Q4 2021 Velo3D Inc Earnings Call
[music].
Greetings welcome to <unk> fourth quarter and fiscal year, 2020 one financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note this call.
Is being recorded I will now turn the conference over to your host Baba Penske head of Investor Relations. Thank you you may begin.
I would like to welcome everyone to our fourth quarter 2021 earnings Conference call.
On the call today, we will start out with comments from <unk> CEO of <unk>, who will provide a summary of the quarter as well as discuss our key strategic priorities for 2022.
Following <unk> comments Bill Mccomb, our CFO will then review our fourth quarter and fiscal year 2021 financial results as well as provide our guidance.
As a reminder, a replay of this call will be available later today on the Investor Relations page of our website.
During today's call we will make forward looking statements that are subject to various risks and uncertainties.
As described in the Safe Harbor slide of today's presentation. Today's press release, our most recent SEC filings related to our previous transactions.
Please see those documents for additional information regarding those factors that may affect those forward looking statements.
Also we will reference certain non-GAAP metrics during today's call.
Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations.
Finally to enhance this call we have posted a set of Powerpoint slides, which we will reference during the call on the events and presentations page of our Investor Relations website.
With that I'd like to turn the call over to Penny Butler CEO of <unk>.
Thanks, Bob.
I would like to welcome everyone to our fourth quarter earnings call.
As you will hear we remain very excited about the opportunities for additive manufacturing and continue to believe our technology when rapidly changed their weight mission critical parts on protection across multiple industries.
I would like to discuss the specifics of our fourth quarter and fiscal year 2021 gives us please turn to slide four.
First of all 2021 was an important and successful year for <unk>.
Enormously proud of everything we've achieved and believe that our successes in 2021 had laid the foundation for our continued growth this year and beyond.
Specifically, we ended 21 2021 with strong execution as we met or exceeded our financial forecast, while achieving a key strategic milestone was the shipment of our first CSR acts.
This system.
Third quarter revenue rose, 20% sequentially and 64% year over year, both ahead of our guidance.
On an annual basis revenue growth was also ahead of plan at 45% as we saw increasing demand from both new and existing customers throughout the year.
We also shipped 23 systems for the year in line with our forecast with record shipments in the fourth quarter.
More importantly, as I just mentioned, we shipped our first so far access system to a customer during the course of.
This is a very important accomplishment is the sector will.
It will be the primary driver of growth in 2022.
We had an outstanding quarter from a bookings perspective bookings starting systems during the quarter.
This brought our total 2021 bookings to 34 systems compared to our goal of 20 for the year. Additionally.
Additionally, we exited 2021 23 systems in backlog against our plan of 20, <unk> to both <unk> and <unk>.
Finally, our balance sheet remains very healthy with $223 million in cash and we remain very comfortable with our liquidity position to fund our long term growth map.
Good morning.
Given our continued execution strong visibility with a record backlog and the successful ramp of our stuff. Our exit we are reiterating our previous 2022 revenue guidance of $89 million.
On slide five we are providing a brief summary on how we delivered on our fourth quarter and fiscal year 2021 guidance compared to our forecast, which positioned us well for 2022.
Back in June at our Analyst day, we laid out the number of close for the year, including achieving our aggressive revenue and shipment growth plans for 2021, delivering a new sofa exit printer markets by year end and exiting 2021 with a backlog supporting our goals in 2022.
I'm happy to report that we accomplished these goals and this execution is reflected in the chart.
I would like now to provide an update on our central right Sheila Please.
Slide six.
As I previously mentioned the highlight of the quarter. It was the delivery of our first CSR access system to a customer.
Key advantages of the <unk> exit.
Exit and close.
About 400% higher production rate compared to setup.
Lower pulp costs by as much as 60% to 80% of.
Production of parts up to 400% larger in volume compared to off set.
Except for our system.
As a result, we continue to see strong exceed the amount.
Both our OEM and contract manufacturing partners.
We exited the year for example, so far exceed backlog rose to 18 systems in the fourth quarter and remain a material portion of ultra 34 bookings last year. This is reflected in our expected Stephane casino revenue backlog, which.
More than doubled compared to our fourth quarter of last year.
This gives us significant visibility for 2022 was close.
50% of our revenue target is in.
In backlog from Stephane.
Okay.
