Q2 2020 Stratasys Ltd Earnings Call
[music].
Greetings and welcome to try to <unk> second quarter Twentytwenty financial results call.
It's time, all participants are in listen only mode.
Question answer session will follow the formal presentation.
Anyone should require operator assistance you May press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like the Turner conference over to Yonah, Lloyd Vice President of Investor Relations.
Good morning, everyone and thank you for joining us to discuss our Twentytwenty second quarter financial results.
On the call with US today, our CEO Yobs IPH and our CFO, we lost Payorski.
I remind you that access to today's call, including the prepared slide presentation is available online at the web address provided in our press release.
In addition, a replay of todays call, including access to the slide presentation will also be available and can be accessed through the investor Relations section of our website.
Please note that some of the information you will hear during our discussion today will consist of forward looking statements, including without limitation those regarding our expectations as to our future revenue gross margin operating expenses taxes, and other future financial performance and our expectations for our business outlook.
All statements that speak to future performance events expectations or results are forward looking statements actual results or trends could differ materially from our forecast for risks that could cause actual results to be materially different from those set forth in forward looking statements. Please refer to the risk factors discussed or reference in strata.
This is annual report on form 20-F for the 2019 year as well as Stratasys is reports on form 6K that we're furnishing to the FCC today, including the related press release concerning our earnings for the second quarter of 2020, and our operating and financial review and prospects, which are attached as exhibits to.
Those reports on form 6K.
Stratasys assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
As in previous quarters today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance certain non-GAAP to GAAP reconciliations are provided in the table contained in our slide presentation and in today's press release.
Now I would like turn the call over to our CEO Yobs IPH, Bob. Thank you you owner.
Good morning, everyone and thank you for joining todays.
As I mentioned last quarter.
My first month CEO of being spent carefully reviewing all aspects of our business.
Good thing through the corporate strategy.
Before we slow though.
Yes.
The one has created a short term challenges for the business.
We will discuss the measure we have taken to address it on the other and it has created more opportunity to focus on the street Decata exists.
You bet to understand our key growth drivers and strengthen the foundation that we have positioned us for loans Dan profitable growth.
The largest opportunity for us in Threed printing using polymers.
And the fastest growing area is manufacturing.
We are already a leader in this market and expect to increase our presence through new offering if we focus on delivering incremental customer value to the sector.
I will go over the current state of the business and then share details regarding our new strategy.
Our second quarter results reflect the impact full quota of coffee 19.
We do revenues challenged by a weak macro environment and it both in capital investment worldwide.
Cost mitigation, it's been a universal.
Business priority, which necessarily impact the purchasing activity of our customers. In addition, brito utilization and therefore material usage was low as many users across our installed base will not walking on site.
We also continued to implement measure to manage costs.
Most of our employees work from home this quarter and we applied at full day was weak across the company.
On top of that Oh executive to Oh executive team took an additional 5% salary reduction since we last through the end of the year.
Early June we announced a reduction in force of approximately 10% as a reminder, these reciting was already a plant biographer new operating model.
Dying to reduced operating expenses, Bob for cost realignment program to focus on profitable growth.
The implementation with accelerated due to the coding situation.
On the last call we highlighted some of the many coffee related initiatives.
With throughout this you laid out industry in helping the global medical community addressed the finest equipment shortage.
They experience.
These activities continued throughout the second quarter and many ongoing we're very proud of the positive impact throughout the season as a hand in helping address the medical supply chain Crunch that happen you to the coke.
And we see this is an opportunity to educate the market on the benefits and value proposition of our technologies.
Despite the slowdown due to the Cobiz, we remain very optimistic about where our business and our industry's headed.
Oh engagement level, we don't customers remains high and the demand for additive manufacturing solution continues to grow.
Threed printing is penetrating further into manufacturing across every relevant business sector in fact.
As we stated last quarter, we are seeing business and government reassessing their supply chain and implementing decision that we drive increased demand for threed printing as strategic imperative.
Leading to additional business opportunities for strategies.
Localization and the need for increased self sufficiency.
I will both on the right.
Among the many benefits that are creating a greater need for manufacturers to seek threed printing solution.
And Athree study by the society of manufacturing Engineering of 700, U.S. manufacturing professional founded 25% of then we're planning to change the supply chain in response to the pandemic.
Threed printing ranked number one alone with robotics as the top choice for corporate investment out of 11 technologies.
Head of such innovation is Fiveg artificial intelligence and digital security.
