Nuburu Q1 2023 Earnings Call Transcript

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May 11, 2023

There are 5 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to the NUBARU Q1 2023 Earnings Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This Call is being recorded on Thursday, May 11, 2023. And I would now like to turn the conference over to Barry Hutton.

Operator

Please go ahead.

Speaker 1

Good afternoon, and thank you for joining us for Nuberu's Q1 2023 earnings call. Joining me on the call today are Mark Zettiker, CEO and Co Founder of Nuburu along with Brian Cannally, Chief Financial Officer. Full details of our results and additional management commentary are available on our earnings release, which can be found In the Investor Relations section of Nuburu's website at ir.nuburu.net. Please note that this This call is being simultaneously webcast on the IR section of the website. Before we start, I would like to remind you that Following discussion contains forward looking statements within the meaning of the federal securities laws, including, but not limited to, Statements regarding Nuburu's future financial results, management's expectations and plans for the business and the company's partnerships with third parties.

Speaker 1

These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, including the general economic environment, difficulties related to raising additional financing and challenges with the company's partnerships as well as those described in our risk factors set forth in more detail in our most recent periodic reports filed with the Securities and Exchange Commission as well as the current uncertainty in the financial markets and the economy more generally. Such reports are accessible on the SEC's website at www.sec.gov and also available on Nuburu's website at ir.nuburu.net. Any forward looking statements made in this conference call, Including responses to your questions are based on current expectations as of today, and Nuveru assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following discussion contains non GAAP financial measures. Nuburu uses these non GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes.

Speaker 1

For a reconciliation of each of these non GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available at the IR section on our website at ir.nuberu.net. Now I will turn the call over to Mark, Co Founder and Chief Executive Officer of Nuberu.

Speaker 2

Thank you, Barry. Good afternoon, everyone, and welcome and laid a foundation for the rest of 2023, which we expect to generate momentum towards 2024. On January 31, we completed our business combination with Tailwind Acquisition Corp, which resulted in Nuveru becoming a publicly listed company and our stock being traded on the NYSE American on February 1. I am pleased to share That our team generated strong Q1 revenue results of $470,000 representing year over year growth of approximately 4 22%. Since this is our first earnings call as a public company, I'd like to provide a brief overview of our business and why we believe that our next generation blue laser welding technology It is the best solution to generate cost and performance benefits across multiple large high growth markets, Nuberu was founded in 2015 as the blue laser technology started to mature and it became apparent that this would be the next generation solution The transition to industrial applications.

Speaker 2

We immediately recognize the greenfield nature of the industrial markets around blue laser technology Because at the time, no one had yet invented a blue industrial laser. Our early start in technology enabled us We filed numerous patent applications covering the use of blue lasers in additive manufacturing, welding copper, welding foils, welding batteries and other materials. Since these initial filings, we have received over 80 patents on technology And proceeds for using a blue laser. We have successfully deployed a number of lasers at key customers and we have recognized, Barrett, the many awards from the laser One that is compatible with a scanning system, which is used for many welding and 3 d printing applications and a second that uses a welding head with a motion system. The unique absorption characteristics of the blue laser has enabled us to displace older technology And to enable manufacturing of parts that would otherwise be difficult to manufacture.

Speaker 2

We now have multiple laser products qualified for production processes and have more undergoing customer valuations. As customers complete their valuation of laser technology, they have begun to have discussions with us about longer term supply agreements in which we will provide multiple lasers into a customer's manufacturing line. Our customers adopt our lasers to displace older technology, which has either low manufacturing yields or where there is simply no other technology available other than the new Blue Laser that can provide the results they need. In addition, we have recently completed a comparison of the blue laser technology efficiency in 3 base applications: metal 3d printing, cell phone battery welding and electric vehicle battery manufacturing. Importantly to both us and our customers, the superior performance metrics of our blue laser technology provides the potential to save significant amounts in terms of Energy cost compared to its infrared laser counterpart when welding aluminum and copper.

