Good day, ladies and gentlemen. Welcome to Nano Dimension's Second Quarter 2023 Earnings Conference Call. My name is Anthony, 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, VP 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 with some business updates 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. Hi, everybody. Welcome to the call, We will go through the presentation and then we'll open it to Q&A. Turning to Slide number 3. Our quarter was an excellent quarter. It follows two other excellent quarters.

Actually, it was Q4 of 2022, Q1 of 2023, and now Q2, each quarter was a stellar -- the quarters were best quarters of the company until now.

The key highlights is, first of all, in our opinion, it's 5 times, there is an organic growth for all people who were asking this for long time and not to speak about some Canadians that are also lying about these numbers, our growth in organic growth in the last three and a half quarters is about 47%.

Our growth from the same quarter last year is 33%, and revenue is higher from -- in the first half is higher by 38% from 2022. More importantly, our gross margins dramatically increased by 81% and 185% for the quarter and half, and they went up from 40% to 48%, depends if you're speaking about adjusted gross margin or gross margin.

And you can see there is in the first column on the left in the bottom comparison for quarters both in IFRS and non-IFRS. In the right column, you'll see a lot of new successes from customers.

Certain things I've been missing there because over the last few weeks, we got one of the major space companies that are buying dramatic amount of machines per one order and more orders to come and similar names that I cannot disclose and in all across the product lines that we have.

On the DeepCube artificial intelligence, very, very important advancement by getting other companies that are building other machines or having other needs, and are interested to buy the DeepCube deep learning machine to install them on their operations -- manufacturing operations, very, very exciting. They recognize the importance.

And remember, we originally bought DeepCube for the purpose of applying the technology inside our machines and in our cloud network -- cloud manufacturing network, but now it seems like DeepCube is going to become a profit center by itself and a revenue generator by itself.

It's under process and we have four or five customers already in the process of signing the contracts and on a long-term basis. We have already one of the largest call-it semiconductor's company in the world that already signed the contract.

The rollout of the DeepCube machine -- sorry, DeepCube engine instead of DragonFly system is happening is out and for me, the most important advancement in R&D is as I told people who are interested when I raised the money two years ago.

The key thing in additive manufacturing contrary to what everybody is telling you may be in this industry is materials. Everything else is doable. It's materials and artificial intelligence. And in materials, we have a major investment over this year.

In three quarters, we invested almost all our R&D in materials and we have major advancement, which we will announce in November in the industry tradeshows. Moving forward, financial specifics. You can see the profit and loss statement in a comparison of Q2 and -- both Q2 as of 2022 and 2023.

Growth of revenue, organic growth since Q3 of 47% and I don't want to repeat myself because I said it in the first slide, but here you see the actual numbers. The EBITDA negative was $23 million, out of which $13 million -- I'm rounding the figures, close to $13 million was R&D expense.

So, yes, it is expense because we don't capitalize it but it is an investment. We spend unnecessary activity at a time Q2 was $2 million on legal for all kind of proxy [indiscernible] which is -- as much I am concerned is a waste of money. But we didn't have a choice so we don't have a choice. We've been forced into that.

The net cash used in operation is $28 million, but we made money from the cash, so really the net-net is only $21.5 million. So on a per-quarter basis, we are making about $10 million, $12 million a year in interest, get close to $50 million per year as the interest rate as per today.

The next slide will describe to you the growth of the revenue of the company on a last 12 months basis. Every quarter measured from the Q3 of 2021 which was $5 million to Q2 '23, it's $52 million -- where the run rate, if we continue at the same rate to be at $60 million at the end of the year.

If you compare this to what other companies in our industry did this quarter of the last few quarters, everybody is down in its revenue, down on its bottom lines. We are up.

Next slide describes it -- the margins graphically, revenue -- sorry, revenue on the left side and margins on the right side and it shows it to you both on an IFRS basis and non-IFRS.

Non-IFRS is basically taking out of the cost, all kind of non-cash expenses or granting of options, expenses that are non-cash to show the actual results in cash as the business actually performs. Next slide shows you the statement I just made about the performance of our peer group.

We chose four or five companies out of maybe 10 that are public, including in Europe. And you can see that other than one, everybody had net shrinkage and we had 33% growth and the one that has dropped is just 5% growth, all this is comparing to a year before.