The company surveyed range across industries, including aerospace automotive consumer product defense industrial machinery, dental medical and education.
Here is further evidence of growing interest.
In may.
A new Bill was introduced in the us out of representative.
All that fencing Threed printing act.
The proposed legislation would require the consumer product safety Commission to undertake a study to assess the state of the Threed printing industry.
It would include evaluating solution to secure the supply chain.
The appropriate federal role to increase and facilitate.
Threed printing manufacturing and innovation.
Two quick ones.
Congressmen, Michael Borgias DEXA.
Three D printing may account for up to 10% of us manufacturing in the future.
We believe in this visionary statement as Stratasys has been actively engaging washing don't well make it happen. We have meeting will be parties on members from relevant committees of the house and center in late June we will continue working with legislators to educate and guidance as they learn more about implementing.
The many benefits of additive manufacturer.
And key customer of ours are seeing these benefits, which stratasys everyday as illustrated by the recent announcements we have made we'd be a system a leader in aerospace and defense industry and general Motors in automotive VA, we continued to Ed its portfolio.
I have asked 900 printers, making strides this is an integral part of their factory of the future initially.
In late last year GM added 17 production grade FDM system to extremities portfolio as the company expanded its additive effort from prototype into the production of tooling, such as jigs and fixtures to.
To you to be used on the factory floor.
The additional stratasys printers were placed in a new multi million dollar additive innovation lab in Michigan in March GM was contracted by the U.S. government to help reduce 30000 ventilator.
By August to have to both covert related needs.
All of the Threed printing tooling for this project was manufacture on strategy system.
I'm also very proud of our team.
Despite the challenges of coffee.
We were able to begin the commercial production of our new Polyjet Jay 55 in the second quarter.
Which began shipping in late June.
The J 55 is an exciting and highly innovative boom. Therefore, the design community that green most of the features of our premium colleges technology into an office Randy system.
Featuring a unique patented turntable forward markets response, so far has been solid.
With 313 million cash cash equivalents and show them deposit and no debt, our company's healthy and able to take advantage of opportunities in the market.
Even with the revenue challenges this year, we've been able to manage our strong cash position demonstrating the resiliency of our business model.
Now, let's talk about our strategy going forward.
When I started as CEO in February.
My mandate was clear to reverse the declining topline and positions processes to return to growth additive manufacturing later period.
We have Bob.
On a deep internally and externally on NAV evaluation to develop a clear strategic direction that we have already started to implement.
To better position us for long term growth, we formed an analysis team representing every aspect of our company and we undertook to tour diagnostic and strategic assessment of both our business and the market.
Until objective. This is of the strategic review what to determine the action necessary to leverage our core competencies and doubled the size of our business.
While strengthening our leadership position and becoming the industry's first choice across a broader range of solution.
I am excited about the results of our analysis.
The market overall is growing.
And is expected to grow further dominated by polling there.
The largest value.
This is consistent with what we are hearing from our customer there is greater interest in using threed printing to help them be more responsive in an increasingly uncertain world.
From bringing new innovations to market faster to creating more adaptive manufacturing lines and supply chain.
Specifically in polymers, our areas of expertise, we see significant opportunity to lead to deliver incremental customer value.
Especially in the fast growing manufacturing applications.
Where we see the longest runway for growth through new technologies. This we will also we will pursue the right technologies to supplement our portfolio that will help us to address this application and achieve our goal.
It is also clear to us.
The competitive landscape and market offering our fragmented.
There is no silver bullet additive manufacturing technology.
Period of application and no clear leader across all major segment of our industry.
Market leadership will be achieved by the company with the most comprehensive solutions.
With the widest couple of technology.
To address multiple attractive growing segment supported by industry, leading go to market and global service interests infrastructure.
We believe that Stratasys is that company and can be defense choice for polling application across the industry. We also believe that we have.
And most trusted reputation for quality reliability in service, which serves as a vehicle to both our customer and help capture the growth.
So let me share the framework and key concept this will drive our strategy going forward.
We'll expand the range of our technology portfolio to include the faster growing solutions that will help us achieve our budget.
Stratasys today leads the industry with the largest chair in material extrusion.
And material jetting.
Through our FDM and Polyjet technologies. However, these two technologies currently address only about one sales of the totality manufacturing hardware opportunity.
Fair there there's growth rates has slowed in comparison to the growth rates of other technologies that suit the needs of faster growing applications, especially in production.
