Q2 2020 ExOne Co Earnings Call
[music].
Greetings and welcome to fund company's second quarter 2020 financial results Conference call.
At this time all participants are the listen only mode. I question answer session will follow the formal presentation. If anyone's you acquire operator systems. During the conference. Please press Star Zero and your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Monica Gould Investor Relations for that some company.
Thank you you may begin.
Thank you operator, and good morning, everyone X one released results for the second quarter of 2020 ended June Thirtyth 2020 yesterday after market close if he did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website.
That's true got X one dot com.
With me on today's call or John partner, Chief Executive Officer does have a chief financial officer.
This call is being webcast and will be archived on the Investor Relations section of excellence website.
Before I turn the call over to John I'd like to know that today's discussion will contain forward looking statements and that's such a subject to risks and uncertainties.
These risks and uncertainties include those risk factors discussed in the most recent reports on form 10-Q, and 10-K filed by the company.
As well as those discussed in the press release.
Any forward looking statements that are made on this call are based on assumptions as of today.
Your take no obligations to update these statements as result of new information our future events.
In addition, the U.S. GAAP reporting X one reports certain financial measures that do not conform to generally accepted accounting principles.
We believe these non-GAAP measures enhanced see understanding of our performance reconciliations between GAAP and non-GAAP measures are included in the table Santa today's press release.
And with that I'd like to turn the call over to John.
Thank you Monika good morning, everybody and welcome to our second quarter 2020, <unk> earnings call.
I'd like to start by thanking the X one team around the world for performing admirably during these challenging times and delivering a solid quarter and year to date performance.
Our results showcase all at once business is truly differentiated within the three D market.
During the second quarter, we made continued progress towards a more predictable revenue model.
We deliver recurring revenues of 6.2 million a year on year your increase of 3%.
And were up 6% in this category for the trailing 12 month period.
This growth is largely due to the growth in our installed base, which is consuming more aftermarket market products.
Funded R&D and other engineering development services.
At the same time, we continued to grow our already strong backlog to 38.2 million a new record level.
That will continue to support the predictability of our revenue for some time.
And our backlog is also diverse with no concentration up geography or industry or any one machine type.
It's also worth emphasizing here not a single machine sale contract has been canceled since the onset of the cobot 19 pandemic.
Also during the quarter, we expanded our liquidity, which now totals almost $30 million.
We achieved this with both prudent operational actions as well as the execution of two financing transactions that Doug will touch on in his prepared remarks.
Overall, our performance highlights our operating models resiliency and our team's ability to continue to execute our strategy in the face up very difficult times.
Now just as a reminder, we've released an updated investor presentation, that's available on our website.
But I'll summarize the key points here.
Which show how the fundamentals that support our business remain highly favorable.
And may even be enhanced by the current market conditions.
X one is part of a $10 billion threed printing industry, that's growing at double digit rates and yet remains relatively young.
For example, Threed printing has only a 5% penetration in the $20 billion molds and tooling market.
And the upside around end use parts is even more compelling.
Within that 490 billion dollar market Threed printing represents an estimated 1% production.
That number is only expected to grow.
Along with increased production expectations for a more responsive and sustainable supply chain.
X one is positioned favorably on all these counts in fact, we believe our binder jetting technology is really in a sweet spot here as manufacturers, what for smart and sustainable supply supply chain solutions that link into a new industry for <unk>.
I know dynamic.
As a quick reminder, we're the only binder jetting threed printing provider with a comprehensive portfolio of solutions for the direct printing of metals and ceramics. In addition to San molds and course used for metal casting.
No we're capable of printing more than 20 materials.
Key competitive advantage for X, one and one that offers our customers incredible manufacturing flexibility.
Recently, we won our first commitments for X one onesixty pro the industry's largest metal binder jet system, which we announced last November.
This breakthrough system, our 10th metal printer to date is well on its way to proving itself as a critical tool to move metal threed printing into high volume production.
Our team has already begun producing the first 160 pros for customers now we remain on target.
Our release plans.
We continue to expect first shipments by the end of 2020 for revenue recognition in 2021.
Like many other innovations we've announced in the past year. These new machines carry higher ASP than our historic products.