I can't skip my most favorite subject, which is the proxy fight in general annual meeting -- annual general meeting. You -- if there are shareholders -- I'm sure there are shareholders on the call are called to vote. We have 10 more days to vote and you basically have two choices.

The last one is what we propose, which is to keep the Board that you have now. There is three people to be -- being revoted. We will continue with strong fundamentals from the past. We have 12% of revenue growth with 60% run rate. We have about three to five M&As ahead of us and two of them are very large companies.

And notice what happened in this whole M&A activity when we removed our proposal to buy Stratasys, then all M&A consolidation in this industry collapsed. Everybody's share went down except us. We went up. Stratasys went down from 21 to 14. 3D which was going supposedly to buy Stratasys went down from 11.5 to 6.

(ph) Desktop Metal went down to dollar something, which is supposed to have a merger with Stratasys. And all this because we pulled our offer and all this while our share went up from over the last I think two months from 2.3 to 3.2 and then back to 2.9, somewhere hovering around 3. So that says something.

It's still under the cash, mind you, but we're moving forward. If you look at our historical numbers, I don't want to repeat them. They're listed on the screen here on the left side and you'll be able to see of course on the website, this presentation is there. We have established a very strong base for global go-to-market and R&D programs.

We have invested more money than a typical small company invests, which is something I have described when the money was raised and along the lines every quarter over the last eight quarters and we delivered strong organic growth, not to forget now, 47%. This will continue.

On the other side on the right side, I mean in red, the group that has total no understanding in Nano's business, if they have any understanding in any business at all other than being a hedge fund, attempting to be activist.

When you look at activist activity in the market, when Nelson Peltz as an activist wanted to get into Walt Disney, or when Carl Icahn wanted to get into Southwestern Gas, or when Elliott wanted to get into Athenahealth, all of them came with a very serious analysis of the business of the target companies, which by the way happened to be much, much, much bigger companies, of what is the alternative they proposed with the shareholders that they want them to vote for, so they will end up by changing the way the companies run as much as the location or as much as selling certain businesses and improving gross margin in other business so the share price eventually will go up.

That's not the case here because we don't have Elliott or Starboard (ph) here.

We have a small family business that wants the cash, which we have $1.1 billion, including Stratasys, which we maintained meticulously because it's your money over the year and something that the prices in the market was too high and we're totally positioned now to use it to expand the growth much beyond $4 a share or $3.7 -- $3.8 a share, which is the cash value per share right now.

Because we were so careful, we have this kind of players, call him, trying to get to the cash and liquidity. It's totally self-interested opportunistic. They're nominees to the Board. Each one of them got $50,000 just to put their bios on the list even if they're not going to be elected.

Mind you, when I read the bios, some of them is not worth $5,000, but they get paid $50,000. It's nice but they have golden handcuffed.

You think about voting to them when they will be Directors in your company when they have been paid before by an organization that wants to liquidate it for $4 or less a share, do you want that to happen? Are they independent? Think about it. I'm thinking about it. I'm a shareholder. I voted.

So if you want that to happen, I invite you to vote for the red side, and of course, we will respect your vote. I'll add to that in the next slide. Everything I say is factual. Contrary to a lot of bad data that I saw published about me over the last year and I bent my head and let it slide over, but fake data and fake news. We are talking data.

When I speak in the slide before about the right red side, it's not based on what I think. It's based as an example on a gentleman called Moshe Sarfaty.

Moshe Sarfaty is the main Senior Analyst for Murchinson, out of maybe 10 employees that is testifying under oath in a court when we were dealing with their illegal shareholder meeting in March, and he was asked by the honorary judge. What? I don't understand. The judge said, what exactly do you intend to do if you want to change the Board.

The answer, now it's a court, I don't analyze the activity because I don't understand 3D printing. We really have no idea what is good and what is not good to do here. I think any other word is unnecessary. This is the person in Murchinson, almost the only one that knows something about the company. For him, he does know nothing. He is testifying.

So if you want this to happen, I will respect that. By the way, I will step down because I work for shareholders. And if the shareholders will vote to change the Board with these kind of people, I'm not worry to work under them, not with them, not beside them, unless we are running the company. They want to be partners, I'm welcoming them.

