Q1 2022 Stratasys Ltd Earnings Call
Greetings and welcome to the Stratasys Q1, 2022 conference call and webcast. 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 conference is being recorded.
I'll now turn the conference over to your host Yamana Lloyd Chief Communications Officer, and Vice President of Investor Relations you may begin.
Good afternoon, everyone and thank you for joining us to discuss our 2022 first quarter financial results.
On the call with US today are our CEO , Dr. Jan <unk>, and our CFO <unk> <unk>.
I would like to remind you that access to today's call, including the slide presentation is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation will also be available and can be accessed through the investor Relations section of our website.
Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitation those regarding our expectations as to our future revenue gross margin operating expenses taxes and other future financial performance.
And our expectations for our business outlook, all statements that speak to future performance events expectations or results are forward looking statements actual results or trends could differ materially from our forecast for risks that could cause actual results to be materially different from those set forth in forward looking statements. Please.
Refer to the risk factors discussed or referenced in <unk> annual report on form 20-F for the 2021 year.
Please also refer to our operating and financial review and prospects for the 2021 year.
And for the first quarter of 2022, which are included as item five of that annual report and in exhibit 99, two to the report on form 6K that we are furnishing to the SEC tomorrow, respectively.
Please also see the press release that announces our earnings for the first quarter of 2022, which is attached as exhibit 99, one to a separate report on form 6K that we are furnishing to the SEC today.
In order to obtain updated information throughout the year concerning our quarterly results of operations and the risks and other factors that most impact those results. Please see the quarterly earnings press releases, and our quarterly operating and financial review and prospects each of which will be attached as an exhibit to our report on form 6K furnished to the SEC on them.
Quarterly basis over the course of the year.
Stratasys assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
As in previous quarters today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release.
I will now turn the call over to our Chief Executive Officer, Dr. Yao.
Yup.
Thank you Donna good afternoon, everyone and thank you for joining us today I will touch on the highlights of our first quarter and share insights on a number of key milestones achieved so far in 2022.
I will turn it off to <unk> to discuss our financial results and outlook in more detail.
The first ball do without throwing it in six years.
Great start to an exciting year for Stratasys.
We delivered solid results.
That include contributions from across our platform to drive top line growth and improved margins all of our technologies group.
And I'm happy to say that all of our key business that showed improvement compared to our pre coffee first quarter of 2019.
We are particularly excited by the early momentum from our new origin, Pitri H 350, SaaS and New York's system designed specifically for high volume production of end use parts.
Our focus on execution is yielding results that demonstrate how our strategy to grow our leadership position in 43 D printing is walking.
Our revenues of 163 4 million were up 22% versus the prior year quarter.
We see particular strength in systems, which grew 37% and we ended the quarter with a robust balance sheet that included over $475 million of cash and no debt.
During the fifth well do it.
We expanded our penetration further into applications for aerospace automotive and fashion, we payload industry specific solutions for example, working with our partner Lockheed Martin, we're uniquely qualified and high performance and terrible material.
For aerospace and use bulk.
In automotive Redfoot. Most doors is now second auto OEM using all five of our technology for use in design prototypes.
Julien and final parts used in vehicle production.
We also officially launched the commercialization of our fashion solution with textile that's T E. C. H Stein the industries fear really printer designed specifically for printing direct to garment and other end.
Product it opens unlimited possibilities for the fashion industry to personalize and customize theorem fixed time.
Clothing bags and accessories footwear and many other fashion applications.
I would like to highlight three important milestones reached since the close of the quote here that we expect will contribute to our ongoing efforts to outperform.
First we announced the creation of a new entity comprised of Makerbot and make them.
Our focus on industrial healthcare and production scale polymer three D printing for manufacturing.
We determined that make it a desktop solution fell outside of our core businesses.
Transaction serves several purposes.
It allow us to further concentrate our efforts to grow our leadership position in our area of focus.
It is a margin accretive benefit when our business.
And our commercial agreement provides us access to entry level three D printing users, allowing us to potentially realize incremental synergies without distracting our resources.
We believe that the desktop sector is growing at a healthy pace and the the new company will be a leading force in that industry and we view our investment as having the potential to realize incremental long term value for our shareholder.
