Good day, ladies and gentlemen. Welcome to Nano Dimension's Second Quarter 2024 Conference Call. My name is Gayleen 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, I want to remind our listeners that some of the information provided on this call may contain forward-looking statements, and the safe harbor statement outlined in today's earnings press release also applies to statements made during this call. If you haven't received a copy of the press release, please check the Investor Relations section of the company's website. A replay of today's call will also be available in that section. Yoav will start the call with a business update, followed by a question-and-answer session where the management team will address your questions. I would now like to hand the call over to Nano Dimension's CEO and Member of the Board of Directors, Yoav Stern. Yoav, you may begin.

The name is Yoav, and I hope people by now know me, but I've been twisted before. Hi everybody, thank you very much for joining us this morning. Taking off your time in the beginning of the day. Quarter is a very strong quarter, the best quarter we have ever, even though we had a strong quarter and a similar quarter last year. We are still about 2% above that, which we are proud of. We have gross margins up to 45%. The adjusted gross margins are similar to last year; on a half-year basis, they are up, while on a quarterly basis, they are a bit down, but negligible. More importantly to us, because we're aiming at positive cash and profits, is that our cash burn was down 54% from a $31 million cash burn down to $11 million. This is a result of a turnaround and reduction of expense plan that we implemented in the first quarter of this year. Not because we don't have the cash to fulfill our business plan for the next three or four years, but because we believe a business plan and a business model should lead to positive cash flow as quickly as possible. We are 64% on the way there. We also have some business updates, which somewhat repeat what I've said before but are very important. We announced the acquisition of Desktop Metal. We have innovative Additive Electronics products, an Integrated Inspection System, and the digital printing partnership between GIS and Esko-Graphics and Fiery. We announced this before, and it's very important as we integrate all our product lines into the wider industry. If you watch now, the customer highlights slide is the next one. I brought up a couple of names from two of our product lines. The reason why we didn't bring many more names is we are not allowed to because many of our customers are sensitive to publishing their names. Some of them are in the space industry, some in the defense industry, and some in other industries, like computing, which are major players in the computer industry, but they don't want their names to appear. Beyond these two new customers, we have close to six to ten western armies as customer files and between five to seven three-letter agencies, secret service agencies, around the world who are customers of ours. We have some serious clients among the largest defense contractors around the world, probably four or five of them are our customers, not just big names, but also HENSOLDT from Europe, which is our joint venture partner in a mutual investment. We are slowly appearing on the forefront of every chosen group of industrial customers. If you're looking at the slide titled 'Creating an Efficient Industry 4.0', this is a very important slide. Not so much because of the data that appears there, which is the data of our company over the last three years compared to last year, but because of the title. Efficient Industry 4.0, ladies and gentlemen, we are not limited to the additive manufacturing industry. We aim to be a part of Industry 4.0. The reason is we believe additive manufacturing is not just an industry; it’s a pile of technologies. The industry we are in is one where we manufacture machines that are digital and converting the regular and traditional industry into a digital Industry 4.0. As an example, if you take a very advanced CNC machine, computer numerical control, it used to be numerical control before it was called computer numerical control. These are also digital machines for the industry. They are edge devices and create an end result product; however, they utilize reductive technology, not additive technology. In our vision, this is part of one industry. As we grow and expand, you will see that we will start to play a role not just in additive manufacturing technologies. That is very important. One of the reasons for that is the additive manufacturing industry – or I shouldn't call it an industry; I should call it a pile of technologies – is considered to sell about $15 billion a year of products and machines. Out of the $15 billion, probably 12 to $13 billion comes from people who are using the machines and selling products using those technologies, while $3 billion to $4 billion consists of those manufacturing the machines, doing R&D, and developing technologies. So two-thirds of the market, or 75% of the market, are people who do not invest in R&D and do not build machines or manufacture materials. The people manufacturing products using our machines are making money, while 95% of the manufacturers of the machines and materials are losing money, which is not a normal situation and cannot hold. Our role in this segment is to consolidate. You can draw an analogy by looking years ago at the aviation industry when there were many manufacturers of aircraft for commercial use. The manufacturers of the aircraft are us, the machine manufacturers, and the airlines that operate them are the users who manufacture products from those aircraft. Initially, before regulation, the airlines were profitable, while the manufacturers were often losing money. Today, we have two manufacturers: Airbus and Boeing. This consolidation allowed them to become profitable because they realized early on that others could not survive on their own. This is what will happen in our industry. While I'm not sure it will reduce down to two, I think we will end up with more, but definitely not 350 companies manufacturing machines, with at least 95% of them not making money. The next slide about the acquisition of Desktop Metal marks one of our first steps. It's not our first step since we consolidated previously by acquiring seven companies before Desktop Metal. However, we waited a long time for larger acquisitions because prices were totally out of whack. If you read their proxy statement for shareholder votes, you will see how we approached Desktop Metal for acquisition—nine proposals over the last two years. The last proposal they accepted was our lowest. Traditionally, one increases their bid when they don’t get a deal, but in this case, we reduced our price with every new proposal because valuations had decreased due to the market conditions. Thus, we are now actively pursuing the acquisitions of larger companies. The next slide shows our belief in where we will be positioned once we close the acquisition with Desktop Metal. Even with Desktop Metal, it takes us from being in the $60 million to $70 million range to $230 million overnight. This places us in a high growth potential bracket with the broadest technology portfolio. However, all these are just sub-level drivers that must lead to a profitable business model. The next slide outlines our plan to develop a premium, high-margin portfolio of additive materials and technologies. As stated earlier, we are venturing into the digital Industry 4.0, which will not be limited to additive manufacturing. We believe that software and AI are the major drivers after materials in this industry, and we are focusing our R&D efforts accordingly. Next, we believe that the merger with Desktop Metal is a strategic transaction for us. There is considerable overlap of distribution and market verticals between the two companies, and we both have significant customer bases. We are targeting industries that require medium volume and a high variety of product designs. These industries often manufacture a lot of specialized designs instead of millions of identical products. Lastly, some acquisition details: we previously shared that we acquired 100% of Desktop Metal in an all-cash transaction. People asked us why we wouldn't pay with shares. The reasoning is two-fold; first, our shares are undervalued by a significant margin. Secondly, paying with shares when they’re undervalued dilutes our shareholders' equity. You also recall that we repurchased shares ourselves because they were undervalued, which makes sense in terms of lessening the share count while increasing future earnings per share value. The reason we don't see immediate attention on the stock value is that the whole sector is receiving negative sentiment from the market due to the struggles of other companies. This acquisition will change that. Total consideration for acquiring Desktop Metal is estimated between $135 million to $180 million and is expected to close at the end of the year, pending regulatory approvals and a positive vote from Desktop Metal shareholders. This is the point where we try to address your questions and will hopefully provide satisfactory answers. Operator, please.