If they want to stay investors, I am more than welcoming them. If they want to stay shareholders, I'm promising Murchinson, they will make money with us. But if they want to take over the company and liquidate, unfortunately, I cannot be there. So -- and I've announced it before so it's not new. I hope all of you will join us.

And I hope now that you are on the call, you can -- you will ask me the tough questions and the challenging questions you usually ask and I like very much to answer. Thank you..

We will now begin the question-and-answer session. [Operator Instructions].

Operator, anybody?.

[Operator Instructions] Our first question will come from Rami Rodge (ph) with Private Investor. You may now go ahead..

Hello? Can you hear me?.

Yes, please..

Hi. So thank you for the presentation. I'm actually also quite disappointed by the fact that Murchinson only talked about Nano's cash position without even providing any roadmap for the actual business and profitability. So I am supporting the current management.

Having said that, can you please share some insight on the early turnouts and chances to win this proxy contest? Thank you..

Yeah. Listen, the people who are coming from Canada together between the two funds and as much as I know have -- and that's what they declared have 15% of the -- sorry, about 12% of the company. That's about I don't know 20-something million shares.

Now I'm assuming they were able and I know about a couple of other funds that they recruited to vote with them. All of them, their cost per share coming in is about $2.5.

The other two funds, I know about Clearline Capital, I know about Intrinsic, people that I know well and we're very, very friendly until with us -- talking to us and then they got greedy when they realize somebody can help them because they had a cost coming into the same price.

So I'm assuming people who will naturally vote for them in order to get $3.7 a share will be the people I mentioned, which together, let's say it's 15%. The rest of the 85% -- maybe 82% -- 83%, maybe there's 2%, 3% of -- in between but the 83% rest is retail shareholders. I'm talking about 160,000 to 170,000 people.

This is almost like voting for parliament. When you have to reach 165,000 people give or take, it's not that you can speak like if there were five institutions one by one and convince them that the growth plans we have comparing to liquidation plan is worthwhile.

So we have to reach and we are making an effort now four weeks to reach these retail shareholders which by the way most of their price coming in is above $5. We're talking about intelligent people. We're talking about people who are using their own savings to invest over the last two years.

Because when I raised the $1.5 billion, I only sold to institutions, and you think about it, only 15% were left. Actually, I did raise the money from Murchinson, but -- and some invested in all my deals and made money. So all -- them including and some at the project time sold their shares to retailers, we paid much more than $4 a share.

These retailers, if they vote for us, it's a total lens-led success for us, 85% against 15% give or take or 83% against 16% -- 84%.

The issue is there are a lot of these retailers are not used to vote and they get emails or messages from their brokers and they don't pay attention because they have businesses and they have companies to run and they have work to do. And if we don't get them to vote and only a few of them vote, then we don't win. We lose.

If half of them vote, we win dramatically. If 40% of them vote, we win dramatically. That's the challenge. We are making the best effort we can. I hope I answered your question..

Yeah. Thank you..

The key thing for these retailers obviously, is if this liquidation happens and these guys get in and they start to do or will buy the shares from the public or do a share buyback and -- at $4 or $3.5, they will make 40% to 70% return on their investment over half year. The rest of the retailers, the 85%, most of them will have losses.

And by the way, note, we announced that we went to court to ask for another $227 million of a buyback and we're asking it for a year. So we will have the option depends on the advancement of the M&A programs and acquisitions to decide what is actually adding more share -- sorry, more value to our share as we move forward during the next year.

Once we get the approval, sometimes we may decide to buy the company we're going to buy, the M&A and merger to make money and earnings per share, or sometimes if their purchasing is not happening in the right pace, we can use this war chest to do a buyback of shares. So that's it, by the way. Yes, please. Next question..

Our next question will come from Katherine Thompson with Edison. You may now go ahead..

Hi, there. Hi. I have a couple of questions. I'll just give up the questions this way. And the first one, you mentioned [Technical Difficulty] I just wanted to understand if that was existing customer, and also when you expect to ship that order and to recognize revenue. And then the second question was on the recent acquisition of Additive Flow.

I just wondered if you could give us any financial information about the company, so any revenue or cost data, and also any information on what you paid for the company. Thanks..