Second we recently published our inaugural report on environmental social and governance activities, which we believe is the first report published two G. R. I stand out in our industry by an OEM. This report outlines our commitment to ESG.
And establishes a benchmark for future targets.
Our sustainability priorities include design for responsible production and consumption transparency people first initiative and social impact programs. We are also focusing on renewable energy project quality education industry innovation.
And climate action.
The three D printing industry is ideally situated to drive innovation and improvement in manufacturing from a sustainability perspective, and Stratasys is aiming to lead those efforts.
Encourage visiting our website to review the report in third.
Last week, we also did our annual flagship manufacturing virtual event, when we announced a number of new product updates, which will strengthen our market, leading offering and defend potential of our product can bring to customers.
P. A twin the most popular industrial three D printing material is expected to be available later this year for H 350 printers.
Also for the aged 350, we announced the upcoming availability of polypropylene.
Which is very popular in traditional manufacturing, but not widely available in three D printing.
This material further demonstrate the competitive superiority that our SaaS technology provides in powder bed space with respect to material speed accuracy Costa about total cost of ownership.
And that's D. M. We are upgrading our if 123 serious.
With the launch of the F 190 C R and the S 370 C. Our systems.
Oh, you mean composite red.
And includes the new nylon CF Pan and carbon fiber material that is both exceptionally strong and like.
Thereby extending the end market opportunities for the F 123 series.
We also announced our first processes validated FDA materials from third party material, it's about there.
Which all of China is we'll begin to sell in the second half of 2022.
Great example of our open materials ecosystem approach beginning to bear fruit.
So our Patriot technology, we're adding rocket print software to origin comp.
Completing the integration effort. So we have a single platform across all of our comb on the factoring system.
We announced the availability of the first origin compatible materials.
From our origin open material license and.
And importantly, we launched origin looker and offline non cloud version, which is ideal for use by certain defense and government applications.
When you consider all of these developments along with the new product that we recently launched you can see why we are so excited about the future.
As we execute on our strategy and build momentum customers continue to permanently replace a number of their traditional manufacturing choices.
Without additive manufacturing solution <unk>.
Expressing their long term confidence in Stratasys, the reason supply chain and related issues have been a catalyst across industries to rethink how they manage their product lifecycle.
We see it happening with leading companies such as general Atomics.
Which invested in both strategies and processes direct and that's been expanding its additive manufacturing program for unmanned aerial vehicles beyond tooling to end use parts.
They have a goal to increase the percentage of parts using additive on their UAV drones to 50% on the smaller ones.
In mid single percent on the larger ones, we see with asking companies like Medtronic, We just moved from.
Machine tools to three D printed tools with threat disease, because they can create more accurate conflicts, Bob while reducing cost by 80%.
Saving millions of dollars.
And we see it transportation giant like ask to them, which is a three D printing fell about tens of thousands of them. So far as part of its industry of the future program, reducing its dependence on outside suppliers, while reducing lead time by 95%.
There are many more such changes taking place across the industry and we believe that this clearly show the bad debt manufacturer of own as they make their production lines more efficient less costly more sustainable and simply bad deal we'd start to see.
We are also encouraged to see the U S government and large manufacturer stepped up to help more companies get involved in our industry through the additive manufacturing forward program.
This initiative was announced by the White House earlier, this month and reflect their belief in three D printing benefits to the manufacturing economy. This includes building more resilient supply chains, and onshoring manufacturing well grow their economy.
The program is specifically designed to web supplier to companies like Raytheon and Lockheed invest more in additive manufacturing G obviation anywhere and Siemens and also some of the initial participant companies while many of our largest customers are building out sophisticate.
Advanced manufacturing center, it's their suppliers that manufacture a lot of their end use parts.
This program helps incentivize more companies to invest in additive manufacturing given large Oems are now committing to purchasing admittedly produce drugs.
The program also will provide training technical assistance and standout development all things needed to handle these manufacturing to go in mainstream and threat to US. This is the first solution and broadest portfolio to support these initiatives with that I will.
Now turn the call over to our CFO Athens, a meal to share the financial results and update.
Outlook for 2020 281.