These machines have been well received by the market and we continue to receive many inbound requests and interest are produced and use products at scale and closer to the end markets.
At the same time, our team is working to surround our new production Threed printers, which also include the S. Max pro on the sand side.
It's a complete and intelligent digital workflow that enhances the user experience.
Recently, we announced two offerings that support this effort.
First we launched our new scout App to monitor and analyze our industrial Threed printers.
Especially in a connected factory environment.
Secondly, we announced the creation of a new San Threed printing that work that manufacturers can conveniently tap for quick digital production of complex castings and tooling.
These are first steps, but this effort will continue and include new automation and software tools that are currently in development.
The next one the pathway to these new production machines is also paved with program development contracts as companies ramp up the engineering work associated with getting a production threed printing sell and workflow off the ground.
So part of the growth in these contracts, which are recognized as recurring revenue is leading towards future production machine sales.
One example of this is a recently awarded 1.6 million dollar contract with U.S. Department of defense to develop a field deployable binder jetting printer.
Beyond Government awards, we have several global manufacturers in the automotive medical and consumer goods industries now engaged with us on production.
Program developments.
At least one of these companies is planning to use our printers to modernize and decentralized their supply chain in key locations around the world.
This is a good example, Apollo threed printing can support a strategy for quick and streamlined local production.
Finally, I'd like to discuss sustainability.
At X one we habit deep commitment sustainability and our dedication on this topic has existed since the company was founded.
Our binder jetting, threed printing process generates far or less waste than other traditional manufacturing processes.
It enables the production of lighter parts as well as the consolidation of parts.
It saves energy throughout the entire manufacturing process.
But the key for US is that X one delivers these benefits at high volumes.
Scale that can truly make a difference.
So while the short term maybe turbulent we remain optimistic about the long term fundamentals of the business and the global growth of additive manufacturing.
We believe that our printer solutions will play a critical role in the transformation of traditional manufacturing to a more sustainable.
And de centralized manufacturing model.
With that I'll now turn the call over to Doug who will provide details about our second quarter financial results and outlook.
Thanks, John Good morning, everyone.
We ended our second quarter with total revenue of 11.1 million compared with 15.3 million in the second quarter of 2019.
Decrease in revenue resulted from a decrease in sales of Threed printing machines offset by an increase in sales of threed printed and other products materials and services.
Both of our product groups were disrupted by Cobot 19, primarily as a result of domestic and international shipping and travel restrictions, which delayed or prohibited the delivery and or installation of our products.
Consistent with the trend at our quarterly revenue on a trailing 12 month basis revenue was 52.9 million through the second quarter of 2020.
Compared to 66.8 million through Q2 2019.
Sales of Threed printing machines were down 47% to 4.9 million in the second quarter compared to 9.3 million in the prior year quarter due to lower comparable volumes under the backdrop of cobot 19, coupled with an unfavorable mix of machines sold.
Trailing 12 month machine sales were 525.9 million through the second quarter of 2020 compared to 41.2 million for the second quarter of 29 King.
Now the machine unit sales for the period.
As a reminder, our direct machines brake components, such as metal and ceramic parts for industrial and other applications and include Rx 125 Pro Innovent plus an M flex platforms as well as our recently introduced X. One 160 pro platform the industry's largest metal threed printer.
Our indirect machines print tools, such as Sam cores in malls and include our S. Max Pro S. Max It S print platforms.
Our indirect machines are larger footprint footprint systems, which typically generate a higher average sales value.
We sold eight machines in the second quarter compared to 13 in the prior year quarter.
The eight machines sold in the second quarter consisted of three interact and five direct printing machines.
Once again, our machine sales during Q2 represented a diverse set of global geographies and customer applications that included a mix of industrial and research and development users.
Well, we are obviously disappointed with the decline in our machine revenue year on year, we recognize the unprecedented challenges that covert 19 has brought to both our business and the market as a whole.
All things considered our second quarter performance was only achievable as a result of the investments we've made at our global operations footprint and the sacrifice and dedication of our people.
On a TTM basis, we sold a total of 45 machines of which 23 were direct and 22 indirect for 2020 versus 64 machines of which 34 were direct and 30 indirect for the second quarter 2019 TTM period.