Can you just repeat the first question? I couldn't hear. There was a little bit bad connectivity..

Yeah. So you recently announced [Technical Difficulty] new large order. I just wanted to know if that was from existing customer or new customer, and also when you expect to ship the order and recognize the revenue..

Okay. I got it. Thank you very much. Okay. So the first question, the large order which was the larger order in our history to one customer and the largest amount of also machines we're selling to the same customer was the first-time customer leading aviation aerospace worldwide company.

They were shipping it within the next few months, some of it this quarter, some of it early next quarter. We expect that's the expectation. They expect to buy many more machines if this first order is successful because they are growing very fast. And it's the first time, as I said, customer.

Secondly, -- second question, the Additive Flow acquisition, we did not publish the numbers for a reason. It's a very sufficient technology and it has very sophisticated clients, some of them customers, some of them -- I disclosed some of them I couldn't.

Obviously, the numbers are small enough that we can afford not to publish it and because of the sensitivity of the technology and the competition to Additive Flow and the customers they have, we decided not to publish..

Got it. Okay. Thanks..

Next question, please..

[Operator Instructions] Our next question comes from Donald Solomon (ph) with [indiscernible] Firm. You may now go ahead..

Hi. Good morning. Yoav, thank you for your presentation. A lot going on, both in the release as well as the presentation this morning. Some shared and some new information. I guess a lot going on out there. I'm interested in picking your brain for a second.

From your perspective, how do you envision the consolidation stage in the additive manufacturing sector following the termination of the Nano's tender offer? And the fact that the current 3D Stratasys deal in my opinion at least doesn't seem realistic, especially after their quarter two results and their current weak cash position based on their -- those results..

Okay. It's a very good question. I kind of referred to it a little bit earlier, but I will expand on that. So let's speak about who we are talking about.

Our industry is, I would say, more than 400 companies for sure because Julien here beside me and our M&A department has looked and we have a list of -- Julien, at least 400, right?.

At least that..

So that's the people we know. I'm assuming always these people we don't know, but that's probably much, much smaller. We know that the industry with companies from -- anyone from $1 million to $650 million in revenue.

The once that are public and you know them better because of publishing the results are Nano, Desktop Metal, Markforged, 3D Systems, Stratasys, Velo3D, voxeljet, in a way materialize, Protolabs, Shapeways, Fathom, Xometry and [indiscernible].

Of course, they're private companies beyond that, and I think, this industry which is estimated at $15 billion today and growing to $30 billion at the end of the decade is bound and must consolidate. And what we started and failed and we did fail because we offered at the end to buy Stratasys at full. They didn't even respond to us.

Then, we offered to buy part of it and they activated their poison pill or had the poison pill. So we couldn't do -- we started something that we believe is right for the industry because none of the company I have mentioned to you is profitable, maybe other than materialize. I don't remember exactly.

Maybe -- and materialize in Protolabs is not really additive manufacturing because Protolabs is more subcontract manufacturing and materialize as well. So all the rest are not profitable. More than that, all the rest are finishing their cash. Five of them are SPAC refugees. The share at SPAC was $10 at a deal point and today, all of them below $1.5.

And this -- there is net of Stratasys and 3D. Stratasys and 3D announced horrible quarters. All the rest of the companies announced bad quarters, may be added in Markforged, which also had a squeeze out in its quarter. This company doesn't have a business model successful.

They have a lot of exciting technologies, entrepreneurs which are very bright, customers which are excited. No successful profitable business model. In order to reach that business model, it must consolidate and it must consolidate along rational lines of synergies, combination of very few and focused vertical markets.

How can you have a company like Desktop Metal which is selling to nuclear, to aviation, to automotive, to dental, to the furniture industry, printing wood, to biology industry? How can you have a company like Stratasys who is selling to similar verticals? Soon enough somebody will sell to the food industry when they print meat and Markforged will buy them as well or Stratasys -- sorry, not Markforged, I mean Desktop Metal.

If I said Markforged, I meant Desktop Metal. I'm sorry. Selling to all this. Markforged is actually the only company that's focused other than Nano Dimension. Markforged is the exception lead showing the rule. So -- and enabling Markforged is losing $16 million to $20 million a quarter, and they are focused and they are good.