Thank you.
And good afternoon, everyone.
We're pleased to have delivered a strong start to 2022.
The revenue growth, especially at this 36, 7% growth in our system sales.
With our improving margin.
To build momentum through the balance of the year and beyond.
For the first quarter.
Total revenue was $163 4 million, a 21, 8% increase from the prior year period.
Even by growth from all technology, and primarily by strength in system.
On a constant currency basis total revenue increased 24% versus the prior year quarter.
Important to note.
Was that all key businesses were higher than the pre pandemic first quarter fire and 19, resulting in total revenue being five 2% higher as compared to that period.
Product revenue in the first quarter was $113 1 million, an increase of 25, 2% compared to the same period last year or 27, 8% on a constant currency basis.
Within product revenue.
System revenue increased 36, 7% to $54 5 million compared to the same period last year and increased by 39, 3% on a constant currency basis.
System sales reflected the highest first quarter total in five years.
Strengthened by the launch of the origin won in mid February and the first full quarter of <unk> 57.
Importantly, the higher margin consumable business. So revenue increased by 16, 1% to $58 6 million compared to the same period last year and increased by 18, 8% on a constant currency basis.
Consumables revenue also exceeded the first quarter of 2019 as well as the fourth quarter of 2021, reflecting the impact of strong system sales throughout 2021 and their expected flow through is initial materials.
Yes.
Service revenue was $50 3 million, an increase of 14, 8% compared to the same period last year.
And slightly higher than the first quarter of playing that game.
On a constant currency basis service revenue increased by 16, 1%.
Within service revenue customer support revenue increased by 10, 1% compared to the same period last year and increased by 11, 7% on a constant currency basis.
We know that 2022 is a year of strategic execution. Following the important acquisition, we made in the past two years to strengthen our technology portfolio and ensure we could provide comprehensive solution.
Across the entire polymer obligation space.
These investments are already contributing to revenue.
Putting us ahead of the curve and increasing our competitive advantage in the three D printing industry.
Now turning to gross margin.
GAAP gross margin was 42, 6% for the quarter compared to 41, 4% for the same period last year.
non-GAAP gross margin was 47, 3% for the quarter.
Compared to 46, 7% for the same period last year.
Margin improvement year over year was driven by higher revenues and system consumables services and improve operational efficiencies.
This was partially offset by macro issue related to logistical challenges and the availability of materials.
Okay.
GAAP operating expenses were $89 3 million, an increase of $15 3 million or 27%.
From the same period last year.
non-GAAP operating expenses were $75 3 million, an increase of $10 1 million or 15, 5% compared to the same period last year.
non-GAAP operating expenses were 46, 1% of revenue for the quarter.
Our lowest Q1 opex as a percentage of revenue in seven years.
Third to 48, 6% for the same period last year.
The $10 1 million.
Year over year increase in operating expenses on an absolute basis was driven primarily by the impact of three acquisition.
<unk> three D, Oregon, and Rps as well as higher commission based on higher revenue.
We were pleased to see the efficiency of our model, where the additional operating expenses reflected only a 35% incremental cost instead of the historical range in the mid to high 14%.
Regarding earnings.
GAAP operating loss for the quarter was $19 6 million compared to a loss of $18 4 million for the same period last year.
non-GAAP operating income for the quarter was $2 million compared to a loss of $2 6 million for the same period last year.
The difference reflects our business scalability and improve operational efficiencies, which resulted in better gross margin and lower operating expenses.
GAAP net loss for the quarter was $20 9 million.
Our 32 cents per diluted share comp.
Compared to a net loss of $18 9 million or 32 cents per diluted share for the same period last year.
non-GAAP net income for the quarter was $1 2 million or two cents per diluted share compared to a loss of $3 8 million.
Or six cents per diluted share in the same period last year.
Adjusted EBITDA of $8 1 million compared to $3 5 million in the same period last year, reflecting our improved profitability levels.
We used $16 1 million of cash from operations during the first quarter compared to generating $22 8 million of cash in the same quarter last year.
The use of cash was driven by deliberately increased inventory purchases and an increase in accounts receivable.
We ended the quarter with $475 6 million in cash cash equivalents and short term deposits.
