Nano Dimension — Creating a leader in additive manufacturing

Nano Dimension (NASDAQ: NNDM)

Last close As at 23/08/2024

USD2.19

0.00 (0.00%)

Market capitalisation

USD485m

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Research: TMT

Nano Dimension — Creating a leader in additive manufacturing

Nano Dimension reported record revenue of $15.0m in Q224, slightly higher year-on-year and 12% higher quarter-on-quarter. The Reshaping Nano initiative continued to reduce cash burn, which was down 64% y-o-y in Q224 and 69% in H124, before share buybacks. Management is focused on completing the Desktop Metal (DM) acquisition by the end of the year. The combined entity will have a broad product offering, supporting the entire value chain from prototyping through to volume manufacturing, along with considerable cash to support organic and inorganic growth. With significant revenue and cost synergies identified, the new group should be able to accelerate the path to profitability.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Nano Dimension

Creating a leader in additive manufacturing

Technology

Spotlight – Update

22 August 2024

Price

US$2.19

Market cap

US$474m

Share price graph

Share details

Code

NNDM

Listing

Nasdaq

Shares in issue

216.6m

Net cash ($m) at end Q224 (including US$11.2m lease liability)

752.1

Business description

Nano Dimension offers equipment for additive manufacture of high-performance electronic devices, complex 3D ceramic and metal objects as well as miniature parts requiring a resolution of only one micron. It also offers complementary equipment for automated assembly of electronic devices and PCBs.

Bull

Additive manufacturing enables creation of more complex parts and is more efficient for smaller-volume production runs.

Balance sheet strength positions the company well to consolidate the sector.

Strategy in place to improve financial performance and reduce cash burn, with gross margins already approaching 50%.

Bear

Currently loss-making.

Distraction of hostile behaviour from major shareholder Murchinson.

Difficult to predict market growth for disruptive technologies.

Analyst

Katherine Thompson

+44 (0)20 3077 5700

Nano Dimension is a research client of Edison Investment Research Limited

Nano Dimension reported record revenue of $15.0m in Q224, slightly higher year-on-year and 12% higher quarter-on-quarter. The Reshaping Nano initiative continued to reduce cash burn, which was down 64% y-o-y in Q224 and 69% in H124, before share buybacks. Management is focused on completing the Desktop Metal (DM) acquisition by the end of the year. The combined entity will have a broad product offering, supporting the entire value chain from prototyping through to volume manufacturing, along with considerable cash to support organic and inorganic growth. With significant revenue and cost synergies identified, the new group should be able to accelerate the path to profitability.

Historical performance

Year
end

Revenue
(US$m)

Adjusted EBITDA (US$m)

PBT*
(US$m)

PAT*
(US$m)

DPS
($)

P/E
(x)

12/20

3.4

(12.6)

(15.0)

(15.0)

0.00

N/A

12/21

10.5

(38.4)

(44.5)

(44.5)

0.00

N/A

12/22

43.6

(91.3)

(96.4)

(96.4)

0.00

N/A

12/23

56.3

(99.9)

(59.0)

(59.0)

0.00

N/A

Source: Company data. Note: *PBT and PAT are normalised, excluding amortisation of acquired intangibles, exceptionals and share-based payments.

Cash burn reduced in Q224

Nano Dimension reported record revenue of $15.0m in Q224 and reduced the EBITDA loss from $23.5m in Q223 to $16.1m in Q224 as the Reshaping Nano initiative reduced operating costs. Factoring in interest income of $10.5m and the reduction in the value of its stake in Stratasys of $31.3m, Nano reported a net loss of $44.0m for Q224, compared to a net loss of $9.1m in Q223. Before share buybacks of $18.2m (Q223: $1.3m), net cash burn reduced to $11.0m in Q224, compared to $30.5m in Q223.

Desktop Metal acquisition process ongoing

The process to acquire DM, announced on 3 July, is well underway. Requests for regulatory approval have been submitted and DM has scheduled a special shareholder meeting for 2 October to seek shareholder approval for the deal. The acquisition is expected to close in Q424 and both companies are working together to be ready to execute their post-merger integration plan.

Valuation: Well-funded for M&A strategy

Nano Dimension has gross cash of $764m on the balance sheet, highlighting its ability to consolidate the sector. After the DM acquisition at the maximum purchase price and assuming no repurchase of DM’s outstanding convertibles ($113m at end Q224), Nano Dimension expects to have gross cash of c $665m, which should support the combined entity to reach profitability and provide funds for further M&A. The shares are currently trading at a significant discount (c 43%) to Nano Dimension’s net cash balance plus the current value of its stake in Stratasys ($77m as at 21 August). We believe that as the company reduces cash burn and moves towards profitability, this discount should reduce.

Review of Q224 results

In the table below, we summarise Nano Dimension’s performance in Q224.