Finally, our new manufacturing facility remains on plan and we believe this facility will provide us with sufficient capacity to meet our growth targets.
I would like now to spend a few minutes discussing our broadening customer footprint. Please turn to slide seven.
This slide details our market segment diversification by total customers.
At the end of 2021, along with a breakout of by 2021 shipments historically, a significant portion of our customers. We are in this space segment. As this segment is characterized by strong until from euro and innovative companies that are pushing the boundaries of new technology and other people in your sector in particular.
As you can see from the charts, we have significantly expanded our customer footprint from our emission base to include new verticals, such as energy aviation and defense contract manufacturing and other industrial applications.
This segments I'll make.
More than 75% of our cumulative customer count.
This strength is also reflected in our 2021 shipments as we are also seeing good adoption of our technology across all of.
Our key industries.
We expect this trend to continue in 2022.
Look to capitalize on increasing demand in this regard because as well as new market segments.
Not only heavily diversified by market segment, but also reduce customer concentration.
Please turn to slide eight.
This chart reflects the successful execution of our efforts to expand our customer base to reduce customer concentration specifically, we were pleased to more than double our customer base to 18, including 10, New customers addition, in 2021 and expect to more than double our customer base in <unk>.
2022.
We are also benefiting from our lend and expense strategy as we continue to see existing customers, adding to their balances would be footprint with additional systems as well.
Are those.
About 60% of shipments last year.
As a result.
Largest customer accounted for approximately 27% of revenue in 2021.
<unk> from 74% in 2019.
Reflects.
The success of our new customer acquisition.
<unk>.
We expect this trend will continue over the longer term.
Investing in our infrastructure to drive new customer growth. For example, we are rapidly expanding our north American sales force as we as well as focusing on developing our presence in the European market. Following our first system sale in the second half of 2021.
We are excited about the opportunity in Europe , and opening of our technology office.
Last year, we are looking to capitalize on the market opportunity that could be as large as what we have in the United States.
I would now like to briefly discuss a few of our key operating metrics for the year.
Well, let's provide our 2022 outlook.
Versus what we discussed at our June analyst day.
As I mentioned, we firmly believe that our strong execution this year position us well for success in 2022.
Please turn to slide nine.
For the year, we added 10, new customers and exited the year was 18 commutative customers.
We expect to add 24, new customers in 2022 in line with previous guidance.
Analyst day last year.
This will bring our total customer count to 42 at the midpoint of guidance for the year.
While this is slightly lower than our guidance last year. It reflects a higher portion of sales to existing customers in 2021 versus our initial plan.
For 2022, we have significantly expanded our sales team and are appropriately resource to meet our new customer objectives for this year.
We also shipped a record of eight systems in Q4, which brought our total for 2021% to 23 also in line with our guidance for 2022, we expect to more than double shipments to 48 at the midpoint of guidance and this reflects the scenario we outlined at our analyst day.
Equally split between safer and safer IC shipments for the year.
Finally, given the increasing demand from existing customers, we see our average existing customer purchase ratio in the range of one two to $1 four consistent with our longer term guidance.
On slide 10, we are providing an update on our key revenue metrics for 2021 and the same performance as a reminder, euro cents revenue includes revenue recognized the delivery of units within the period recurring revenue includes maintenance support consistent base revenue attributed to <unk>.
<unk> delivered.
Overall revenue was ahead of guidance at $27 million.
With year over year increases in Europe sale as well as recurring revenue.
For 2022, our guidance remains unchanged at $89 million at the midpoint.
Your cell ASP for the quarter and the year was in line with our guidance at $1 million, We expect Europe cell ASP twice in 2016 to the range, one five to $1 $7 million.
The result of increasing separately <unk> cells as well as <unk>.
Shifting and transaction mix to more print doses.
Before turning the call over to bill to discuss our financials I would like to conclude my remarks by highlighting our strategic priorities for 2022.
Please turn to slide 11.
Overall, we continue to see a rapidly expanding global addressable market for high value metal parts, and we remain committed to providing our customers with technology to produce the parts they need without compromise.
First we believe we can best address this opportunity.
And expense strategy by increasing our footprint with existing customers through follow on system purchases.
Currently we are also focused on new customer additions, which is an important driver of future growth.
We continue to invest in.
Infrastructure to achieve these priorities as well as.
