Miri Segal - MS-IR Amit Dror - Chief Executive Officer Yael Sandler - Chief Financial Officer.

Eric Martinuzzi - Lake Street Michael Brcic - National Securities Jed Dorsheimer - Canaccord Genuity. William Morrison - National Securities David Baker - Mach 100 L.P.

Good day. And welcome to the Nano Dimension Third Quarter 2018 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference call over to Miri Segal of MS-IR. Ms. Segal, the floor is yours ma’am. .

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss Nano Dimension’s third quarter 2018 financial results. On the call with us today are Amit Dror, 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 statements 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. Amit will begin the call, with a business update, followed by Yael, who will provide an overview of the financials. We will then open the call for the question-and-answer session.

I would now like to turn the call over to Nano Dimension’s CEO Amit Dror. Amit, Please go ahead..

Thank you, Miri, and thank you all for joining us this morning. We are very pleased with the sequential revenue growth which we recorded in the third quarter, as well as the healthy increase in our customer install base.

In the third quarter of 2018, we generated a record $1,672,000 in revenue, which represents sequential growth of 54%, when compared with the previous quarter.

We are gratified that our global sales strategy and channel expansion plan is bearing fruits and we are pleased to report sales of ten DragonFly Pro systems in the third quarter of 2018, representing sequential unit growth of 43%.

We were pleased with the successful expansion of our sales channel, as our additive manufacturing solutions are gaining positive traction with top-tier professional resellers throughout the world. This is reflected by our increased engagements of resellers.

Our growing pipeline of sales opportunities and the clarity we are gaining regarding our ability to increase revenue in the coming periods. Accordingly, we expect to continue sequential revenue growth consistent with our current trajectory during the fourth quarter of 2018 and beyond.

In the United States, our certified vendor status for commercial and government entities issued by the Department of Defense Logistics Agency has allowed us to rapidly increase sales to several agencies and departments within the Defense sector.

We anticipate several additional sales within the Defense sector in the coming periods and our status as the first mover in additive electronics allows us to increase our penetration in this key vertical. In the third quarter, we added three U.S. resellers, GoEngineer, Accucode and Productivity.

These new additions aligned with our plans to build a robust top-tier reseller network and achieve optimal market coverage throughout the United States. During the quarter, we continued to enhance our demand generation campaign and intensify our market education.

Specifically, we participated in 11 trade shows and conferences including four in North America, three in Europe and four in Asia-Pacific and Australia. We believe that by participating in these trade shows together with our resellers will strengthen our lead generation and prospect acquisition capacity and increasing our overall brand awareness.

I will now hand the call over to our CFO, Yael Sandler to review our financial results in detail. .

Thank you, Amit. Good day everyone and thank you again for joining us. We reported a record revenue of $1,672,000 for the third quarter of 2018, representing a 54% sequential increase over the previous quarter revenues of $1,088,000.

The increase in revenues was mainly attributable to growth in commercial sales of the DragonFly Pro 3D printer, which began in the fourth quarter of 2017. Research and development expenses for the quarter were $2,199,000, compared with $2,063,000 in the second quarter of 2018 and $2,894,000 in the third quarter of 2017.

The increase compared to the previous quarter was mainly attributed to an increase in share-based payment expenses and a decrease, compared to the third quarter of 2017 was mainly attributed to a decrease in payroll and related expenses and materials expenses.

Sales and marketing expenses for the third quarter of 2018 increased to $1,167,000, compared with $1,086,000 in the second quarter of 2018 and $500,000 in the third quarter of 2017.

The increase compared to the second quarter of this year is mainly attributed to marketing and advertising expenses associated with the company’s accelerated commercial operations.

The increase compared to the third quarter of 2017 is mainly attributed to headcount increases and related expenses, as well as marketing and advertising expenses.General and administrative expenses for the third quarter of 2018 was $615,000, compared with $609,000 in the second quarter of 2018 and $642,000 in the third quarter of 2017.

