Good day, ladies and gentlemen. Welcome to today's Conference Call to discuss Nano Dimension's Third Quarter 2022 Financial Results and Quarterly Update. My name is Betsy and I'll be your operator for today's event. On the call with us today are Yoav Stern, Chairman and CEO; Yael Sandler, CFO; and Julien Lederman, Head of Corporate Development.

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 Yael will answer questions.

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

Thank you very much. Good day to everybody. We're going to go [Audio Gap] short, hopefully everybody has it in front of you. We finished a beautiful quarter of $10 million of revenue, which takes us to about $31 million of revenue over three quarters, comparing to three quarters last year as hundreds and hundreds of percent above, almost 1,000%.

And comparing to the last quarter, similar period last year, it's also 650%. So we're happy about it and we have certain criticism at ourselves, which we'll be talking about. But we'll start with the highlights, we'll go through what we think should be improved.

So, on the highlights, which are not numbers highlights, but rather milestones in the business. First and foremost, we had M&A and investment activity. We acquired a relatively small company, but probably with the largest potential to grow from all the acquisition we acquired until now.

So Admatec/Formatec in Netherlands with an amazing additive manufacturing technology for metals and ceramics based on DLP Direct or Digital Light Processing.

It is something we looked for a long time, size of the company is relatively small, less than $10 million in revenue, but it was a subsidiary for many, many years of a much larger company that was in different business. So it was growing kind of behind the scenes.

And we believe that the growth potential is more than anything we acquired until now and it will be already manifested as we go forward. This year, they'll finish one and a half quarter under us, which are already ahead of the projections last year.

On the Fabrica side, the first AM company we acquired a year and a half ago, major advancement in the material. And if people remember, I told you early in the game that whoever speaks about additive manufacturing, in general, additive manufacturing electronic specific is a technology of robotics automation is missing the points.

Additive manufacturing main core technology is materials, materials, process and process. And major advancements here in Fabrica, which will -- was the main kind of blocking of substantial sales, because it took us until now since we acquired them to develop the new materials. So that's very good.

AME, application development, I should say, what's not written here, we have a very, very exciting advancement in the materials in AME as well, which enabled application development. We have about three new materials that are much better than the previous materials are going to be released to the market the beginning of the quarter, next quarter.

And they are going to be applied for all the models of the machines we have including backwards compatibility, which is very, very important. Customers are very excited. We had just a month ago customers users conference in Munich.

We had 40 people, 24 customers, and including very high profile ones which I can’t mention for obvious reasons and excitement was felt across the board. And finally, last but not least. In spite of the amount of cash we have, we're still operating the way we operated last year and so much, as the acquisitions. We’re frugal.

We're not spending money on acquisitions, which are foolish. It's multiples that are totally unacceptable, which was done by everybody around us. And we relate the same way to management of our overhead, which is not acquisitions. [Audio Gap] of our manpower this quarter, the beginning of the third quarter.

That was not easy in a company that is growing, and where the employees and executive know that we are relatively comfortable cash wise. I still and we still -- Yael and myself insisted on reducing the headcount, because we felt when company grows so fast, there's enough fat that we can cut.

And it resulted in a reduction of $10 million expenses level on this quarter comparing to the original budget, which we're very proud of. Now, back to focusing on the numbers which are important. So the revenues $10 million, this quarter, $31.5 million for the three quarters.

Gross margins are deceiving, because obviously, the IFRS includes a lot of non-cash expenses and for share -- shares, granting, et cetera. But look at 29, even the 29, which is net, and it's really gross margin is a bit lower.

Our typical gross margin is about 40 and it's a combination of margins of above 60 for the new machines and about 40, 38 for the more machines that are in a later stage in the lifecycle, is products.

So why is it lower this quarter? The answers are pretty clear and I'll speak about in the next slide? Our EBITDA, if not minus $24 million includes about $13.5 million of investment in R&D.

That basically means that if you guys told me that if we didn't have the belief in the huge multi-$100 million potential of the Additive Manufacturing Electronics, which demand still an investment of about $13 million a quarter in R&D, we could close cut that or sell that and within two, three quarters, we'll be making money.

