Nano Dimension Ltd.

Good day, ladies and gentlemen. Welcome to today's conference to discuss Nano Dimension's fourth quarter and full year 2020 conference call. My name is Nick, and I'm your operator for today's event. On the call with us today are Yav Stern, Chairman and CEO, Yael Sandler, CFO, and Julian Letterman, Head of Corporate Development. Before we begin, a reminder to 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 on the investor relations section of the company's website. I will begin the call with a business update, followed by a question and answer session, at which time Yalva will answer questions. I would like to turn the call over to Nano Dimensions CEO and CEO Chairman Yalva Stern. Yalva, please go ahead.

Thank you very much, Nick. Hi, everybody. Hopefully, some of you have seen me lately. I wish I could see you today, but I'm trying to visualize you. I will go to the business description. You have a presentation in front of you. So I will try not to read the presentation, just to scan through it. and if you have questions regarding the business, please write them down and we'll be happy to answer later. So we had an excellent year, excellent fourth quarter, the best fourth quarter we ever, actually the best quarter we ever had, $12.1 million and the best year. It's not so great, it's not so difficult to have the best year at 44, give or take $44 million because the year The years before were hundreds of percent less. Now it's really the challenge going forward and continue to grow in very high rates, which we intend to. So still, it's good to tell and to let the employees and shareholders know that it was a good year and we had notable advancements with customers and relationship. We sold to very, very serious players all our products, including Edith Manufacturing Electronics, People and Organizations like NASA, Western Defense Forces, all kinds of institutions, research institutions, etc. We have a partnership with Henselt, which is a German-owned or German-partly owned public defense company. Personal relationship between the CEOs and their management team. and Partnership James is growing and doing very well, 50-50 partnership. And we got into engagement with the government of Bavaria, which is considering putting a grant in our operation in Germany, so it's very exciting. On the technology and the business side, we did the acquisition of two acquisitions this year, one in the beginning, one in mid-year, and we launched a product in ceramics and metal printers which are manufactured in Europe, in the Netherlands and we are now in the process of merging actually those technologies. Very, very exciting. We're merging the technologies that we acquired with the technologies of Fabrica which we have and we're going to have new products and technologies which are merged. Not so simple, not so obvious but justifies the acquisitions because it creates growth engines. We have patents in the AI and the cloud manufacturing etc. Everything else is on the list and actually one of the most important that people may overlook is the last point. Progress and standardization of protocols with IPC. IPC is the organization that does protocols for electronic engineering and we work with them it's kind of together with other companies but we are leading and the fact that they will set special Thank you very much. integrate the product that our machines are making into their own products because they're going to be IPC approved. Extremely, extremely important. And people understand what does it mean. If you compare it to the business of medical, it's like FDA approval. A little bit of the numbers. You have now the numbers highlighted in front of you. Let me focus on the year. Yearly numbers, because again, the first quarter was very, very good. But let's look at the full year and focus on the fact that this shows the quarter. We have improvements of gross margins and we have the negative EBITDA, which is mostly affected by the R&D expenses. So if you move for the next one, which shows Actually, where is the full year? Full year on the right side. Sorry, in the bottom part of the slide, you will see that the gross margin are up from last year, which is a manifestation of the fact that mostly our products that are higher margin are being sold more, so it's product mix. And we didn't even start improving the gross margins of the product by reducing the cost of manufacturing. That's going to be the next step because we're still in the stage of products penetrating into the market. So most important for us is to put products at customers' hands even if we reduce the price a little bit or even if we didn't finish maximizing the value engineering at the cost of goods sold. But that's the next step. So I expect in the longer term Gross margins to grow because new product with our advanced technology, when it goes out to the market, has to have 65% gross margin. And the 46 you see here is a combination of we have 65, we'll have more, and we have products that are more mature and are lower than 65, and the average ends up being 46. Another thing to pay attention again on the full year on the bottom is the fact that The negative EBITDA of $88 million, out of that $55 million is an investment in R&D. And as I said to people who were listening to me two years ago, a year and a half ago, a year ago, half a year ago, and now, the investment in R&D is, of course, recorded as expenses because we don't capitalize those. But this is the value we build other than through acquisition. Most of the investment in R&D is in the, I should say all of the investment is in between the additive manufacturing and the additive manufacturing electronics. And we are actually seeing the investments starting to slow down because