Recurring revenue, which includes our threed printed and other products materials and services.
6.2 million in the second quarter, reflecting a 3% increase over last year's second quarter.
This growth was driven primarily by funded research and development rate arrangements, including an automotive development project, which began in the fourth quarter of 2019.
Similar to machine sales recurring revenue felt the impact of cobot 19 in the second quarter, mostly in the area of materials, where we saw a steep drop off between our first and second quarter.
We attribute this to some abnormal buying trends by our customers late in the first quarter as Cobot 19 began to appear in the market and general industrial slowness in shutdowns of operations, which reduced consumption during the second quarter.
For the trailing 12 months recurring revenue was 27 million compared to 25 and a half million in the prior year period.
For the second quarter gross margin of 27.8% compared to 33.7% in the second quarter of 2019.
The decrease was primarily due to lower revenue volume, which I cited partially offset by lower fixed overhead costs driven by cost actions taken in other reductions realized as a result of covert 19.
For the trailing 12 months gross margin of 30.9% compared to 36.7%.
As I just referenced in response to covert 19, we took various cost saving actions, including a mix of employee terminations furloughs pay rate reductions and decreases in consulting and other spending all in an effort to conserve cash and maintain adequate liquidity.
As a result of these actions and other reduce costs such as global travel we realized approximately 2 million in cost savings in the second quarter.
We estimate an additional cost savings in the range of approximately two to 3 million for the remainder of 2020 with approximately two and a half millions of the total 2020 cost saving sustained into 2021.
For the quarter, our total operating expenses decreased by 21% the 6.9 million from 8.7 million in the prior year period.
Research and development expenses were 2.4 million compared to 2.5 million in the second quarter of 2019.
The decrease of 7% was primarily due to lower employee related costs, resulting from actions taken in response to covert 19.
Our R&D investments remain focused on the further development of Binder jetting technology, including the Onesix X one onesixty pro production metal printing Threed printing system for which we recently secured our first customer commitments for delivery in 2021.
For the trailing 12 months R&D was 9.8 billion through Q2 2020 versus 9.7 million through Q2 2019.
Selling general and administrative expenses were four to half million compared to 6.2 million for Q2 2019.
This decrease of 27% was driven by a combination of factors, including lower Tradeshow expenses and cost reductions associated with Covance 19, as well as lower equity based compensation.
For the trailing 12 months SDMA was 21.7 million.
Through second quarter, 2020, compared to 22.2 million through second quarter 2019.
Turning to our backlog.
As a reminder, our backlog includes firmly committed orders received from our machine and recurring revenue customers. It also includes our machine maintenance contracts as well as the noncancelable portion of our operating lease agreements.
Additionally, backlog includes orders for our global metal and San printing operations and other contractual services, including funded research and development.
We ended Q2 with another record backlog balance of 38.2 million compared to 23.2 million at the end of the second quarter of 2019, and 33.8 million at the end of the first quarter of 2020.
Our second quarter backlog includes machine orders totaling 25.8 million representing 35 total units.
Significant uncertainties associated with the duration and severity of Cobot 19 continue to make it difficult for us to predict the full year and longer term effect on our business at this time, including the impact on future capital equipment spending decisions of our customers.
While our record backlog provides a path for operating stability in our second half we remain cautious given the number numerous disruptions we have faced over the last several months.
Our goal continues to be to appropriately manage our business through this crisis and ultimately exit the situation in a position of strength further enhancing our market leading position and binder jetting technology.
Moving to the balance sheet.
Cash cash equivalents unrestricted cash as of June Thirtyth 2020 increased to 20.2 million from 17.3 million at March 30, Onest 2020.
The increase was driven by cash inflows from financing activities of 5.6 million, including 2.9 million and sales of common stock and at the market offerings and 2.2 million through a federal Cobot 19 loan program.
Offsetting this were cash outflows from operations of 2.6 million, mostly due to the widening of net loss that up noncash items for the period.
Working capital remain generally balanced as it flows from customers approximated our investment in inventories for future delivery against backlog.
Our cash capital expenditures for the second quarter were limited to $300000.
We anticipate an additional $500000 to 1 million a planned cash capex for the remainder of 2020, reflecting a reduction to our previous outlook as part of our capital Conservation plant.
