Good day, ladies and gentlemen, welcome to today’s conference call to discuss Nano Dimension’s Third Quarter 2019 Financial Results. My name is Alison, and I’m your operator for today’s call. 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 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. 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. Please note this event is being recorded.

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

Thank you, Alison and thank you all for joining us this morning. Our third quarter of 2019 was an exciting and meaningful quarter, in which we successfully executed on actions and mitigated issues encountered earlier this year.

We’re happy to announce that our quick response time and actions taken resulted in sales growth with higher gross margins in this quarter. The revenues for the third quarter of 2019 amounted to $2.2 million, a quarterly record-high revenue.

During the third quarter, we sold eight new systems and eight upgrades of existing customers to our new LDM technology. Additional significant milestone that was achieved in the quarter is the sale of our 50th system worldwide.

We believe that the increase in sales, thanks to several actions we took, the introduction of the DragonFly LDM system that has proven higher reliability and improved value for customers with its Lights-Out Digital Manufacturing Technology.

The feedback for the LDM from both customers and partners, we’ve acquired and started using it is very positive. As anticipated, the ease of operating of the LDM system as well as the 24x7 printing has made a positive change in perception by customers, resellers and prospects.

Another reason that allowed us to present growth in sales is the introduction of more applications that provide value for customers. For example, capacitors at production grades, in fact 30 specific high-quality capacitors within the ranges of 0.2 nanofarad and 5.2 nanofarad.

These capacitors can be used to produce RF filter circuits, RF matching capacitors and any circuits with capacitors and medical application that was introduced by our customer in Italy, the Italian Institute for Technology.

The application is a packaging of a 3D embedded sensor for medical wearable devices, which are used for measuring body performance. We intend to continue developing new innovative applications in-house, as well as to partner with industry leaders for the development of new applications.

Our advanced technology enables greater flexibility and relatively short-time from idea to a fully-functioning application.

The third reason we believe that led to sales improvement is the cyclic sales pattern for capital equipment, and the fact that in the second half of each year, more purchases of capital equipment are being made by customers around the world. That was the case in 2018 and we continue to see this year.

We anticipate this pattern over the stronger second half to continue. In the third quarter, we improved our gross margin excluding amortization of intangibles to 45%. This is a significant improvement in comparison with the previous quarter gross margin of 28%.

We believe that within the coming periods, we will be able to continue to present better gross margins. The positive trends though have increased in consumption by our customers continued in the third quarter.

Our consumables sales have increased by 111% compared to the previous quarter, and we see these trends as a positive validation to our recurring revenue business model, which is based on our proprietary in product. Our operating expenses in the third quarter have decreased by 16% in comparison with the previous quarter.

This is a result of the restructuring and the actions we implemented to reduce our expenses and get the company back on a growth path. I will now hand the call over to our CFO, Yael Sandler, to review our financial results in detail.

Yael?.

Thank you, Amit. Good day, everyone, and thank you again, for joining us this morning. In the third quarter of 2019, we presented revenues of $2,243,000 compared to $1,161,000 in the previous quarter, and $1,672,000 in the third quarter of 2018. The increase was attributed to higher commercial sales of the DragonFly Additive Manufacturing System.

In the third quarter of 2019, we sold eight DragonFly systems and eight LDM upgrades to existing customers. In addition, our revenues from ink and other consumables have increased concurrent with the increase in our system installed base.

The gross margin in the third quarter of 2019 was 45% excluding cost of goods for amortization of intangibles, which is a material improvement from the previous quarter gross margin of 28%. This tremendous change is a result of the introduction of the LDM system, which allowed an increase in the sale price of the DragonFly System.

In addition, as previously mentioned in the third quarter the revenues from consumables increased. Our ink products is high gross margins of more than 70% and with that, they contributed to the overall increase in gross margin.

Research and development expenses for the third quarter of 2019 were $2,083,000, compared to $2,322,000 in the previous quarter and $2,129,000 in the third quarter of 2018. The decrease compared to the previous quarter was mainly attributed to a decrease in payroll and related expenses.

The decrease compared to the third quarter of 2018 was mainly attributed to a decrease in payroll and related expenses as well as materials expenses. Sales and marketing expenses for the third quarter were $1,217,000, compared to $1,507,000 in the second quarter of 2019, and $1,167,000 in the third quarter of 2018.

The decrease compared to the second quarter of 2019 was mainly attributed to a decrease in payroll and related expenses. The increase compared to the third quarter of 2018 was mainly attributed to an increase in rent and travel expenses.

General and administrative expenses for the third quarter of 2019 were $799,000, compared to $1,023,000 in the previous quarter and $685,000 in the third quarter of 2018. The decrease compared to the previous quarter is mainly attributed to a decrease in professional services expenses.

The increase compared to the third quarter of 2018 was mainly attributed to an increase in professional services expenses. Finance expenses, net for the third quarter of 2019 were $1,035,000 [ph], compared to finance income, net, of $3,537,000 in the second quarter of 2019, and finance expense, net, of $34,000 in the third quarter of 2018.

The increase in the expenses compared to the previous quarter is a result of finance expenses due to changes in the fair value of convertible notes and warrants that we issued during this year.

The increase in finance expense compared to the third quarter of 2018 is a result of issuance expenses that were recognized as finance expenses, as well as expenses due to changes in the fair value of convertible notes and warrants.

We reported a net loss of $4,308,000 or $0.02 per share for this quarter, compared to a loss of $1,188,000 or $0.01 per share, in the previous quarter, and $3,628,000 or $0.04 per share in the third quarter of 2018.