Speaker 2

This can equate to saving 100 of tons of The key advantage of the Anuburu blue laser to an infrared laser is that nearly all metals are less reflective to the blue laser light, enabling a much more efficient coupling of the energy from the laser into the parts to be welded. For industrial welding applications, These physics advantages translate into speed and efficiency in the manufacturing process. In Electric vehicle and battery manufacturing, this fundamental physics advantage means that our blue lasers can complete the tens of thousands of wells needed For each electric vehicle faster than incumbent infrared lasers and thereby can reduce hundreds of tons of CO2 emissions Annually depending on the source of electricity. In consumer electronics, the advantage of blue lasers means that we can weld cell phone components, Specifically, vapor chambers, significantly faster than using traditional methods, which entail welding with the diffusion process in an oven requiring batch processing and maintaining the material at near its melting point for 24 hours. By using the blue laser to weld the parts significantly faster And with higher yield rates, we can enable a significant reduction in CO2 emissions from the manufacturing process.

Speaker 2

The same physics advantages that enable better welding also enable better results when 3 d printing metal parts. Our lasers when integrated into a 3 d printer can print at much higher speeds than incumbent infrared lasers resulting in a lower per part cost. Ultimately, the manufacturing performance improvements that the blue laser technology delivers translates to a lower manufacturing cost, Higher return on investment and more competitive pricing for end products to customers. We and our customers are Excited that these benefits have real sustainability advantages. In the case of printing stainless steel, we estimate that the blue laser can reduce CO2 emissions by a factor of 2 75 percent for each kilogram of material being printed compared to printing with an IR laser.

Speaker 2

These advantages will translate to more rapid adoption of these 3 d printers for manufacturing and drive our revenue growth in 2023 as we look to 2024 and beyond. In the Q1, we had several notable achievements related to the commercialization of our technology, which crossed multiple applications. In the area of additive manufacturing, We completed our first delivery of units to ecentium as part of what is potentially a multimillion dollar, multiyear agreement. Through this relationship, ecentium is integrating our blue laser technology into their high speed extrusion additive manufacturing platform for metal parts in automotive, aerospace and defense applications. This high speed printing platform, when combined with the efficiency of the blue laser, will enable breakthrough build rates for most materials compared to an IR based 3 d printer.

Speaker 2

In the area of industrial welding, We launched and began taking orders for our new Blue BL Series at the industry's premier event Photonics West. This is another first in the industry The BL Series laser can now be combined with a laser scanner to directly address the needs of several markets, which include Welding cell phones, welding electric vehicle batteries and additive manufacturing. We are very excited to See this technology now moving from the development stage to full production. In NAREIT Defense, we were selected as 1 of 7 companies by the U. S.

Speaker 2

Department of Defense for a position on its contract for the fabrication delivery of prototypes and equipment in support of solid state high energy laser weapon systems. We are eligible to participate in the multiple award contract with a maximum ceiling of $75,000,000 In addition to our commercial progress, we also strengthened our intellectual property portfolio, which consists of over 190 patents and patent applications comprising more than 7,500 claims relating to our technology. In March of 2023, we were awarded a patent for methods and systems for welding copper and other metals The group of metals included in this patent include copper, aluminum, stainless steel and their alloys. These materials are essential to electric vehicle production because of the large amount of copper and aluminum used in battery packs. The last material included is stainless steel, which is used in hydrogen fuel cells, another important technology for reducing greenhouse gases.

Speaker 2

We are very excited to have received this patent, which further shows that Newburu is a leader in this industry. In April 2023, the European Patent Office granted us a patent for multi kilowatt class blue laser system, because of the unique architecture being used to achieve the industry's first high brightness source that can be used directly with a scanning system. Now I would like to explain our product development philosophy and outline our current roadmap to develop and launch several new technologies in the next few years. Our product journey prioritizes developing progressively more powerful blue lasers, which can be focused on smaller and smaller spot sizes. This is important because it enables us to weld thicker materials, which broadens the applications we can address and consequently our customer base.

