimately improve its thermo-mechanical properties. This, in effect, opens tremendous new business opportunities.

The Financial Engine Continues to Run

More than ever, we are shaping our decisions around the aforementioned bottom-line, but top-line is critical to enable success. Fortunately, Nano Dimension finished 2023 with another record year. This was on the back of a strong Q4/2023, and in fact, all quarters for the year have reached records within themselves compared to previous years. And not by small margins. As an example, Q4/2023’s $14.5 million in revenue was 19% higher than the same period in the year before. Importantly, this revenue growth is entirely organic. This is proof of our ability to acquire, integrate, and achieve synergies. The overly used yet highly indicative adage of “1 + 1 = 3”.

Stewards Responsible to Shareholders

2023 was a year in which we had constant engagement with shareholders, especially leading up to our Annual General Meeting which occurred on September 7th, 2023. Nano Dimension’s slate and existing stewards received the support needed from thousands of shareholders to continue to operate as directors for the Company.

Even with that continued mandate, we made proactive changes to our Board of Directors. Firstly, we separated the Chairman and CEO function with me stepping down as Chairman, while continuing to serve as a director. The Company and its shareholders should be enthralled to have Dr. Yoav Nissan-Cohen as Chairman. Dr. Nissan-Cohen brings many years of advanced technology innovation and corporate leadership, including as CEO of Tower Semiconductor for over ten years.

Secondly, we are honored to have a new voice on the board with 4-Star General Michael X. Garrett (Ret.), who was most recently the Commanding General of the United States Army Forces Command (“FORSCOM”). Two directors stepped down as part of this refresh.

The Capital is Yours

Since raising $1.5 billion in capital in 2021 we have consistently operated under the belief that this capital was given to us by our shareholders for a few years to create added substantial value. On this basis, we have constantly sought to allocate this capital in the best way to deliver a short-, medium- and long-term return on investment (“ROI”).

We have most often spoken about capital allocation through two channels. The first is organic investment, namely R&D and go-to-market. The second is inorganic, specifically mergers & acquisitions (“M&A”). But there is a third option: return capital to shareholders, while improving Nano’s enterprise value. We have done just that to a notable extent with a share buyback program, for approximately $96 million in 2023. Furthermore, we currently have another $200 million repurchase plan approved and underway.

Time for CONSOLIDATION

M&A has long been part of our strategy as evident by our seven acquisitions since April 2021. But more than being acquirors, we have been prudent buyers – unwilling to pay unreasonable valuations. Why? We believe you don’t make money when you sell, you make money when you buy. In other words, the acquisition price must be right.

In another deviation from the financial reports of all AM industry public companies – we do not see systemic reduced demands for our products. What we do identify are too many AM companies without the gross margins that fit the required R&D, machine building, and marketing budgets. The systemic lack of profitability is a result of overcrowded domain which was over-financed and over-valued by the 2021 SPAC-and-micro-cap-markets-and-small-AM-companies-MANIA. None of them are selling in a synergistic manner, none of them have focused on solving well defined and large yet coherent applications domains and vertical markets. The results are companies that sell, by a single corporation as an example, to the following markets: dental, defense, aerospace, medical body parts, medical instruments, consumer product and more. And those are pretty much all the companies that are large enough in AM and all burning cash annually while being left with ever shrinking reserves.

The solution for zero profits of the more than dozens of AM companies over the last few years is only one: consolidation. This general realignment will in turn increase our competitive advantage, increase gross margins, and focus on synergetic business lines rather than “We sell everything to everyone as long as it is 3D printing machine and/or material.”

The market is prime for consolidation, and we are positioned to be one of its main leaders.

It isn’t just about acquisitions because we have the capital, but also at compelling valuations that will drive an ROI for our shareholders, and proper merger and amalgamation of the management teams and rationalizing the product lines and go-to-market networks.

There are many great, albeit imperfect, companies in the AM industry. Great in that they have cutting edge technologies and meaningful customer relationships with our own customers and industry verticals. Imperfect in that for any number of reasons they have, poor business models that drive high costs, which have consumed the lion’s share of the capital that many of them raised. This is a unique and tremendous opportunity for Nano Dimension and its shareholders.

With close to $56.3 million of revenue, Nano Dimension is the fastest growing of the cohort of publicly traded AM / 3D printing companies (approximately 10-12). Contrary to reports by all other 3D printing public companies, and inconsistently with the reduction in the revenues of all during 2023, we do not feel “Industry headwinds”. This is not even one “industry”; medical equipment, defense, organic parts, prosthetics, 3D food printing, aerospace, aviation, energy, automotive, dental – are not “AM Industries” and do not necessarily see supposed headwinds together. Just as an example, the defense, aerospace and dental and electric/electronic transportation, as much as we know, did not have slowdowns in 2023.

Bottom line: Nano is the only company that grew, and substantially so; this year 29% organically vs. 2022 when we generated $43.7 million in revenue. And we are not shy to say that we were short from our original goal of $60 million. It is not because of headwinds; it is because we performed to an extend of 95% of our 2023 revenue goal.

We aim for go-to-market led consolidation AM/3D Printing and materials companies. This is the only way to accelerate toward profitability as fast as possible. If we can complete this M&A strategy as soon as we can at reasonable prices, we shall see a Nano Dimension that is well in the hundreds of millions of revenue and in a position to deliver to the bottom-line magnitudes more with greater scale and efficacy as practically the one of very few AM companies that is not only well managed and innovative, but also properly financed and positioned to deliver value to shareholders.