We're not going to do that, because we're not going to give up the opportunity, which we believe will lead us to where we promise it will lead us. So it is still important to know that as we look at EBITDA, half of it -- more than half of it is an investment in R&D.

And the rest by the way was investment in the developing of the go-to-market after the acquisitions. The net cash used in operation is $22.3 million, which is more than $10 million less than projected.

Our projected run rate for the whole year was above $100 million cash spent on the investment and as you see 22 is a rate of about $80 million to $90 million a year. Our backlog is untypically high and the reason is -- will be discussed in the next slide. And our cash is -- actually, I can speak about it now and our cash is 1.05.

Now, the reason the backlog is high as -- is because in Europe. The results of the conflict in Ukraine and the result of the supply chain callbacks caused our customers -- did cause us problems but customers that bought machine -- machines ask to deliver them either this quarter or even next year.

So a lot of revenue from this quarter was held back and postponed, but it is on backlog which means signed purchase orders. So you will see the results in next quarter. This is also by the way a reason why the gross margins were reduced in this type of product, because it's all by the way in very gory details in the new release.

Because as we sold out of the door less machines, certain overhead in COGS which was fixed is of course manifesting itself in percentages of revenue as higher number of COGS lower number of gross margin, because the revenue is lower, but that is going to correct itself between the next quarter already and maybe even during the next two quarters.

Some information about this acquisition I mentioned before. As you heard from my voice, we're very excited about it. The activity and the type of materials are shown here in the picture. We are expanding already the portfolio and we're expanding the go-to-market. We applied all our go-to-market forces, salespeople around the world.

We already since the acquisition in July, had a course and training and these machines, and we're starting to sell them in North America, which was almost [not sold]. And we’re expecting very, very positive results from growth as I mentioned before. This is just a manifestation of what I mentioned earlier about R&D.

There's no way a company can be profitable when it invests 52% of its revenue in R&D. Our business model, which we are running on a five years basis, is showing that profitability on a quarterly basis, will happen in 2025. And at that time, the ratio of the R&D to the revenue is going to be down below 20.

So I should correct myself there, R&D is not 50% of revenue, it's 52% of operating expenses, which is much less than 52% of revenue. But you have the actual numbers on the left. So that's easy, R&D is $18 million a quarter. Out of this $18 million a quarter, my estimate is the R&D for AME is much more than a half, actually closer to $14 million.

So it's always why I said before that we are very encouraged with the results in the products in AME which are coming to the market in the next two quarters, because that's what’s going to lead us to the growth as expected and profitability. This is just a comparison of our cash divided by our annual run rate.

So if you take us in three competitors in the market -- by the way, they're not direct competitors but at least they're in the same market. You can see that we have 14 -- almost 14 years if we continue to burn cash the way we are and we're not going to, as you already heard, we cut it even this quarter.

But assume we continue at $80 million to $90 million a year, we have 14 years without acquisitions. And then the other companies have between less than a year to around two years. So we're very comfortable that we're not going to go back to the market to raise more money. And we are comfortable that it isn’t going to take 14 years to spend this money.

A, because we're spending more of it on acquisitions and wait for the news it's coming this year and earlier, like I mean 2003 and earlier -- 2023 and earlier.

And it's all aimed for profitability with spare cash as we need, as much as revenue for the three months and nine months I mentioned before, on the right side, you see the -- on the right side is the quarter and on the left side..

In the right side, it's the gross profit for the year-to-date..

The gross profit and in the left side is the revenue. And you can see how on three quarters, nine months, the number is 31.5, I've mentioned before, and the gross margin is accordingly around the 11 and change. Vision, the vision of the company has not changed in the strategy is a derivative of the vision.

We are aiming to build a network of very smart machines, mostly additive manufacturing, and additive electronics, which are going to serve as edge devices on manufacturing and cloud manufacturing network, both of which the network and the machines are going to be run and directed by our DeepCube deep learning technology.

