Good day, ladies and gentlemen. Welcome to today's conference call to discuss Nano Dimension's Second Quarter 2020 Financial Results. My name is Chad, and I'm your operator for today's call. On the call with us today are Yoav Stern, President and 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’ve 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 Yael will answer questions regarding the second quarter 2020 financial results.

I would now like to turn the call over to Nano Dimension's President and CEO, Yoav Stern. Yoav, please go ahead..

Thank you very much and good day everybody. Hopefully everybody is in good shape and healthy.

Let's get into what I have to say, which we'll try not to follow the just dry new release verbiage and summarize what I wrote last week, I think when I invested the money in the Company finally, and I also gave a quite a elongated quote with describing where we are and business status.

So, I'll repeat some of it, and mostly after I finish, I'll be happy to answer your questions. First and foremost, the top-line, as I informed three months ago, informed all of you. I saw the top-line will be zero in Q2.

It wasn't exactly zero, but it was close enough, few hundred thousand dollars, as a result of not selling any machines, and which doesn't have to say that we were not in touch with the market. We were very much in touch with the market, including present customers. But, there's nobody home.

Europeans are a little bit faster and are already starting to work with us, the Chinese are ahead of everybody. But the Americans initially said, the big corporations that they'll be starting to accelerate back in beginning of July, that didn't happen. So, we've changed and I've changed the working assumption.

And working assumption by definition is something you assume, my last one was that in the beginning of July, things will start to come back. I was wrong. So early in -- or actually late in May and during June, I changed the working assumption. And my present working assumption is business is not coming back until the end of Q1 2021.

Once you say that there's a working assumption, of course, if something changes during this and the next quarter, for the better, we will change the working assumption. But, as long as it's there, then you have to adjust your business plan according to this working assumption. And frankly, I don't think it will change for the better.

I think, the elections in the United States will affect what's happening and not necessarily for the better on the financial markets, at least not fast enough.

So, because of that, we changed on what part of you may have heard initially in the beginning of the year of planning to really accelerate marketing and sales and go-to-market expenses in most of the United States and in Europe, we are not doing that.

If you look at our numbers, comparing it to what we budgeted, most of our expenses in sales and marketing are lower-than-expected. We held back starting two months ago already. We were going to be in the end of the year 17 people in the headquarters in the United States. We are going to be no more than 8 to 9, which we have by now there.

In Europe, we will be no more than 4. And in Hong Kong office, we reduced from 6 to 3. And what we -- the reason we've done that is because there's no reason to spend the money when your customers are telling you they're not allowed to sign capital expenses, unrelated to if they want to buy the machine or not.

So, we have customers, for instance, very, very large corporation, one specifically from the Far East that all of you know, can't mention the name, that finished a benchmark with us, which they paid for and the venture in the area of fifth generation antennas -- for fifth generation solar antennas that used by us. They liked the results very much.

But, they said that they cannot now buy a machine as they planned, because of the freeze. This is a multibillion dollars corporation. And therefore they're doing another project with us which they are paying for Nano’s [ph]. And we're proceeding along that line.

But in turn, what we are doing already in the last 45 days, and even more accelerated and moving forward, is we have decided that we're going to use this lull, call it a lull in the market of at least three quarters from now, maybe more to emerge in four quarters or even earlier in three quarters with a product that is much better and much more competitive.

And when I say competitive, it’s comparing with alternatives, which are not even closer to our performance, but the alternative is a traditional PCB industry. We will emerge with a product that will be much closer to manufacturing with material specs that fit, if not defense specs or milspec, commercial spec and maybe industrial.

And we will emerge with a new generation machine halfway through its development in the middle of next year, beginning of next year.

All of this is described in the news release note of as of today but new release from last year in very detailed fashion, including the three projects that we defined by name, and the next generation machine which is called Next-Gen.

This is very exciting because it enabled us to -- specifically me, after I spent the first quarter and a half raising the money and building the go-to-market and commercialization plan to shift into product and technology, which is actually something I like very much.

So, I'm spending a lot of time with the development people and the product people, and my confidence in the direction they're going today and with the resources that we put. We increased the size of our R&D by 50% from 45 days ago, most of them PhDs in the areas of chemicals and physics.

And not that because they’re PhDs that are so great, but we needed to have this force in order to accelerate a machine that works into a machine that performance are much, much better, not to speak about the new machine. So that is happening.

