Q3 2020 ExOne Co Earnings Call
Due to depressed cobot related demand there was limited to certain segments of our sand printing business.
Other areas of recurring revenue have seen strength and growth during this period, including revenues from R&D contracts services consumables and our metal threed parts business.
Gross margins were below our norm, primarily due to low contribution margins on various system sales as well as some increased warranty expense.
During the quarter, we further increased our liquidity.
Which now totals nearly $50 million.
We achieved this with both prudent operational actions as well as the execution of financing transactions that Doug will touch on in his prepared remarks.
Overall, our performance highlights our business models resilience and our team's ability to continue executing our strategy in the face of challenging conditions.
Given our strong performance year to date and improving visibility we are on track to deliver year over year revenue growth in 2020, despite challenging market conditions and assuming no significant increase in travel restrictions.
Also we believe that this positive momentum will continue into 2021.
Now I'd like to talk in a little more detail about our business, which will show you why we're confident about the road ahead.
Today ex once production metal binding binder jet systems are in use and gaining momentum in the marketplace. This.
This includes the X 125 pro launch just a year ago.
We have now successfully installed multiple machines and have a customer expanding into multi site production operations.
Meanwhile, the new X one onesixty pro our 10th and largest metal binder jet system will be shipping soon with initial revenues anticipated to be recognized in the first half of 2021.
During the quarter, we also announced our Innovent pro advanced entry level metal Threed printer.
This is a major upgrade to the Innovent, plus which is the world's best selling metal binder jetting system today.
Over the last two years, our team has honed a process that gives manufactures a low risk pathway to adopting metal binder jetting technology in production.
Given our success, we're expanding our investment in this X one production adoption model.
This five step method de risks the buyer's journey and really gives them confidence as they move towards a significant shift in their metal production strategies.
In our updated investor deck, we've added some examples detailing where customers are in this process as they head towards substantial investments in our technology for their production.
That includes a global automaker.
Medical device company, several consumer goods companies and defense companies.
Given our 20 years of experience in metal Binder, Jetting X ones role in helping manufacturers through this sizable shift is turning out to be a major differentiator we.
We aren't just selling machines, we're delivering a complete factory floor solution.
At the end of the day Binder Jetting is still new to most manufacturers. So they really value our insights and they are gravitating towards us because of them.
At the same time, our clear leadership in material offerings in metal Binder jetting continues to widen.
During the quarter, we announced third party qualification for and Canal 718, a widely used material in defense and other high performance applications.
That brings our total qualified material list to 22.
More than half of those being single alloy materials.
This quarter, we also announced a new car contract with the US Air Force Research Lab AFE RL for Binder Jetting, a novel high strength steel alloy.
With these and other exciting materials, such as aluminum being fast track for qualifications, we believe Exelons binder jetting will transform the face of metal manufacturing, making it faster smarter and more sustainable.
Now lets move our discussion to the sand side of our business, which remains an area of focus for excellence team.
We have long term relationships with our sand customers and foundries here, our technology is moving into a new phase focused on improving productivity and performance.
In addition to our scout industry 4.0, App, we've been rolling out a new semi automated de sanding station.
The first of several upcoming solutions that improve customer productivity.
To wrap up we continue to manage through the COVID-19 uncertainty, but are moving ahead with confidence.
We believe our binder jet Threed printing solutions will play a critical role in the transformation of traditional manufacturing to a more innovative sustainable and decentralized manufacturing model.
And we are confident that we will remain the market leader in this segment by continuing to innovate.
Advancing machines and material technology, and partnering with our customers and other companies, who help us deliver on our mission of sustainable manufacturing without limitations.
With that I'll now turn the call over to Doug who will provide details about our third quarter financial results and outlook.
Thanks, John Good morning, everyone.
We're pleased to report strong third quarter results, we delivered the highest level of third quarter revenue in the company's history.
So our backlog sequentially to another record level and demonstrated continued execution in both our machine and recurring revenue streams. Despite unfavorable market conditions and continued operational disruptions brought about by COVID-19.
We ended our third quarter with total revenue of $17.4 million up from $10.9 million in the third quarter of 2019.
The increase in revenue was primarily driven by a 164% increase in Threed printing machine revenue, while a recurring revenue remained flat.
On a trailing 12 month basis revenue was $59.4 million for the third quarter of 2020 compared to $61 million through Q3 of 2019.