And if you want to use an analogy, which will describe it the best way, we're seeing the industrial market moving forward to become you manufacture it, when you need it, where you need it, if you need it. And the rest is staying as digital inventory on the cloud. And the analogy is think today about the paper industry and PDF.

You do not buy a printer, you buy a Word processor application, and you buy the PDF from Adobe or whoever. And you work your product on your computer, and you print it where and when you need it. And if you need it in England at your lawyer's office, you will send it through the cloud and it will be printed there.

The same vision we're seeing for cloud manufacturing, especially if the edge devices, additive manufacturing machines for electronics and for other additive manufacturing. So that is our vision. And as we build, we know, we're not going to have all the types of the edge machines.

But we have certain technologies that will be mastering the edge machines for certain types of products. And we are focusing on the software and artificial intelligence that's managing this network and managing the machines as edge devices. And the vision is described here. I'll just read it quickly to you.

We want to transform additive manufacturing and additive manufacturing electronics to fully digitized sector with environmentally-friendly and economy-efficient additive manufacturing that fits the definition of Industry 4.0. So one-production-step-conversion of the designs to functioning results in devices.

Now, you all realize I am sure that the focus of this vision initially is on high mix low volume. That's where it excels when you have very, very large amount of designs and the manufacturing per design is not 40 million pieces.

Industries that are served by this kind of profile is defense, is aviation, avionics, aerospace, advanced medical, advanced automobile, advanced industrial, and clean energy, and of course the array of research institutions and academy. And all our products are aimed, including this vision to this specific vertical direction.

Now, let me step off the presentation here and mention to you that about a month and something ago we had investors conference in New York which was very, very successful. We were not the only participants. Many, many companies did participate. And we met 35 to 40 institutional investors.

And after we finished the presentations one-on-one, we did a survey. We wanted to get feedback from our investors. Some of them were hind versus some of them, by the way, were new investors, of course. So the feedback is not qualifying, who is who because it was unnamed, unanimous.

But we had out of about 30, 40 response right about seven responses that were, I would define them as criticism or requests for what is not being supplied. And I wanted to go to this response, specifically, I'm not going to go to the positive response, obviously, to self-serving.

But it's not as important as it's important to us to fix what investors feel is missing. So I'll just quickly go through that for you. It may cover part of the questions you're having, make it shorter or it may not -- hopefully it will help.

So first question is or was, it’s very hard to understand organic growth story and how shareholders are served by buying companies without near-term incremental upside? So the response to that is, first of all, all the companies we acquired, bar none -- one exception, I'm sorry, grew organically since we acquired them, which is an amazing achievement.

So the company grew the growth from $10 million to say a rate of -- run rate to 42 is combined, frankly, mostly for organic growth because this year we acquired only kind of 1.5 companies, if you wish, because the first -- the last company we acquired in July, it's not even appearing on the numbers. So the organic growth is inherent.

Many of -- most of it came because we merge the companies, we merge them into our go-to-market and we leverage our go to market to sell more, and therefore the organic growth come from there. The only exception, which I promised to mention, is I spoke before the situation in Europe, for the company that is in additive electronic.

And there was, for instance, a reduction of $1.5 million in sales comparing the year before, just from Russia and Poland, which was a major number and 75% down on that section, because we stopped selling to Russia for obvious reasons, and stopped ordering. And this is the exception.

By the way, at the same time, the same company, we took them to the United States and grew the revenue in United States by 60%, 70% just organically. So it goes to show you. Second question, one issue we have is how to value the company with relatively low revenue, especially with respect to such large cash balance? Well, it's simple, actually.

You take the cash balance, that's worth cash. And to be fair, we had the cash balance of $1.5 billion about a year and a half ago, with more February 2021. We were -- we have close to $1.2 billion, including investments today. So we only spent $300 million out of which half of it was acquisitions, and half of it was operating costs.

And we're very proud of the fact that we didn't spend it. But we don't intend to continue not to spend it. We just intend to spend it smartly. So what is the value of our company? First of all, it's valued at $1.2 billion.

