Good day, ladies and gentlemen. Welcome to Nano Dimension’s First Quarter 2024 Conference Call. My name is Betsy and I'm your operator for today's event. On the call with us today are Yoav Stern, CEO and Member of the Board of Directors, Tomer Pinchas, CFO and COO; 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 at 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 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 Dimensions CEO and Member of the Board of Directors, Yoav Stern. Please go ahead..

Thank you very much, Betsy and good day to everybody. Good morning, good afternoon, good middle of the day. We are going to speak today about the first quarter of 2024 and some reflection from before and after. And I would not read you the news release. You hopefully read it or you will be able to read it later.

I'm going to speak into the presentation and give as much as possible time for your questions, so we can lead it toward what's more interesting for you. To start with, we had a great quarter with total fitting, which was totally fitting the reshaping Nano initiative, which we started the last quarter.

And it was a very important initiative, because it's basically embarked us on a direction of emphasizing profits and adjusting the business model toward profitability eventually EBITDA positive et cetera. Rather than just either to internal growth or organic growth or acquisitions just focusing on the top line. Of course, the top line is first.

By the way, the top line here [Technical Difficulty].

Pardon me, it appears we've lost connection with our speakers. Please wait while we reconnect. We've reconnected with our speaker line..

Okay, I'm sorry, ladies and gentlemen, something technology is not perfect in spite of everything. I guess we dropped off or you dropped off. I don't know where, but I'll continue from where I was, and if there'll be questions, I'll get back. We had an amazing quarter of improving profitability according to our reshaping Nano initiative.

We went up to [Technical Difficulty] is another important, I'm just trying to adjust the presentation. New customers partnering with us is another important factor in this order. RF, for everybody that doesn't know it is radio frequency. This is one of the major applications for AME, Additive Manufacturing Electronics.

We have a proof-of-concept that new customers are wanting to use it. A lot of it is in defense. We have repeat sales to Western Defense Agency, we have new customers in advanced electronics. Some of the names you appear here, obviously the name does not appear. We have two leaders in the new space industry. You can guess what kind of industry is that.

And we have repeat defense sales, repeat sale to a defense contractor. This is just small part of the achievements of this quarter. Innovation and securing the competitive advantage relate to how we develop our products and what achievements we reached, while developing and investing in R&D.

AI services is a starting business where DeepCube is actually starting to make money by itself. Not that we intended ever for our AI technology for an industry to be a profit or a revenue center, because we bought it and we're using it mostly to advance our machines in their AI for industrial accuracy and maintenance.

But we have enough customers that requested us to potentially do business with them just with the AI capability and to install them in their machine as long as they're not competing with us we're doing it.

On the robotics side, we increase the speed of our robotics additive electronics by a factor of 300%, and mostly it is also used beside component mounting. It's used for solder paste spreading, and this is a very, very important competitive edge comparing to a competition. And not less important is our digital solution in software.

We partner, we just announced it with Esko and Fiery and to become a one-stop shop for digital printing solutions. Highly important achievement. The reshaping Nano that I mentioned before is all about numbers, obviously.

If you look back with the reflection on the -- starting from the left side of the slide, since 2021 we had 150% compounded annual growth. Since 2022, we have 36% expansion of our gross margins, that's 36 actual percentage from 10% to 46%. Our gross margin grew by 4.6 times.

Our operating expenses in 2023 and ahead were reduced by about a third comparing to Q1 of 2023. And the most important point that we are so proud of is our cash burn was reduced from $27 million a quarter to $7 million a quarter.

And we're still moving ahead in the reduction of this to the point that the year-end, on a quarterly basis, will be close to break even, assuming the company is as is without acquisitions. Last but not least, and actually one before last, the industry situation. The industry situation is very well reflected by this graph. It shows you the following.

The left side blue is the combined revenue of the four industry leaders in 2012, and the combined profits EBIT or EBIT to be accurate. On the right is the situation in 2022, a 1.5 ago, two years ago. Actually, it's a year and a half. The combined revenue grew from $650 million to over $1.5 billion.

And the combined profit grew from positive to deeply negative. I wouldn't say grew, but shrunk, probably a better name. This is a indication, a manifestation of a market that is growing, but poor business strategies and business models that destroyed otherwise good businesses.

Meanwhile, the demand for additive manufacturing is existing in the market, because all those service providers, which are using multiple additive machines from different suppliers, which they're buying cheaply, are making money by supplying parts, which means the demand is there.