Exhibit 1: Q224 results highlights

$m

Q224

Q223

H124

H123

Revenue

15.0

14.7

28.4

29.7

Gross profit

6.8

6.5

13.0

13.1

Adjusted gross profit

7.0

7.0

13.6

14.1

EBITDA

(53.3)

(19.8)

(97.5)

(7.9)

Adjusted EBITDA

(16.1)

(23.5)

(29.7)

(47.2)

Operating loss

(20.8)

(30.4)

(39.8)

(61.6)

Profit/(loss) before tax

(44.1)

(9.3)

(79.1)

12.7

Profit/(loss) after tax

(44.3)

(9.4)

(79.2)

12.6

Net income after minority interest

(44.0)

(9.1)

(78.7)

13.1

Net cash

752.1

938.7

752.1

938.7

Revenue growth y-o-y

1.7%

32.8%

-4.6%

37.9%

Revenue growth q-o-q/h-o-h

12.1%

-1.5%

6.5%

34.4%

Gross margin

45.4%

44.1%

45.8%

44.0%

Adjusted gross margin

46.6%

47.5%

48.1%

47.3%

Source: Nano Dimension

Q224 revenue was 1.7% higher year-on-year and 12.1% higher quarter-on-quarter, a record quarter for Nano Dimension. Gross margin increased 1.3bp y-o-y, while adjusted gross margin was 0.9bp lower year-on-year at 46.6%. A reduction in operating expenses of $7.4m y-o-y resulted in the adjusted EBITDA loss reducing from $23.5m in Q223 to $16.1m in Q224. We note that in Q224, costs of $2.7m were incurred relating to the DM acquisition. Without these, underlying operating expenses reduced by $10.1m y-o-y due to the Reshaping Nano initiative. Adjusted EBITDA strips out the loss from revaluation of assets and liabilities (mainly the movement in Nano Dimension’s stake in Stratasys) of $31.5m, share-based payments of $3.4m and exchange rate differences of $2.3m. The company generated net interest income of $10.5m.

Nano Dimension’s 14% stake in Stratasys was worth $81.3m at quarter-end, based on a share price of $8.39. The share price has since declined to $7.96.

Net cash, including leases of $11.2m, was $752.1m at quarter-end, down from $780.3m at the end of Q124. The main moves in the quarter were:

cash flow from operating activities: -$17.7m (reduced from -$28.2m in Q223);

cash flow from investing activities: $5.2m; and

cash flow from financing activities: -$18.3m, which includes share buybacks totalling $18.2m.

Excluding share buybacks, cash burn for the quarter was $11m (calculated as the change in cash, cash equivalents and bank deposits of $29.2m adjusted for share buybacks), with monthly cash burn reduced to $3.67m, down 64% y-o-y. For H124, cash burn was $18.0m compared to $57.9m in H123, down 69% y-o-y.

In H124, the company bought back shares worth $69.8m. Management noted that its share repurchase scheme is still live (current facility authorised to maximum of $200m), with the timing of purchases dependent on the share price.

Update on Desktop Metal acquisition

The process to acquire DM is ongoing, with regulatory approvals already sought for anti-trust and foreign investment (US: Hart-Scott-Rodino and Committee on Foreign Investment in the US; Canada: filing under the Investment Canada Act; Germany and Italy: approval of foreign direct investment regulators). The deal also requires DM shareholder approval (a majority of voting rights); a special shareholder meeting is scheduled for 2 October for this. Subject to these approvals being received, the company expects the deal to close in Q424.

As a reminder, Nano Dimension will pay $5.50 in cash per DM share for a total value of $183m. This will be reduced by the following:

DM’s transaction costs, up to a maximum of $0.63 per DM share.

DM’s utilisation of a $20m bridge loan from Nano Dimension. Nano Dimension has offered to provide a bridge loan if closure of the deal extends into 2025. This could reduce the share price by a maximum of $0.80.

Overall, the maximum reduction would result in an offer price of $4.07 per share or $137m in cash. DM is currently trading at $4.15 per share.

Both companies have already started working closely together to produce post-merger integration plans, with the intention of enacting them as soon as the deal closes.

The company noted that its focus over the next 12 months would be on the integration but it would also consider further M&A subject to management and operational bandwidth.

Exhibit 2: Financial summary

$m

2019

2020

2021

2022

2023

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

Revenue

 

7.1

3.4

10.5

43.6

56.3

Cost of Sales (including amortisation of capitalised IP)

(5.1)

(2.3)

(9.4)

(29.6)

(30.9)

Gross Profit

2.0

1.1

1.1

14.1

25.5

EBITDA

 

(11.7)

(12.6)

(38.4)

(91.3)

(99.9)

Operating profit (before amort. and excepts.)