We have already started the journey into through manufacturing evidenced by our experience in our existing high end FDM application, including end use parts and our leadership position in the high standard Aerospace sector. For example, they are over 100000 Polymet about flying.
Today that have been printed on Stratasys system and ahead. We are witnessing continued expansion in manufacturing application. They still plenty of growth opportunity also in prototyping.
Therefore to help us when this.
After growing areas.
We will invest organically and inorganically in new polymer technologies, such as powder bed fusion.
Photocall amortization, and others, which will help us generate more opportunities with new offering to better meet the market demand as an example.
We have a joint venture with zero colds downstream co developing a cloud to bed fusion production grade system.
This expansion will help us address additional manufacturing focused customer application, while leveraging our extensive infrastructure and core competencies.
The strongest go to market vertical industry knowledge and experience.
The largest installed base the best receptive channel and the deepest polymer additive manufacturing no. We have the proven experience to grow with our customers throughout their adoption lifestyle kind of their journey in polymers.
We believe that leveraging this core competencies across all of these technologies. This will be in our portfolio will convert the addressable opportunities into increased revenue and profitability and introducing the technologies to open up more application can better serve both our current and potential.
New customers grow the overall opportunity.
And more than doubled our addressable market. In addition, there will be an operational model change to ensure the success of our strategy those changes of screening process. So I will share more details on new operating more than at a later today.
I'll now turn the call over to be Laura will share the financial results of the quarter Leila.
Thanks.
And good morning anyone.
Revenue in the second quarter was 117.6 million compared to 163.2 million for the same period last year and decline of 27.9%.
GAAP operating loss for the quarter was 29.3 million compared to operating income of 0.8 million of the same period last year.
Non-GAAP operating loss for the quarter was 8.1 million compared to operating income of 9.1 million for the same period last year.
GAAP net loss for the quarter was 28 million or 51 cents per diluted share compared to net income of 1.2 million or two cents diluted share for the same period last year.
Non-GAAP net loss for the quarter or 7.4 million or 13 cents per diluted share compared to non-GAAP net income off excellent fastening in all 16 cents diluted share it policies for the SAP deals last year.
Well that revenue in the second quarter was 73.9 million decreased almost 33% compared to the same period last year, we've seen product revenue system revenue decreased 35.6% compared to the same period last year.
Consumables revenue decreased by 70.6% compared to December last year.
Service revenue was 43.7 million a decrease of 17.2 per cent compared to December last year within service revenue customer support revenue decreased by 7.5 per cent compared to the same period last year.
GAAP gross margin was 37.2% for the quarter compared to 49.7% for the same period last year non-GAAP gross margin was 45.4% for the quarter compared to 52.5% for the same period last year.
The decline in gross margin is due primarily to the lower proportion of consumable out of the total revenue mix as we noted on our last call. We expected a continuous sequential reduction in the gross margin for this quarter.
In addition, operational inefficiency and an impact given that last year, we proactively didn't inventory in operation cost were in efficiency mode, but now due to the lower revenue and lower production level. He tells the opposite effect so the delta between the quarters.
Even more notable.
We are confident that gross margin will recover as our customers we tend to their pre coveted utilization.
Legend.
GAAP operating expenses were 73 million down 9.2% compared to the same period last year.
Non-GAAP operating expenses decreased by 19.8% to 61.4 million for the quarter as compared to December last year, driven by proactive cost cutting measures Ines. Genie example of this into the almost no travel during the quarter and no choice.
Charles most employees are working from home, which reduced maintenance and related costs.
There has been known essential position, having free everyone has been effectively reduced drilling 80% was weak in the executive team has taken an additional 5% take tack on top of that.
Additionally, there was a passionate impacts of the recycling plan that started in June.
A walking assumption is that causes 19 will continue to weigh on the business at least through the end of the year. So we plan to maintain these cost cutting measures.
Regarding Alan Dean I would like to point out. Despite this expense declined both sequentially and he'll disease. It was primarily due to the interest of the reduction of our work week to 80%, we selectively applied to allenby cost control to ensure that the npis for while we're not affected and we.
Plan to continue investing as needed in order to support our new product development program.
The company you 9.7 million of cash from operation during the second quarter as compared to 3.8 million of cash yields in the same quarter last year.
We ended the quarter week 313 million in cash cash equivalent and short term deposits compared to 325.5 million at the end of the first quarter of 2020, we believe that we are well start to manage the call weakening currencies.