As we have more than doubled our sales force over the last 12 months to drive customer expansion.
We are also ramping our European operations.
Recently <unk>.
Establishing new sales and service team. In addition to opening our new Technology Center in Germany.
Finally, we remain focused on working closely with our contract manufacturing customers to drive box demand.
Specifically, we have formed a business development team is solely dedicated to securing design wins, which we feel will be instrumental in driving system demand with our contract manufacturing partners.
Our second priority is to execute on our manufacturing expansion plans that we announced last quarter, which will provide the capacity we need to meet the growing demand for our surface systems.
This includes the Buildout of our new manufacturing facility that will support the production of up to 400 systems annually when fully ramped.
Goodness in phases and current capacity supports our 2022 growth plans of tablet shipments this year.
We're also focusing on successfully managing our supply chain in relation to our production schedule to date, we have been able to mitigate supply chain effects on our business, but this issue remains a material risk to our shipment plan.
We continue to be proactive to offset any potential impact by building an inventory cushion as well as further diversifying our supply chain better condition will sometimes.
At this point, we remain confident in meeting our 2020 to close despite this ongoing issues, though we are closely monitoring conditions for any change.
Our final priority is to continue to deliver industry, leading service to our customers. We believe our customer service separates us from our peers and is a critical driver of why we continue to see strong demand from our existing customer base.
Specifically with our end to end.
Metal manufacturing solution the ability to leverage.
Our covenant hardware and software foundation allows customers to quickly benefit from any improvements and process capabilities to drive better system performance reliability and quality.
We also have a number of initiatives underway to help customers maximize system utilization.
It's particularly important for our contract manufacturing partners and higher utilization rates means increased throughput and parts volume, while reducing those costs.
Finally, we will continue to invest in our next generation technology to provide our customers with the best solution for their ongoing Mds.
In summary, we are pleased with outperformance in the fourth quarter as we posted strong revenue and bookings growth added to our growing customer list and shipped our first <unk> system.
Looking forward the opportunity for 2022 and beyond is very exciting for all of us at developed would be all.
Our shareholders, our customers and our partners, we are changing the way our most innovative customers manufacture metal thoughts by providing them the technology, they need to develop and manufacture mission critical metal parts without compromise.
We remain confident in our future vision and a strong 2021 execution position us well for 2022 as we continue to push the boundaries of what is achievable with metal additive manufacturing.
With that I would like to turn the call over to bill to discuss the financials and our guidance.
Thanks Benny.
Moving on to our quarterly financial performance, Please turn to slide 13.
Revenues for the quarter was $10 4 million up 20% sequentially and 54% year over year.
The increase in revenue was driven by six point of sale transactions in Q4 versus five in Q3 recurring revenue declined slightly for the quarter due to temporary contract delays leased system buyouts, which occurred in Q3 and other factors. We expect recurring revenue growth to resume in Q1 of 2022 and to continue.
On a quarterly basis through the year.
Gross margin for the quarter was 16% essentially in line with Q3 Q4 gross margin was impacted by lower launch customer pricing for the Sapphire XC system shipped in the quarter higher material costs and other than service cost associated with positioning the company for significant growth in 2022.
I'll say more on this shortly.
Adjusted operating expenses, excluding stock based compensation rose, 21% to $18 2 million in Q4 compared to $15 million in Q3 due to increased SG&A spending to support our growth plans in 2022.
Sales and marketing increased $1 3 million as we expanded our direct sales force, while G&A increased $1 9 million due to costs associated with being a public company and increased facility costs GAAP net loss for the quarter was $14 4 million on a non-GAAP basis, which excludes stock based compensation.
<unk> and other adjustments net loss was $17 5 million.
Adjusted EBITDA for the quarter, excluding the same costs was a loss of $14 7 million.
On slide 14, I'd like to provide more detail on those factors that impacted Q4 gross margin and the expected gross margin trend for 2022.
As you can see from the chart. There were three main factors that impacted our gross margin in Q4, and which we expect to have a continued impact primarily in the first half of 2022.
First is the impact of lower pricing launch customer orders for the first 10 sapphire exceeds compared to the other orders in our backlog in Q4. This had a negative margin impact of 4% when we shipped one system.
And we reduced Q1, and Q2 2022 margins by approximately 10% as we expect to ship three to five system for the quarter.