So one -- if one asks me the direction it's going, there is no other way than the direction we started to curve and we failed. So we moved back. Churchill moved back in Dunkirk as well. If he wouldn't have pulled the forces in Dunkirk -- Dunkirk in second World War, he wouldn't have won the war three years later.

So we moved back because we were wasting our time fighting types like Stratasys' Board. And we're moving ahead again and we will lead this and we will lead this also because our strategy is not based on only buying 3D printing companies. If you look at our presentations across the line, we are talking about cloud manufacturing.

We're talking about converting into a digital industry, which is managed through the cloud and through artificial intelligence. And the edge devices can be additive manufacturing, can be additive assembly. It can be a lot of other edge devices as long as they're digital and can work in a high mix low-volume environment.

So our strategy is not technology-based. It's based on the principle of what kind of industry we want to make efficient and profitable. And we will move forward, and as I mentioned earlier, we have already a few in the process since what is M&A and we'll consolidate them on the principle of purchase and grow, not purchase and squeeze..

Okay. So based on what you just shared where you're saying that except for Markforged who is doing it right, everybody else is just losing money, and we're seeing the significant sell-off in major cases as well as the decline in share price of Nano's peers.

Is everybody just running at a capital? And do you foresee bankruptcies coming through like with everybody else except for Markforged and Nano?.

Nano is definitely not going to any other direction other than growth. Yes, I hope and I think they're smart enough people. They're not going to drive it into bankruptcies. They have to drive it into -- I'll give an example. Take Velo 3D. They finished their cash.

They announced -- they didn't have a choice so they announced last week that they're raising convertible debt at $70 million. Their share went down 40%, of course, because it totally labeled. They'll get the cash. They're totally non-profitable Velo.

They have gross margins ridiculously low, if I remember right now, between 15% to 20% and they don't have a business model. They have one customer that I think is more than 35% or so from what I know on their business. Can they finish their cash? So they didn't go under. They raised money, diluted the share.

Share went down from $3 to $1.40 and still going down. That's a good example. Another example is [indiscernible] much smaller and posted debt is $30 million business, which we know very, very well. And they didn't do what's right. They're getting close to finishing their cash and are desperate.

And it's not easy for them to raise money because they're a German company with a German corporate law them allowed to raise money at any price, you're limited by how much discount and [indiscernible] I don't know if they'll survive. Desktop Metal finishing their cash within a quarter and a half. 3D.

3D cannot be to Stratasys what they committed in the proposal because they had a bad quarter, they burn the demand also. So I don't remember the exact number. They don't have enough cash to pay now. So I don't think they will go bankrupt. I think they're smart enough people that will understand that they need to consolidate..

Great. Thank you very much..

Thank you very much..

[Operator Instructions] Our next question will be a follow-up from Rami Rodge with Private Investor. You may now go ahead..

Hi. Thank you.

Following my first question, do we know how the voting is going? How many people are voting so far?.

So far I think I saw about 30 something million shares voted out of 250 million. But remember, we have 10 days ago. So usually people vote -- traditionally vote what have been told by our experts in the proxy solicitation firm, they're voting usually in the last few days. So I'm not surprised that it's still low..

Okay. Thank you..

Thank you..

This concludes our question-and-answer session. I would like to turn the conference back over to the company for closing remarks..

Let's just wait for a second and see if a couple of other people may have some latest thoughts about the question to give them an opportunity and then we'll close it. Okay. It seems like it's quiet on the Western front. So I will thank you very much all participants. I would also want to invite you.

Over the last few months, I'm spending time writing, answering emails to private and -- not private investors. Personally, I made it my goal to respond to you as we're in this not-to-nice process of people saying bad words about other people and people trying to liquidate the Company.

So if you wish, I'm sitting it night hours and answering emails to retail investors.

Feel free to write me and to call me if you wish, and we have other teams here, other members also of the team that are totally focused on answering the question because our goal when we're convinced that from 85% of our investors, if we have reached to each one of them, we would have 85% voting for us.

Of course, we can do that, but we're making our best. So thank you very much everybody, and have a good day..

The conference has now concluded. Thank you for attending Nano Dimension's quarterly earnings conference call. You may now disconnect..