Relation with a strong balance sheet and no date.
While focusing on cost control and cash generation.
Regarding guidance. The next few quarter, we'll continue to be unpredictable and visibility will be limited due to positive 19.
Therefore, we continue the suspension of fall in dining and in the economic environment stabilizes.
Above and reconciliation between GAAP and non-GAAP financial measure I provided in the table at the end of southwest Tunis and slide presentation with itemized detail consent concerning non-GAAP financial measure.
I would like now to turn the call back to you.
Thank you Leila.
To sum up we believe.
The value proposition of Threed printing is more compelling than ever.
To the manufacturing industry.
Even in fact, especially in light of the uncertain global environment. We're in today.
We believe we have the ecosystem resources and strategy to be delivering polymer additive manufacturing for all of the key growth areas design engineering manufacturing and health care.
With the strongest and why this portfolio supported by the best sales and service infrastructure.
We will announce and broaden our technology offering to serve significantly more application and offer full suit of solution.
Stem Materialise software and service.
Combined with the capability to rapidly expand applications with our wide era of technologies.
We are confident this effort we read both grow in the short to medium term.
Provide us with access to a greater customer share of wallet and drive our topline growth in the future.
Operator, please open the call for questions.
Thank you at this time, we will be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tonal indicate your line is in the question Q.
You May press Star too if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we pull for questions.
Our first question today comes from Shannon Cross of Cross Research. Please. Please proceed with your question.
Hi, This is actually Allen on for Shannon.
Do you provided a lot of detail on the polymer market and manufacturing that's very helpful. But.
I'm wondering if you think about the polymer shaggy, where does your metal technology and that and then similarly with manufacturing market.
Thereby.
You have some desktop systems for engineered but I'm, just wondering how that business kind of benefits the manufacturing market and then I've a follow up thanks.
Thank you.
So let's start with the matter.
We are here to you know gear the company for short and medium level growth and making sure we are maintaining and strengthening our polymer position period, but we have met or we have the LTM.
But it's in a nurturing stage.
And we'll we'll explore now best way to moving forward it serve different customer base. It has a different.
Value proposition and it's still an nurturing incubation stage and it will not be the one that will generate a growth in the shorter. So we are exploring it and we'll update on it in the future.
Now for Makerbot.
Why do I own Mehta, we are one of the.
Our largest leaders in metal manufacturing here with our SDMA and we are well known for a quality of fall that will keep running but that's on the Palestine.
And for Makerbot.
When we are saying this is executive Fantastic example.
For the advantage of focusing on polymers, because we start with Makerbot with engineers.
And then we'll take it through the lifecycle of the apart from the design through that function.
ER engineering Paul.
Phase of developing the product through the production and what we're doing with Makerbot, where we have significant competitive advantage in terms of our new offering which is the hit the chamber, we're going to stop and think about is part of Stratasys and you start with the same.
I would say platform and ecosystems, and then violent no matter, where you are in the lifecycle of developing a product forms is you know initial design through manufacturing introduction.
Got it and then you mentioned a willingness for inorganic development I guess in the near term or maybe the Mccann are there any areas in particular that you're considering what parameters. What you put in place if he wanted to make any acquisition.
As you expect will not chair specific data as best in General we're looking for best in class technologies that will generate revenue.
And we'll be contributing to our it appears that first of all.
And also with healthy balance sheets are ER and the fact that we have a cash and ability to invest puts us in a very good position.
To meet those criteria.
We're going to act you know responsibly and to find those this will strengthen our position in polymers.
Thank you very much.
Your next question is from an Anda borough of loop capital markets. Please proceed with your question.
Hi, good morning, Thanks for taking the questions.
Yeah, just a couple a couple if I could the first one would be with regard to the strategy.
You just spoken to sort of M&A, a little bit how would you guys like us to think about incremental investment.
Even with anecdotally and philosophically thatll be required he like to get get the new strategy can the place you want to be.
And then if you could talk about often new types of talent.
You may need in that regard also and and if you could also mentioned what am I do the cost structure. I know you said you'd get that he made matching earlier.
That there may be some model changes is that also part of the model changes and then I have a quick follow up as well. Thanks.
[noise], so hi, good morning.
No bid a bit of a petition but oh, we have asked the balance sheet, we are well positioned and we are very attractive, but the way for many companies to copper is with us.
Both on the in on the M&A from because we are bringing this huge infrastructure that we have that can leverage.
Any technology practically in deploying our space because we are there we are leading the space and given our strong position.