As mentioned sales of Threed printing machines more than doubled to $10.5 million and the third quarter compared to $4 million in the prior year quarter led by higher volumes, including contributions from our fourth quarter 2019 product introductions. The S. Max Pro and the X 125 pro platforms and a fee.
Operable mix of machines sold.
Trailing 12 month machine sales were $32.4 million for the third quarter of 2020, compared to 35, and a half million to the third quarter of 2019.
Now I'll move to machine unit sales for the period.
As a reminder, our direct machines print components, such as metal and ceramic parts for industrial and other applications and include our excellent 25 Pro Innovent plus an M flex platforms as well as our soon to be delivered X 160 pro platform, the industry's largest metal threed printer and our recently.
We announced an event pro platform.
Our indirect machines print tools, such as San cores and molds and include our S. Max Pro S Max and EZ print platforms.
Our indirect machines are larger footprint systems, which typically generate a higher average sales value.
Our direct machine sales have historically lean heavily to our innovent platform, which has a lower priced entry level metal system.
However, the recent introduction of our 25 pro platform has increased the average sales value of our direct units and we anticipate the Onesixty pro system introduction to further increase our direct unit average sales value and 2021.
We recognized 13 machines in the third quarter compared to nine in Q3 of 2019.
The 13 machines recognized in the third quarter consisted of seven indirect and six direct printing machines.
We were pleased with our ability to navigate the difficult market conditions influenced by COVID-19, and executing on our current quarter installations. The resiliency of our global team was clearly on full display.
As an organization, we continue to sell into a diverse set of global geographies and customer applications, which includes a mix of industrial and research and development users.
Our recurring revenue, which includes our threed printed and other products materials and services were flat at 6.9 million as compared to the third quarter of last year.
Increases in aftermarket revenue driven by our growing global installed base of printers, and funded research and development a strategic area of focus for the company.
Were largely offset by decreases in printing services for sand due to lower end market demand principally in the automotive market brought about by COVID-19.
While recurring revenue was flat on a year on year basis. We are encouraged to see that recurring revenue increased sequentially from $6.2 million in the second quarter driven by growth in aftermarket consumable material and funded R&D revenues, which were offset by a decrease in printing services revenue.
For the trailing 12 months recurring revenue was $27 million compared to $25.6 million in the prior year period.
For the third quarter gross margin of 22.4% compared to 26.4% in the third quarter of 2019.
The decrease was primarily due to low contribution margin on various system sales, including the X 125 Pro platform. Following its initial market introduction and the sale of a discontinued San system during the period as well as unfavorable product warranty experience.
For the trailing 12 months gross margin of 29.3% compared to 34.1% in the prior year period.
As I mentioned on our Q2 call and response to COVID-19, we took various cost savings 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 we expected as a result of these actions and other reduced costs such as global travel, we realized approximately $2 million in cost savings in the third quarter.
We estimate an additional cost savings in the range of approximately $1 million to $2 million for the remainder of 2020 with approximately two to 3 million of the total 2020 cost savings sustained into 2021.
For the third quarter, our total operating expenses decreased to $6.8 million from $7.7 million in the prior year period.
Research and development expenses were $2 million compared to $2.4 million in the third quarter of 2019.
The decrease was primarily due to cost savings measures and other cost reductions associated with Cove at 19, and lower material and consulting spend associated with machine development projects.
For the trailing 12 months R&D was 9.3 million through Q3, 2020 versus 9.7 million through Q3 2019.
Selling general and administrative expenses were $4.8 million compared to 5.3 million for Q3 2019.
This decrease was driven by a combination of factors, including lower travel and Tradeshow expenses and cost reductions associated with Cove at 19, as well as lower net bad debt expense offset by an increase in sales commissions expense and the absence of an incentive compensation reversal from 2019.
For the trailing 12 months SDMA was 21.2 million through third quarter 2020, compared to $22.4 million through third quarter 2019.
Turning to our backlog.
As a reminder, our backlog includes firmly committed orders received from our machine and recurring revenue customers includes our machine maintenance contracts as well as the noncancelable portion of our operating lease agreements addition.
Additionally, backlog includes orders for our global metal and sand printing operations and other contractual services, including funded research and development.
We ended Q3 with another record backlog balance of $42.6 million, an increase of 12% as compared to $38.2 million at the end of the second quarter and an increase of 65% as compared to $25.8 million at the end of the third quarter of 2019.
Our third quarter backlog includes machine orders totaling $27.3 million, representing 40 total units both sequential quarter increases.
