Sandvik AB, CNC Software Inc M&A Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : A few questions from my side. First, I would like to understand or basically take a step back and understand how the distribution works. So who is your -- who is the customer of CNC Software? Is it the machine operator? Is it a machine part at a large company? Or is it the CNC machine manufacturers? Or do you have license agreement? So my first area of question would be, how does -- what's the sales channel? How does -- how do you make money with these systems? Stefan Widing - Sandvik AB (publ) - President, CEO, Director and President of Sandvik Manufacturing & Machining Solutions Thank you. And I'll let Mathias jump in here to answer.

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Okay. So the software would work on any machine -- it's machine independent, CNC machine independent. Is that correct? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 27, 2021 / 11:00AM, SAND.ST - Sandvik AB, CNC Software Inc M&A Call Stefan Widing - Sandvik AB (publ) - President, CEO, Director and President of Sandvik Manufacturing & Machining Solutions Yes. What you do is you take a -- create a 3D drawing and then you take that 3D drawing into the CAM system and the CAM system would generate code, G code, that then will tell any machine how to operate or how to machine the part. So that's a simple way of describing what they do. And just to add that what some customers then do, but still far, far from everyone would be take, for example, CGTech VERICUT and then run it through another step where the code is being optimized for a specific machine. But that's still...

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : So given that -- and that -- so perfectly switch to my next question, given that the machine makers want to be independent of the software and want to have open source as possible, open access as possible. Why would it make sense to buy a CAD software company, a CAM software company, simulation software company, verification software. And if you can't package this into 1 big product because the customers don't want it, they want to pick and choose. Why do you think it's a good idea? I mean I'm a bit devil's advocate here, but I kind of see why it makes sense to buy software businesses. But I don't quite understand this, how you can scale up on this, right? Because if I run a big DMG MORI machine, and I have 5 different brands to make my CAM software and 5 different brands to run my CAD software and 5 brands for simulation, why would I all choose it from one provider? What -- because it's all open source, right? So it's platform independent. So what's my benefit as a user to have everything coming from Sandvik? I don't quite understand that yet. Stefan Widing - Sandvik AB (publ) - President, CEO, Director and President of Sandvik Manufacturing & Machining Solutions Yes. So I can answer that. First of all, we also have, and it was in the presentation here, a strategy that this will be agnostic. You have to do it like that. Ultimately, the customers choose. And we cannot and will not force anyone into some kind of closed ecosystem. So our cutting tool brands, they will work with machine tool builders, CAM software providers as an example, and they will continue to do that. CAM vendors do the same in all dimensions, so to say. EasyTech works with various CAM providers and machine tool builders and cutting tool providers, et cetera. So everyone does that. We will continue to do it as well. That does not mean that if you can offer a full suite, you can make your components when they work together more seamlessly integrated, provide more value in terms of even more optimization, less waste, et cetera. There are many dimensions to this, select the right tool and so on. And of course, if we can do that in a good way, the end customer -- a specific end customer will definitely have an incentive to select maybe 1, 2, 3 or all of these parts of the value chain from Sandvik. But we will not force anyone to do it. It will be up to us to provide enough value in this value chain. That's the strategy. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 27, 2021 / 11:00AM, SAND.ST - Sandvik AB, CNC Software Inc M&A Call

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Yes. Final brief question. Do you plan to kind of introduce the Sandvik brand for Mastercam and Cambrio and CGTech to tell the customer, "Listen, this comes from the same mother company, and it's more seamless to use these 3 technology or 3 software platforms." Do you plan to introduce this Sandvik brand for those or not? Stefan Widing - Sandvik AB (publ) - President, CEO, Director and President of Sandvik Manufacturing & Machining Solutions We will have to come back on the branding strategy here. But I would say, eventually, in some way, we will have some kind of, of course, soft endorsement. But when and how, we will come back on that.