I would say balance sheet position, we will not a.
Compromise on a best in class technologies, a company that started at least to generate revenues and to grow and to contribute to our operating.
But is that the general contractor.
Oh and for the expenses you want to address isn't enough yeah, no and obviously when we address the recycling plan a a few months ago and we know what I'll do objective going forward is as we mentioned it was not because of Nicholson that it was more about morphosis unique perspective.
We also and make sure that we allow full few chair and walking into where we believe there's only be a expansion Anthony and requesting it will cry investment. So we obviously going about on its own they additional investments weve a minority owned.
On a compromise on other stuff will well taken up different play out in order to add to address if needed additional debt.
Got it that that's helpful. It sounds like what that sounds like demand.
Yeah, there'll be additional investment, but for the most part you'll be able to accommodate inside of Italian recurrent attacks model and well like you're not going on there won't be a shock to the op ex model going forward.
Yeah, Yeah. They expectations. This we will in when needed.
[noise] when needed understood and then like like my follow up is just could you share that any any context around.
Around conversations you've had.
With man you need the manufacturing industry.
With regards to sort of fast forwarding are moving forward.
Some of the Threed printing initiative, you gave some of the metrics, but I love that I'd love to get any idea the additional context in the conversations you've had over the last few months.
[noise] managers they sold on the next day questions I want to clarify it's not necessarily that a wheel hub commentary. He will provide an integration into the holiday extending our optics and spending going to look like in the future.
It would you say that we basically a prepare ourselves in a two way to allow for any additional expansion if needed.
That's a we are not a commentary specifically now in terms of why does it mean in house when they look like and specifically any on any specific day acquisition.
Thank you Oh go down in factory.
Oh no.
We believe this amazing infrastructure globally, which allow us will enable us to offer both system Materialise software service.
No around the globe.
And we can do much better in terms of leveraging this sixtym or this machine that we agree over the years.
And we really it's something which is on president now we take into manufacturing and we already manufacturing because we have those FDM machines as our you know repeating and ER and are being used for end use Bob So we bid on it and but we are stepping much further than this by getting into discussion with.
I might affect your producer in our key industries to make sure we really understand they need and we tailor the logical solution for their needs. This is expenses philosophy that we're the leader there we want to make sure we leverage this position.
Got it thank you guys.
Your next question is from Paul Coster of JP Morgan. Please proceed with your question.
Yes, Thanks for taking my question so first off the.
I had the since earlier on in the near the new products are becoming a small to pretty quickly. Obviously, it's like 65, it's been a success, but so we were looking sorry, I guess the dissolved high speed sintering solutions come to market soon into maybe for why and also your so light product line speed extended can you just comment Tom So near term catalyst.
Around new products.
Yeah for sure so.
Maybe it's important to state first of all that we with all the cost measures. If we do we made sure. This we are not for using all we are no hurting a new product introduction.
That's very important to share.
We already introduced the day 55, which is really state of the out there there is nothing even close to eating the industry in terms of design machines or I would say advance.
Machine for designers.
And it's in the market, we see really good traction from a design houses whoever wants to take is design capabilities to the next level.
At the same time, we have other no product in the pipeline one of them of course is the czar and are.
We are going to launch if we didn't commit to a specific data. We also mentioned the fact that we want to go out in a day, where we'll be able to capture the market absorption of the market excitement, which is not exactly what we see now in the market, but we are there it's going to causing a.
Moving on track and we look forward or a two of the Indian view is the next quarter.
Okay, I know I just want to reconcile to comments made on the onetime the market is fragmented central who must necessarily sold by the combination of print engines and I'm sure materials I know, there's a sense what have you seen since it's been sort of a you know a full scope provider of polymer based solutions have already.
So all those two.
Flexing statements.
Okay. Thank you for the question.
So that's exactly the reason why we want to focus and we are focusing on polymers. It's a fragmented market. The biggest profitably sporting there what we know is polymers both on the chemistry side and from the hardware side. This is our expertise. This is the deep knowledge of the processes develop on both sides of the ocean for the last Thursday.
Two years.
And now they are so many segments any and applications and the industry is an evolving industry. It sounds like the car industry that you know it doesn't matter if it's a toyota or the sees it will take you from agency for specific application in specific solutions.
And we have those solutions and we will broaden it as well and then you create these photos across.
The different polling there segments.
So on one hand, you are addressing many of the application on the other and you leverage is not suffer from the focus because you liver levers the same infrastructure the same knowledge and the same go to market [noise].
