Good day, ladies and gentlemen and welcome to Nano Dimension’s First Quarter 2023 Earnings Conference Call. My name is Joe and I’m your operator for today’s event. On the call with us today are Yoav Stern, Chairman and CEO; Yael Sandler, CFO; and Julien Lederman, Vice President 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 statements made on 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. A replay of today’s call will also be available on the Investor Relations section of the company’s website.

Yoav will begin the call today with a business update, followed by a question-and-answer session, at which time the management team will answer questions. I would now like to turn the call over to Nano Dimension’s Chairman and CEO, Yoav Stern. Yoav, please go ahead..

Thank you very much. Good day to everybody. Thanks for being here. Let me start by apologizing that this quarter we're a little bit late in releasing the results of last quarter. We're almost finishing the second quarter. And this is just the first quarter.

Reason is because we've been extremely busy this quarter in lot of integration and the implementation of SAP, the new computer system in all our subsidiaries and all the acquisitions from last year. The good news is, it worked very well and in the future, we’ll be able to be much faster.

My goal is to be able to release full results of the quarter in the middle, around the middle of the quarter after, maybe even better. But for that matter, we, maybe different than others are trying to even be earlier and we released earlier results with list revenue few days after the end of the quarter, which we will try to continue to do.

So the good news is, the second quarter early results will be out in few days.

Before I start to the presentation, just let me tell you that we spend a lot of time and [indiscernible] of lawyers on fighting silly fights with some shareholders and quarterly results of last quarter and this quarter is one of the proofs that you shareholders, our shareholders, my partners, have a great company that is improving on a quarter-by-quarter basis.

And the share price will go up unless you will succumb to people who manipulated the shares and bought them for $2.5 and are trying to get them out, themselves out for $4. We're not going to get them. It's pretty much over. We are winning in every way possible in all. There are [terms in silly] [ph] complains to courts.

So, we're moving forward, and we'll speak at the end about other plans and M&A. It's all good news today. Let's start first, the highlights. We had almost $15 million of quarterly revenue, best quarterly revenue ever. Our gross margins have gone up to 47% on a non-IFRS and year-over-year growth in revenue is 43%.

The increase in gross profit is beautiful and huge percentage number above 550% and adjusted gross profit increase is 68%.

So, what can I tell you? I'm proud in the efforts of both the sales marketing operation teams and not to speak about the R and D efforts that are by now starting to show results and more important than everything else, 50% organic growth, which means the internal generated technologies and breakthroughs is actually causing the advancement.

In specifics, we sold to NASA. We have 10 defense contractors, Fraunhofer Institute, Western government defense agencies are speaking about Western government defense agencies we're talking about all what they call the three letter agencies, which you all know, some countries in Europe they have more than three letters, especially in Israel.

But the same kind of people realize that buying our machines. The DeepCube implementation into the DragonFly and now starting to go into other machines is working beautifully and justifying the smart deep learning that is making the machines accurate with higher throughputs.

Going into the specific financials and in comparison to Q1 of 2022, I don't want to repeat the numbers that I just said in percentages. You can read them yourself. I will just highlight for you in this slide, the fact that the R&D expense is $15 million. It's a huge investment.

And out of a loss in EBITDA of close to $22 million, almost $15.5 million of it is R&D, which means it's a decision of [the invest] [ph] in the future of the company. We can turn this company, which we will profitable very quick.

The decision at this point to continue to invest is showing by the fact that our revenue are at the rate of $60 million, which is almost 50% growth from last year or 35%, 40% growth. Secondly, if you look at the adjusted EBITDA, net of the revenue expense, sorry, R&D expense you see or experience, that's what I just said.

The first quarter ever in the history of the company that we are profitable, $22 million of net income. I'm highly unimpressed with this number, guys. Because this number comes from the fact that we are shareholders of Stratasys, mostly, and Stratasys shares went up as a result of us putting a bid.

So, the fact that the shares went up from 14 to 18 caused us to make money as well. So, let's be fair. That's not how we measure ourselves. It's nicer. to have that than the opposite, but we measure ourselves based on profits from operations and EBITDA unrelated to financial profits. That's how we measure the company. Of course, we have interest as well.