These deliveries will be completed by Q3.
The second factor is higher material cost compared to plan, primarily for the SaaS far exceed this reduced Q4 margin by 7% and we expect a similar impact for the first half of 2022, however, as we stabilize the supply chain for this new system and take advantage of growing volume, we expect we will be.
To meaningfully reduce material cost starting in Q3.
Finally, we incurred excess labor and overhead costs compared to plan in Q4.
As compared to the first build of the Sapphire exceed we expect unit production costs to decline progressively through Q4, as we accumulate substantially greater experience in building the system.
Given our large backlog of orders and the benefits of moving down the experience curve and building this new system and the roll off of launch customer pricing impacts. We believe we have good visibility to reaching our goal of a gross margin above 30% in Q4 of 2022.
Turning to the balance sheet on slide 15, we exited the year with a very strong balance sheet and ended the quarter with $223 million in cash and very limited debt.
As we outlined in the chart more than half of our cash usage in the quarter was tied to nonrecurring items, including $22 million for expenses related to our merger in 2021, and the retirement of $21 million debt.
On an operational basis cash usage was approximately 31 million capex.
Capex was $10 million, including $5 million related to the build out of our new manufacturing facility.
We expect to spend an additional $5 million to $6 million in Q1 to complete the project and provide the capacity necessary to meet our growth forecast.
Working capital usage was primarily driven by increases in accounts receivable and inventory and funding our growth. We also built inventory to provide a cushion against current supply chain conditions for.
For 2022, we expect total year cash usage to be in the revenue of $80 million to $90 million with quarterly usage being front loaded in the first half of the year before declining substantially in the latter part of the year.
Looking forward, we have significant visibility in achieving our 2022 revenue forecast please turn to slide 16.
Overall, our confidence is driven by the fact that we have high visibility on more than 60% about 2022 revenue target.
Of this 60% our firm backlog of 23 systems sales accounts for 48% of total revenue of $42 million with the balance of 12% were $11 million coming from our growing recurring revenue base.
Given these factors we remain very confident in our ability to achieve our 2022 revenue target looking forward. We also wanted to provide some color on the distribution within the year about 2022 to financial performance targets we have.
Expect our business to continue to grow rapidly on a sequential quarterly basis.
Our current forecast.
First half will account for between 37% to 43% of annual revenue target annual targets for revenue shipments bookings and new customer additions with the balance of 57% to 63% coming in the second half for all four metrics.
I'd now like to provide our guidance for 2022, please turn to slide 17.
This slide summarizes our guidance for 2022 as well as how this compares to our prior guidance given at our analyst day presentation in June of last year are.
Our revenue guidance remains unchanged at $89 million.
We expect continued growth in our bookings rate with 2020 to bookings in the range of 47 to 49 systems.
We expect customer additions totaling 24, new customers in 2022 also in line with analyst day guidance.
Finally, our shipment guidance remains unchanged in the range of 47 to 49 shipments our guidance is based on and consistent.
50, 50, Sapphire Sapphire exceed shipment mix scenario presented at our analyst day last June .
In summary, given our continued sales momentum large backlog strong demand for our <unk> systems and solid balance sheet, we are well positioned to capitalize on what we see significant growth opportunities in the end market in the years ahead with that I'd like to turn the call for questions operator.
Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your <unk>.
Set before pressing the star key one moment please poll for questions.
Our first question is from Brian Drab of William Blair. Please proceed with your question.
Hi, Thanks for taking my question.
I was wondering if we could just start by clarifying the gross margin on slide 14.
I guess the Blue line Blue column is the.
Gross margin forecast is that right Bill and then the first quarter or are we.
What what are you, telling us about gross margins zero or below zero for the first quarter.
Yes, Brian .
Lou Bar.
Is the expected gross margin.
And.
As indicated on the chart.
It's impacted by a confluence of three factors.
<unk>.
The launch customer pricing.
Higher than planned material costs and the.
Yes.
Excess labor and overhead so those are the transactions.
<unk>.
Al.
Expectation is that we will be around zero in the first quarter.
When those three factors.
Hi.
And then as those.
And those factors.
Ah reduce going forward.
The reported margin will increase.
And just to comment on.
The launch customer pricing this is the impact.
On margin the difference between the pricing and the launch customer contract and the rest of the orders in our book So that is.