It's just somebody in our industry, which I would say including all of us, is not running our strategy right. And we intend to try our best to change it because of two reasons. A, we have the theory and the analysis of what to do. B, we have the practical ability to do it and C, we have the capital to effectuate the consolidation of this industry.

Now it's last but not least, the buyback program that some of you recommended for us to do a 1.5 year ago and we listened. As proven to be successful, we bought shares much below the cash value of the share between $2 to $3 a share. We reduced our share count by 15% and we have more inventory for this activity.

If you're buying a share today of Nano at $2.7 a share, beyond the excellent performance that we just spoke about, and beyond what we are discussing and promising regarding acquisitions, you're buying a share at $2.7, which is a discount even over the cash of $4.1, and not considering the value of the business above it.

So as I think I've mentioned in the past, certain people see a problem in every opportunity, “problem” being the share still at the lower price than it should be by far, and certain other people see opportunity in the problem. When the share is below cash, that's the opportunity.

I don't think you have a lot of companies with performance like that and yet the share is below cash, so this is my bottom line. At this point, Betsy, I would like to open up the session for questions-and-answers..

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Troy Jensen with Cantor Fitzgerald. Please go ahead..

Hey, gentlemen. Thanks for taking my question. Good morning, good afternoon.

Quick for you Yoav, I'd be curious, if you look at your Q1 or 2023 revenues, how much of it, if you could break it down a little bit between like additive and robotics or the other sectors you're in, I'd just love to kind of get a bigger picture of your total additive exposure?.

It was about half from additive, a bit less than half than additive manufacturing, sorry, additive electronics and half form additive manufacturing of all kinds, including electronics, including micro mechanical polymers, special polymers..

All right, perfect, thank you for that, I appreciate it. And then also Yoav, I think it's 12/28, you guys had the announcement for Stratasys and the offer for [16.50] (ph), if I remember correctly, but you guys been extremely quiet ever since.

So I wonder if there's any update you can kind of give us on the status on when you think this validation cycle could start? And then I got one more question for Tomer..

I remember, you know, of course remind me that when my kids used to be quiet in the room, I got very nervous. Yes, we were quiet. The reason we are quiet is not we are doing bad things. The reason we are quiet is because contrary to last year when we did not manage to convince Stratasys to speak with us. This year we have a very friendly discussion.

It's intensive and we're continuing our discussions about what we believe is a good solution for the industry. And we are strategic partners, because we are the largest shareholders of Stratasys 15%. And obviously we're not competing with each other and you know that very well, they know it as well. So we are in a discussion of how to proceed.

And the reason we kept the offer out is we don't want to rock the boat. Eventually, obviously, you know, that the prices have changed since then, but we're not giving up the potential to cooperate. It's done right now on a very friendly basis and Yoav and Yoav -- I think two Yoav’s are talking a lot..

Okay, yes, that's great to know.

How about lastly and I'll see the floor, but Tomer if you could give me just kind of a sense of what revenue level do you think you need to hit breakeven with all the restriction that you guys have planned here?.

So basically our plan is to reach breakeven towards the end of 2025, second-half of 2025. And assuming we are going to grow our business as planned, similar to this year, but 25% to 30%, the second-half of 2025 will be a break even..

Okay, awesome. Well, thanks guys. Congrats and good luck..

Thank you, Troy..

Thank you..

The next question comes from Katherine Thompson with Edison. Please go ahead..

Hi, good morning everyone. Just wanted to ask three questions. I'll quickly get the questions out.

First, could you characterize customer demand at the moment and kind of how that might have changed over the last quarter or so? Secondly, just so I can understand the cost base that we're seeing for Q1 ‘24 after the reshaping Nano program, is that now the kind of steady state level of cost or is there more cost to be cut? And thirdly, should we expect to see you doing more share buybacks at a similar pace to what you've done over the last six months or so? I guess that's partly dependent on share price..

Okay, excellent questions. And thank you for that. Let me start by the first one customer demand compared to Q4. We sell to about six or seven, we're selling to six or seven verticals. So the customer demand is obviously typical to vertical.

I can tell you that, for instance, on the defense side, the market is very, very active, obviously because of the conflicts in Israel and the conflicts in Europe. Mostly by the way in Europe, in Israel, we don't feel it by demand, but in Europe we do. In the United States we do. Customer demand in other areas.