The amount of money we have, some people ask me in the past through emails kind of very, I would say, funny questions or actually, more than questions, I saw criticism that we are not making enough money with the money we have. Well, we are at the rate of $45 million a year of profits from our cash.

So, we're not – and that's without risking the principle, which means we don't invest in certain tools and certain financial tools that we could, which we would make us make maybe $60 million, $70 million just from there, because we don't want to risk the principle, that's not what you gave us your money for, but we are in the business of maximizing return on this capital as it's being prepared to be used in business development, [means] [ph] M&A, etcetera.

The net cash in operation expense that we have spent is much lower than we budgeted for and which is good as well. You see it here in a graphic format, comparison between the first quarter and the first quarter of last year, both on the revenue side and on the gross margins.

It shows in two colors on the right side based on IFRS, how much we grew and the adjusted non-IFRS, which take out of the gross margins, all kind of non-cash expense that are coming from granting of RSUs or stock options to the employees.

We built up an interesting graph here for you, rather than just during year-over-year, over the last three years because our revenue history, really the substantial money is just over the last two years.

We took the LTM of every quarter since Q2 2021, the last 12 months and we show how the company's revenue is growing on a last 12 months basis, which is actually a better way to look at the performance of the company than just looking at year-over-year because who says somewhere the end of the year in the 31st December is the right time to measure.

The right time to measure is every quarter when you look at 12 months before that quarter. That is what this graph shows you.

And you have here 1, 2, 3, 4, 5, 6, 7, 8, 9; 8 data points that shows you how healthy is the company and how healthy is growing and to remind you all these list – the last $48 million in one column before the last is close to 50% gross margin.

And the last column is just taking the first quarter multiplying by four to show you the run rate for the 2023. Here, I did a little bit of a comparison of how are we comparing to the peers that are publicly traded. 3D Systems, is down 9%, Services is down 9%, rest of metal is down 9%. Markforged was good company, up 10%.

The peer group, this peer group has an average down 7%. We are up 43% year-over-year quarterly. Now, if this doesn't convince some people that this company is going to a multi-billion dollars with acquisitions. Without acquisitions, we're going to multi-hundred million dollars, then I will never convince anybody.

The next slide speaks about the synergies from the M&A. I mentioned it twice. I'm very proud of the 50% growth not over a year, but over a half year, which means in Q3 comparing – Q1 now comparing to Q3 two quarters, three quarters ago, is 50% growth.

And the reason I took that is because the last acquisitions that we've made, which was a small one, was the end of Q2 beginning of Q3 last year. And since then, it's all organic growth. We had organic growth before, but this is more protruding because there was no acquisition for six months.

The next slide shows you what – how much we grew in just machine sales, which means, as you know, our business is combined from razor and razor blades. We sell machines and then we sell materials and we sell services, etcetera, etcetera.

Now, why is the machines important? Because the machine growth – the machine sales is the infrastructure that enables eventually the recurring revenue to grow by themselves and continue. And the systems product line revenue increased 45%.

I gave you on the right side here in comparison to company called Stratasys, which reduced their sales in our systems over the same period first quarter of the year by 26%.

Of course, you may not see it from their publications because one of the things you read very soon in our news release is in our due diligence, which is an ongoing uncertainties we're discovering major black holes in their reporting. They are not reporting everything and not reporting everything accurately, but that's a different subject.

Now, let's speak for new products in technology advancement, we have new systems both in the Micro - AM design, you see the machines actually the new machines' pictures there with growing installed base with Accumold, TTH, Government Defense Agency’s DeepCube is starting to show results in the operations of the machines and the most exciting things about DeepCube is we're getting requests from the market, the industrial market, other companies with other machines not competing with us, which are requesting us to implement the DeepCube engine, the DeepCube, Deep Learning engine into their machines and their production flows, which justifies the whole concept of where we started to look for Deep Learning two years ago and eventually end up buying DeepCube is that the need for a tool like this, which is, kind of going together and what you're hearing today about the resurgence of the AI in the industrial field without Deep Learning and AI, this is a glass ceiling that will not be penetrated.