Our backlog increased also benefited from an increase in firmly secured research and development contracts with the federal government of approximately $4 million.
Moving to the balance sheet.
Cash cash equivalents and restricted cash as of September Thirtyth 2020 increased to $39.9 million from 20.2 million at June Thirtyth 2020.
The increase was driven by cash inflows from financing activities of $25 million, including $24.8 million of total equity sales.
Offsetting this were cash outflows from operations of 5.3 million, primarily due to the widening of net loss net of non cash items for the period and a reduction in cash inflows from customers based on timing of payments.
Our cash capital expenditures for the third quarter were limited to $200000 and we expect less than $1 million of planned cash capex for the remainder of 2020, which will remain 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 $49.4 million at the end of the third quarter compared to $29.7 million at the end of the second quarter.
The increase was driven by changes in cash that I just discussed as there were no borrowings outstanding under the Companys 10 million dollar related party revolving credit facility during the period.
As John mentioned, our backlog position and enhance liquidity give us confidence as we head into the fourth quarter and plan for 2021.
That said, we remain vigilant as it relates to the significant uncertainties associated with the duration and severity of COVID-19, and its related impact on the markets, we serve and our operations.
As Weve stated previously it is our goal to effectively manage our business through this crisis and exit in a position of strength.
Further enhancing our market, leading position and binder jetting technology.
That concludes our prepared remarks, and we would now be happy to take your questions.
Okay.
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 a confirmation tone indicate your line is in your question Keith.
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One moment, please let me pull for questions.
And our first question is from Brian.
I mean, we align Google partners. Please proceed with your question.
Great. Good morning, nice to see the stronger cash position.
However, I am struggling with understanding how on the surgeon revenue. The gross margin plan you mentioned a variety of reasons in the press release, such as low margin on system sales in introduction of the X one discontinued product sale and unfavorable warranty expense.
Can you touch on each of these in the impact on the margin in how these trends might persist if ACO apple applicable for each please.
Sure Brian Hey, this is Doug.
So on the margin side relating to the system sales a couple of things to point out number one one of the systems that were sold during the quarter was our discontinued Ics cereal system, which was a greater than $1 million sale that effectively was slightly above breakeven.
We discontinued that in 2017, and yet we still retain one unit in house, and we were able to sell that to an existing user the same system. So.
A win win for the company and we were sort of happy too.
Get that to the customer to expand their operations.
With both a favorable aftermarket agreement and then continued material sales tied to that.
On the 25 fro.
We've had a little bit of discussion ongoing here I think in the last couple of calls that we've done this is a little bit different than some of the other platforms that we've introduced recently this is from a ground up so we sort of started this one with a blank sheet of paper and took a lot of our binder jetting Tech and built this up so really what we're seeing here is.
The manufacturing costs that are associated with the first set of large units introduced to market are coming through at a lower rate or return than other systems that we sell.
Ultimately, we expect that to normalize back to what we typically sell systems for but we're probably not out of the woods on this one quite yet.
Likely to see some margin disruption in Q4 and likely in Q1 of 2021.
On the warranty side, we had some disruption there as well relative to for the most part on our sand products. So again did a new product introduction or product introductions in 2019, and we had a little bit of a hiccup in the most recent quarter. We don't expect that kind of experience to recur we have a pretty.
Strong history of having a balanced equation when it relates to warranty experience. So it's not something that we're expecting to take.
Any type of abnormal charges for into the future.
All in all when you add up all those components Semina My rough estimate is that that probably cost us about 10 margin points.
So with the 25 pro piece continuing into the future.
That's probably the only component to that that would foresee that we have in our plans going ahead.
Great that's helpful very helpful.
One of the questions I get from.
Expected investors.
You know in your slide deck as well as just the industry market estimates the compact compound annual growth rate.
Starting may back to now and even going forward is about 20% and.
And while this quarter was very strong from a revenue standpoint as youre on track probably to be at 27 to 2018 revenue levels. So I guess in hindsight why do you think ex wine has.
Participated in the additive manufacturing.
Manufacturing market, notwithstanding a little bit of course.
Hey, Brian had thanks, Yes, I would say that our growth took a pause as the manufacturing economy went into a bit of a.
Hold period at the in 2019, we.
We're obviously seeing good recovery now as it's shown in our backlog and our and our current results. The second thing is there were a number of players that introduced.
Machines that frankly had customers take a look at the industry and the good news is as they as they've looked at other potential.
