Nano Dimension Ltd. — FY 2017 Form 20-F
Reporting period: Fiscal year ended December 31, 2017; filed March 15, 2018. This is an annual report, not a standalone fourth-quarter report. It identifies the fourth quarter as the start of commercial sales of the DragonFly 2020 Pro printer but does not provide a clear set of Q4-only financial results. Financial statements are audited and prepared under IFRS as issued by the IASB; U.S. dollar amounts are convenience translations.
Business context
Nano Dimension develops, manufactures and sells 3D printers and proprietary conductive and dielectric inks for printed electronics. Its DragonFly 2020 Pro is designed for in-house prototyping and short-run production of multilayer PCBs, antennas, sensors and other electronic components. The company began early-access commercial sales in the second half of 2017 and described Q4 2017 as the start of commercialization. It remained an early-stage business, with revenues characterized by management as insignificant.
Financial highlights
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | NIS 2.984 million ($861,000) | NIS 175,000 ($46,000) |
| Gross loss | NIS 1.163 million ($335,000) | NIS 565,000 ($147,000) |
| Operating loss | NIS 60.070 million ($17.326 million) | NIS 34.614 million ($9.003 million) |
| Total comprehensive loss | NIS 63.005 million ($18.173 million) | NIS 34.470 million ($8.965 million) |
| Basic and diluted loss per ordinary share | NIS 1.11 ($0.32) | NIS 0.85 |
| Cash used in operating activities | NIS 56.886 million ($16.408 million) | NIS 22.737 million ($5.914 million) |
| Cash at year-end | NIS 21.159 million ($6.103 million) | NIS 47.599 million |
| Total assets | NIS 74.524 million ($21.496 million) | NIS 85.459 million |
| Total liabilities | NIS 11.542 million ($3.330 million) | NIS 11.241 million |
| Total equity | NIS 62.982 million ($18.166 million) | NIS 74.218 million |
Revenue comprised printer rentals of NIS 1.326 million, consumables of NIS 663,000 and printer sales of NIS 995,000. Total cost of revenue was NIS 4.147 million, including NIS 2.676 million of amortization of capitalized development costs. Reported gross loss therefore includes substantial amortization; the filing does not present an alternative gross-margin measure excluding it.
Research and development expense rose 151% to NIS 38.947 million, primarily because development costs were no longer capitalized in 2017. Sales and marketing expense rose 103% to NIS 7.859 million as commercial operations expanded. General and administrative expense declined 17% to NIS 12.101 million. Net finance expense was NIS 2.935 million, mainly reflecting exchange-rate differences. EBITDA was negative NIS 55.352 million and adjusted EBITDA was negative NIS 49.036 million; both are non-IFRS measures.
Investing cash outflow was NIS 13.286 million, mainly for fixed assets. Financing activities provided NIS 46.928 million, primarily from share issuance. The company reported no off-balance-sheet arrangements. It had NIS 4.061 million of liabilities related to government grants, including current and long-term portions; no conventional borrowings are identified in the supplied financial statements.
Changes versus prior period
- Revenue increased from NIS 175,000 in 2016 as printer leasing, ink deliveries and initial printer sales expanded, but remained small relative to operating costs.
- Total comprehensive loss increased 83%, and operating cash outflow rose substantially. The company attributed much of the R&D expense increase to ending capitalization of development costs; 2016 included NIS 16.273 million of capitalized development expenditure.
- Year-end cash declined by NIS 26.440 million, despite NIS 46.928 million of financing inflows, and year-end ordinary shares outstanding increased from about 50.1 million to 62.5 million.
- In the fourth quarter, the company separately presented sales and marketing expenses; comparative expense categories were reclassified, without changing total comprehensive loss.
Outlook, risks and unusual items
- Management estimated existing cash would fund current operations at least until the end of 2018, while also stating that additional capital would be needed to support mass production. It warned that unavailable financing could require delayed or reduced development or commercialization and could raise substantial doubt about the ability to continue as a going concern.
- In February 2018, after year-end, the company completed a U.S. public offering of 6.9 million ADSs for approximately $13.8 million gross, before underwriting discounts and expenses. This subsequent financing is not part of FY 2017 cash flows.
- There is no quantified revenue, profitability or cash-flow guidance in the supplied filing. Plans include expanding reseller coverage, sales infrastructure, customer experience centers and service-bureau activity; management aimed to double its reseller network in 2018.
- Key business risks include limited commercialization history and customer acceptance, continued losses and funding needs, competition and technological change, dependence on key personnel and suppliers, product defects and limited product-liability insurance, and protection or infringement of intellectual property.
- Additional exposures include foreign-exchange movements (the company does not hedge), Israeli political and security conditions, and Innovation Authority grant restrictions. Grants can require royalties of 3%–5% of applicable sales and prior approval for certain transfers of technology or manufacturing outside Israel.
- A 2015 intellectual-property and trade-secret claim seeking NIS 20 million in damages was settled and dismissed by the court in March 2017 without material effect, according to the company. The filing reports routine legal proceedings but no material pending claims.
- Management reported effective disclosure controls and internal control over financial reporting as of year-end; the external auditor did not attest to internal control, citing the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Whether commercial printer sales and recurring ink revenue grew meaningfully after the limited FY 2017 revenue base, and what the Q4-only results were.
- Whether the February 2018 offering proceeds, together with cash burn and production spending, provide adequate runway beyond management’s stated end-2018 estimate.
- Printer shipment volumes, customer retention and reorder rates, realized pricing, gross margins, warranty obligations and manufacturing capacity.
- The expected cash and royalty burden from Innovation Authority grants, and any approvals required for planned manufacturing or technology transfers.
- Potential dilution from subsequent share issuance and outstanding options or warrants; FY-end shares were 62.5 million, while the filing reports substantial later share issuance in February 2018.