The decrease compared to the third quarter of 2017 is attributed to a decrease in directors’ fees. We reported a net loss of $3,628,000, or $0.04 per share for the third quarter, compared with a loss of $3,770,000, or $0.04 per share for the second quarter of 2018 and $4,117,000, or $0.08 per share in the third quarter of 2017.

We are diligent about controlling our operating expenses and maintaining a consistent cash burn rate, while actively shifting our resources from R&D to growing our sales operations and commercial expansions. The CapEx for the third quarter were $257,000 and depreciation and amortization expenses for the quarter $504,000.

Share-based payment for this quarter were about $102,000. The company ended this quarter with $7,529,000 in cash and cash equivalents, compared to $6,103,000 on the end of 2017.

This reflects the proceeds received from the issuance of our ordinary shares in the first quarter of 2018, less the cash used in operations during the nine months ended September 30, 2018. We ended the third quarter with approximately $2.6 million of product inventory, which we expect to tune in the ordinary course.

With that, I will turn the call back over to Amit for final remarks..

Thank you, Yael. We are very pleased with the record quarterly results and with the over expansion of our sales channel and markets. We believe that at this stage, our products are well received by the markets and that our organization and infrastructure are ready for the additional growth that we anticipate.

Looking ahead, we expect to continue sequential revenue growth consistent with our current trajectory during the fourth quarter of 2018 and beyond. With that, I will turn the call back over to the operator and we will be pleased to take your questions.

Operator?.

[Operator Instructions] The first question we have will come from Eric Martinuzzi of Lake Street. Please go ahead. .

Thank you. Just commenting first off, congratulations on the good success you are seeing with the, just the sequential growth. That’s very impressive. I know it’s hard to get that going. So, just a clarification. On the revenue outlook, you did talk about sequential growth expected in Q4 here. Do you mean, as a percent? Or do you mean in raw dollars.

We’ve been going out that looks like about a $0.5 million in Q3 and then – sorry, $0.5 million Q1 to Q2 and then $600,000 in Q2 to Q3. So, raw dollars increased that same trend or percent of revenue. So sequentially, we are up 64% sequentially. .

Right, right. All right, too many good options, Eric. So, well, to be on the conservative phase, let me just say, the trend we are expecting increase in revenue and I don’t want to make any promises on the percentage. But it’s definitely a positive one. .

Okay..

And now just into the fourth quarter, also looking beyond that. .

Yes, I did see the slide deck that you included in the 6-F filing also talked about a targeted model between 2018 and 2020 of 100% revenue CAGR. So that also speaks to the confidence that you guys are – that you have in the business. So, that’s good to see. I had a question about your traction, just in different geographies.

Obviously, you are seeing near-term success with North America specifically in Defense Contractors, U.S. DoD-related.

What about other regions? How are you – how do you feel about your traction with partners in Europe and in Asia-Pacific? Are they tracking to plan? Do they look like they are going to require a little bit more attention to get going? What are your thoughts?.

Well, the United States is definitely the leading region, for now with a growing pipeline – more foreseeable pipeline that we manage very well with the help of the strong resellers that we have. But also, China, which where we just started operating comes second and appears to be very promising.

It’s not that, Europe or other places are not important, but these are the areas looking at the U.S. and Asia-Pacific, which are more promising at this stage. .

Understand. The – it’s something that you didn’t disclose and I don’t know if you will in the future, but I imagine, a portion of the revenue success you are seeing is follow-on ink sales from the beyond the initial unit, the ink that ships with the unit.

What percent of revenue was ink in the quarter?.

Well, the percentage portion is still just several digit percentage. But, let me give you a different perspective. When looking at the previous quarter, while the actual amount was just several thousands of dollars, in this quarter, we are talking tens of thousands something closer to $30,000 versus just several.

So the trend is positive and pretty much in accordance with our expectation. .

Okay. Las question for me, the cash, you finished out the quarter at $7.5 million. It was a little bit higher burn than I was modeling. I don’t know if you are comfortable disclosing, but I think the monthly burn rate – does that changed? And we saw an increase in the revenue. But it doesn’t look like the burn rate led up at all.

What are we looking at monthly? Is it still $1 million, $1.5 million?.