We intend to leverage a trend in the market that people see over the last two months, and it's quoted in medias like Bloomberg and like New York Times and many others and some of it is on our website, where the large electronic manufacturers are now convinced that they cannot afford to continue to be dependent on a Chinese, Taiwanese PCB industry.

It's a $65 billion industry that most of it is in the Far East. They are now talking about shortening supply chains; they're talking about moving production, especially prototyping and early runs, manufacturing runs fabrication runs to United States and to Europe.

And there's a quote from the Los Angeles Times talking about the tariff war which is added to the corona. Everything is leading large -- large corporations to move things, or at least to move enough, so there'll be a buffer zone where they can manufacture part of the inventory and have capability to bridge crises, like this one.

And when I say this one, I mean both, the tariff wars and the corona, and similar ones in the future. So, this is also a trend that we are -- we intend to catch, as they say in surfing, to surf that wave as well, which is already starting to accumulate height.

But, this is still under the circumstance where people can't even sometimes install our machines which are waiting to be installed, because they're not allowed to go to the offices, and we need to go to their offices to install the machines.

So, this from the other side what's holding things back and enabling us to spend the money what I believe is the right thing now, is like an investment that will penetrate through the radar screens, once the budgets will start to be released.

We are aiming a lot at universities and academic institutions, which we believe the budgets there are being released earlier. However, we have universities -- that is true, they moved faster than corporations to intervene with machines in last few months.

But, we have one specific in New York for instance that the government does not allow them to spend the budget that’s already approved for them yet. So, we have complications like this as well. To summarize where we are and where we proceed, how we’re proceeding is the M&A work has been doing over the last -- since mid-June. So, it's about two months.

I probably contacted and researched 55 companies in this industry personally with the help of Needham & Company, and probably spoke with half of them, including PCB manufacturers, PCB prototyping, and a lot of printed electronics companies that are having technologies that are either complementary to ours or competing on the ink side but not close enough.

But, they still yet have certain advantages and some other printing technologies that I've seen, I know what's happening in this industry. So everything I'm describing to you, which are industry trends and market trends are not only from what I see in Nano, but what I speak with 20, 30 other companies.

I also, very careful -- saying it very carefully looking at some of what we researched and due diligenced as potential moving forward results in our acquisition phase. Some of them I decided that we don't need to acquire, we can just buy an OEM, the product and technologies. Some of them, I'm discussing more exciting opportunity of merger.

I can't -- obviously, in M&A, you can’t say, what will happen, what will not. But, I can tell you clearly that the work on that area enforced what I believed when I came in and when I invested just last week, and this Company is ahead of the curve by at least two years.

And I think the opportunities that were given out to get ourselves even more ahead and catch this tsunami when it's coming out of the -- around the corner beginning of next year, we're better positioned and our competition are not as advanced as I thought. And most of it is old -- what I would call old industry.

The competition is the old industry, not the high-tech new industry. I think at this point, I will stop and will let anybody that has questions, please ask. And of course, Yael is here if you have questions regarding the financial results and in detail we'll be happy to answer.

Chad?.

Thank you. [Operator Instructions] And the first question will come from Morris Jefferies [ph], a private investor. Please go ahead..

Yes. My question is directed towards the CFO.

How much in operating expenses will be saved as a result as a reduction in workforce? And do you still see a continuation of reduction in workforce as we move forward?.

I will answer you. We are not reducing workforce. We're increasing workforce, mostly in R&D side. So, there's no reduction. There's an increase..

I only asked that because you mentioned that you're reducing Hong Kong and other….

Yes. We're reducing on the sales and marketing side, but we are increasing on the R&D and technical side. So, the net result, let's say, we increased -- or I will even quality it, on the sales and marketing, we reduced a little bit in Hong Kong, but in the rest of the basis, we just didn’t increase the way we planned for this year.

And on the R&D, we increased it more than we planned. We didn't plan to increase on the R&D and we increased it. So, the total amount of headcount in the Company grew. Now, if you want to hear numbers, we're not talking about hundreds of people. The Company had 69, 70 people before, it has 80 people or so, now. So, that's the difference..

And how much money do you expect to -- is this a wash or is this a cost savings?.

Our run rate is similar to what it was before..

Have you all -- but, given up in terms of anticipating any sales whatsoever?.

Well, of course, I'm anticipating sales. Otherwise, why am I in business? But, I'm not anticipating sales....

You reduced your sales force..

Yes. But, I didn’t nullify my sales force. The sales force today is still bigger than the sales force the Company had in the 1st of January 2020. So, I intended for instance to increase my sales force and sales organization and support in the states from 2 people in January to 17 people in December. Instead, I'm going to increase it from 2 to 10.