Alternative suppliers decided to move forward and come back into our camp and that's where we're also seeing benefit within the.
Within the backlog so I'd say for the both those reasons, we think our growth rates will be positive going forward.
I think theres, a we talk also about the supply chain reconfiguration and decentralization of manufacturing, which.
Many times is being done in a way that leverages additive manufacturing and not just adamant additive manufacturing for prototypes, but really the production side, which is exactly where we excel and why we're getting so much interest today. So.
I think that gives you a little perspective of the of the past and the pause there and I think it gives us great promise for the future.
Great one more question.
With the increased capital twofold first how do you make investments in sales and marketing or you plan to that will go through the PME now that create more market awareness for binder Jetting and then second question on the capital.
Desktop metal.
They are in their process, we're going through right now with their boasting.
A plan of course to just a plan to introduce a binder jetting printer next year that had a significant faster speed than Youre binder jetting machine. So.
Do you think about.
Investments in a faster speed printer, so a twofold question on capital deployment.
Yes, I'll get it started and Doug you can add in.
I think we've got many opportunities to invest capital to expand our organic growth rates. Both as you said in sales and marketing and Weve.
Increased our footprint in as far as coverage globally. We've just hired a brand new Asia Pacific leader, where we had nobody in that space before covered that through reps remotely.
And we've also increased our marketing presence and capability. So we see opportunities there we see opportunities to continue to expand our material palate, we have significant customer interest in a range of new materials, but as we introduce new materials were many times working with these customers through the adoption process that was in the.
Slide deck and I described in my script.
And that is actually causing us to put some more capital to sustain those sorts of new development projects that were collaborating with customers on.
So that is the said that on the first part of the question I think we have plenty of places to invest in organic growth and we're really excited about those in there many times very aligned with our customer needs on the on the claims of other other folks out there look.
Look theres a lot of claims I think the important thing is we're delivering.
And have been for more than 20 years machines to customers and I think one of the things we understand when we talk to customers is.
Speed is not the only considerations mass effect is not the primary consideration there number one consideration is can we deliver high quality parts within their with their material added in a reliable fashion that is what we are doing every day and again that adoption model helps the customers prove that and de risk their buying.
Journey I mean look if you look forward in our roadmap, which we share with certain customers under end Deejays do we have improved productivity of our printers out there absolutely, but again right now customers are buying on KWE.
Quality parts ability to deliver those in a reliable fashion and ability to service them in the long term. So we think some of the benefit we're seeing right now is because that's that's the type of partner. We are we are with these customers and I expect that to accelerate in the future.
Great. Thanks tumor shrinkage in my questions Yes.
Yes, Thanks, Brian take care.
And our next question is from Sarkis Sherbetchyan with B. Riley Securities. Please proceed with your question.
Good morning, and thanks for taking my question here.
Sure good morning.
Hey, John can you can you maybe touch a little bit more on the funded R&D I know Youve recently.
Released some interesting kind of releases regarding for example to be.
United States Air Force awarded contract, maybe just touch on.
What that means for your business, how do you see that portion of the business growing and then ultimately what does that mean from maybe increased systems and material sales over time.
Yes sure.
So funded R&D is really part of the aspect of saying Binder jetting is still relatively new to many customers and has dramatic opportunities to expand the material pilot and the capabilities for production Threed printing. So we're saying to customers look we need to do.
Second this together and we are going to need your help financially to make these things happen, sometimes those customers are government customers and Thats, where Doug mentioned some of our success. There. It was an initiative we started.
In the last few years and have seen some recent success as he talked about in.
That was an increase of our backlog of almost 4 million. This quarter now remember those contracts don't come off the next quarter those tend to be running over eight quarters. So we we expect that to be in in absolute improvement in our recurring revenue next year.
And beyond that and that was a secondly, I'll go to the commercial R&D contracts within that adoption model that we have in the slide deck those steps scope of work validation of technical and business case include funded R&D with the customers that actually.
We prove that they can go into high volume metal part production with their with their platforms in the future and we work together with them and we asked for contribution to that effort and many times. What we're doing is proving out either new materials, new geometries, new applications and so all that leads not.
Just two at the end in both of these cases, new opportunities for individual machines, but new opportunities. Many cases from multiple machines. So at the end of that Rainbow. There's some some positive news for us and frankly very positive news for the customer because there it's not just a promise.