Compared to $502 2 million at the end of the fourth quarter of 2021.
We remain well funded and well positioned to capitalize on value enhancing market opportunities as they arise.
Now, let me turn to our outlook for 2022.
I would note that our guidance continues to include full year anticipated contribution from Makerbot.
The announced business combination with leukemic here has not yet closed.
We expect the transaction to be margin accretive upon closing and we plan to update our outlook later this year.
To date, we are tightening the revenue range from our previous guidance for 2022 revenue.
It is now 685 million to $695 million.
While we are encouraged by the level of engagement with our customer.
And confident in our growth potential. We're also monitoring global issues that can have an impact such as the shutdowns in part due to China currency fluctuation and continued other supply chain constraints.
We continue to expect revenue to grow sequentially each quarter throughout the year with the second half of the year, notably stronger than the first half.
Revenue growth for the second quarter is expected to be low to mid teens as a percentage over the second quarter of 2021.
From a gross margin perspective.
We continue to expect full year 2020 to be flat to slightly higher as compared to 2021.
With the second half stronger than the first half based primarily on higher revenue.
We expect the second quarter to be relatively flat to the second quarter of last year.
As a reminder, we view the current gross margin situation as temporary.
When headwinds caused by logistics and material macro issue path.
And we continue to execute on our long term plan, we expect our margin to hand, it back over 50%.
In 2022, we continue to expect our operating expenses to be approximately 20 to 25 million higher than 2021.
Primarily due to the impact of owning luxury D for the full year higher cost that results from higher sales and investment in new growth driver such as origin won and health care.
Operating expenses.
Are typically higher in the second quarter as compared to the first quarter due to the normal timing of compensation expenses.
While the absolute dollar value of these expenses will grow we expect to see the percentage of revenue remained flat or even improve slightly throughout the year.
While the first quarter came in stronger than expected, we recognize that the above mentioned supply chain and other macro issues could impact our revenues and cost. So we continue to guide non-GAAP operating margin to be slightly above 2% for the full year.
Longer term, we expect operating margin to achieve double digit.
As our growth plan unfolds.
We continue to anticipate a GAAP net loss of $74 million to $67 million.
Or $1 11.
Two one.
Per diluted share.
non-GAAP net income of 10 to 13 million or 14.
219.
Diluted share.
Adjusted EBITDA is still expected to be in the range of 38 million to 41 million and capital expenditures in the range between 20 million and $25 million.
With that let me turn the call back over to you for closing remarks.
Thank you Ethan.
Our strong start to the year.
And the strategic moves we continue to make demonstrate that we are executing on our plan.
The powerful combination of our new technology offering <unk>.
Expanding the materials and software solutions.
<unk> balance sheet and our dedicated talented team.
Positions us well to execute on our strategy with excellence.
We will continue to grow our top and bottom lines, improving profitability overtime due to increasing scale.
I noted earlier.
We are relentless about our focus to grow our leadership position in polymer additive manufacturing our results over the past two years clearly reflect that our strategy is working.
With that let's open it up for questions operator.
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In addition, we ask that you. Please limit to one question followed by one immediate follow up questions.
One moment, please while we poll for questions.
Our first question is from Greg Palm with Craig Hallum. Please proceed with your question.
Yeah, Thanks, and congrats on the progress here and thanks for taking the questions.
Yeah.
Thanks, Greg.
You'll have you have.
<unk> been a big believer in having a full product portfolio across different kinds of polymer technologies and you know curious now that everything's launched it in the market.
How are you seeing that synergy.
Aligned with what you expected or are they better or I mean, you mentioned the second auto OEM. That's used in all five but curious if you think you're capturing more wallet spend what some of the existing customers as well.
Thank you Greg for the question as we wrote in our script the strategies Logan.
Spirit.
So the ability of strategies to leverage our infrastructure our go to market our expertise.
In Poland, our cutting edge technologies and build all these on two ecosystem two platforms, which are the material and the software with cutting edge technology.
Capturing the synergies across technologies, but also wheat in customers with the same go to market. It works.
And we are very encouraged by that because we really put in place.
Our differentiation and our uniqueness to walk.