As we deliver those systems that that impact will go away. So we know that that's kind of.
Will be largely gone months of June quarter.
The material cost.
As we to important to keep in context that we are starting a large new program here.
And then as production matures material cost come down.
Had that experience on the Sapphire.
On.
On the sat Fi for example, the material cost on the first satisfy we haven't produced.
Approximately two X what they currently are and then on the.
Third factor, which is late.
Labor and overhead.
Sure.
And <unk> seen many production environments, the labor and overhead that's required to produce the fuel system with a lot more than the labor and overhead we expect will be required as we produce <unk>.
Samples of <unk> system in late 2022.
Those are the three factors in terms of why we expect them to.
To come down.
The year.
Thanks, Thanks for that.
Would you expect that the launch customers that obviously was getting very favorable pricing for good reason.
Is it ultimately going to.
<unk> be a good customer at regular pricing down the road.
Is that kind of part and part of the <unk>.
Sumption of giving them the.
Favorable pricing.
Yes.
This is Ben.
The favorable pricing for the first customer as you mentioned.
Is it.
Because of this customer when they purchase the system about one nonetheless yields before the system was shipped to them.
It was just plans for those system by system was not given at the beginning of development.
And they basically took the risk making a commitment for 10 systems as a result of the significant discount for this order that.
Helped us to develop it.
Going forward the pricing for this customer will be in line with the pricing.
[noise] closer much closer to it.
The pricing of our customers would be.
Yes.
Yeah Okay.
Kind of saying you can you can figure all this out if you look at me.
Now the size of the launch customer contract in there the number of systems. If you look at the balance.
<unk> backlog in the number of systems, we can figure out that the average pricing is significantly higher.
And that the <unk>.
Balance of the backlog are mostly those we've got some really good pricing and then.
For the orders that we booked subsequent to that the pricing is even higher still so there's.
Our pricing has steadily.
Stepping up on the time on payment system.
Got it understood and I know, we've talked a lot about that right now I'm just trying to get to the.
Just one last follow up question on the what.
What inning do you think you're in in terms of expansion with that large with that launch customer.
You see a growth runway to sell more machines and expand with them.
As they grow it's obviously a very exciting customer.
It looks like they need more engines in.
That the growth is on track and more engines per rocket more and more engines per space for you call. It just seems to us.
There's maybe a lot of growth there I'm trying to get a sense are you going to sell more machines over the years to this customer potential.
Yes.
The answer is yes.
Yeah.
You all follow.
Public news about this program.
The associated has not launched yet.
And the social is planned to launch.
Launches this year and accelerate launches next year, we anticipate.
<unk>.
Production rates are profitable.
Engines will increase and was that the need for capacity.
You probably know.
Some of the uncertainty about the timing of this program.
So I will not.
Venture to guess about the exact timing of when this will happen.
Against the base customers uncertainties about the timing of this ramp up.
Got it thanks very much.
Thanks, Brian Thank you bye.
Our next question is from Jim Ricchiuti of Needham <unk> Company. Please proceed with your question.
Alright, thank you.
Looking at the.
The pickup in gross margins beyond.
<unk>.
We can appreciate the mix change.
But I'm wondering as youre dealing with higher costs.
Just some of the inflationary pressure.
How comfortable are you that youre going to still be able to get that kind of a pickup in margins. So for instance are you are you maintaining prices as you deal with some of the cost pressures.
The rest of the customers.
Sorry.
Jim Thanks for the question, it's important to highlight.
The change in the gross margin.
The temporary decline and then the recovery of the gross margin.
Really entirely.
Around there.
Dan.
Launch of the <unk>.
The aggressiveness and the rate at which we ramp up this program.
Is such that it.
This new makes introduction of this new model has a very large effect on the total.
Gross margin of the company and Bill mentioned.
We are gaining experience in the manufacture of the systems that we shipped one we're going to ship a few this quarter and every system that we ship, we're gaining a lot of experience and with this experience we amortize.
Labor, although many more systems, we are much more efficient there's much less waste in the influence we document and let me picturing process much better and people are more efficient and the materials that we purchase.
It was also less wasteful and.
More representative of the final materials, so all of those.
Drive dramatic improvement in the gross margin together with the fact that.