And we have it. The next slide, we'll speak about something that's not connected with the performance of the company. I'll just remind you, it's the last slide. We are buying services. We are buying it for [$20.05] [ph].

We are looking forward because we have a very clear plan of how to fix that company, how to get around their entrenchment of their board and the shortcoming of their management, not to speak about the plans – of the other plans that they put, which are, as everybody here knows quite improper for the shareholders.

So, we're looking forward for this deal to be completed. And by then, our shareholders are going to be seriously benefited from this transaction, but in a very natural way, their interest will be in-line with the Stratasys shareholders which will benefit from this transaction.

I'm welcoming all the services shareholders that are going to sell their shares to us. And I hope that those who sell the shares will keep small amount of shares that they wouldn't sell because those shares will go up after we will implement our plans for Stratasys as their major shareholder. So, I hope to be partners moving forward.

At this point, I would like to open the discussion for Q&A, please..

[Operator Instructions] And our first question here will come from Sol Zelman with Gericare. Please go ahead with your question..

I have a very specific question, which you touched on, but I'd like to add to it and then get your feedback on it. I feel slightly that the market underappreciates the AI capabilities of the DeepCube subsidiary of Nano.

My basic question is, just the knowledge and expertise of the DeepCube's team that alone can be monetized either by alone or even divested.

Just looking at the NVIDIA and Intel's race to dominate that sector, how does Nano fit in there? How do you see that growth opportunity vis-a-vis the other players in the market?.

Okay. First of all, DeepCube business right now is a subsidiary, it's a division of Nano. When we purchased DeepCube, they were in discussion with Intel and with NVIDIA for a purchase, both of them were interested to purchase them. And we kind of slashed it under because one of DeepCube – actually the CTO and DeepCube Founder at the time, Dr.

Eli David, one of the world expert on the Deep Learning was on our board. That's how I knew about DeepCube and [didn’t know] [ph] about it very early, it was by then three years old. So, yes, of course, DeepCube could be of interest to NVIDIA, could be of interest to some other similar companies.

And as I mentioned, as you said yourself, I touched on it, we are already getting interest from the outside for DeepCube to be installing it in unrelated – the company's unrelated to us. We are following up. We will maximize the value of DeepCube. It could be in ways you mentioned.

It could be in combination of some of the way you mentioned, but we're totally focused on that..

Understood. And that information will be available by what period of time? What are we looking at based on – again, it's a superhot environment. I'd love to see – as an investor, I'd love to see what you guys – what your answer to that is? So, when would you [Multiple Speakers].

You will hear every time there will be advancements on the DeepCube side with an agreement with an outside company, we will publish it..

Okay. I'm looking forward to that. Thank you very much..

Thank you very much..

And our next question comes from Katherine Thompson with Edison. Please go ahead with your question..

Hi, there. Actually, this is a follow-on question on the DeepCube opportunity. I just wanted to understand, for you to maximize opportunity, is there a lot of investment you would need to do internally.

So, having the right staff so that you can help sell that software into the existing customers, but also [Technical Difficulty] company and help them integrate that software in with their own hardware..

Since we purchased DeepCube, we [sharpened our pencil] [ph] and we have today a group that we believe can answer all the technological requests that we're getting from outside customers, as well as from internal.

We have about 30 data engineers, data scientists, PhDs, and technicians, including very special programmers that can program the sophisticated algorithms in an efficient manner that it doesn't need [resized] [ph] computers. All of them together is about 30 and the cost is much, much, much less than $10 million per year.

And we feel that we don't have to – and we have a very – in a combination between the group in Israel and the software capabilities we have in our Cambridge Group in England, we feel we have everything in-house..

Okay. Thank you..

Thank you..

And our next question will come from Rick Smith with Smith Capital. Please go ahead with your question..

Good morning, good afternoon.

I don't know if you guys are aware, your filing last night says $25 per SSYS, is that a typo?.