So, it's not that we're giving up on the market. We have salespeople; we have sales development representatives internal that are talking to customers. We have hundreds and hundreds of leads that are interested to talk, most of them generated over the last two months. So, of course, the commercial side is working and taking.

But, I'm not trying to overspend because even people who are interested talking about we need to get back to our offices where we will -- the budgets will be released. And therefore, I don't want to overspend.

But definitely, having a group of -- let me tell you is about 25 out of 80 people involved on the commercial go-to-market sides around the world. I'm just not growing it..

You mentioned a number of months ago, a breakthrough technology. And you just mentioned just a few moments ago that your machines will become even better as time goes on.

How is that not enough of a competitive advantage from your competitors to show that your machines are better? Why would a customer buy any other machine besides yours?.

Customer will not buy other machine beside us because there's no other machine like ours. The machine that we have is if you wanted as analogy, is similar to when Apple invented the iPad, not iPod, iPad, and there were basically no iPads. Actually Steve Jobs was against the iPad and its size, because he said nobody is going to use that size.

Nobody was competing with them either. The issue is here, educating the market that what they can do with an iPad, and in our case, what they can do with our machine. What they compare it to is to the all industry, when they did -- as they do today.

PCB in a traditional way in production line in a very dirty industry, very high intensive in infrastructure chemicals et cetera, and it's sophisticated industry, it's very old, it's 40 years old. And we offer a better, faster, cleaner ecologically solution, but it's new. And the electronic industry is very traditional.

We have to convince the market that the results of what the machine will produce will perform similar to the traditional PCBs, including in high temperature, including in vibration, including in what's called spec -- for milspec. I mentioned it, industrial spec or commercial spec. So, that is what we are facing in the markets.

We're not facing competition. We have to prove that our machine is better. Our machine is one of its kind, and it's a market education. It's a typical situation that other companies had in the past.

It's not new, it's in the rule books, and in the business school books, where the way you go to market in a place where you are the early comer and the educator is different than when the way you go to the market when you have a competing solution, a better mousetrap, which is either better in price or better in performance. We are not in that area.

We're in the area of market education. And the way we do it and the reason why I did it way with distributors and resellers, which was a mistake of the Company folks, is when you deal with market education, you have to build a sales force, it’s very sophisticated. Most of them are electronic engineers.

You have to be in touch with customers, like the names I mentioned before, and I wasn't allowed to mention.

But it's the largest defense manufacturers in the United States, large and more very, very reputable secrete services in Europe, the Army and the Navy in United States, those people are talking very seriously with us and working with us on our machines. But, two things are holding them back now.

Right now, they're not in the offices, they can’t even go to the labs; and two, they -- people who already made the decision to move ahead with our machine after being educated, they have a freeze on CapEx. So, it's not an issue of showing we're better than another machine. That's a bottom line..

Have you, in terms of your Holy Grail customer -- let's call that a Holy Grail customer, Dell or Intel or Tesla, have you considered a loss leader?.

Tesla and Intel are absolutely not our customers, not even close. Intel does not manufacture PCBs. Tesla, if at all, buys the PCBs, manufactures from subcontractors.

So, our vertical that we're looking after out of which you can choose any Holy Grail you wish are the defense industry, the academic industry, education, the medical industry special in vivo products and other electronic subcontractors to these industries. So, in those industries, consider loss leader. We don't need to consider loss leader.

The minute we talk with a serious customer that the price is an issue for him, we have enough flexibility to play between the price and the price of the materials we're going to sell him later for one, two, three or five years.

We also have template between the price that he pays upfront and maintenance costs, the annual warranty that he gets free for the first year, but he pays for the two, three years later and he can get a reduction on that.

Plus, I have by now enough margins because I'm controlling the sales and not selling it through resellers that I can reduce the cost of the machine. And lastly, but not least, we have a program to lease and just to rent our machine today, because we have a strong enough balance sheet.

So, again, if you're dealing with the government and defense, which we are very experienced in dealing with, government, for instance, for them, signing a contract for a rent or lease and signing a contract to buy a machine, it's the same round of approvals. It doesn't matter the name.

But for commercial people, when we're now offering them lease or rent, they’re not considering it because it's less cash upfront. So, even that is another way to reduce cost.

We don't need to have a loss leader?.

So, for the next three quarters, you're anticipating awful financial performance?.

No, I don't anticipate awful financial performance. I'm anticipating very low revenues..