we are getting closer to the performance we need. And I expect the investments in R&D to slow down in the next year or two, unrelated to acquisitions. Once we do an acquisition, then of course, investing in R&D there is ready to do the acquisition specifically. So the next slide, again, shows you what I just described in graphic form, so I don't want to get into details, but you see between the year 21 and 22, the very large growth, and you see it in a very nice way. Thank you, Yael and Julian. The next slide is an interesting slide that I've been asked a lot about people including people who I wouldn't mention their names but they're not call it shareholders that have real interest in the company growth that wrote lies and false information all over the place that claimed that we don't have organic growth so we decided to show you the organic growth which is combined 24% from the acquisitions that are mentioned here and it's broken down here between three acquisitions and you see Each acquisition has a different growth rate after we acquire them comparing to the year before, which means this is called organic growth. Not to speak about the organic growth of our own products before the acquisitions, which is also substantial. And by the way, we are now close to the first quarter of 2023. and I can tell you that in the first quarter, this organic growth is continuing strongly. Next slide speaks about the improving operational efficiencies. Not good enough to my taste. Yael is sitting here, I'm looking at her eyes and I want, you know, when the operational expenses are high, it's easy to reduce High percentages. But the next stage will be to reducing those percentages even more toward profitability. And that comes in two ways. One, increasing revenue without increasing operational expenses because we build an infrastructure, guys. We have a run rate of 50, last year, $44 million. This year, projected to grow dramatically. So in a run rate of above $50 million, with operating expenses that I believe will fit the next acquisition. So we'll have a huge saving in operating expenses once we do the next acquisition. Next slide relates to a subject that, again, some of the small shareholders that are eyeing the cash and don't care about all your shareholders that are looking for an upside. take it as a negative. We see it as a positive. The positive things is here, the positive item here is that we have theoretically, of course, 12 and a half years on the run rate, cash run rate we have today. Of course, we're not going to continue the cash run rate negative for the next 12 and a half years. We're going to be profitable very soon, at least by cash flow. I can tell you that the Our cash flow improvement from 2022 to 2023 is going to be huge. We're going to be much less in cash burnout. And again, the profitability will follow. It depends on the acquisitions as well. And if you compare ourselves to three other companies, it was based on their last year results. I know Mark Forge, Desktop Metal, and Velo very, very well. They don't have 2.3 years Mark Forge and Desktop Metal don't have one year and Velo maybe have half a year but those guys have less than a year to survive unless they go raise money and their share price is lower than us both in numbers and is also lower than us in so much as losing value of the last year and a half so the strength of our business is we don't need to raise money and they I don't know what they'll do but you obviously can guess behind the scene. If I tell you I know them, what is happening? Next slide will speak about our intention to become a market leader. We are the best positioned company to become the market leader. This market is $16 billion going according to industry reports to 105 billion in five, six years. So forget five, six years. Let's say 16 billion today, let's say it's going to 20 billion in a year or two. And there's no 800 pounds gorilla. There's no large company. The largest companies are two, which is Stratasys and 3D, and they're not too large for a market at 16 billion. They're only half a million, 600 million each, give or take. and they're not doing the right things in order to consolidate the market plus they're not capitalized properly. We do and we are and we intend to do it based on synergies and based on technologies and based on running a business that is focused on the bottom line, not on the top line. We're not looking to be a $1.5 billion business that's losing $200 million a year. We prefer to be half a billion dollars business that's making $100 million a year. And that's our aim. Our aim is EBITDA, or eventually profit per share. And we're going to do it both by growing organically, as you saw, and by acquisition. And Stratasys, in so much as saying no to the first proposal, and now the second proposal since yesterday or so is out, they better hurry. because we have three others that we're looking at and talking at different stages. And we are not committed to buy services at any price, but we will, at the price we're offering, we're going to go all the way to get them. And if eventually the shareholders will say no, of course, shareholders are shareholders, Well, probably in parallel, you will hear other news about the physicians. So that was my presentation or kind of point I wanted to speak about. I took my 10, 15 minutes of your time, and I'll be happy to answer your questions. Thank you.

Thank you. We'll now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. For using a speakerphone, please pick up your handset before pressing the keys. To throw your question, please press star then 2. This time, we'll pause momentarily to assemble the roster. Thank you. First question comes from Anne Margaret Grove, Edison Group. Please go ahead.