Nano Dimension Ltd.

Good day, ladies and gentlemen. Welcome to today's conference call to discuss Nano Dimension's second quarter 2020 financial results. My name is Chad, and I am your operator for today's call. On the call with us today are Yoram Stern, President and CEO, and Yael Sandler, CFO. Before we begin, may I remind our listeners that certain information provided on this call may contain forward-looking statements. and the Safe Harbor Statement outlined in today's earnings press release also pertains to this call. If you have not received a copy of the press release, please view it in the investor relations section of the company's website. Yoav will begin the call with a business update followed by a question and answer session at which time Yale will answer questions regarding the second quarter 2020 financial results. I would now like to turn the call over to Nano Dimensions President and CEO, Yoav Stern. Please go ahead.

Thank you very much and good day everybody. Hopefully everybody is in good shape and healthy. Let's get into what I have to say which will try not to follow the just dry news release verbiage and summarize what I wrote last week I think when I invested the Money in the Company, finally, and I also gave quite an elongated quote with describing where we are in business status. So I'll repeat some of it, and mostly after I'll finish, I'll be happy to answer your questions. First and foremost, the top line, as I informed three months ago, I informed all of you, I thought the top line will be zero in Q2, It wasn't exactly zero, but it was close enough. A few hundred thousand dollars as a result of not selling any machines. Which doesn't have to say that we were not in touch with the market. We were very much in touch with the market, including our present customers. But there's nobody home. The Europeans are a little bit faster. and are already starting to work with us. The Chinese are ahead of everybody, but the Americans initially said the big corporations that will be starting to accelerate back in the beginning of July, that didn't happen. So we've changed, and I've changed, the working assumption. And the working assumption by definition is My last one was that in the beginning of July things will start to come back. I was wrong. So early in, or actually late in May and during June, I changed the working assumption. And my present working assumption is businesses not coming back until the end of Q1 2021. Once you say that there's a working assumption, of course, if something changes during this and the next quarter, For the better, we will change the working assumption, but as long as it's there, then you have to adjust your business plan according to this working assumption. And frankly, I don't think it will change for the better. I think the elections in the United States will affect what's happening and not necessarily for the better on the financial markets, at least not fast enough. So... Because of that, we changed on what part of you may have heard initially in the beginning of the year of planning to really accelerate marketing and sales and go-to-market expenses mostly in the United States and in Europe. We are not doing that. If you look at our numbers comparing to what we budgeted, most of our expenses in sales and marketing are lower than expected. We held back starting two months ago already. We were going to be in the end of the year 17 people in the headquarters in the United States. We're going to be no more than 8 to 9, which we have by now there. In Europe, we'll be no more than 4. And in Hong Kong office, we reduce from 6 to 3. And the reason we've done that is because there's no reason to spend the money when your customers are telling you they are not allowed to sign Capital Expenses, unrelated to if they want to buy the machine or not. So we have customers, very, very large corporation, one specifically for Nefari that all of you know, can mention the name, that finished a benchmark with us, which they paid for, in the area of fifth generation antennas, for fifth generation cellular antennas produced by us. They liked the results very much, but they said that they cannot now buy a machine as they planned, because of the freeze and this is a multi-billion dollar corporation and therefore they are doing another project with us which they are paying for for NAMOS and we are proceeding along that line but in turn what we are doing already in the last 45 days and even more accelerated and moving forward is we have decided that we are going to use this LAL call it a LAL in the market of at least three quarters for now maybe more to emerge in four quarters, or even earlier, in three quarters, with a product that is much better and much more competitive. And when I say competitive, it's competitive with alternatives which are not even close to our performance, but the alternative is the traditional PCB industry. We will emerge with a product that will be much closer to manufacturing with material specs that fit, if not defense specs or mill specs, commercial spec and maybe even industrial and we will emerge with a new generation machine halfway through its development in the middle of next year, beginning of next year. All this is described in a news release note of today but the news release from last year in very detailed fashion including the three projects that we defined by name and the Next Generation Machine, which is called NextGen. This is very exciting because it enabled us to, and specifically me, after I spent the first quarter and a half raising the money and building the go-to-market and commercialization plan, to shift into product and technology, which is actually something I like very much, so I'm spending a lot of time with the development people and the product people. And my confidence in the direction they are going today and with the resources that we put, we increased the size of our R&D by 50% from 45 days ago. Most of them PhDs in the areas of chemicals and physics. And not that because the PhDs that are so great, but we needed to have this force in order to accelerate a machine that works into a machine that its performance are much, much better, not to speak about the new machine. So that is happening. We intend to leverage a trend in the market that people see over the last two months, and it's quoted in medias like Bloomberg and like New York Times and many others, and some of it is on our website. where the large electronic manufacturers are now convinced that they cannot afford to continue to be dependent on the Chinese, Taiwanese PCB industry. It's a $65 billion industry that most of it is in the Far East. They are now talking about shortening supply chains, they are talking about moving production, especially prototyping in early runs manufacturing runs, fabrication runs to United States and to Europe. And there's a quote from Los Angeles Times talking about the tariff war which is added to the corona. Everything is leading large, large corporations to move things or at least move enough so there'll be a buffer zone where they can manufacture part of the inventory and have a capability to bridge and many other crises like this one. And when I say this one, I mean both the tariff wars and the corona and similar ones in the future. So this is also a trend that we intend to catch, as they say in surfing, to surf that wave as well, which is already starting to accumulate height. But this is still under the circumstance where people can't even sometimes install our machines which are waiting to be installed because they're not allowed to go to the offices and we need to go to their offices to install the machines. So that's from the other side what's holding things back and enabling us to spend the money, what I believe is the right thing now, which is like an investment that will penetrate through the radar screens Once the budgets will start to be released. We are aiming a lot at universities and academic institutions, which we believe the budgets there are being released earlier. However, we have universities that, it's true, they move faster than corporations to intervene in machines in the last three months. But we have one specific in Europe, for instance, that the government does not allow them to spend the budget that's already approved for them yet. So we have complications like this as well. To summarize where we are and where we proceed, how we're proceeding is the M&A work that I'm doing over the last, it's mid-June, so it's about two months. I probably contacted and researched 60, 55 companies in this industry personally with the help of Needham and company. I probably spoke with half of them, including PCB manufacturers, PCB prototyping, and a lot of printed electronics companies that are having technologies that are either complementary to ours, or competing on the ink side but not close enough. But they still yet have certain advantages, and some other printing technologies that I've seen I know what's happening in this industry, so everything I'm describing to you, which are industry trends and market trends, are not only from what I see in Nano, but what I speak with 20, 30 other companies. I'm also very careful, saying it very carefully, looking at some of what we researched and due diligence as a potential Moving Forward Results in our acquisition phase. Some of them I decided that we don't need to acquire, we can just buy and OAN the products and technologies. Some of them I'm discussing the more exciting opportunity of merger. I can't, obviously in M&A you can't say what will happen and what will not, but I can tell you clearly that the work on that area, enforced what I believed when I came in and when I invested just last week. And this company is ahead of the curve by at least two years. And I think the opportunities that were given now to get ourselves even more ahead and catch this tsunami when it's coming out of the around the corner beginning of next year, we're in a better position and our competition are not as advanced as I thought. And most of it is old, what I'll call old industry. The competition is the old industry, not the high-tech new industry. I think at this point I will stop and we'll let anybody that has questions Please ask, and of course, the ad is here if you have questions regarding the financial results. Any detail, we'll be happy to answer.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. And the first question will come from Morris Jeffries, a private investor. Please go ahead.