In the future, it's not just selling a machine and hoping things work in a couple of years. We are throughout every step of that journey proving to them that this will meet their requirements and then they have the confidence to Suvs spend substantial capital to new many comp time set up new facilities to meet their parts requirements in the future.
Yeah.
No understood and you kind of step back and think about this process.
How long do you anticipate on.
These processes are taking from start to finish and then obviously from a from a benefit perspective, whether it be through increased.
Machine sales are material sales.
How does that kind of flow through as you sell more systems and set up those processes for your customers.
Yes.
So and again a lot of times these are more challenging applications and or significant steps up in volumes. So.
That five step process is taking anywhere from we see that one defy at one to three years in timeline.
And we say that because again many times. These customers are moving through we're working on new materials working with their own custom materials working with their own geometries validating the cases, they're going before their boards and validating large capital expenditures were doing the first machine, we're running that inside of our facility then we're moving it into their fun.
Realty and then they're scaling up from one machine to multiple machines, so that's sort of process.
It is a one to three year process and frankly, a lot of times. Our customers are they are not doing this for their existing product that they design five or 10 years ago. They are doing this for new products and new initiatives to help them have substantially improved and product of their own. So it's really exciting.
To work with them on that journey.
Understood and just wanted to kind of Cook come back to the backlog real quickly I think the comments you mentioned machine backlog was up quarter on quarter and I think you just mentioned that the government contract, which was up 4 million Bucks and sit in backlog as well right. So.
Total backlog was up maybe about $3 million can you just maybe help me understand the math or if theres something that I'm missing there.
No I think you have that right.
So the backlog on a machine basis increased from 25.8 to 27.3 Q on Q.
Which means that the remaining portion of the increase was tied to all other streams of work.
And that we added the Gulf Con piece here in Q3, which would have then been offset by reductions are a recognition of other sales on the recurring side.
Got it so just simply stated it was.
Burn of backlog being recognized in sales is that the right way to think about it yes, yes.
Okay got it.
Good and just wanted to kind of come back to the discussion regarding.
The margin you mentioned the disruption continues to Fourq you in.
21, with the kind of the magnitude of that I think that was associated more so with the 25 pro machine, what's the order of magnitude as sales should be growing so just want to understand.
But the contribution margin looks like on an incremental basis.
Yes, it's a little bit hard to say because every machine sale that we do represents a slightly different configuration, depending on the customer and the application than the last.
And we don't I don't necessarily have perfect visibility into the timing or the mix of sales that we'll have in any particular period I think history has pretty much on that.
When you look at the current quarter again sort of doing a breakup and thinking about what the.
Assumption is related to the margin impact simply on the 25 pros for the current quarter I'd again estimate somewhere maybe two to three margin points.
And reduced return we've done a little bit better in our me because its manufacturing driven we will continue to do better on some of the sales coming through in Q4 and in the early part of 2021.
But to put a specific finger on what that might look like for those two cues I wouldn't necessarily say at this point.
Okay, No thats helpful and then just.
Circling back to the cost savings.
And the piece that's the vein into 2021.
Just remind me.
Given.
The $2 million and save them I think you mentioned one to 2 million upcoming was was the 2 million rolling forward into 21.
Was that the right number.
Correct somewhere between two to 3 million I think last quarter, we had been set on about two and a half have widened the range to two to three.
And the reason for that is it thats predominantly.
Permanent employee terminations that we didnt replenish.
Yes that number is really representative of those costs that would continue on into 2021.
And any incremental kind of SGN, a coming through would really be to support the new product rollout and kind of marketing initiatives is that the right way to think about it.
Yes, I think you see a variable variable selling cost stand or other variable costs come up.
To the extent that the commercial operations with dictate that so thats really where we would earmark increases I think otherwise we're pretty stable.
Good that's all for me. Thank you so much for yep. Thanks.
And again as a reminder, if anyone has any questions. You may start one of your telephone keypad. Our next question is from did Bush with Canaccord. Please proceed with your question.
Yes.
Hi, Thanks, guys nice job on the quarter I.
I think most of my housekeeping questions have been asked and answered already so just maybe high level John.
I'm curious in terms of what you're seeing in and how you might be able to articulate articulate or quantify.
Any cross Pollinization efforts with respect to some of the larger customers on the sand side in terms of interest on.
The direct side.
Of the business.
Okay.
Sure. Thanks Jed.
So the good news is we have long standing relationships as I mentioned with sand foundries and a number of Oems, who who have incorporated digital mold and core printing within their own operations.