First systems that we are making are all at a significantly reduced price compared to any other system that will be sold in the past, but again I want to put things in perspective, our price has not eroded at all during this period, we were able to maintain price.
And the inflight inflationary pressures.
Relatively negligible.
This scheme.
Compared to everything else that we mentioned so.
We do not anticipate needing to increase price.
Our customers to absorb inflation and price increases because we don't see.
Material pricing questions for example cost increases in the production of the <unk> system that is already much more mature.
No need to discuss to our customers.
A couple of months.
The first and second quarters of next year will be unusual quarters.
And reason for that is that we have this confluence of.
The launch customer orders.
Representing a.
In the first quarter.
More than the majority of our revenue.
And early stage product.
Uh huh.
Recessionary pricing and it represents more than a majority of revenue over the course of that.
The first quarter of the year is this on the lowest revenue quarter of the year. So you have a concentrated effect of those tractors in that quarter.
Yes.
And as.
As we progress through the quarters of 2022 for the reasons I described not only will affect us in absolute terms become less of an issue, but their importance in each successive quarter gets smaller and smaller.
On a mathematical basis.
Then the other point I would make on margins is that this is all about the maturity of DXP program.
Already at on a product basis gross margins of greater than 50% on the Sapphire.
And that's because the Sapphire is a product that was it was increased.
<unk> introduced two and a half years ago three years ago.
So we have every confidence that we can get the <unk> in the same sort of program status over time.
Thank you that's helpful and maybe just switching gears for a second just as we think about the ramp in the second half.
And I think you alluded to just some of the supply chain channel.
How how are how comfortable how confident are you that youre going to be able to manage through these supply chain challenges to be able to ramp.
As much as Youre looking at in terms of the revenue target that you're you're forecasting for 'twenty two.
So as of this moment.
We were able to mitigate.
All of the supply chain effects.
Shipment schedule.
So as we are.
About two months ago, we had a lot of pressures in the supply chain, particularly in the areas of electronic components.
But we were able to acquire the components that we needed.
The components build inventory.
Now we have what we need to execute this year.
There are other components.
Our dramatically more expensive, but it is much more expensive for us to build inventory for those components for the full year. So far we haven't seen.
Supply chain disruptions that are going to cause us.
To worrying about those but if the supply chain the global supply chain will become so much more fragile, but even those.
Will it become.
Trace.
This could result in us.
Having to adjust shipment schedule, we don't see this happening right now with them having any indication.
As opposed to ethanol can happen.
And as such at this.
Martin.
I have relatively high component, but we are living in a global world.
<unk> happening outside of our control so I wanted to highlight these choices.
Okay understood and just one very quick question looking at the shipments in Q4, the eight how many of those are.
Eight.
Represented customers, who now have multiple machines and presumably your large customers putting aside your large customer.
Once again, I think we shift too.
So we shipped in Q4 <unk> machines.
Of those eight I think.
Two were to new customers. So if im not mistaken six are to existing customers.
That's correct.
Got it thank you.
I think actually deal with.
While confirming this June but I believe four six multiple machine customers.
Yeah, Okay, great. Thank you.
Yes.
608 machines are.
Existing customers.
Our next question is from Troy Jensen of Lake Street Capital. Please proceed with your question.
Hey, gentlemen, congrats on a great year on the Dfc shipments.
Thanks, Chuck thank.
Thank you.
And just I guess I wont hit just launch pricing one more time.
Was pricing renegotiated in recent months.
With the surprises or is this some already.
Contract with this customer.
Okay. So it's just the margin surprised somewhat these machines are going to be doing that the revenues.
So again.
Just the gross margin surprised us on these machines not the not the revenues.
Correct, yes.
And.
When you say surprised retrospectively, we probably should have talked about this before but.
But.
We have been focused I think the detail.
Okay.
Yes look I think a lot's changed this contract was negotiated in early 2020.
A lot has changed with respect to global supply chain conditions, right and that's true for 20 months.
Tom.
And the system was.
Under extreme pressure and the time.
Well it was very difficult to hire.
So.
Doug.
Aggressiveness of the schedule. So you have to understand that between when we sign the contracts start to hire the team to build these products and when we delivered the first product it was all in.
17 months.
Okay.
Understood.
We have the team to grow this.
So responding sentiment I get it.
Yes.
When you hit the point I believe in that.
The.