And at work.
Yeah, Greg as you all know what I would add on that.
Is it is very encouraging to see how customers are actually making that permanent switch from their traditional manufacturing two additives. We highlighted a few of the customers in the in the slides, but theres dozens and dozens and I think that really is the strongest and demonstration from the from the market.
That they believe in the technology. They believe that we can help them improve their production lines.
And we look forward over the course of the next quarters and years to building and building on that because that's how you start to disrupt the traditional manufacturing and begin to take away that 13 trillion dollar addressable market piece by piece, yeah completely agree and.
It goes beyond just the five technology.
The ability to create a solution with the material.
Which is open we can.
And validated with the software with the service and put everything together around this package.
Which is practically we are connecting everything with the software.
Rarely I think it would be very difficult to competitors.
To meet this offering to our customers.
Yes that makes a lot of sense and thanks for that commentary my follow up was going to be along those lines in terms of of who or what you think your.
Displacing and it sounds like maybe it's more of a byproduct of displacing traditional technologies, but if all of a sudden you've got customers that are used in all five year technologies, presumably you're displacing maybe some competitors in the additives field as well what are your thoughts on that versus traditional.
We are focusing on delivering value to our customers and we believe that using one platform of material in software and services with five technology with our expertise with our application engineers.
The best value that we can deliver and.
Very competitive in the marketplace.
And that's what will take us forward.
In some cases, we see customer, replacing and displacing other additive manufacturing to providers.
We are focusing on adding value and not on taking out with other systems.
Provider.
Okay. Good well best of luck going forward and look forward to senior rapid this week.
Thank you.
Our next question is from Troy Jensen with Lake Street Capital. Please proceed with your question.
Hey, gentlemen, congrats on the 22% growth there it's pretty impressive.
Thank you.
Hey, So first a clarification of any time could you give us the dollar amounts again for systems and consumables.
You mean, you mean, the total revenue of chunky ones.
Yeah total system revenues in Q1 again.
So total.
System is.
$54 five.
Total consumables is 58 six.
Awesome. Thank you for your polypropylene.
Helene I guess to.
To my knowledge that that material is it available at all in the industry and I thought you said it wasn't widely available. So I guess I'm curious and I was just real probably polypropylene or polypropylene like.
Can I correct in thinking that it's not really available.
So it is available.
But we believe that our offering will be a much better one in terms of accuracy speed like all the whole list if we put together in the script.
And cost per Boe.
Because of the I would say the versatility of our machine and our ability to have a great tumor control, which is very important for polypropylene I for many years I was the managing plant where the main input was polypropylene, it's a great material and its really a great step into.
Thanks Terry.
This is the most common plastic out there.
Yeah, that's totally agree and am I correct that it was just the H $2 50 that this is arne.
Yes, Youre right awesome.
Awesome guys well congrats on the great results and I'll see you tomorrow.
Thank you. Thank you thank you tomorrow or event.
Okay.
Okay.
Our next question is from one Z Mohan with Bank of America. Please proceed with your question.
Yes, thank you and and congrats on the strong results are really nice revenue growth.
Thank you.
I was wondering if you can talk a little bit about about gross margins I think you guys alluded to about macro challenges and availability of material. So can you help us think through how much of a gross margins pressured by inflation and supply chain issues currently because I understand your your target.
It has to be significantly higher what sort of pressure are you currently absorbing.
Right. So thanks, everyone.
Good question.
I think related to this India screamed that in Q1, we.
We had approximately a little bit more than 2% 200 basis points compared to Q1 2021.
That's the impact of Athene.
The inflation in material costs.
We need to compensate with the price increase.
But really we're focused on delivery to our customers.
And that's the focus and where we're able to mitigate some of the pressures and costs with price increases as I mentioned.
Okay. Thank you I'm also trying to understand the EBITDA bridge as it pertains to the second half versus the first half if I just look at your Opex guide increase for the year of corny to twenty-five you already have about 10 million of that increase absorbed in Q1.
And you already said Q2 was going to be up sequentially. So is it right to think that most of this opex inquiries is very front end loaded for you in the year and if so if the back half Opex is relatively flat and you're already doing $8 million in EBITDA.