Then you take our business, we have a $50 million or $45 million run rate business, which is very high tech growth business, advanced technologies. So how much the $45 million business valued? It's up to you, it can be valued.

1x investment -- sorry, 1x revenue, 2x revenue, 5x revenue, if it was 10 -- if it was a year and a half ago, it will be valued at 10x revenue, 10x revenue is $0.5 billion, $0.5 billion plus 1.2 is 1.7, divided by 280 million shares, you can find out why the share should be 7 or 8. But I'm not the one to say what the share should be.

And just the one to say, very simple to value our business. Cash, plus the value of the business and today the value of the business is clear because the numbers are much clearer and the growth is there. By the way, our revenue over the last two years only went up by 2,000% and more.

So another way to give you a guideline; or two, to measure what is the worth of the business? Third question was -- a person says, I wish to better understand the company's acquisition strategy, especially in light of looking at so many companies. Since we have Mr. Lederman here, and my voice is getting its course.

And he is heading with a team of four or five very talented people, the implementation of a strategy of acquisitions.

Why wouldn't you speak few words about it, please?.

Good morning, good afternoon, wherever you are. Our strategy has generally two pillars to it. One is technology. The second is commercial. And the first one is technology. It's about hardware, software, and in particular materials science companies that can help us leapfrog our R&D pipeline to get us to where we want to be faster.

And then secondly, on the commercial side, it's about acquiring commercially successful businesses that are selling products and services to the same end customer verticals. I think that's a very important aspect of what we're doing. To give a few examples briefly.

On the technology side, DeepCube is an exemplary example of a software, specifically AI that is a key technology. On the commercial side our acquisition most recently of Admatec and Formatec is an example of that. The products, particularly the printers that they make and sell, they sell to the same end verticals that our other businesses do.

A third example and one that's particularly interesting is our acquisition going back almost a year now of Essemtec. Particularly interesting to us because it is a technology acquisition and a commercial acquisition.

This is something whether of these three varieties that we plan to do significantly more in large part, because of the market valuations which I'm sure have been discussed before and we can elaborate on later..

The one thing we don't do with acquisition strategy is we don't buy companies that has to be maintained afterwards as a silo, standalone subsidiary. We're not in that business, because there's no synergies, no growth and no delivery of dollars to the bottom line. The second thing about acquisitions is the size.

As much as I'm concerned, I much better buy company with $200 million of revenue than company with 10 million or 20 million or 30 million. We've been looking at it. We've been negotiating that for, I would say, two years. And we said no to everything, other than what happens over the last quarter and a half.

We're starting to see finally, the numbers shrinking down. People don't ask for 5x to 10x revenue anymore. And the large companies that we have looked at, none of them other than one, was sold. And our total preference is to buy large companies as long as they hit the guidelines that were described by Julien. Now, another feedback.

Large cash balances that are just on balance sheet are not strategic assets and the company will be pressured to spend it. Very good comment. And let me tell you something. Cash is not strategic question but cash can buy strategic, which means cash is strategic asset, a potential if you spend it right.

If you spend it wrong, because you're under pressure, because questions like this are being asked, then it is not a strategic asset, and then it's going to become a wasted asset. So I'm sorry to -- for the person who has this question, which I don't know.

But I'm telling you, I am totally committed not to spend your money, unless I think it is converted to a strategic asset, which it is, everything we spent it until now was. And hopefully, the few things that are on our table right now are going to make you even happier because of the size and their strategies. So today, look at our competitors.

Companies in this industry are anything between one and a half years of survivability with their cash to less than a year. And that makes cash much more strategic in regular times.

And it makes it positive for myself as an investor and you as investors because reduces the chance of going to the market and needing to raise money at a lower valuation as the market delivers right now.

And people know, our industry know, without names, certain companies that raised over the last half a year emergency cash at valuation of half and less of their valuation before and of course that took them down. Next question.

An investor asked, why did the company invest in Stratasys? So I don't want to invest in companies and invest in other public companies, particularly in the same sector. I agree with this person 100%. It's not attractive for me as an investor or for you to invest in public companies -- or invest in public companies. This is one of the kind.