So in other as you know from a different perspective, I can say it will it is very difficult.
To be or to have a scale and the advantage of scale, if youre going for one application lets say jigs and fixtures for example, because you need to put all those people you know those countries and to support when we sell these wins application engineers, but if you already there it just about making sure you have the right technology.
Right application, we are there well make sure that would be there even in a stronger way.
The next question is from a gym, Richard to eat of Needham and Needham and company. Please proceed with your question.
Hi question I have is just as we've started to see some other countries opening up are you seeing any any signs of or your consumable business starting to pick up in those regions, where we're starting to see a companies coming back.
Hi, Jim Good morning, Yes, definitely acute hi, <unk>. So definitely in Q2, we sell a reduction in almost costs all industry and they have all told Dan has significantly you probably heard me say.
Oh, so of course say, a other sectors and what we so they can effectively investor day since I am Q2, and what we see stuff and if it doesn't say anecdotally a indicators is specifically from then sad that they are they slightly back to business.
And it seems that seems like demand picking up in the dental aspect, it's probably too early to address other area also and we heard this also them some comes back and Buddy.
Me too early to add to comment on that and specifically in l. visibility sells to the end of the year, specifically to the same quarter ones. When he's still remain names and no and that's we are cautiously optimistic given what we see in the market.
Do you view D. S. T M business is being in early indicator.
Possibly a turn in the business that might.
Indicate a recovery in the rest of the business.
[noise], some cases or do something [noise].
It really depends on they easily depends on the industry.
Our top business. He is heavily also impacted by AOL and also from the somebody's 72 and business. So he is impacted by that and they all personal auto flow of older. Obviously these are the first a sign all say of the crisis was that customers are shopping.
Hum overflow of older age. So it's too early to see whether there we see sound like hasn't come back at the Palestinians yet.
And lastly, just wanted to pricing environment. What are you seeing both on the hardware side than on the service Bureau side.
Yeah.
We don't know, we just didn't see any significant hey pricing pressure.
It's all about talking to spending overall and shutdown offtake customer shutting down so it's not that it was not about pricing pressure in see anything significantly on the hardware as well as only consumables.
Thank you.
Your next question is from Brian Drab of William Blair. Please proceed with your question.
Hey, good morning, Thanks for taking my questions like I, just wonder first stuff to make sure that I have the spike in my my notes that he.
30 million in cost cuts is that broken down roughly like 23, 20 to 23 24 million unless you named the rest in Cogs.
How to think about that for next year as a run rate.
[noise] [noise] [noise] and yeah, there and they usually you why Didnt 30 made on these across all expanding fashion killed in coastal says and it's when is the Opex NDC say, hey, I'm all set necessarily it's the Eric.
And on a quarterly spend aim and we do not make 50 60 day springtime between often and cost of says lets you can assume that they some fortunately. The is one point is also says is what.
Okay, and so you're not able to say I mean, that's.
In my notes here I don't.
Not sure who I'd spoken too.
I believe you all know, but most of it was SGN I couldn't even say that like you know just to help US model, yes, it could be really helpful and some there's a large amount and.
Has huge hearing on how they everyone's going to model gross margin.
Yeah, Let me tell what he sees it doesn't tell the DTC eightys opex, but there are we saying portion also elderly Oh, yeah. There is a function of the culture also said.
Okay, and then Hum.
How did your on demand business due in the corridor and how's that trending into a through July.
[noise] <unk>, Yeah, my family, but at the same age was down significantly this quarter.
In fact, mainly I don't see keep article facile, several notable and and and the Bobby This is basically indication of all four of the economic overall, it say impact by the overflow of orders customers.
Hey, the first thing about doing is basically shutting down those overflow any any projects that are not necessarily so that's why in the past needs as they significantly impacted it's too early to say, whether we see it business coming they eat what are the bids coming back into like a.
We see something I think it's too early so we cautiously optimistic in terms of how is the I'm going to look like in Q3 in Q4.
There are no additional questions at this time I would like to turn the call back over to Europe Zion for closing remarks.
[noise], thanks for joining us stay safe and healthy looking forward to updating you again next quarter.
Thank you.
[noise]. This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.
[noise] Oh.
Ooh.
[music] HM.
Oh.
[music].
Hmm.
Oh.
Oh.
Ooh.
Oh.
Oh.
Oh.
Oh.
[music].
Oh.
Oh.