Our capital expenditures for the remainder of the year, we'll be focused on our existing operations and strategic asset acquisition and deployment.
We increased our total liquidity, which includes unrestricted cash and cash equivalents and availability under our related party revolving credit facility to 20 to 29.7 million at the end of the second quarter compared to 26.8 billion at the end of the first quarter.
The increase was driven by changes in cash that I just discussed as there were no borrowings outstanding under the Companys $10 million related party revolving credit facility for either period.
We continue to believe that we have sufficient liquidity to manage through these uncertain times and to provide stability for our business.
That concludes our prepared remarks, and we would now be happy to take your questions.
If you would like to ask a question. Please press star one I know your telephone keypad. They come from each until indicate your line is in the question can you.
You May press star too if you like to remove your question from the Q.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the start here.
Our first question is from Brian Kinstlinger with Alliance Global Partners. Please proceed.
Great. Thanks, so much.
I missed it did you see there were 35 machines and the backlog and then how many machines had been in there one within six months and how long do they typically sitting in backlog.
Oh, that's Brian Hi, this is Doug.
That's correct 35 total units.
You know the age of the contracts is varied some of them.
Go back as far as 2019 at this point, so I don't have a specific statistic for you on that the relative age.
Our typical average at this point from order to completion of an arrangement.
Last year the averages about four months given the disruptions associated with co bit I could see a situation where that is perhaps a little bit longer one we stretch out all of 2020.
But it's our goal to try and tightened and shorten that.
Timeframe. It it can vary from one transaction to the next depending on the machine type and the geography that we're focused on.
And I don't know if you have a which you do you have maybe a breakdown of direct versus indirect in there.
I can get that number for you.
We are related to machines I do keep statistics relative to that but just not for overall backlog since we really don't run those a separate businesses, we're really running them as product lines or their product lines within our consolidated operation.
Great and then.
Are you able to share with us maybe deliveries in July in early August.
It's already been delivered.
Oh, no specifics statistics, what I can tell you is that near the end of June I'm really for the month of June things started to open up a little bit certainly domestically. If you looked at some of the.
And when I say domestically I mean here in the United States.
A lot of the restrictions that had been imposed by various government authorities, primarily states state governors started to open up a bit and I know, we've had a little bit of a fallback related to covert 19 recently.
But that gave us the opportunity really kicking off in June to go out and do some work.
We were in the process, we completed one domestic installation within the month of June at all we've continued that work thereafter in Europe, and then broadly in Asia, you're starting to see things open up a little bit as well.
So for the month of July where we're out conducting work in various geographies, but.
But.
I'm not going to given a number specific or or any other details related to the third quarter.
Yeah, and then you had mentioned last quarter about international travel, creating some restrictions obviously or your international demand. How are you adjusting to that in and has anything changed since the last time, we talk that has helped that business out.
Sure so.
When you look at the trend line certainly in the April May time period, I think that the for the most part the global had been shut down for several weeks.
What you're seeing now predominantly is a some form of disruption from the U.S. traveling abroad.
Obviously, the cobot effect is a little bit more significant here than it is and other parts of the world.
From our but Luckily what we have is as I mentioned in my prepared remarks, we've invested as a company in the global footprint. So we have operations in each of our most significant geographies, including the U.S., Germany, and Japan, where we can move around fairly freely.
So the biggest challenge at this point as having folks from the United States travel abroad, and touch customers in foreign jurisdictions.
Some cases that the technical requirement that may be associated with the contract.
So we're going to look to the second half to see how that plays out beyond that again, we're starting to see things open up relative to Asia and Europe. So I feel a lot better about where that is heading into the second half that I certainly did on our last call.
Great last question I'll hop back in the queue, you mentioned cobiz impacting the recurring material sales.
Look a lot looked like a lot given you still had marginal growth clearly it's impacting it.
Is that big is that business began to slowly recovers since we ended the quarter as well as restrictions disease and businesses have opened up.
It's been a little slow at least on the and the month of July I would say, it's been a little bit slow I think that what I was trying to highlight was if you looked at the sequential quarter. You saw basically a 900000 dollar drop one Q to the next relative to recurring and from our and materials represented about eight.
Hundred thousand or that 900000 dollar total.