 

(14.4)

(15.2)

(48.3)

(98.5)

(106.4)

Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

(145.2)

(40.4)

1.6

Share-based payments

(0.4)

(20.5)

(29.8)

(32.6)

(20.1)

Operating Profit

(14.8)

(35.7)

(223.2)

(171.5)

(124.9)

Net Interest

6.5

0.2

3.8

2.2

47.4

Exceptionals

0.0

(13.0)

13.7

(58.7)

21.9

Profit Before Tax (norm)

 

(7.9)

(15.0)

(44.5)

(96.4)

(59.0)

Profit Before Tax (FRS 3)

 

(8.4)

(48.5)

(205.7)

(228.0)

(55.6)

Tax

0.0

0.0

4.9

(0.3)

(0.1)

Profit After Tax (norm)

(7.9)

(15.0)

(44.5)

(96.4)

(59.0)

Profit After Tax (FRS 3)

(8.4)

(48.5)

(200.8)

(228.3)

(55.7)

Average Number of Shares Outstanding (m)

3.5*

42.9*

247.3

257.8

248.0

EPS - normalised ($)

 

(2.25)

(0.35)

(0.18)

(0.37)

(0.23)

EPS (normalised, fully diluted ($)

 

(2.25)

(0.35)

(0.18)

(0.37)

(0.23)

EPS - (IFRS) ($)

 

(2.38)

(1.13)

(0.81)

(0.88)

(0.22)

Dividend per share ($)

0.00

0.00

0.00

0.00

0.00

Gross margin (%)

28.1%

31.3%

10.7%

32.2%

45.2%

EBITDA margin (%)

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

 

 

 

 

 

Fixed Assets

 

13.0

13.1

78.1

139.1

170.4

Intangible Assets

5.2

4.4

0.0

0.0

2.2

Tangible Assets

7.4

8.3

12.2

22.4

28.8

Deferred tax and other

0.0

0.0

1.0

0.9

0.0

Bank deposits/securities

0.0

0.0

64.4

115.0

138.4

Restricted deposits

0.4

0.4

0.5

0.9

0.9

Current Assets

 

9.9

676.1

1,311.9

1,064.3

894.0

Stocks

3.5

3.3

11.2

19.4

18.4

Debtors

2.4

1.8

9.3

12.8

24.0

Cash

3.9

585.3

853.6

685.4

309.6

Bank deposits

0.0

85.6

437.6

346.7

542.0

Restricted deposits

0.0

0.1

0.1

0.1

0.1

Current Liabilities

 

(4.4)

(6.7)

(32.0)

(37.0)

(34.5)

Creditors

(4.4)

(6.7)

(16.7)

(27.9)

(30.0)

Short-term borrowings

0.0

0.0

0.0

0.0

(4.5)

Other

0.0

0.0

(15.3)

(9.2)

(0.0)

Long-Term Liabilities

 

(6.8)

(15.5)

(13.7)

(16.1)

(14.1)

Long-term borrowings

(2.1)

(2.6)

(4.4)

(13.1)

(9.3)

Other liabilities

(4.7)

(12.8)

(9.3)

(3.0)

(4.7)

Net Assets

 

11.6

667.1

1,344.2

1,150.3

1,015.8

CASH FLOW

 

 

 

 

 

Operating Cash Flow

(11.7)

(12.6)

(38.4)

(91.3)

(99.9)

Working capital

(0.8)

2.9

2.7

(1.2)

(7.3)

Exceptionals and other

(0.2)

(0.0)

(7.0)

0.4

2.0

Tax

0.0

0.0

0.0

0.0

0.0

Net Operating Cash Flow

 

(12.7)

(9.6)

(42.6)

(92.1)

(105.1)

Net Interest

0.0

0.2

3.7

17.5

41.5

Investment in intangible & tangible assets

(0.6)

(1.4)

(9.8)

(9.4)

(10.6)

Acquisitions/disposals

0.0

0.0

(74.6)

(219.5)

(9.3)

Equity financing

14.6

679.0

805.7

0.0

(96.4)

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

(1.7)

(1.6)

Net Cash Flow

1.4

668.1

682.4

(305.3)

(181.4)

Opening net debt/(cash)

 

(3.8)

(1.8)

(668.3)

(1,351.2)

(1,018.9)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

(3.3)

(1.6)

0.4

(15.0)

1.3

Closing net debt/(cash)

 

(1.8)

(668.3)

(1,351.2)

(1,018.9)

(837.7)

Source: Company data. Note: *Adjusted for 1:50 reverse split effective June 2020.


General disclaimer and copyright

This report has been commissioned by Nano Dimension and prepared and issued by Edison, in consideration of a fee payable by Nano Dimension. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

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General disclaimer and copyright

This report has been commissioned by Nano Dimension and prepared and issued by Edison, in consideration of a fee payable by Nano Dimension. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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