Hi, gentlemen, thanks for taking my questions here. Good morning, good afternoon. I felt like the message this quarter was much more focused on robotics, AI, and software than it has been previously. Is that correct? I sensed a significant change in tone regarding the consolidation you want to pursue.

Yes, we believe that what will drive sales of all our machines, including Desktop Metal and others in negotiations, is software. To draw an analogy, consider that when developing your product—think of spreadsheets and Word documents—you're focused on the software that enables your work. I don't think you know the name of the printer in your office; the software drives your manufacturing of products, not the hardware.

All right. Understood. I kind of agree; I get it. And then how about your thoughts on growth in additive versus growth in the robotics market, when you think about the next 12 months? Is robotics driving growth while assuming less in additive, or could you provide any extra color?

I believe that the robotics and automation sectors, related to Industry 4.0, whether in electronics, additive electronics, or other domains, have established industries that grow at 10% to 15% annually. However, the growth exists, especially as these industries digitalize. The growth in Additive Manufacturing is focused on specific segments. We believe metal Additive Manufacturing segments will experience significantly higher growth once the fitting formula for materials and printing technologies harmonizes. We already see this occurring. Furthermore, a critical driver of growth within the Digital Industry 4.0 is the software and applications enabling seamless design and printing processes—this is essential for growth.