I explained it three times before, I don't want to get too much into details, but it is a strategic investors -- sorry a strategic investment, which is explained in the email when we announced it, please read it. It stays very strategic. We are now the largest shareholder of Stratasys as much as we know. Stratasys came out with the last quarter result.

They were the only company in this industry other than us. And they're bigger, of course, that came with good quarter results without excuses. So we're very happy with them. And we're looking at this very favorably as much as what is going to happen in the future. But we're not going to do other investment in public companies.

This -- definitely this gentleman is right. Investor feedback about holding the stock a long time. And sorry, that's not the one, the next one. The market cap and cash value have a disconnect and this is concerning. The company is either burning cash too fast, or there is not a real business to support.

Well, the first question stems from a source of lack of knowledge, which is fair, because this is probably a person's matter the first time. So, company is not burning cash too fast. I described to you that cash we’re burning in the 14 years we can be living with that. Obviously, it's not going to be the case.

And do we have a real business or not? Well, we have a 45 million or 43 million, 45 million run rate business with gross margins, it is growing and we spoke about it enough. We think it's real and it's growing. Last but not least, with the reluctance to buy back shares, the company must do solid acquisitions in 2023. Two comments about that.

First of all, I agree that we must do solid acquisitions in 2023. Secondly, regarding reluctance to buy back shares. Well, watch us. We have a year to do that. And we know to value on -- the Board is valuing on a monthly basis when and how much to buy, and you will hear about it.

Until now, I think, I went through the seven comments I wanted to go through and saying it's time to let you, ladies and gentlemen, ask your questions, and we'll be happy to answer..

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Ashok Kumar with ThinkEquity..

A couple of questions. The first one is on the supply chain of components. I think an ease up there which would help support faster organic growth. And you also talked about cash burn and R&D, right. So R&D is about 60% of cash burn now. And your cash burn is about 80 million annualized on average.

You talked about R&D dropping to about 20% of expense ratio by '25 versus. Currently it's about 60%. Just an absolute number is right. So where do you see that in '25 from the 55 million plus or minus today.

And the third part is the gross margin trends, I think you also highlighted 65% on new machines and mid-30s on the traditional surface technology with increased focus on software and service, which is not part of your revenue stream now.

Where you see that in that same timeframe '25?.

Okay. Let me start with the second and the third, I don’t remember the first one. But the second one was about the R&D expense. Let me make it clear, because I think it was a bit my mistake in the slide and I kind of -- maybe, I'm confused you. Our R&D expense as percentage of operating expense is 51%.

Our business model leads to R&D going down as percentage of revenue to less than 20% of revenue. That is where the profit starts to come up at the bottom line, EBITDA and below. Now, in order to reduce the R&D to less than 20% of revenue, there's two ways of doing it, A, increasing revenue; B, reducing the actual dollar spent on R&D.

We have a very clear business model moving forward that the only assumptions that are less known there is of course, what acquisitions will come on the way and we have certain assumptions about acquisitions as well. And in 2025, it shows that the profit on EBITDA level comes somewhere in the middle to the third quarter of the year.

And that's exactly when the EBITDA -- sorry, the R&D level of -- in percentages goes below 20% of revenue. And it goes -- frankly, it depends on the -- how fast the revenue grow. If the revenue grow fast enough to fit this model, we're going to continue to invest in R&D in order to accelerate product development and new technologies.

If, as I said, the revenue grows a bit slower, then we will reduce the amount we spend on R&D, but we'll choose where to reduce it so we don't risk our innovation, which obviously create the revenue moving forward. So the last question that you asked was about our gross margin and services and software moving forward.

We have a lot of investment in software now which includes -- or comes from the concept that we believe that as the analogy I gave you and when you print documents, you don't think about your printer, you buy the printer from Lexmark or HP or wherever, you think about what kind of software you're using to design the document, is the same for product.