Really good pricing, which represents the bulk of the orders that are in the rest of the backlog.
It's significantly higher than the launch customer pricing.
Once the only build pricing expired subsequent.
Orders that we've taken since then.
Leading client count.
Price.
Sue progressively higher pricing in the <unk> because it.
The system.
That has been very strong demand and has a great value proposition for customers.
Alright, understood Hey, Bill I'll follow up for you too can you just talk about how you think.
Opex is going to come in for the year.
Sure.
So first.
First one is that Q4 was up first.
Normal quarter, as a public company and reflecting in flex full public company costs.
And also the facility costs for expansions.
Nike.
So I would take that as a base and we would expect moderate growth.
Sequential quarter basis from there.
On the Kuwait correctly.
Alright, gentlemen, keep up the good work.
Thanks, Greg Thank you for that.
Our next question is from Brian Drab with William Blair. Please proceed with your question.
Hey, I just wanted to ask one follow up.
You have so.
So much of the.
The revenue forecast for 2022 covered by backlog.
Really pretty good visibility.
What what would need to happen.
Perhaps.
What would need to happen for you to exceed the guidance in terms of revenue for the year. Just it seems like you could end up shipping more systems than would be required to hit hit 89.
And yes.
And then I have one quick follow up to that.
Yes.
So I mean.
He wants to make things clear.
Don't want to give any hint.
Cause you to believe that we are going to.
It's more than a plan this year.
Our plan for $89 million.
Almost three five times increase in <unk> compared.
Last year, we have there.
Bookings for that to have a very strong pipeline to deliver on that.
We haven't been in.
The capacity to deliver that and maybe to deliver beyond that.
The challenges that we have to overcome at the same time <unk> enormous.
We are as a company we were good at solving problems and were able to.
Delivering what we say, but I don't want to.
So the expectation that we're going to be.
Our economic Illinois payments by a margin.
Yeah, It's obviously very impressive growth.
I wanted to get your take on that and then.
Great.
Do you have a better visibility now in terms of what percentage of the shipments in 2022 would be on the recurring revenue model versus the outright sale.
Yes, we actually do.
We.
Sure Brian .
The Sapphire, we've indicated in the past with the Sapphire portion.
Yes.
Although transaction during our shipments are.
Broadbrush 50 50.
40% to 50%.
Recurring revenue in the balance sale transactions.
See what the book is.
No.
A very high percentage of that is <unk>.
<unk> transactions.
The vast majority of that.
Basically all of it and smiled transactions.
So you put those two together and that pencils out to a sale versus a recurring payment mix of approximately $75 25 somewhere in that Zip code.
Three units and unit comps next year.
Yes.
Okay. Thanks, that's helpful.
I would also add that over time, we would expect so and thats a higher percentage of sale transactions and then in 2020 . One all the time, we would expect the recurring payment transaction.
Sandidge are total to increase.
One of the reasons that we talked about in other presentations.
And the recurring revenue.
Yes.
Okay.
Not in 2022, given our expectations for that beyond 2022, we would expect.
Recurring payment transactions too.
Become a higher proportion and the 25%.
Understood.
I think you are.
Talking about it.
Around $11 million in recurring revenue for 'twenty two.
I'm not sure I saw that number matching them at today.
Yes, that's still good guidance here.
The guidance, yes, okay. Thanks very much.
Thanks, Brian .
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One moment, please while we poll for additional questions.
There are no more questions at this time, we have.
The end of the question and answer session and I will now turn the call back over to Denny <unk> for closing remarks.
Thank you so much so I'd like to summarize by.
If anything.
We have started this journey.
Really great market opportunity.
Rich.
It was a very fast growing emerging markets.
And.
An application, where we are very critical supplier to our customers.
Driving our land and expand business with those customers as we have shown year to date.
Again.
This is all driven by a very unique technology capability sets us apart from other competitors and one of the things that <unk>.
Really proud is that we haven't been able to continue to deliver on our commitments.
And.
We are.
No.
Out of the.
The CF.
CFO of promises.
We can see for many companies we are delivering on our commitments, providing a lot of transparency about our business and making sure that we are hitting our goals.
Our detailed guidance.
The strict so we would be.
<unk> two.
I'm sorry more questions as they come. Thank you so much and we're looking forward to a great 2022.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Yes.
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Okay.
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