Okay, basically, the spend rate has not changed as we said, and the cash balance at the end of the quarter related to also to our revenues. You can see the trade receivables balance for more than $1 million. .

That should probably change your equation if you add that additional million, right?.

Yes. .

Okay. Well, congratulations on the good success in Q3 and best wishes in Q4 and beyond. .

Thank you, Eric. .

Thank you. .

Next we have Michael Brcic of National Securities. .

Yes, hi. Actually, I have a question about the cash burn et cetera, as well. So, that’s been answered.

So, at this point, have you – what should target on getting major resellers, more major resellers in the next few quarters?.

Well, the trend continues. So, basically, we started the year with about ten resellers. And we said we are going to double it. Right now, we are officially counting 18, but the trend continues. We’ve done a major progress in the U.S. where we were really at the place where we wanted to be.

But we continue working with those value-added resellers worldwide. So, we do expect to continue the trend and have additional resellers even still in 2018 and on into 2019. The strategy remains working with value-added resellers and leveraging our marketing and sales activities with them.

So, it’s really in accordance with the plan and we will continue. .

Very good.

Now, what about capacity on them? How many? What’s the maximum number of machines you can put out in a quarter now?.

Okay, so, according to our production plan, as we look to this year, I mean, we are looking at the fourth quarter right now, where we already have the inventory that we need. Our capacity from production perspective is approximately – right now, right, is about 20 machines a quarter. But, we are taking actions to increase our production capabilities.

So, looking into next year, we will be able to - technically speaking, to produce more. .

Got it. Well. Well-done. Thank you very much guys. .

Thank you, Michael. .

The next question we have will come from Jed Dorsheimer of Canaccord Genuity. .

Hi, thanks, and congrats on the quarter. I guess, for me, and I joined the call a little late. So, maybe, you may have mentioned this. But, could you – I saw that you talked about the DoD.

Could you also provide some insight into your qualifications and sort of how that’s going? In particular, I was with one of your resellers a couple weeks ago and it was clear the value prop, particularly in the medical device area. And I am just wondering where we are in terms of that qualification process in some of the non-DoD related applications.

Thanks. .

Okay. So, I’ll try to choose my words carefully, not to say things I am not supposed, okay. So bear with me here. Obviously, you guys know that all of our customers are Tier-1 companies.

Some of them are on the medical device and all of our customers, including in verticals which are not DoD are taking the technology with the clear purpose to define the applications that they need in order to take into production. The challenge is to figure out how to produce their applications that they are defining with our technology.

The value-add is clear, being able to combine different elements, whether it’s the antenna with the 3D component and PCB, in some cases to add additional sensors and making sure that we are reaching the right yield and certification in accordance to that specific application need.

So, the status of things is that with some of our key customers, our own application engineering team is basically working with their engineers to figure out what would be the qualification. Actually, the one example I would like to use right now comes from the DoD side of the vertical, which is Harris.

And we have presented that a few days ago this use case and we are thankful for Harris for willing to share that, because most of our customers are not willing to share. But that’s our F component that Harris Engineers defined and work with us in order to make while the initial stage.

The second stage was for them to run quite a lot of testing and validating that the actual frequency in that capable 6-gigahertz stuff is aligned with more common products that they are having. So that was a back and forth process. That actually took several months.

But once validated by them, and in this case they also shared with the whole industry, it helps us to move on into use similar cases, similar applications with other companies. And that applies also for medical devices.

You may have seen the TechniPlus use case that was released a couple of days ago on how on the automotive industry, a company called TechniPlus that we are collaborating with has created a unique application for cognitive real with unique gliding that reacts to the driver. And well, there are more examples that I am not able to share. .

Understood, and I appreciate it. I was wondering if you’ve looked at – my background came in semiconductors years and years ago. So, I am – and I am familiar with the process of an ASSP versus an ASIC and the use of FPGAs.

And this reminds me of that process where there was a clear value proposition, because as you look at 3D printing from a PCB perspective, you should have the ability to – the analog would be the use of the FPGA for – before you go to that ASIC type design.

