Yoav Stern
Analyst · ViewTrade Securities
Thank you very much, sir. Welcome, everybody. We waited around 2, 3 minutes over 9 am in order to get all people that want to be online. So I apologize for that. And so I hope the day will start well with our call and later, have a good day in the market rather than a day like yesterday. But those are our lives on a daily basis. So we know that. What we're going to do in this call is I will speak a little bit about the business situation and where we are. We're not going to have me read anything that you could -- everybody can read on the news release in order not to waste your time. In the same manner, we're not going to have Yael read all the numbers and all the MD&A management discussions and analysis because you could read it there, and I don't want to waste your time. But on any subject afterwards that you want to ask about, we will direct the questions. Either I will direct them to myself or to Yael on anything you want to ask about numbers or anything else. And then we'll hopefully have a call that is efficient in time and content. What I'm going to tell you about the business situation, to many of you is probably known, it's only 2 weeks ago, actually 3 weeks ago that we closed the public offering. And thank you very much for the support. And during that 1 week or 8 -- 7 days roadshow, I met with 60 -- I had about 60 -- 45 to 55 meetings, actually, 50-something meetings. I don't know with 60 people or with 80 people, but I met most of you, probably. And everything I told you then is true today. There's only 3 weeks difference. So it's not -- you're not going to hear earth-shattering information. As much as the previous quarter, which is what we're reporting today, I spoke with most of you on these occasions, as I just mentioned, about what happened in the first quarter. And what you hear and what you read today is a repetitive story. We lost the opportunity for that quarter to sell about from 3, 4 machines and our revenue went -- was $700,000 comparing to $1.7 million quarter -- the same quarter a year before. But it's irrelevant to compare it to a year before, the year before did not have corona. The corona entered China early in the quarter. China was one of our main buyers for machines this quarter. Prospective buyers, and that's gone. It's gone to come back. We are now talking with the Chinese same organizations about doing the things we planned last quarter for this quarter. And if not, it would be the late part of this quarter, if not maybe early next quarter, but it actually makes signs as if it's happening. The interesting thing about last quarter is, if you break down and you look what we sold, we did sell ink in high percentages. Obviously, the percentages are high only because the top line is low, not because we sold more ink than usual. We sold ink relatively okay because the machines started to close to shut down toward the middle of that -- of last quarter. So even ink was not in the numbers it could have been. And of course, we sold upgrades for the machine, which is a very, very important point, which I mentioned to you before. Upgrade is a really serious vote of confidence of our customers that both machines got a bit disappointed from their performance, but decided to invest $35,000 to $55,000 to upgrade, which means they are committed to the technology and to the direction we're showing so much as our road map and where we're taking this company, its product and hopefully taking the market with us. So that's last quarter. I'm sure you want to know about this quarter, we are 45 days into it. It could have been 45 days or 1 day, nothing happening, nothing. Customers in the United States are completely dormant, like bears in the winter. Even in FedEx with a Board with a product, we sent -- I think it was [indiscernible] I don't remember. It didn't even get to the FedEx because the office was closed, and they have to send the FedEx to one of their engineers to his home. Of course, if he gets the product at home, he can do anything within it. He doesn't have a machine, but he wanted to get a product at home. So we had to re-FedEx it. That is the status of the market. There's nobody home. In Europe, it's a little bit ahead of the United States. The European walk up earlier from the corona, or I think they actually went to sleep. They weren't sleeping like in United States as deep. But even in Europe, it's still -- we have issues with our customers, including our loyal customers that are saying, look guys, we just came back to the office. We have 20 things that are more urgent for us than dealing with buying a new machine, another machine or doing anything with you, but we're with you. We're getting back. We're getting back. In the Far East, they are ahead of United States and Europe, and they are already talking business, but carefully. So that's the situation today. I expect this quarter to be as much as revenue, really bad as much as working assumptions moving forward. We have a director from Lockheed, and I -- we had a Board meeting a couple of days ago, and he told me that in Lockheed, across the board, they are starting to talk to them -- and he is a senior guy in Lockheed, very senior, they are starting to talk about bringing people back, which means somewhere in June, they hope, things will start to show signs of normalcy, people coming back to the office and maybe July, start to do business normally. Hopefully, this summer will not be as usual summer as you know, people in July and August are not there. And not to speak in Europe, they closed the continent. So that this summer may be a bit different. So the working assumption at this point is that the