FINANCIAL RESULTS:

Fourth Quarter 2023 Financial Results

Total revenues for the fourth quarter of 2023 were $14,454,000, compared to $12,158,000 in the third quarter of 2023, and $12,104,000 in the fourth quarter of 2022. The increase is attributed mostly to increased and more effective sales efforts across the Company’s product lines.

Cost of revenues excluding write-down of inventories and amortization of assets recognized in business combination and technology for the fourth quarter of 2023 was $7,358,000, compared to $6,739,000 in the third quarter of 2023, and $3,784,000 in the fourth quarter of 2022. The increase resulted primarily from the above-mentioned increase in revenues.

Research and development (R&D) expenses for the fourth quarter of 2023 were $13,580,000, compared to $12,788,000 in the third quarter of 2023, and $20,993,000 in the fourth quarter of 2022. The increase compared to the third quarter of 2023 is mainly attributed to an increase in payroll and subcontractors expenses. The decrease compared to the fourth quarter of 2022 is mainly attributed to a decrease in materials, share-based payments, payroll expenses and subcontractors expenses.

Sales and marketing (S&M) expenses for the fourth quarter of 2023 were $8,289,000, compared to $7,715,000 in the third quarter of 2023, and $9,758,000 in the fourth quarter of 2022. The increase compared to the third quarter of 2023 is mainly attributed to an increase in marketing and other expenses, partially offset by a decrease in share-based payments. The decrease compared to the fourth quarter of 2022 is mainly attributed to a decrease in share-based payments expenses.

General and administrative (G&A) expenses for the fourth quarter of 2023 were $14,051,000, compared to $20,848,000 in the third quarter of 2023, and $9,091,000 in the fourth quarter of 2022. The decrease compared to the third quarter of 2023 is mainly attributed to a decrease in professional services expenses, mainly from proxy contest related expenses, including the matters relating to activist shareholders and ADS holders, such as proxy advisory, voting, and litigation. The increase compared to the third quarter of 2022 is mainly attributed to an increase in professional services, from the same aforementioned reasons and share-based payments expenses.

Other income, net for the fourth quarter of 2023 was $1,627,000, compared to $0 for third quarter of 2023, same as for the third quarter of 2023. The increase was attributed to additional compensation from government authorities for damaged inventory, less reorganization costs which we incurred during 2023.

Impartment losses for the fourth quarter of 2022, were $40,523,000. In 2023, no impairment losses were recognized.

Net loss attributed to owners for the fourth quarter of 2023 was $1,049,000, or $0.01 loss per share, compared to net loss of $66,604,000, or $0.26 loss per share, in the third quarter of 2023, and net loss of $87,667,000, or $0.34 loss per share, in the fourth quarter of 2022.

Year Ended December 31, 2023 Financial Results

Total revenues for the year ended December 31, 2023, were $56,314,000, compared to $43,633,000 in the year ended December 31, 2022. The increase is attributed mostly to increased and more effective sales efforts across our product lines.

Cost of revenues excluding write-down of inventories and amortization of assets recognized in business combination and technology for the year ended December 31, 2023, was $30,759,000, compared to $24,943,000 in the year ended December 31, 2022. The increase resulted primarily from the above-mentioned increase in revenues.

R&D expenses for the year ended December 31, 2023, were $62,004,000, compared to $75,763,000 for the year ended December 31, 2022. The decrease is attributed to a decrease of $9,702,000 in share-based payments expenses, as well as a decrease of $3,627,000 in subcontractors’ expenses and a decrease of $2,176,000 in payroll and related expenses.

S&M expenses for the year ended December 31, 2023, were $31,707,000, compared to $38,833,000 for the year ended December 31, 2022. The decrease resulted primarily from a decrease of $6,126,000 in share-based payments expenses and a decrease of $982,000 in payroll and related expenses.

G&A expenses for the year ended December 31, 2023, were $58,254,000, compared to $30,457,000 for the year ended December 31, 2022. The increase resulted primarily from an increase of $19,421,000 in professional services, mainly from proxy contest related expenses, including the matters relating to activist shareholders and ADS holders, such as proxy advisory, voting, and litigation, as well as an increase of $4,711,000 in payroll and related expenses and an increase of $3,508,000 in share-based payments expenses.

Other income, net for the year ended December 31, 2023, was $1,627,000 compared to $0 for the year ended December 31, 2022. The increase was attributed to additional compensation from government authorities for damaged inventory, less reorganization costs which we incurred during 2023.

Impairment losses for the year ended December 31, 2022, were $40,523,000. In 2023, no impairment losses were recognized.

Net loss attributed to the owners for the year ended December 31, 2023, was $54,550,000, or $0.22 per share, compared to loss of $227,423,000, or $0.88 per share, for the year ended December 31, 2022.

Balance Sheet Highlights

Cash and cash equivalents, together with short unrestricted bank deposits totaled $851,538,000 as of December 31, 2023, compared to $1,032,025,000 as of December 31, 2022.

Total shareholders’ equity totaled to $1,015,786,000 as of December 31, 2023, compared to $1,150,292,000 as of December 31, 2022.