Speaker 2

We were pleased that we recently made the transition to implement higher performance laser diodes in our lasers across all our product lines. And we achieved this transition well ahead of our internal schedule. This transition has enabled us to streamline our roadmap, which leads to savings on inventory and working capital because of our ability to use the higher power laser diodes in all of our products, thus eliminating the need to maintain separate BOM structures. We believe that the core products in our roadmap We'll have higher revenue and gross margin potential because the products are actively aligned with our customer needs and the higher power laser diodes provide for higher brightness and fewer components in each of the products. Our current product, the AO-six fifty, Is a 6 50 watt blue laser product that started shipping in June of 2022 with a number of units delivered into 3 d printing and vapor chamber welding While the AO 650 is not of the same brightness level as the BL Series, it played an important role in establishing multiple beachheads for new brew in additive manufacturing and welding cell phone components.

Speaker 2

Consequently, a North American 3 d printing partner Has integrated multiple laser systems into their large scale high speed 3 d printer and is currently finalizing the processes necessary to produce high quality parts using wire feed additive processes. High efficiency of the wire feed process with the blue lasers gives this 3 d printing partner A competitive advantage in this printing space. The ALLO 650 systems are also currently integrated Multiple production lines producing copper vapor chambers for cell phones and are being evaluated for additional welding applications. This laser system is also the light engine for our proprietary area based 3 d printing technology, which uses a commercial spatial light modulator To print an image in the metal rather than just a spot as is the case with the conventional metal 3 d printer. This is a drop in replacement for the Olive production and provides the users an even higher brightness and performance The Nuberu BL250, which we announced at the Photonics West show.

Speaker 2

Importantly, this product is Already compatible with the scanner technology being used in all powder bed 3 d printers, battery welding applications and cell phone welding applications. The first shipments are for applications such as cell phone battery welding, electronic component welding, 3 d printing and non metal material processing. Some of the units shipping this quarter and next quarter are going into manufacturing testing The next release of the Newburu BL Series is planned for June at the Laser World of Photonics show in Munich, Germany. This release will be approximately 1 kilowatt with sufficient brightness to be compatible with a scanner. This is the laser configuration requested by All of the electric vehicle customers and with this power level has the potential to maneuver from thin material processing to the large electric vehicle battery and components market.

Speaker 2

We are also working on the next generation of blue laser technology, the new Blue single mode, which will produce a beam at the limits of physics or the ultimate brightness laser source. This laser will be the ideal choice for 3 d printing And remote welding applications. In addition, since a laser of this performance has never been offered to the commercial marketplace, There are likely many unforeseen applications that will provide us with great market opportunity. We anticipate releasing the 1st laser in this product line in the 2025 timeframe. This technology is heavily protected by new I want to touch on a few other topics that have me excited.

Speaker 2

We have made a number of changes to our leadership over the last 12 to Chief Operations Officer in late 2021. Brian has brought much needed experience in laser diode technology, 6 Sigma and Lean Manufacturing. This experience will continue to help drive our operations to achieve our product roadmap and single product flow, which will be required to capture the commercial growth. We hired Brian Kennelly as our Chief Financial Officer In the beginning of 2022, Brian brings the experience of a multi time public company CFO and has extensive background in manufacturing and capital equipment. This experience was significant as we transitioned to a public company.

Speaker 2

Most recently, we appointed Doctor. Matthew Philpott as our Chief Marketing and Sales Officer and his background, including 20 years of laser industry experience with Coherent Corp focused on battery and EV production. This will help us further accelerate market penetration across all segments. In February of 2023, Newburu appointed several new board members, who each bring significant expertise in the industrial sectors and corporate governance. Elizabeth Mora is the Chair of our Audit Committee.