Have you looked at that analog from a value proposition here in the printers?.

Well, to be honest, you just went one step deep and I would need to ask one of our application engineers to step in and help with that. So, if you don’t mind, I will give you that answer separately. Because I am not sure I wouldn’t like to give an inaccurate answer on this. .

No problem. I guess, what I am getting at is, the ability to articulate the value prop. I think there is some examples out there, since you are relatively nascent and this is a new technology. There seems to be some other examples in more mature industries where you have a very similar take up.

And compare and contrast to those other industries like the semiconductor industry with the FPGA might be useful in terms of looking at how the adoption curve will occur for your printers. .

Yes, on that I fully agree and I can tell you that, it’s not just the application engineers. Our Chief of Technology, Dr. Jaim Nulman, just comes from Applied Materials has exactly the same thought and that’s why on the front-end of our discussions, we have the replication engineers.

In fact, many of them do come from the semiconductors industry that – in this case also applies to us. So, it’s definitely the direction and with the same purpose of taking the technology and making sure that we come out with the application that would help our customers to take the product and technology into their production line. .

Okay, great. I’ll jump back in the queue. Thanks. .

Thank you, Jed..

The next question we have will come from William Morrison, National Securities. .

Hi, Amit, it’s Bill. Just a follow-up on that previous question. It seems to me like this is somewhat of a manufacturing breakthrough to print electronic components.

I mean, for this antenna, it seems to me the design is meant to go into production and use these in the field and not just for sample, right?.

Yes. Although I have to say that in the case of the space industry, things takes a bit longer. I can tell you that when we look at other verticals, whether it’s defense or even medical devices, the path to production is faster than space..

Right. But, these aren’t just engineering samples that you are using for prototypes and manufacture the production product in a - with a normal manufacturing, semiconductor fabricated components.

This is meant for production for their - for the whole unit volume, right?.

That is correct. And I like to elaborate on that. Firstly, the approach that we started with for prototyping is valid. Many of our customers are using the machine to prototype printed circuit boards and other components or just develop things on their R&D lab. That’s for sure. That’s pleasant and it really helps that kind of bread and butter of things.

But what we are seeing now, is how many of those customers that start to get the understanding of how the value-add comes into more pragmatic ways are taking their developments towards how to use those applications.

Whether it’s those RF antennas or other smaller medical devices or in the automotive industry it’s definitely with the pure purpose to go to production. And I think that is definitely something that we are promoting and looking at the product roadmap. The idea is to move on. We have the DragonFly Pro.

It’s level-entry system, but even with the DragonFly Pro, we could make the next step into low volume production. .

Good.

And then, are there any other types of components – electronic devices or components that, it looks like low hanging fruit that you can print?.

Yes, small IoT devices that combine the RF components with the PCB. Different types of IoT components that have 3D structures where you need to create small structures to have a battery connected easily and you can make that with a printer even though the height of the whole part is just 3 millimeters. It’s still good enough for IoT components.

All kinds of antennas and RF components, whether they are combined with PCB are not – and a few more things. .

That’s beautiful. All right. Great. Thanks a lot. I appreciate it. .

Thanks, Bill..

[Operator Instructions] The next question we have will come from David Baker of Mach 100 L.P. Please go ahead. .

Congratulations, Amit on a great quarter..

Thank you, David. .

My question is, per the company’s discussion of the cash position, what are your thoughts about financing going forward? What are you telling the market? Obviously, you are growing very quickly, but you are going to need more capital.

Can you address that please?.

Right. Okay, so, you know, David, while we increased our sales, we still expect that our cash used in operation will decline and with our main focus in continuous growth and sales expansion, right. We ended the quarter with $7.5 million and we will make a decision for fund raise and based on market condition and our capital needs, so. .

Okay, thank you. .

Thank you..

[Operator Instructions] Well, with no further questions, this will conclude our question-answer-session and today’s conference call. I would like to thank the management team for their time today and thank you all for attending today’s presentation. At this time, you may disconnect the lines. Thank you. Take care. Have a great day everybody. .

Thank you, have a great day..