Nano Dimension Ltd.

Ladies and gentlemen, thank you for standing by. All participants are present in listen-only mode. Welcome to today's conference call to discuss Nano Dimensions' first quarter 2021 financial results. On the call with us today are Yoav Stern, 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 this press release, please view it in the investor 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 Yael will answer questions regarding the first quarter 2021 financial results. As a reminder, this conference is being recorded May 20th, 2021. I would now like to hand over the call to Mr. Yoav Stern. Mr. Stern, would you like to begin?

Yes, thank you very much, Operator. Much appreciated. Hi, everybody. Welcome to Q1 results conference call. I will start by explaining to you the news release. Pretty much it is worded, and if you have read it, you'll know what I'm talking about, and I'll try to help dig a little bit deeper in the details. And, of course, later, We'll have questions and you can ask anything regarding what I said, what is written, and regarding the results, financial results between me and you. We'll try to help you. So first of all, while the investor relations people that work with us advise me that the description of the business is too complicated, I believe that all our shareholders are intelligent and can understand it. And this is how we work. We work on three different axes nowadays and the axes are orthogonal to each other. Think about it as standing in a football field and one axis is going to your front all the way forward, one axis is going to your right all the way to your right and one axis goes from where you are upside, upstairs, above. So you need to proceed on three axes and each one of them is orthogonal to each other which means there's no influence between one to the other which means there's no leverage. So we are really active on all three of them moving forward so there's enough movement and enough achievement on all one of these three axes. And then eventually they start to merge with each other. Once those three axes start to merge with each other, we start to have influence from one axis on the other, and that's when the leverage is coming and then when the accelerated growth is coming. So as the axes over time are merging into one business direction, which is coherent and harmonious, then suddenly you're seeing why in each axis that we are today, we have to push forward so there'll be enough critical mass and enough advancement. We are very well financed, so we will have enough fuel to go on those and we are going to start to show results as the axis merge, we believe, in the next few quarters. So first axis is the efforts and the sales efforts on our traditional business. The Dragonfly LDM, which is an early bird machines, introduced to the market and moved forward by upgrades. Obviously, we're affected by all what happened in the world over the last year, but we are pushing forward on the sales, and as part of that, we are building our sales and marketing in the different three locations that we have, and we just achieved one sale of one machine a few days ago. We announced it, but it's not necessarily so important as much as the importance of the market starting to slowly wake up, and we're starting to see customers in three geographies that are actually discussing buying more machines with us. Those are the traditional machines that we are – selling since the last 12 months, obviously during the pandemic we sold less and now we're looking at accelerated growth in that area. Those machines are going to be upgraded and that's when we are moving into a second axis. The second axis is where the axis of the R&D and the product development. On that one We are investing a lot, much more than just developing the existing machines into the next generation, the next release. We are by now quadrupled our R&D and product development teams over the last two quarters in order to develop in parallel three generations of machines. One generation is the generation of the Dragonfly, which are proof of concept and machines for prototyping. And those are going to be followed up by a new Dragonfly called Dragonfly 4, which will be in better sight within the next quarter. And over the early summer, we expect it to be in the hands of our customers. It's exciting. Summer for customers depends on the agreements that will be upgraded As part of the existing agreement, some of our customers will buy the Avgator Dragonfly 4, and the difference between that machine and the older machines is in the performance, which I'm not going to get into details, but it is a substantial difference. But more importantly on the second axis is we're developing two new generations of machines, which are coming in the next year and a half and two and a half years. And those machines are going to be the machines that will move us into production, machines for fabrication of PCBs and hybrids. The investment in those machines is material. A lot of the investment is in the development of inks and different materials for building the 3D printed parts. And we expect to... do not only the R&D internally, but we are buying companies that will merge into R&D efforts because they already have technologies that fit the two new generations of machines that will be coming in the next two rounds. The third axis, naturally, is the axis of the M&A efforts. Only recently, in April, which is actually after the first quarter, we announced two acquisitions. very successful ones. I'm not going to get into details unless people will ask me about those acquisitions because we had a conference call about those before. But the two acquisitions were early birds of many other acquisitions that we expect to come to fruition in the next while. We have explained to you in the past the three types of acquisitions we're looking at, type A, B, and C acquisitions. All three of them are in action now. We are negotiating both in Europe and in the States with probably, I can say carefully, four or five companies in parallel. And as I explained in the write-up that we sent you, the news release, we are not going to do any acquisition unless we can visit the companies and tour the facilities, which is something that... is only now starting to be enabled to open Europe just a week ago, if I remember right, for visitors. We managed to visit Europe before, about three, four weeks ago, because we got a special permission from the Swiss and the German government. But in practical terms, acquisitions are only being held by us until we are able to visit the companies and see the sites and make sure that we are neither overpaying nor going to be encountered with issues later because of not being able to visit. Moreover, part of the companies we're acquiring, which are PCB manufacturers, we have the need to clear up issues of environmental cleanups and make sure there's no contamination of ground. Obviously, that needs visitation. All