In the general electronic field, a bit weakness in the German market, maybe because of the war itself. So we feel a little bit slow down, but it's marginal in the periphery. It's not affecting our main business. And in the other verticals, including medical, including academics, research institutions, we don't feel a change in the demand.

As much as the second question, what is the cost basis in Q1? Is it going to stay or is it going to be cut more? The answer is, we are going to improve our cost basis and it's going to be reduced from the first quarter definitely and you're going to see it in the next two, three quarters to come definitely.

And last question more shares to buy to purchase. Share purchase and acquisitions and investment in R&D is all about asset allocation. It's a very different three profiles of how you allocate your capital and what is the return.

We believe that the return in general by investing in R&D and investing in acquisitions on a longer term basis is much higher than the return on buying shares.

The buying shares is a quick return, because you buy shares right now at less than cash and the result is immediate on the quality, on the, sorry, on the value of the company's balance sheet, and obviously on the number of shares. So it’s always a decision we're going to take on a quarterly basis. Depends what's the alternative ahead of us.

As I mentioned before, right now, the acquisition trail is pretty bubbly. The asset allocation according to what we see in the immediate future and we're using it accordingly..

Great. Okay, thank you..

Thank you..

The next question comes from Sol Zelman with Gericare. Please go ahead..

Thank you, Betsy. Good morning, Yoav, and thank you for the excellent presentation and great to see that the quarter is starting off strong and may continue that way, especially with everything going on in Israel. I will praise her with you.

You know, at the gentleman, I apologize, I didn't get his name, but the gentleman from Cantor Fitzgerald touched on my question. You got off easy with the answer, but I guess I'd like to touch on it just a drop more is investors, traders have this question quite often.

When you look at, let's call it your investment thesis, which is you look at performing trade, underperforming trade, when do you recalculate that thesis to see when you reverse or cut that underperforming trade within your portfolio? For example, very specifically on the Stratasys offer back in, I believe it was end of 2023, based on where they are now, based on their recent results, it looks like they're underperforming.

It's in your portfolio.

I don't believe that your previous offer is relevant anymore, you know, are we looking at continuing in the offer? Are we looking at potentially cutting our losses on this and pulling back from that position?.

We are not going to -- we are not looking to cut our losses and to be a little bit cynical, we didn't lose anything as long as we didn't sell. The investment is a strategic investment is not an investment for trade in the market. I've said it a year ago, more than a year ago actually.

When we purchase it, the investment to have 15% of a market leader without getting into its business and without competing with him -- with it, is definitely a strategic investor, a strategic investment, point number one. Point number two, of course, that leads to the discussion we have today.

It's true that our offer from few months ago is probably a bit too high now. But as I mentioned before, we don't intend to divest from this investment at this point. We believe Stratasys have a good future. And now that we're getting close to their management, we believe they have management that is sharing a lot of our vision.

And we're continuing the discussion with them on potential cooperation..

And thank you.

Just a quick question [Technical Difficulty] do you feel that it has a negative overhang for Nano, having that -- maintaining that position?.

Sorry, I didn't understand you..

Does maintaining that position or maintaining, not having that serious reassessment, have any negative overhang for Nano Dimension?.

No. The only thing that maintaining this position is affecting you or me is in a funny way because of the accounting rules. If in the last day of the quarter, give an example, let's say the shares of services went up by 30%, I will have in that quarter a huge profit.

If in the last day of another quarter, the share went down by 30%, I will have a huge loss. Both the profit and the loss obviously are not indicative of anything other than one day trading, but that's how the accounting rules work.

It doesn't affect the cash flow, it doesn't affect our business, it doesn't affect how we proceed, it doesn't affect the acquisition, it doesn't affect how we do R&D..

Great. I'd love to see how this plays out. Thank you for sharing that there is a consideration on that reassessment, that one that you're doing in very much in par and together with the Stratasys team..

Thank you very much..

Thank you..

Thank you..

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Yoav Stern for any closing remarks..

Okay, thank you very much everyone. Thank you for your questions. I'll summarize by saying that something I said during the meeting today, our industry is in a very peculiar situation and a very peculiar place.

Look at everybody around us and think on your mind how the situation today relates to the strategy and the intention of Nano Dimension as I described to you over the last two years and you'll come to the conclusion by yourself without me having to say anything at this point. So I thank you very much for thinking about us and being our partners.

Good-bye..

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