Speaker 2

She currently serves on several other public boards, which include serving as the Audit Chair for MKS Instruments. Elizabeth was formerly the Chief Financial Officer of Harvard University and the Chief Administrative Officer of Charles Stark Draper Laboratory. Lily Van Hughes is the Chair of our Nominating and Corporate Governance Committee. She previously served as the Chief Legal Counsel and Corporate Secretary for Arrow Electronics and Public Storage and is currently the Assistant Dean for the Syracuse University College of Law. Kristi Hummel is the Chair of our Compensation Committee.

Speaker 2

Ms. Hummel is the Chief Talent Officer at UnitedHealth Group, and she was previously Chief People Officer for Skillsoft. Dan Hirsch has also joined the Board as a Director representing Anzu Partners and brings experience from 2 successful go public transactions involving SPACs, Playa Hotels and Resort and Broadmark Realty Capital, where he served on the Board for both companies over a number of years. We are grateful to Ron Niccol for serving as Chair of our Board through the transition from private to public company, along with his continued support as we execute our plans going forward. Now that we are public, we are expanding our engagement with the financial community.

Speaker 2

I recently had the honor of presenting at the virtual growth series hosted by Maxim Group, where I was able to talk about Newburu's Latest high power blue laser series, while highlighting emerging sector trends and some of our opportunities driven by new technology. Apart from the financial community, we continue to actively engage with a broad range of customers and industry players. These interactions help us stay current on the customer needs and technology trends, along with identifying potential partners for future efforts. In March, we participated in the International Battery Seminar in Orlando, Florida. And in June, Nuveru will participate in 2 key industry events.

Speaker 2

First, the 30th Advanced Laser Application Workshop, which focuses on the e mobility market, will take place in June in Novi, Michigan. 2nd, the Laser World of Photonics exhibition in Munich will be in late June, one of the largest photonics exhibits with over 30,000 attendees, which will enable us to showcase the new BL product line to a global audience. These opportunities will give us another valuable opportunity To interact with industry, thought leaders and potential customers. Before I hand it over to Brian, I really do want to emphasize the excitement that I and our entire management team have for the potential of our cutting edge additive technology portfolio. It is clearly being recognized by market participants and commercial partners.

Speaker 2

We see a tremendous opportunity to accelerate the performance and growth of multiple large markets and we are all heads down focused on delivering on these opportunities. Now I'll ask Brian to provide insight to our financial performance.

Speaker 3

Thanks, Mark. As Mark indicated, This year has started with both significant transition and excitement that Nabooru became a public company, launched our new BL Series laser and completed deliveries under several different agreements. By establishing this foundation now, we are well positioned to build additional momentum towards 2024 and beyond. I will start the financial review by commenting on several income statement items. Revenue for the quarter ended March 31 was Approximately $470,000 This revenue amount represents 4 22% growth on a year over year basis.

Speaker 3

As we are still in the early stages of growing the company, our gross margin remains negative. However, it improved substantially during the quarter coming in at a negative 158% compared to a negative 5 17% for the same period in the prior year or an improvement of 3 59 percentage points. We continue to ship early units and we are confident As we scale the company, our gross profit margins will improve substantially. In the quarter, our operating expenses were $4,600,000 up from $1,800,000 in the year ago period. The significant increase in operating expenses were primarily attributable to $1,200,000 in one time costs associated with the closing of the business combination that occurred in the Q1.

Speaker 3

In addition, our research and development spending increased by approximately $700,000 As we finalized our BL series design and increased our headcount to support our future product offerings. And finally, We incurred approximately $700,000 in ongoing public company costs that we did not have in the prior year. Given the above factors, our Q1 of 2023 operating loss was $5,300,000 This compares to an operating loss $2,300,000 in the Q1 of 2022. In the quarter, we had $500,000 And other income driven by the fair value of our public warrants. Please keep in mind, this is a non cash item, which may continue to be volatile quarter to quarter.

