Nano Dimension Ltd.

Ladies and gentlemen, thank you for standing by. All participants are at present in listen-only mode. Welcome to today's conference call to discuss Nano Dimensions' second quarter 2021 financial results. On the call with us today are Yoav Stern, CEO and Chairman, 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 Yoav will answer questions regarding the second quarter 2021 financial results. As a reminder, this conference is being recorded August 18th, 2021. I would now like to hand over the call to Mr. Yoav Stern. Mr. Stern, would you like to begin?

Sure, thanks Michal. Hi everybody, welcome to the call, and good morning, I assume, North America, good afternoon in Israel and Europe, and good evening in the West, in the East, where we have shareholders all over. So I will not refer to the numbers, other than mentioning it. I will basically go along the message to the shareholder, which I wrote, which is long, But I recommend to everybody, other than if they're going to listen today, which will be great, to read it very carefully. I incorporated there a lot of information and read, which is all, by the way, subject, of course, to all the regulations of what can be published and what not. So read the lines and read between the lines. There's a lot of information there, and it's very, very important. I will try to summarize it, but I don't want to take too much of your time. The market is opening soon, and it's morning. And I want to let you ask questions, so I will refer to things that are of interest for you. So I will go along this letter or message to shareholders. Start with mentioning numbers can go around without it. Yes, our revenue did grow 68% comparing to the first half of last year, and our gross margins went up 40% compared to the same period in 2020. But this is not necessarily a comprehensive indication. A, because 2020 was a very weird year with the corona and the numbers there were low. And even if it wasn't, 68% growth in revenue and 40% for numbers that are small are not impressive enough, at least not for me. I'm not impressed. I'm looking for exponential growth, which I see happening. So this quarter was good or this half was good. Better do it this way than go the other direction. Better go up 70% and 40% rather than down or flat. Not the focus. The focus is what are we doing beyond or under the numbers that you, our loyal shoulders, should know, understand, hopefully, and support. Because what we are busy doing right now is spending a lot of money, not on ourselves, which means none of the management here, as I told you last few times I spoke, got any bonuses for raising that money or for performing along those goals we have set in the last year and a half. But we did have and we do have $1.4 billion. which we are now spending and trying to accelerate it because our success in moving forward fast and creating value is based on how smart we're spending and we will be spending that money. And that's what one should be seeing in the numbers. Of course, the numbers of spending the dollars is only an indication. It depends how you're spending and what you're spending it on. And I can tell you that most of what we're spending it on is in two directions. One, and first of all, is an R&D and product development. We increased our manpower by 100% in the last six to eight months from 70 people to 130 people. And the second thing we spent is in go-to-market, which we are building toward the phasing out of the corona, which is not phasing out. But notwithstanding that, we are investing now very heavily, which I wanted to do, frankly, at the end of last year, but my organization here was basically holding back, feeling that the corona time will just make this spending a waste. So by now, we believe that spending on go-to-market, besides spending on the R&D, is exactly what we need to do to create the value, and it's very exciting to see it's happening. We also doubled our sales and marketing organization beside the R&D. The company, now that I mention it, it's a unique business. It's a startup with outstanding and unprecedented disruptive status. And it comes out from three factors which I described in the news release. And it's important to understand those three factors. Each one of them stands by itself, but in three of them combined together, they have an exponential ability to inflate value over time. So the first is, of course, our technologies, which are by now a combination of the robotic brain with self-learning, self-correcting, enabling higher yield printing for 3D printers, both in electronics and otherwise. And we are in the process already of implementing it in our new acquisitions of Nanofabrica, which will also have the robotic brain soon. So we will be probably within the first few, if not less than few companies that in the industry of additive manufacturing, which is estimated at $30 billion industry size and growing, that will have machines that are totally intelligent with deep learning, machine learning. When you ask yourself, what is this technology going to do, either and both for the electronic industry, which is more complicated, and for other industries, which are a bit less complicated, take into consideration the metaphor of the PDF files, which I'm sure all of you are very familiar. The PDF files, compared to the printing houses, small printing shops of 20, 30 years ago, which were printing brochures, which were printing documents, which was printing your contracts and sending it to your lawyers through FedEx. Everything disappears. Everything disappeared. I'm sorry. This PDF file. The PDF file is the design file of an electronic component or it's the design file of a non-electronic three-dimensional other component or part. It is now flying all over the world through the cloud, off the cloud, in the cloud, You don't move things around. You just print them when you