Well, that results in awful financial performance..

No, no….

On a bottom-line basis..

No. All the financial results are spending my money and not building value in a time where the market is under the corona affairs. So, the fact that I reduced my expenses overall and directed them into investment in value of the product, which will pay back in three or four quarters, when the market comes back, is not awful financial performance.

I would call it performance considering the market we’re in..

Your shareholders may disagree with your definition, given....

My shareholders, if you are a shareholder….

I am..

You can define it any way you want. I am giving you the data..

From a net margin perspective, are you providing guidance that will be negative for the next year almost?.

What are you talking about, margin perspective?.

P&L, the net margin, EBITDA and/or....

What do you call net margin, gross margin, EBITDA or net profit?.

Net profit..

There will be no profits in the next year and a half..

A year and half?.

Yes. No net profits..

Okay. Thank you. I have no more questions..

They’ll be gross sales and revenue and gross of EBITDA, but there'll be no net profits..

Okay. Thank you. I have no more questions..

Thank you..

[Operator Instructions] The next question will come from Kenny Ross with [indiscernible] Stock Holdings. Please go ahead..

Hi. I just had a quick question regarding the total production time reduction. I read an article, I believe it said it was a total reduction of 97% when compared to the usual production time.

Is that -- is there anything that we can -- that you’ll have that maybe I guess, additional information backing that or showing examples of that or videos or anything that can shine a little bit more line on that? Because that is a very dramatic reduction in production time..

What are you -- I'm sorry.

If you can clarify please for me, what do you mean by production time?.

I believe it was on news website. I haven't looked recently. It was about a week ago. I found it. There was a news article that said, I guess, the PCB production time..

No. You can’t -- it's not a measurement of production time, you can't measure -- first of all, machines are not in production yet, the machines prototyping, not the machine in prototyping -- machine is manufacturing prototypes.

So, if you look at a product, for instance, which you have on our website, case studies for instance with a company like HENSOLDT, which we're very close to in developing very exciting programs, which hopefully in the future, we'll be able to discuss it.

So, HENSOLDT is a defense manufacturer in Europe that actually gets on our machine better results that our people themselves realize that they can get from the machines.

So, HENSOLDT on in the case study, which is on our website show that when they produce the standard PCB on their traditional PCB manufacturing shop floor, it took them about four months for the specific model. And when they did it with our machine, it took them about 8 to 10 days. So, maybe that's the number you remember.

They prototype by the regular way four months, and by our machine let's say 10 days. Four months is about 120 days. 10 days out of 120 is about 8.7%. So, it's 93%. Maybe that's the number of coming in, and you calculate it, which makes sense. But it's an example of a case study from a customer..

Okay, makes sense. One last….

So, your number was not too far actually..

Okay. Yes, I didn't actually do any actual calculations, but I'm actually kind of surprised I was that close. My last question, I guess I'm kind of scouring a little bit for some videos or some materials or anything to get like a visual of how this -- your product works, I guess. Is there anything that I can find….

Yes. Go into YouTube, in the search function of YouTube, write Nano Dimension, the name, and you'll find about 10 or 12 videos..

Okay. And do they show in detail like time….

Yes..

Or the production time?.

Yes. And if you have portions of those video, feel free to call me -- us here. And I'll be happy to help you and go through some videos with you..

Okay, awesome. Thank you. That's my last question..

Thank you..

The next question comes from Quinn Larson, [ph] a private investor. Please go ahead..

Yes.

I was just wondering if the timeframe for corona spans longer than we anticipate, how much cash do you have? Well, maybe not the cash, but just from an operating point of view, how long can you continue to do what you're doing and still be okay?.

If there'll be no revenue, zero revenue for the next four years, we're still okay..

Okay. Thank you..

[Operator Instructions] Our next question will come from Robert Rallo with Right Talent. [Ph] Please go ahead..

Can you hear me?.

Yes..

I'm new to the investing world. I've always invested in mutual funds and what have you. And so, I'm learning as a new investor. But, I came across your company just about two months ago. And I'm telling you, I'm so excited about your product, and what I think your company has to offer for the future. I'm in this for the long haul.

I see getting in early, and that in 2, 3, 4, 5 years down the road, it’s going to return tremendous investment for me. So, I'm really excited about what you're doing. This is a very first conference call I've ever participated in. So, I'm very pleased with hearing your responses. That's exactly what I wanted to hear.

And so as a result of this, I plan to slowly try and increase my ownership and stock in your Company. One thing, I'm not a technical person.