Got it. Understood. If you think about the next 12 months, do you believe you'll focus on integrating Desktop Metal? Or do you think we will also hear about a couple more acquisitions? I know you can't say for sure, but your thoughts would be helpful.

In the next 12 to 24 months, we'll focus on both the integration of Desktop Metal and potential further acquisitions, as long as our management team is capable of managing it effectively. One thing to remember is that while acquisitions are exciting, it's the successful merger that ultimately yields profitability. We are carefully negotiating with three to four other companies. Depending on their size—if they're smaller, we may proceed with them quickly—but for larger companies, similar in size to Desktop Metal, we will move cautiously. We are actively in discussions.

All right, thanks for your time, and good luck moving forward.

Thank you, Troy.

Hi, it's actually Katherine Thompson. The first question— I believe you have teams already working with Desktop Metal on integration plans for post-completion. Can you share anything about that process and how it's been going?

Yes, the process is referred to as PMI, or post-merger integration. We run this process with teams from both companies working daily on-site at both headquarters in Boston. It's straightforward to merge interests, and the teams work closely to plan the process. Formally, we can run the combined company on the day after the closing of the transaction. Until then, Desktop Metal is managed by its current team, which I've found to be quite excellent. They'll be integrated into our management team for collaborative decision-making from the day of closing. Meanwhile, the PMI is a very detailed planning process, ensuring we hit the ground running upon closing, which has been progressing very well between the teams.

Great. On the same topic, could you provide more details on the rough timing for the different regulatory approvals?

Yes, there are two regulatory approvals that typically take some time. One is the Hart-Scott-Rodino Act, which examines mergers to prevent monopolies. We don't anticipate major issues since although we have overlapping products, we also have non-competing products. The second is CFIUS, which reviews mergers between American and foreign companies—that’s become increasingly important. Fortunately, we have a friendly relationship with the regulatory authorities due to our base in Israel, so we don't anticipate major hurdles.

Understood. I noticed you bought back about $8 million worth of shares this quarter. Are you continuing this buyback for the rest of the year?

We have allocated approximately $150 million for share repurchases approved by the Court in Israel and by our Board. We buy back shares based on certain decisions, which relate to share price and ensuring we do not have inside information that would prevent purchases during key events. Various factors affect our buying and selling strategy, but we do have funding allocated and will buy back shares as deemed appropriate in the next few quarters.

Great, thank you!

Thank you very much.

Good morning, Yoav. And good morning, team. Thank you for your excellent presentation. I just returned from Boston, and it was wonderful to see you all. I'm routing for a smooth post-merger process. I have two questions, slightly different but along the same track. First, you mentioned that over the last couple of years you've placed various bids and noted how 3D companies have seen their valuations decrease based on market sentiment. In your opinion, what gross margin would indicate a dynamic change in the business's sustainability? Currently, your margin stands at 45%. Would you consider 60% sufficient for a dynamic change, or would significantly higher be necessary?

As I mentioned, we are moving into Industry 4.0, especially in areas like robotics, electronics, and construction. These more traditional industries can sustain 45% or even 40% margins. However, when dealing with new technologies like in our electronics manufacturing, as well as with Desktop Metal, we must aim for 60%. Our gross margin is indeed improving, and we are currently working to enhance Desktop Metal's gross margins as well. It’s crucial because we need to reserve enough margin for profits.

For the second question, it seems that Nano has vacated its poison pill allegations against Stratasys. Does that indicate there's no ongoing interest in pursuing a Stratasys buyout? If that's the case, why not formally withdraw the $16.5 offer from last year, as it’s causing an overhang on the stock?

Initially, my investment in Stratasys was strategic, as I shared when we announced it back in June of 2022. The previous offer to acquire Stratasys will not be executed, as it is no longer relevant. However, there is a strategic relationship now between our companies, and that certainly holds potential for future collaboration. Management from both sides has established a very amicable relationship, and we communicate regularly. We have not given up on these strategic relations at all.

Thank you very much for clarifying!

Thank you.

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

Thank you very much. We completed this in 35 minutes, and I appreciate your time in this early morning for your working day in the United States. We're looking forward to speaking with you soon because we truly believe we have many interesting events on the horizon, and we hope to fulfill those plans. Thank you for your support.

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