need them, where you need them. Who would have thought about that 20, 30 years ago? Some of you 20, 30 years ago were in kindergarten, but the people who were in business like us, it didn't exist. I'm not speaking only about inventory on the cloud, but the ability to convert inventory so fast from the digital format into the analog format, which is the paper, the books, the newspapers, whatever it is. This is what our combination of material technology and process technology in electronics and printing technologies in additive manufacturing in general, both together controlled by a robotic brain, which we acquired through the acquisition of DeepCube, is going to deliver to the industries that are incorporated in what I described to you earlier. A revolution like this did happen. And as I mentioned, the printing industry, it took this revolution, which started in 1970s in Israel with a company called Citex. It's one of the first companies to do digital printing. And it took 30 years. So by now, it's 2020, it's 40 years after the 70s, 80s. and digital printing is all over the world and this is where we are today with our technologies. I don't think it's going to take 30 years to turn on the industry. We are already much ahead of that. The world learned from the printing industry and I think we are within years of this revolution occurring. Very exciting. That's point number one. We are there ahead of probably everybody else I've seen in a material way because of the robotic brain and because of the process and printing technology. Now, the second point, point B, in the three factors that makes us unique while being a startup, really, is we have 1.4 billion dollars of financial reserves. You see and you hear a lot especially in the last year and a half where the market is so high and money is chasing deals, about unicorns in the private market when people announced that they just raised money for private companies at the valuation of $2 or $3 billion. That is not us. Those people raised $100 or $200 or $300 million at a very high valuation. That's not what we've done over the last year with your help. We raised $1.4 billion. We didn't raise 100 or 200. We're in a position today that we have enough fuel to fly all the way to the target, be it two or four years or even more. We have the ability to do it without raising more money, without needing to dilute shareholders anymore, and with the ability to spend as much as we need without focusing necessarily on quarterly results and advancement. Actually, the way to measure one indication of our success is if we're able to spend more in the areas of R&D and go to market. And believe me, it's not easy because bringing the people in, and we insist on bringing in mostly stars, PhDs, scientists, et cetera, the ability to grow from 70 scientists to 130 is not simple, notwithstanding the money. Obviously, we're not paying millions of dollars to people to join us. We have to be in control or under control, but we need to get them, and there's competition on manpower, and especially the manpower and the sophistication areas of the deep learning, machine learning, as well as the process and materials. So this is our success for now. And of course, behind it, numbers hide the achievements we have in our R&D in a product as it develops. And we are very close to releasing, very close to releasing the next product in our Dragonfly line. By the way, we are late by about two months, but it's not material. And it will be much better performance than Dragonfly LDM. And we're very excited about it. And that's an indication, of course, that what we spend and what we're doing is right. And that's, again, just one step, still only one step for Nano, huge step for the industry, just to use Neil Armstrong's statement. And I'm using it with all the respect. The last point, point C, is actually a point I mentioned three or four times already. It's the people we have, the ability to grow them in numbers, but without compromising the quality. And it goes forward to them, I'm convinced, being able to perform a mission, vision and mission, which is to transform the electronic and the adjacent 3D printing industries into environmentally friendly, economically efficient, additive manufacturing industry. environmentally friendly for people who don't understand what it is and I have one person at least that wrote me that she doesn't understand what is it environmentally friendly it means that we are replacing industries that are full with chemicals with environmental pollution with ground pollution not to speak about of course carbon signatures with a digital industry that is very clean the chemicals are totally contained inside boxes, or call it like the HP cartridges, and an ability to build a factory like what we produce in the West, where we're very, very sensitive to the environment, is much more attractive, and part of our mission is exactly that, We intend to enable this by building the eco-friendly intelligent distributed network of AM machines. We will enable to have another question that this lady asked, what is material on the cloud? Well, digital inventory on the cloud means if you have a PDF file, this is your product. It's on the cloud. Yes, the PDF is on the cloud. Your product and your material is on the cloud. You print it when you need it. It's exactly what we're trying to do with other products, not paper, but rather electronics and other products. So this is the kind of summarizing our position and our uniqueness. And please repeat myself, read between the lines as you read the news list. In summary, The three business development axes, which I described in the last news release three months ago, are synergetic M&A, accelerated R&D, and revolution in the go-to-market. So I already spoke with R&D and go-to-market. On the M&A side, M&A is a binary activity. I shouldn't say binary activity. M&A is an