The other thing about that is they understand our production readiness and how we're doing things at scale as opposed to purely for prototyping.
That actually is starting to play in if I think about the customers that are in our production adoption model. Several of those are companies that have had experience with us on the sand side.
So they understand and know our teams they understand the expectations of scale.
Scaling the business and I.
I think that this.
Frankly in my talk about the pillar of expanding our technology and modularity were taking some of that same very robust reliable production ready technology that we have in the sand and building that into for example, the excellent 60 pro which.
Is.
Truly exciting to a lot of these players because they're already familiar with some of those core.
Technology components.
And frankly the software so.
That is that is a benefit we weren't sure how extensive it it will be but it.
Would be but where are we are seeing it seeing.
Seeing it probably more in the automotive or large industrial and some to some aspects in the defense business too.
So from a timing perspective, I mean, if we look at what Tesla has done in EPS now Tesla is openly half has open racks.
Around Threed printing.
Systems in terms of some of the position they are looking to hire so.
If we look at Tesla is kind of avant garde for.
For E V.
You've also got a.
Train of traditional Oems.
Many of which you have.
Relationships on the sand side for the casting.
That are going to need to.
Or have plans on the side and what we've seen in other technologies is kind of a follow the leader. If you will so do you think it's more of.
Just a timing situation or.
I guess, how do you translate sort of those queries into.
You know a in RFP or.
As well as to an order.
Sure.
Yes, I'd say that a majority of the automotive companies customers, whether traditional or either any b. They see the ability to threed print lightweight parts is absolutely vital to their future whether it is yes.
Well, yes hybrid vehicle or E b so.
I think it is a matter of time, if you look at some of this more newer firms on the TV side. We've had a number of discussions a lot of them are just trying to get their product out and get the design finalized but they are at the same time looking to light weighting and production oriented solutions for Threed printing and.
And it could be the nice thing for us is that could be a sand solution that gets some started depending on the scale of the part they are looking at or are they are the material base and in other cases, it can be direct metal in a production basis, particularly with the scale of the 160 and the ability for that to do larger parts and.
Significant throughputs.
And the same holds true for the production company the traditional companies in the automotive space, who are increasingly moving to hybrid and TV type platforms. They are leveraging their knowledge I would say to an extent, but it is a timing thing. It takes time for these companies.
These to finalize their platform get the supply chain said and start to produce so I.
I think that the next few years are going to be quite exciting when it looks when we see the adoption of metal threed printing again, whether direct or indirect in these sorts of firms and that that spells I think multi machine opportunities for us.
Got it and where do you fall along the lines of so additives pretty straight forward.
It seems as if thats more of.
I don't want to say convincing but hitting specs in terms of reliability sort of you know, it's a newer technology from.
The robustness of the part for example, where is the sand in a casting is tried and true.
So if you look at the.
Yeah.
Both can kind of lead to a path of lightweight.
On the sand side, you might need lasers to remove excess material from your casting to get to that lightweight do you see that as kind of being the first half before you see that.
The direct additive or you.
Is it really OEM dependent in terms of that Lightweighting.
Process.
So.
As you said, it's both it's both for sand casting threed printed digital sand casting and for direct metal.
Yes sand casting is more established it people understand the metallurgy.
So that is probably ahead, but I would say and this really.
As I mentioned again, the production adoption model, that's where we're working through customers to tackle the sorts of concerns that you described.
People may have in past gotten excited about some speed claims or proposals, but now they when they get real about as they need metallurgy upped.
Uptime automation cost per part and that is what we are validating in the production adoption model such that they can feel comfortable to press the button on large capital expenditures that may come into their platforms.
Then on the automotive side, you know the cycle times were at it may be getting shorter, but we're talking to several companies on projects are working with companies on projects that are for platforms or 2022, 2023. So that's sort of timeline really does ensure that they have high degrees of car.
Funds to work with us and deploy systems.
To meet their production requirements at that point so.
We have short mid and long term pass to help the customers when they're.
Okay.
Great well, thank you and keep up the good work and hopefully a breakout for you apps.
Absolutely I appreciate your time.
Okay.
Are there any other questions.
And when we had finished with the question and answer session I will now turn the call over to John Hartner for closing remarks.
Everybody. Thank you so much for your time and attention today and your questions. We look forward to talking to you again at the end after our fourth quarter in the new year and have a safe and good fourth quarter take care bye.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Okay.