Speaker 3

Net loss in the Q1 of 2023 was $4,800,000 This compares to a net loss of $2,300,000 in the Q1 of 2022 or an increase of 104%. Reflecting certain business and accounting adjustments, Our EBITDA loss was $4,700,000 compared to a loss of $2,200,000 a year ago. Turning to our balance sheet and cash flow. As of March 31, 2023, our cash and cash equivalents were 1 $600,000 the prior year. In the quarter, we had a free cash flow usage of $4,400,000 Reflecting an operating cash flow use of $4,100,000 and a $300,000 in capital expenditures.

Speaker 3

In the prior year, our free cash flow usage was $2,000,000 reflecting operating activities and CapEx of $1,900,000 and $100,000 respectively. Finally, we have received approximately $3,100,000 in net proceeds After paying deal related expenses from the closing of our business combination in late January. As that completes my comments about the Q1 results, I will share our thoughts about our financial expectations for the rest of 2023. Mark discussed our innovative technology and growing commercial activity. As we look forward to 2023 and beyond, we are excited about our plans to continue executing Our commercial agreements, while also progressing on the product development roadmap that Mark outlined.

Speaker 3

Today, we reiterate the full year 2023 guidance we provided in late February, including our expectation To earn total revenue greater than $3,000,000 representing a year over year growth rate in excess of 100% And EBITDA loss in the range of $21,000,000 to $23,000,000 And a free cash flow usage in the range of $24,000,000 to $26,000,000 Reiterating this guidance today reflects our confidence and our ability to raise the appropriate level of capital within the next 6 to 9 months. We are actively engaged in several conversations related to additional sources of funding. These conversations include both current Naburu investors and potential new investors. However, it would be premature for me to talk about specific deal sizes or structures at this time. The leadership team will continue this effort and we will update you at a later date.

Speaker 3

Now, I'd like to turn the call over to the operator for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Questions will be taken in the order received. Your first question comes from the line of Ananda Baruah from Loop Capital. Please go ahead.

Speaker 4

Yes. Hey, guys. Good afternoon. Yes, congrats on coming public and thanks for I guess just to start, is any context you can share with us With regards to the annual guidance here, what we could expect in terms of cadence As you see certain milestones coming up with regards to, I guess, to the top line. And then I just have a quick follow-up.

Speaker 4

Thanks a lot.

Speaker 3

Sure, Nanda. Great to hear from you. Cadence As far as guidance, we'll take a view of that each time that we have quarterly earnings. And so, we'll update as we go forward. As we said, we reiterated guidance at this point that we shared with everyone back in February.

Speaker 3

I think you're thinking about things right that one of our KPIs will be revenue and that's Certainly. How we're looking at, if you will, our scorecard as we move forward in 2023.

Speaker 4

Okay, great. That's helpful. And then just a quick follow-up on a couple of the business highlights that you had in the press release. Yes, with the DoD multiparty award contract, maximum ceiling of 75,000,000 Can you provide us some context on that? And then I guess also Sort of the Air Force, the technical sort of the Air Force contracts as well, context on that, that'd be great.

Speaker 4

Thanks.

Speaker 2

Great. Thank you for the question. So I'll start with the Air Force contacts. We continue to make great progress on the program And we will be giving an update on it in the weeks to come. We're very, very excited by the progress we're making on that program.

Speaker 2

Now with respect to sorry, there's a voice in the background. With respect to the DoD contract, That is a multi company award. And basically, Our participation is that we will receive requests for bids in that program. But at this time, our role in the contract has not yet been fully defined. So we will probably update Everyone, as soon as we know more there.

Speaker 4

Okay. That's helpful. And let me just ask one more quick follow-up after that. The ceiling of $75,000,000 what does that refer to specifically?

Speaker 2

That is the ceiling across All 7 contractors. So it's an open contract, dollars 75,000,000

Speaker 4

Appreciate it. Thanks so much.

Operator

Thank you. There are no further questions at this time. Please proceed.

Speaker 3

Thank you everybody for attending our conference call and we look forward to updating you in the future and speaking to you next quarter.

Speaker 2

Thank you, everyone.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all

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