The increase compared to both the second quarter of 2019 and the third quarter of 2018 is attributed to finance expense of approximately $1,094,000 that were recognized this quarter as a result of issuance expenses and evaluation and changes in the fair value of convertible notes and warrants.

The CapEx for the third quarter were about $212,000 and our depreciation and amortization expenses for the quarter was $680,000. Share-based spend for the quarter were about $173,000. We ended the quarter with $5,466,000 in cash, compared to $3,753,000 in the end of 2018.

the increase reflects the proceeds received from the sale of ADS' representing the ordinary shares in the first quarter of 2019, and from issuance of notes in the third quarter of 2019, less the cash used in operations during the nine months ended September 30, 2019.

We ended the third quarter with about $3.6 million of product inventory, which we expected to own in the ordinary course. With that, I will turn the call back over to Amit for final remarks..

Thank you, Yael. It’s important to execute swiftly on actions that would get the company’s growth back on track, and we’re satisfied with our execution in many achievements in the third quarter. Our technology advantages and superiority is reflected by the positive feedback and adoption over DragonFly LDM System by customers and partners.

We’ve made another important step in the journey towards changing the way electronics are made and we will continue to focus on increasing our sales and optimizing our expenses. Now, I will turn the call back over to the operator and we will be pleased to take your questions.

Operator?.

Okay, thank you. [Operator Instructions] And our first question today will come from Michael Brcic of National Securities. Please go ahead..

Good morning or good afternoon.

I came in a bit late on the call, so, I’m sorry if you covered this, but can you just give me an idea of how the performance of your resellers has been compared to your expectations of them over the last nine months?.

Well, the resellers performance – I don’t have the statistics in front of me. So, I’ll try to….

just more of a general sort of thing is enough..

Okay. So, with that, I think that what we’ve learned over the ninth month is that the sales and the sales cycle we’re running, it has to be very technical.

So, what we’ve started doing in recent months is to work closely with the resellers in a more collaborative way, in which we put our application engineers more in the front together with the sales people by the resellers that do not have the same level of depth and we collaborate in that.

So, generally speaking, we’ve learned how to work better with the resellers, and we’ve made our sales cycle much more technical in order to be more clear with the customers above the value the customers are getting from the product.

Does that answer your question?.

Yes, yes.

On maybe, where you see – which industries do you see or do you see any industries standing out as far as potential for future growth or if that’s more general?.

Well, yes, we do. I think, doing a top-down answer, I would say that it seems like defense and aerospace are creating more traction, both in terms of actual purchasing so far and also in terms of the specific applications that we can offer them. And I think you could understand that we did DragonFly LDM, they can go to production.

It would not be mass production. But if you think of aerospace and defense, the usage of our technology for lower volume at the level of thousands, let’s say, would be suitable for aerospace and defense. So, these are two sectors, where we see a significant focus and significant potential growth.

in the meantime, it’s also worth mentioning that on the sector of research, whether it’s universities or a different type of government institutions for research, there is high traction and we managed to have a good access in those places.

But it’s fair to say that we see them as entry level points that work with industry, whereby the end of the day what we’re targeting is to find the strategic customers that would go to production with valuable applications and would become repeat customers that buy multiple machines..

Got it.

Since you’ve released the LDM, is it a lot of those purchases coming from existing customers or has that opened your machines up to maybe, people that would not really considering it?.

one is the new system, DragonFly LDM System and the other format is an upgrade on existing DragonFly Pro System, right? We wanted to make sure that it’s accessible also to existing customers.

So yes, let’s pull out the numbers, but obviously, most of the new sales that are going out and definitely, all the new sales moving forward are of DragonFly LDM that goes to prospects, new customers.

But how many cells have we had so far to existing customers were upgrades?.

We have several customers with repeat orders, but in this quarter, we sold eight systems to new customers; some of them were at LDM and some of them were still at Pro. And in addition, we had eight LDM upgrades that were sold to existing customers in the third quarter meaning, we had the customers that bought the Pro – the dragonFly Pro in the past.

And when we introduced the LDM, we allowed them to buy just an upgrade kit. And the eight of them have done that in the third quarter and a few more in this quarter..

Right, right. So, the backlog of LDM bridge increases, because an upgrade is not as expensive. It comes easier to existing customers to upgrades. And obviously, whether it’s existing customers on your prospects or also, nobody’s buying the pro anymore. Everyone is moving to DragonFly LDM..

Got it. Finally, the consumable sales were up by 111% in the quarter.

Is that maybe, a seasonal sort of thing or is that like a new plateau at least level 4 now? Is it more of a blip or do you think that could be more sustainable?.

The trend of increase is obviously not seasonable. I don’t know how we will end the fourth quarter in terms of the consumables revenue, but it tends to several actions we took, which is the introduction of the LDM, which allowed more operating time of the printer.

So, the – our customers that are using the printer, a lot can use it now a lot more and hence they consume more ink. And that’s something that the number shows and I believe they will also – we will also see it in the next quarters as well as the simple fact that our installed base go and we have more customers that are buying the ink.

And also the fact that we now introduced more applications and they’re working closely with our application team and presenting applications to customer is also something that I believe contributed to the consumables revenue, because customers can now really understand what applications they can print using the system..

Great. Thank you. Great to see you back on track. Appreciated..

Thank you..

Thank you..

[Operator Instructions] I’m not showing any further questions. This will conclude our question-and-answer session. And at this time, we will also conclude the Nano Dimension’s third quarter 2019 financial results conference call. We thank everyone for attending today’s presentation. The call has now concluded. And you may now disconnect your lines..