Which again was abnormal purchasing that we saw and highlighted in our Q1 discussion.
What's really dropped off in Q2 that was a lot of sort according of materials sort of a toilet paper mentality that took place in them in the month of March for the most part and then what you saw in April and May was a lot of our customers because of whatever restrictions were in place or even just macroeconomic factors or running printers as hard as they tip.
Typically would therefore consumption was lower and the wasn't necessarily a need to.
You know pull supply and for materials, we've seen some of that stabilize I think in the third quarter, but I think what you ultimately see as sort of an abnormal first and second quarter and we should see that the third quarter matches more closely to this to the second.
Great. Thanks, so much.
Sure.
Our next question is from Turkeys Sorbet young with B. Riley. Please proceed.
Hey, Thank you and good morning, John and Doug.
Good morning, John in your prepared in your prepared remarks, you talked about inbound requests and interest to produce and use products at scale.
Maybe if you can touch on some more details regarding that just to kind of give us a sense for what kind of activity you're seeing even in this market.
Sure and that's a that's a global phenomenon I think you're whether it was started with the trade.
Trade wars, or cobot, 19, or other political tension there there's a desire with all that uncertainty for companies to consider.
Where they build things to supply future demand and there are major. This is this is happening across all of our sectors.
And frankly.
Mid size and large companies that are talking about this.
Where binder jets sits with its ability to do add volume or end use parts that volume allows us to be the type of solution, where customers come by and talk to us regarding that that potential future solution those supply chains.
Had been built over a number of years. So they don't change overnight, but the good sign we're seeing is customers engaging with us many of those engagements we are working with them on process development contracts.
To ensure that we can produce at scale their parts and reashure those parts, whether that's bringing back into Germany, or Italy or to the us or Japan. So.
It's quite a it's quite a really positive I'm.
Discussion point, we're having with a number of companies and worry in a as I said, a sweet spot to be able to deliver on that desire to have a more decentralized a more resilient in a more sustainable supply chain.
That's helpful and I know and also the prepared remarks, you you talked about auto medical and consumer goods I was kind of some of the representative sectors, you're involved with any sector, that's kind of surprising or new but you guys are dealing with.
Yes.
Our business is quite diverse which is which is a strengthen these sorts of uncertain economic times. So it is fairly broad I would say.
The one sector I may highlight there is because we are we have such a broad range of material set and can produce at scale I'd say medicals. The one that's kind of cropped up not not been a large part of our business in the past, but at least we're seeing.
Customers, who may have short gotten to supply from other geography is looking at getting those supplies closer to home. So I'd say, yes, broadly know where its diverse that's our demand thats a good thing in these uncertain times, but the only one that might pop up as unique might be medical.
Got it and one for for Doug Here, you mentioned on the Opex side and estimated additional two to 3 million remaining for 2020.
Can you maybe help us understand.
Where that comes from is it predominantly the assuming your line is it R&D is that a combination of both.
It's actually a combination of our fixed overhead DNA and R&D. It's all three areas really our fixed cost base overall and it stems from the remaining benefit or the remaining reduction that we would see throughout the remainder of the year associated with some of the permanent terminate.
Things that we took action on in March and April.
The furloughs that we've had.
For our programs both in the U.S. sand abroad.
As well as other.
Variable costs that we would see play out for the remainder of the year against our original plans.
Got it and if we kind of think about the comments around stability.
You do you kind of think the back half of the year looks a lot like the the what we saw here in the second quarter or do you think theres an opportunity took on the show sequentially improving financial results closing up here.
I think from our perspective, we would see Q2 as sort of the trough.
But to give any specific color on Q3, and Q4 individually I think it's a bit of a stretch just given some of the uncertainties associated particularly on the system side.
I think we've commented.
Several times related to our our comfort level related to the stability on the recurring revenue side. I think you look again at Q2 as a likely trough point the system side and again the back the backdrop.
The backlog driving that the $25.8 million machines, a lot of that is gives us the opportunity to deliver in the second half, but a lot of that has contingency at it.
Associated with the impacts on the broader market of Cobot, 19, and again, making sure that some of these travel restrictions that other restrictions that are in place.
Don't become more pervasive for us to operate.