ongoing daily activity. It's binary results. And we have a lot of M&A in progress for obvious reasons of SEC regulations as much as disclosure. We cannot disclose it until it happens, and then it becomes binary. Before it's zero, after it happens, it's one. And as you may remember, we had two acquisitions in April this quarter. No, we did not make this acquisition starting the 1st of April. We worked on this acquisition half a year before, but we couldn't talk about it. So all these factors that I've mentioned, ABC factors, did not exist eight months ago. You are shareholders of a company that, based on investment bankers that some of them are on our board, did their research and they didn't see a parallel to something that happened in the foreseeable past, which means an exciting technology with a promise, yet in an early stage company, that is so well equipped to fulfill a very ambitious vision because it has your support as shareholders, which we are thanking for it very much. I've used this metaphor many times before. It's like a biotech investment. There it's much more acceptable when companies are working for years with hundreds of millions of dollars of investments before they show financial results. This is there very understandable. This is where we are. And when people mistakenly thought that when I said compared to biotech, our downside is protected to understand that the downside, the protection of the downside is in the price of the share, that's not the case. Biotech downside is not protected because if the FDA does not improve the third grade or the third testing or the third level of testing, then investment of $1.5 billion goes down in a drain. We are not subject to any approval of regulatory authorities. There's a reason. The downside is protected because if we don't reach our goals on time, if we are delayed, we can always sell what we developed to this point and get a certain return. Obviously, not as high return as we are planning of three, four times your investment, if not more. The downside, and so much as compared to biotech, where the downside is zero, there's no downside of zero here. There's a business to be sold. And it will grow through inflection points, which I've mentioned before. Business disruptive inflection points are binary phenomena. Before it happens, you expect, you expect, and you feel that nothing has happened. And then once it's happened, it's overnight and it's there. And to summarize and to close, Maybe I'll mention the elephant in the room because it is connected to this last subject. The elephant in the room is the price of the share. Yes, the share went down and the share went up half a year ago to eight months ago in the same speed as it went down. We have very, very loyal shareholders, which I respect a lot, a lot of institutions and dozens of thousands of retail shareholders. And if you pay attention on the volume of the share as the share went up, the volumes were four to ten times the volume of the share traded when the stock went down. What it means is that certain people that are impatient, not impatient as a negative connotation, impatient means short-term investors, traders, and as they sell, the share goes down. And if there's not enough people to buy, then the share goes down on small volumes. That is what happens. Notice the volumes of the last few months. Very low volumes, which means very few people affect the price of the share. Most of the people are holding the shares, and I have 60 institutions that I know of that are holding their shares and very, very loyal, and many, many others. So take this in consideration. Yes, there are short sellers, people... tell me that they're upset with the short sellers. I'm not upset with the short sellers. Short sellers are players in the market like everybody else. I respect them. They gamble or they do things based on looking at the market and the share as a commodity, which is on a supply and demand curve. The more demand it goes up, the more supply it goes down, and the short sellers create a driver for supply. So the share goes down. The connection between the share price and the performance of the company in the case of nanodimension, which I've described laboriously until now in this meeting, the last 20 minutes, is negligible. The share price is a reflection of supply and demand, not of the status or the state of how advanced we are and what we're doing. And on the long term, investors, all the short-term investors that are trying to be long-term, let me warn you on one thing. Everybody that's been investing in the public market knows, it's written in all the textbooks. Be very careful from trying to time the market. Don't try to time nanodimensions business development. It will be very surprising. It will go to inflection points. It's not... a grown, mature business with $500 million of revenue on a quarterly basis with two cents up or two cents down in earnings per share. So there will be an inflection point when we will announce achievements that will cause things to jump up, and you will be late to come into the share. So my recommendation is don't try to time it. Make a decision. If you're long-term investors, hold on. Buy, be in, and when the inflection point will arrive, you will be riding up with us. The people who are trying to get out now and to get in when the inflection point happens, go back to the textbook. You cannot time the market and you cannot time a binary event, either it's M&A or great achievements in R&D or both or combination of both, which is probably going to be the case in any case. as the end result. So I'll stop right here. I spoke for 25 minutes, and I would like to let you have the opportunity to direct me into items that are of interest. Please.

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 are 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 Bonit Makhoui. Please go ahead.