So, could you tell me a little bit about the new -- improving a machines, is that going to result in better performance, higher cost, better performance same cost, or better performance, lower costs? And I'll hang up and listen. Thank you so much..

Thank you so much for your compliments. And yes, I agree with you. I also invest in more people that I know will invest very soon. With a long-term view like yours, I had the long-term view before the corona.

Obviously, the corona may extend it a little bit, but the corona is changing our life, eventually, mostly, I believe will be for the better after it. But during it is a bit difficult, but we'll go through that. But, specifically to your question, we have three projects going on moving forward.

One -- two of the products are with the existing machine, one is called PIK and one is called MARK. The PIK is performance improvement kit and the MARK is a manufacturing and reliability kit. Those are working on the existing DragonFly machines. They approve it. At this point, we're not even sure that would increase the price.

It would depend on the market. This other gentleman that asked about Holy Grails and et cetera, et cetera, the cost of the machine to manufacture after we improve it with the PIK and the MARK kits, is not going to increase dramatically for us. So, it will increase the price when a machine to comes out with this improvement? I'm not sure.

We may even reduce the price. Whatever will cause our revenue to go up, we'll go -- we'll do. It's not going to materially affect our margins. Then, there is a third project in development, which is called next generation. This is a next generation machine.

It's totally different from the existing one, but of course it's based on the experience and the technology we experienced over the last -- the R&D teams over the last five years of development.

The new generation or next generation machine will be more expensive with much higher performance, straight into manufacturing, including different ways of depositing the electricity conductive material, not only inkjet, but we'll have a revolver that will have few heads with different methodologies which enable us to accelerate production when we want and slow production and make it more accurate PCB as needed.

So that machine will cost more..

Thank you. Our next question will come from Michael Moresenski [ph] a Private Investor. Please go ahead..

Good morning..

Hi..

How are you doing?.

Good. Very well. Thank you.

And yourself healthy?.

Oh! Yes, sir. Thank you. I’ll call it ad, [ph] because I was reading on your guys’ web page about the Harris Corporation with satellites and I know Jeff Bezos got awarded a $10 billion contract to produce -- build a whole network of satellites.

Do you see the printing technology that you guys have working with them?.

Yes. The space industry is one of a typical vertical that we're going after. Back to the gentleman that spoke about Tesla and Intel and I told him, not them, but the space industry, definitely. Reason is because they need very sophisticated, what we call, high-performance electronic device, which are light and complicated in structure under generation.

Two, they do not need 3 million pieces. They manage with 5,000 or 500 because they don’t manufacturer 50,000 satellites.

And Harrison, we have a case study where allowed us to show it on our website, where we already showed them that one of [Technical Difficulty] RF technology cost us -- cost them about 10 times, order of 10 less, which means 10% comparing to the manufacturing.

And they took the two results, both of -- they did it manually and we did it with the machine. It's now planned to go up to the space station to compare performance in space environment. So, I believe that market is a definite opportunity for us. But again, what happens now in that market? And we're very close.

Our headquarters in Florida is for a reason [Technical Difficulty] from NASA and other and Harris, a lot of things are being held back, not because the money is not there, but mostly because they want to see how things evolve before people who are confused and worried tend to hold back signing checks rather than signing faster..

Okay.

So, you're telling me and our investors that there is technology going to -- into space or is in space using your 3D printing?.

I'm saying that our 3D painting machine has produced a specific product for Harris, which is going out to space to test it in an environment of space. And if you ask me what is limiting us from sending many more to space, we are working as part of development on materials.

The minute the materials will fit milspec, which is the temperature, radiation and vibration, actually vibration in space is no big deal, much more vibration in air in aviation that's not in space. So, that is where the market to space will open up even more. Right now, it's early experiments..

That's excellent. Very exciting new. Thank you, sir..

Thank you..

The next question comes from Michael Brcic with National Securities. Please go ahead..

Yes. Hi. Just a quick clarification on the next generation product..

Yes..

Will that still be targeting the design of the PCBs or the production?.

It will be geared much more into early production and short run productions..

Got it. Thank you very much..

Thank you..

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the call back to Yoav Stern for any closing comments..

In closing, I can just thank you all very much for participating and join you with a hope that we’re going back into normal circumstances. And, definitely on our side, I can tell you one thing, myself and people around me are working more hours in a day since the corona. So, as much as that is concerned, we are becoming more and more effective.

Now, we'll just wait until the wave starts to raise and we'll show the results. Thank you very much..

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..