Great. Thanks for that I'll hop back into queue.
As a reminder to star one on your telephone keypad. If you would like to ask a question. Our next question is from Jed.
Doug Shimer with Canaccord. Please proceed.
Hi, Thanks.
A lot of mining Ben I answer, but I did.
Digging in.
I guess my read is even.
Leased how you're describing is it really is dependent on.
That travel limitations and.
Effect from co bid in terms of your business. So.
Monitoring Kobe. It is is really how we should think about.
Your ability to.
To deliver both the consumables and additional machine it am I missing something.
Good morning, Jack Yes, John here, the what I'd say is certainly in the short term in the quarters few quarters ahead, that's true relevant to delivering on the strong backlog that we have.
Luckily recurring revenue is something we've continued to see grow and we've developed other parts of recurring revenue like contract services and.
In engineering development contracts, which we see growing in the future, but if I step back and think long term I'd go to the point I mentioned about reconfiguring supply chains, and binder jetting being the only.
The only threed printing type of technology that will allow customers to reconfigure their supply chains to re shore to break things closer to an end use markets. So.
As I made made mentioned in my comments I think theres, some long term potential to see our markets grow even faster and so thats why were so excited about our new products and.
How we're actually managing through this.
This crisis got it no I think were seeing thing sorry, if I.
In terms of my question I was just asking in terms of NADDI navigating through some of these choppy waters.
I guess.
But I do want to dig into the backlog for a minute in terms of maybe you could just help with.
Do any of these have cancellation provisions and if you've got backlog that you know over eight months old nine months old based on what Doug was saying.
You know have those customers found I know that you're the only solution, but there might be other workarounds in order to address and I'm just wondering what the risk of.
Hi cancellation.
Our with respect to that backlog.
Sure Jeff This is Doug I'm happy to to address that so.
Hi would in general say that the risk of cancellations with respect to our systems contracts is quite low the reason I say that as a few factors number one most of the contracts we require a pretty significant deposit and they generally don't have termination clauses that are one sided on them, where you can simply back out before we deliver the.
Product, we're pretty well protected in that regard when I look at the age.
While some of these maybe dated back into 2019 for example, we often get orders that are place well in advance of whenever a customer expects to receive and do and installation and I know that sounds strange, but thats just based on their business cycle, when and how they're operating a lot of them need to do sort of custom facility arrange.
Vince in advance of making an investment an additive, which which requires perhaps like a clean room to be developed or some nuance to their facility to be rearranged and often times. They are buying the equipment in advance. So it's not uncommon to see some distance and relative age of the contracts a lot of the stuff that's the most stage.
Within our current backlog.
The machine is actually physically onsite at these customers and we've been working diligently to help support them remotely or continue the process as we can through the crisis. The reality is that when you look at the company's inventories that are sitting on its balance sheet. We have a fair amount elicited finished.
Goods over 7 million at the end of this period.
When you draw upon our typical profit you can see that there is a large value that sitting there waiting to be turned over the bulk of that is sitting at a customer facility at this point so.
A lot of the new newer stuff. That's 2020, I, just don't see being likely to be cancelled in some respects. It may be delayed again because of the macro conditions, but we've not had anyone come to us and say that they need to back out for financial or other reasons.
That's a really important distinction then.
Thanks for pointing that out so up to 35 million do you have a number that.
It is on grounded.
Just a revenue recognition issue in terms of.
As you know final final acceptance.
Because that would certainly.
At least from my perspective, it reduces your reps there.
Yes, I don't I don't have a specific spot number that I want to give you.
I can certainly do some research and come back to you if you'd like to discuss that further but again I would hinge that offer the finished goods inventory, which again as per our way. We are accounting for this generally means that we've completed the machine and it's either been delivered or isn't a stage of delivery built to customer spec. So you can pretty much fully.
The that that value.
Considering our historical profit margins on such machines gives you an indicator of the the aggregate value that's out there in the field most of that Doesnt mean, we don't hold finished goods really in our facilities very often unless there is just a slight timing delay and getting the unit out the door. So most of that is in transit are sitting at a customers.
Right.
Got it that's helpful.
And then last question I guess, along similar type line you know if you.