this is in action as we speak. Things are actually opening up and moving forward, so I'm very excited about it and very excited to tell you about it. So, from the three axes that I described now, one may ask me, okay, Yoav, so are you totally happy with the advancement on all fronts, on all the three axes. Are we getting close to when those axes will be merging with each other and we leverage and we see the results? So my answer is no, I'm not happy on all the three axes. I'm sorry. I'm a little bit unhappy about our development on the revenue, marketing itself, build up on the existing revenue access because I think while we push forward during the end of the Corona to build up our marketing and sales organization, we are not fast enough. I think we should have been faster even though it was against an instinct because there was no customers at home. Now that customers are starting to come back to the offices, We're accelerating our sales and marketing efforts, which if it was up to me, I would have been happier a quarter and a half ago. We would have built up, but we didn't have two, three quarters ago the amount of money that we have today, and we know we can spend it. So now we're spending it in an efficient manner, but without holding back because we want to be with sales and marketing organization all year. set and ready and effective within the next quarter. We hired a new president to the company only two months ago, a bit less even, and he took over all the sales and marketing and other commercial activities of the company worldwide. He's an executive that comes with 30 years experience in North America and Europe in running the companies with, uh, commercial and activities and distribution channels across the world. And, uh, since he's joined, uh, we already seeing things moving forward. I am, uh, more, uh, excited or more content, I would say about our advancement on the second axis, which is the R and D we have, uh, changed the R&D dramatically. Remember, we could only start to do that in the third quarter of last year when we started to realize that we actually have the money, the fuel to do it. So we started and we changed since then the total management of the R&D, middle management and top management. We have allocated my time senior executive under me Mr. Tiki Pele to be dedicated full-time to the technology side of the business. We've hired senior people from companies like Orvotech and Variant and others, and we have a full stack of R&D personnel and researchers that I feel are well-positioned to take us forward with the three generations that we are developing, the existing one and the two new ones. Actually, on the third axis, I'm happier and more content than the other two, which is the M&A efforts, because while the results of M&A are coming in a binary manner, which means it ain't happening and it ain't happening until overnight you announce two acquisitions, So it's difficult for you to follow up how gradually, quarter by quarter, we see results from M&A. What I know is from what we're doing is that there's enough activity in the right direction. And once an M&A effort is manifested, as I said, binary, suddenly you announce it and you will hear about it. It's coming and it's coming based on the variables and the limitations that I described to you before. but now things are opening up, so I'm very content with what's happening there. All in all, I always try to speak in front of you now no more than 15 minutes, so I'll give you time for questions, but I'll summarize by saying the following. It's a very, very unique company, Nano Dimension. It is well-financed. We will perform what we're describing, but you will not, if you expect to see a quarterly change, this is not where we are. We are looking in the long term, and there will be quarterly changes, but those are not important. What's important is you look at it more like, I mentioned to many of you, like a biotech company model. The investment is there. We don't need to raise more money. We don't need to have more dilution. We have enough money to go through all the stages and to hit the inflection point where we're actually going to affect the industry of electronic fabrication by changing it and building the digital network of Industry 4.0, a neural network of machines of three kinds only by us. And from the acquisitions we are now planning, there will be more machines of different kinds serving the same market, being part of the same neural network, managed by artificial intelligence and deep learning with machine learning brains sitting both on the machines and on the cloud. And we're going to see, based on that, valuation of us, of the value of what we're doing, multiplying by order of magnitude. The changes are going to happen on a quarter-by-quarter basis, but you're not necessarily going to be... If you're going to be impatient as much as the revenue, the revenue will grow as well. A lot of it will come from acquisition. A lot of it will come from internally. But what I would be looking at is how the value of the company is growing over those quarters and over those next one to two years. And that is where we are aiming as managers. And as managers, I think I mentioned in the last call, All of us are shareholders in the company and all of us and all of our upsides is connected to the value we're creating. So we are long-term players and marathon runners and we expect and we see the signs today where the three axes are going to merge and leverage each activity that we're doing. R&D, product development, marketing and sales, and M&A merging together and leveraging. The industry is bound to change dramatically. I know that some of you follow what's happening in the semiconductors industry. Worst things are going to happen as much as shortage in pricing on the PCB and general electronic device industry. And we are positioned to solve those problems as we move forward and to transform an industry from a total analog, inefficient, in a way dependent on the Far East, into an analog industry that is on-demand, digital, as other industries operate today. Industries that went through similar transformation. I'll give you an example. The traditional printing industry. Before it was digital, it was analog. And over the years came the death of publishing. And since then, we are now in an industry where inventory is digital. You don't print unless you need. And if you need to send, you send a PDF file. The industry of printing turned into a digital industry. That's exactly what we are envisioning in the fabrication, printing, printed circuit boards industry. and electronic device industry, converting it into digital industry, and it's a revolution. So I'll stop here. It's 20 minutes. And operator, I will be happy to hear questions if there are.

Thank you. Sir, ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you're using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Jeff Rice of Small Cap Limited. Please go ahead.