Yes..

Okay. On the last call, I'm sure you remember this, I asked you when the tender offer expired and you told me to date, and I asked you if you promise.

When are you guys going to go away from this thing?.

[We’re not] [ph]..

The market does not believe you..

Who is the market? You?.

The market is the share price.

SSYS right?.

The market [indiscernible] close the deal. The market will believe us when we close the deal..

When you close the deal. Okay. Thanks..

Thank you, sir..

And our next question will come from [Ram Reddy] [ph], an Investor. Please go ahead with your question..

Thank you for reporting a nice quarter. I have a couple of questions. The first one is, so when are you going to get the final judgment from the court or from settlement for the lawsuit between Nano Dimension and [Toronto Group] [ph]? Second question is, are you expecting any analyst coverage in the near future? So, please answer those two questions..

Okay.

Can you repeat the first question, please?.

I want to know what is the time line for getting the final judgment between Nano Dimension and Toronto Group lawsuit..

The Canadian Group?.

That is on everybody's minds..

We don't have any settlement with them. Those are shareholders. They are trying – they were trying to liquidate the company because the price coming in was $2.5. So they wanted to stop all activities and take the money at the $4 since 85% of our shareholders are prices that are higher than that, and we don't think it's even reasonable.

We don't – I don't know what settlement you're talking about..

But I'm thinking right now, when the judgment is going to come from the court. Otherwise, your job is in the [indiscernible].

We don't know whether you're going to be CEO of the next shareholders meeting or not?.

I'm sorry, I don't understand what you're saying.

What is the question?.

The question is, right now the lawsuit pending in the court, right?.

There is a court case, which they are going to lose because I don't have the right and they didn't have the right to try to do what they did six months ago. And even with the other court, as you can see, whatever they did six months ago, has no meaning. Business continues as usual. The company is performing very well.

So, we're not looking at them as any factor in what we do as we run our business. They're totally not a factor. They're shareholders, and that's it..

But is there any date for the final court hearing on that? Is there any date set for that?.

There's few court hearings, both in New York. We sue them in New York for manipulating the share last year. We found out with computer programs that they were cooperating with other funds there, and we're playing with the shares. This is a federal offense. So, we sue them. And this is going on.

And there's a court in Israel, which they try to enforce something they did six months ago, but they didn't succeed. So, until the – once there will be a court decision in our lawsuit against them in New York or in Israel, we'll let you know..

Yes.

But until then, if court is going to say, [what are] [ph] the shareholders meeting they conducted in March, that is a valid, then you are out, right?.

I don't know what you're talking about. I'm really sorry to say that I don't know what you're talking about..

I'm sorry, because they had an illegal shareholders meeting in March 2023 right?.

Sir, as I told you, nothing happened. We continue our business. It was six months ago, the company is growing with doing acquisition of Stratasys soon. So, if there will be any Court decision, we will publish it. Thank you very much..

[Operator Instructions] And with that, this will conclude our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks..

Okay. I see there's a couple of other questions, let them ask them. The opportunity still – so it's just half an hour or so. So, please..

Absolutely. Our next question will come from [Eric Marcus], an Investor. Please go ahead with your question..

Mr.

Stern, can you hear me?.

Yes..

Mr. Stern, at the last quarterly meeting, I asked when you felt there would be – when would be scheduled an annual shareholder meeting to vote on share and directors? And you said it would happen later this year.

Can you give us an update on that?.

I already gave you an update. I published it last week in a news release..

Can you please tell us when that is?.

Yes, it could be probably around September..

Alright. Thank you very much..

Thank you..

Now, with no remaining questions in queue, I'd like to turn the conference back over to the company for closing remarks..

Okay. Thank you very much. Thank you very much everybody, for participating. It was a pleasure to speak with you. Thank you for the intelligent questions. And if you would like to know more, please feel free to connect to us or even to me directly. We'll be happy to speak with you. Have a good day, everybody, and good day in the market..

The conference has now concluded. Thank you for attending Nano Dimension’s quarterly earnings conference. You may now disconnect your lines..