And maybe we can take that offline, but I would be interested if we if we kind of parse out what's on ground versus what saying Q.
What.
Do you consider certain legacy verses.
Hey, where I'm going with that question as your ability to up sell to your.
Leading edge product when you look at that backlog because of the delayed is there a certain percentage that you think you can convert over.
Because it's taking longer which might be an opportunity for you guys.
Yes, I mean, when I look at the backlog currently.
I would say with reasonable confidence that the vast majority of what we currently have under contract is representative of our new offerings.
Our legacy offerings, which for the most part we've turned over now between 19 and 20 have pretty much been exhausted at this point there are some examples of that.
Within the backlog, including some refurbished machines that we sold and maybe just a few more legacy models that are out there but for the most part the backlog is pretty fresh with the pro offering on the San side and certainly the 25 pro that we introduced that are started delivering at the end of 19 on the metal side.
Great I'll jump back end. Thank you so much.
[music].
Our next question is from Ralph.
Well with our while investment management. Please proceed.
Good morning, John and Doug Nice Nice report.
Good morning could you could you.
Possibly talk a little more about the you with department of defense contract.
And perhaps the give me some kind of indication of what might be the long term potential of this I assume it's not just the one shot deal and maybe they're testing it but.
What would be the long term potential.
Another question would be a could you comment, but just a little bit more.
Possible on the automotive development contract that you have.
And and might you be involved in doing anything for the.
The industry, Andy and the third.
Would be for what uses might the initial commitments the for the X.
X when the pro.
Sure Okay, I'll try to get all three of those the the first one Ralph on the government contracts yet we've talked about the one that has just been contracted in the quarter.
For 1.6 million.
Stepping back probably about a year ago as I mentioned in some of our commentary that we had a really great opportunity with binder jetting to approach and be a supplier to a range of government agencies, whether what whatever part of de Odidi, OE, NASA et cetera and.
We put a team on that specific team that is focused on those projects and contracts.
I think this is the early stage of what they mean, there's a long gestation period to win those contracts to have them actually not just awarded but actually contracted in the backlog and most of these contracts are going to be run their R&D type work with potentially some part production or.
Or even machines included and certainly machines afterwards.
They tend to run between four quarters, and let's say 12 quarters. So it's categorize within our recurring revenue stream. So we see a lot of potential I think this is the first time, we're really talking about it highlighting in a quarterly call, but we're going to be talking more about this in the future. So there is more where that came.
From and we see that is an important leg of our future.
Secondly.
Yes, I think the the next question was on.
Automotive right. So the question, yes, the automotive projects I mean, one of the things. We're seeing is the automotive suppliers have said binder jetting. They love Threed printing the issue with most threed printing is the cost and therefore, they had not had rapid adoption.
Except for in the prototype space. However, binder jetting has now been accepted as the high volume production potential product of choice their technology of choice and so those customers I mean, it across multiple automotive brand names are working with us to come up with the workflow.
Those the certifications of products and materials to ensure these products are going into there.
Our future vehicles.
Just to be clear the we're working primarily with customers, who we're talking about vehicles that will be launched in platforms that will be launched in 2022. So this is not a short term type.
Boost for us, but it is a very important long term boost and I can say some of those vehicles also include dv or hybrid type configurations that would allow us to.
Help in that space, certainly for SMB vehicles, and hybrid vehicles Lightweighting is critical and that's when you come to Threed printing and that's when you come to binder jetting whenever you need volumes.
Okay. Thank you.
A third third question was BRE what uses might the initial commitment the where the X onesixty.
So.
No that automotive is a perfect example, but the commitments we have are across three or four different space is right now so the nice thing as our platforms are very versatile.
But anyone is looking for higher volume metal parts decentralized production the 160 as a great opportunity for them. So it is going across all of our end markets.
So the ones that we've already mentioned so we're very excited about this platform again, we're on schedule with it we are planning to shift towards the end of this year and we but we will not recognize revenue on this until sometime in 2021.
Thank you.
Okay.
Yes reach the end of our question and answer session I would like to turn the conference back over to John for closing remarks.
All right everyone. Thank you very much for spending the time today with us and for your continued interest in next one we think we thank you for the time and we look forward to updating you again next quarter.
Goodbye.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.