We are focusing on design and therefore we're focusing on adding software to the mix, which includes software potentially in the future as a service and software as part of selling a machine. And we see this starting to affect the numbers and the end of 2023. And I'm sorry, Ashok, can you remind me the first question..

Yes, the first question was just basically supply chain components, right? Whether you're seeing any ease up?.

Yes. Okay. We do not feel a supply chain issue with our machines. What we did is when the whole thing started, since we were not spend it for cash, we pre-purchased a lot of our semiconductors that we need for our own usage in advance. And by the way, we paid premium for that, but we didn't care.

By the way, it does affect gross margin, but we didn't have any delay because of delivering machine because of that. So we're not affected. What we are affected is that our customers are affected by lack of components.

So customer for instance buy additive manufacturing, additive electronics machines, which are used to position and add and mount components on boards, since they don't have the components, they say we bought the machine but we want to be delivered next year, but that's the effect on us not by effect on our manufacturing..

One last question on your M&A strategy, you have been very disciplined in terms of acquisitions. And earlier talked about having both a technology and a commercial strategy in that realm and the acquisition of the Polish company was a sub of a large American company.

It looks like you're open to the larger acquisitions, and then how that fits into this cloud manufacturing strategy and machine learning and deep learning and so on, right? So I think how you tie all that together?.

Very good. Excellent question. First of all, it wasn't a Polish company, it happened to be Netherlands company, but close enough, a bit North, actually North and West.

The component of -- and a decision algorithm of what to buy, which is derived from our ownership and our achievements in the deep learning algorithms and artificial intelligence is critical.

All the companies we buy, less, very small exceptions will gain from applying the artificial intelligence the deep learning that we have into the machine, which would increase their throughput, especially through increasing their yield by having a very smart robotic brain that in real time can identify errors in printing and correct them or stop the printing, so increases the yield.

No artificial intelligence deep learning machine exists like this in the world today that can do it in real time with millisecond response time, other than in Tesla, actually, and probably in certain deep learning in space technology, or in missile technology. But other than that, we have it. The difference is they have to do it over in hardware.

We have the patents, and we did it in software. So you can work actually with a regular computer inside the machine. So that's point number one about acquisition.

And point number two is yes, we are looking at large acquisitions, larger acquisitions and the way they fit the cloud manufacturing concept is that the machines that the other companies we are acquiring and manufacturing the machines through the integration of the deep learning is going to connect to the cloud and enable to the software developing design through the cloud, including inventory subject to IP protection, certain defense companies will do it on the private cloud, and downloading it straight into the machine, which is a micro center for manufacturing.

And it's being printed as needed and when needed. So it fits beautifully. And we're actually very, very excited about the about the concept -- this concept..

The next question comes from Anne Margaret Crow with Edison Group..

I have a couple mainly related to acquisitions.

So firstly, could you talk a little more about how you are actively integrating the acquisitions to remove that silo effect that you talked about? Following on from that, how -- when should investors start to see the results of this integration or are there -- is there evidence of that already with regards to cross-selling and the integration of the DeepCube technology into other existing systems that you have already? And then the third question is, looking at the cash pile that you have -- and one alternative would be not to spend it on acquisitions, and then you'd have 14 years of cash at the current rate of cash burn, which, clearly, you're not going to do.

Could you give us any indication of roughly how much of that cash you've got earmarked for acquisitions? I think you've made it quite clear that valuations are more reasonable now.

So you've got much more to choose from?.

We have 12 people in our senior and mid management team, five of those -- first of all 10 of those are ex-CEOs, 10 of 12 are ex-CEOs. They joined us, I guess with the excitement of working with such an open ended and beautiful planned development and growth plan.

But out of this, five were from acquisitions, which means a management team is of 12 is integrated with five which are ex founders, or ex general managers of the acquisitions we did. So that's closing up on your first question..

Okay, guys, it's 50 minutes. I think this is -- everybody has a day of work ahead of them. Unless there's other questions, I want to thank you very, very much for participating. Thank you very much for your interest. And again, you have our emails, phone numbers, and you know how excited we are to speak with you so even if it's offline.

Looking forward to that. Thank you very, very much..

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