end of Q2, the beginning of Q3, hopefully, business are starting to roll forward. And we are preparing for that. In order for preparing for that, there's 2 mantras that I put in front of the company, mantra #1 is our cash today, it's your cash, which are we holding temporarily in order to use it in the best way, our cash today will be worth much more 3 months from now, when the -- specifically, when the corona is starting to recover, either it's 2 months or 1 month or 4 months. So under this mantra, we are going into the second mantra, which is therefore, we are going to conserve cash now even if it's 4 months, for sure, if it's for 6, and spend it sparingly only on 2 subjects: one, the development of the road map of the product. So when the market recovers, we're having even a better product than what we have today. And two, on sales organization building United States in order to be ready for -- when customers are back in the office, that our sales organization is up and running with pipeline that is active with salespeople that are crisscrossing the continent. So that is the 2 areas we're not saving cash. We're not saving cash on building up the North American sales organization, for that Middle European as well. And we're not saving cash on the product road map and moving it forward. Where are we saving cash, everywhere else. We are not spending money on customer care and support, which is an organization we are building because the customers don't want to be taken care of right now. So there's no reason to bug them and to run around. They are not -- there's nobody home. Actually, there's nobody in the office, everybody is home. And we're not spending money on building machines. We are not building machines. And we are reducing our cost of operations and manufacturing because we have enough inventory to build machines for the next 6 to 12 months, and we have the operation to build machines, and we just not need to man the operation until we're actually building machines in a fast enough pace that we need many people to do that. As much as manufacturing ink, we didn't touch it. We're manufacturing ink as usual. The demand for inks didn't go down yet even though the machines are down, a lot of the machines are down, more than half. But we didn't see the ink consumption going down. I believe we'll see it this quarter, and then I expect it to pick up again. So as much as manufacturing, the self-life of our it is long enough. So we even manufacture the inventory right now, especially because manufacturing of chemicals, you can't stop manufacturing. It's a process that needs to be operated. And we're not worried about it. We know that there'll be homes for our inventory of inks, even if we'll have a little bit more inventory. It's not big numbers in any case. So I'm getting toward a summary of what I had to say, which is going back to the 2 mantras I started with: Cash we conserve today will be worth more when corona days are starting to phase out. Two, don't hold back on building the North American sales distribution go-to-market organization and not holding back cash from them. The other things we're holding back. Last, but not least, we had the first user group ever initiated. I started -- I found out when I came to this company a few months ago that we never had user groups. I met with the American Army, the American Army told me how come you don't have user group. User group is the main important tool to meet all users that -- especially in a company that you're bringing such new technology to the market. So I close it with a note. Today, we had the first user group in Europe. We had 55 participants, 3 hours conference, people from Italy, Germany, Russia, Eastern Europe, 55 people present, all of them from our customers, that's not including people that were post listening from the company. The user group that was virtual included discussion by customers about their experience with the machine, including things that the company discovered that the customers are more advanced than us in developing applications of the machines, which is exactly what I was hoping for. Now the customers are telling us, you don't know that you can do this and that, I don't want to get you into technical details. You can do this and that with your machine. Here is what we did with your machine. Our people were overwhelmed. It was a very successful meeting. So it's good news, especially under consideration of a time like that. And obviously, I can with this -- it's not that I invented this idea. User group is a tool. It was this company did not to use it. So I'm not an inventor. I just applied it, and our European organization put it together, and we're going to do user group like this much more frequent. In a funny way, it's very easy to bring people together in a conference call for 3 hours all on video than bringing together physically as we used to user groups in other companies. There is an advantage to get together to have dinners together as well, but it becomes, for sure, more expensive and logistically a nightmare to do it. So you can't do it too many times. User group on a video is something you can do twice a month, and that's what we're going to -- and it's not costing us almost anything. So it's very good news, and I'm very encouraged it happened to this morning, early 12:00 O'clock in the morning, New York time. So I couldn't hold it back just to tell you that, that was the case, and it's very encouraging. I'll stop here, spoke for 15 minutes, and I will open this up for Q&A, both to me and to Yael, which is waiting for your questions. And if you will direct them to me, I will either answer myself or ask Yael to answer. Please.