Well why would you not see much more stronger EBITDA leverage.
In the back half of the year, because you're idealizing already to 32 million EBITDA and your low end of your guide is 38, but your Opex was so much front end loaded. So can you just help me think through the moving pieces on the EBITDA bridge. Thank you.
Okay.
So yeah that's.
That's a good question. So first of all when you look on 2021 spread over the quarter over the year.
So there was a difference between the different quarters and an opex increase.
In the second half of 2021, partially related to the acquisition and other items that we've mentioned in previous calls. So that's why the change the increase that you see Q1 versus Q1 does not necessarily reflect.
The trend for the next quarter.
And I hope that it addresses the question and then Dan on the improved EBITDA or are they kind of EBITDA that we are we guide.
As mentioned on the script you know, we're very confident about our ability to meet our numbers and to meet our guidance, but we do take into account the challenges the macroeconomic challenges and the high certainty in the current market. So we embedded that into our bottom line guidance.
And as we move throughout the year, we will be able to update further if those.
If conditions improve.
Okay. Thank you very much.
Maybe one thing I would just want to leverage.
Uh huh.
No question just to thank our operations team your question about supply chains, because they need really above and beyond.
I know many companies in our industry and out of our industry that couldn't deliver and couldn't meet their revenue targets because of supply chain and I only guys did fantastically well.
We are sourcing globally, but they.
We found so many creative ways to deliver and I, thank them for that and despite the fact that we put delivery is first priority we improved gross margin.
All the flows for our ops team.
Yeah.
Our next question is from Paul Chung with Jpmorgan. Please proceed with your question.
Hi, Thanks for taking my question so.
Just on consumables should we kind of expect some acceleration here maybe.
After such a strong rebound here in system sales over the last couple of quarters now.
Is it because of the lag for Reorders for for some of these newer systems and then just on utilization rates from your installed base for consumables, you know where are you seeing.
Pockets of strength there on board.
Materials and applications.
Thanks, Paul.
Paul for the question.
You saw the increase in our hard work this quarter and also in the last few quarters and the higher the hardware growth.
The more consumables and services will follow and we already start to see those crudes in this quarter, which was the consumable was the highest since Q2 2018.
And we expect to continue to see this growth also coming from our new products.
Okay, Great and then.
Follow up on me.
U S government initiatives here you have a slide here I'm pointing that out are your discussions kind of accelerating from here.
Some of those key companies in the aerospace on this slide.
Do you get a sense or maybe kind of possible government funding involved or you know are you seeing any catalysts from the on the policy side. Thank you.
Thank you for the question Paul we.
Have long relationship with the government and specifically with the U S. Government, we believe that the government is the catalysis.
Practically for the adoption of a three D printing because so.
Yeah.
Sweet Nike, it's the best fit for long sustaining programs Oh I see.
We showed it with outerwear and.
Now, they're a deal which is a long term deal and we are supporting it and we will see more of those deals going.
Going forward. So we have a lot of appreciation to the U S government as a catalyst for the adoption of additive manufacturing, but the ability.
To leverage also relationship with corporate America, and leading Aero and auto players like Lockheed Martin and others and to build the package.
Yes, not the leading company, but many many many suppliers.
He is really unique strategies, because as I mentioned at the beginning of this call. We have the solution. We have the full package and when someone want to step into additives and to stop manufacturer. It's a lot of training its a lot of support it's a lot of you.
You know we need to hold the hands of those small suppliers and make sure. They are meeting their requirements on the certification and the lower but if we invest so much for the high end. So we believe that the combination of our corporate America, the government and our.
Our infrastructure and capabilities can be a great success.
It's a journey, but we're happy to start stepping into it.
Great. Thank you.
Our next question is from Jim Ricchiuti with Needham. Please proceed with your question.
Hi question, just given where we are a middle of May I'm wondering what you've seen in terms of demand you. Obviously had a strong Q1 in terms of top line growth, but I'm just wondering in light of some of the macro challenges that we're hearing about are you seeing any change in <unk>.
Man either in specific verticals or geographies or you know do you are you seeing the same level of demand.
Exiting the quarter that you saw in Q1.
Hey, Thank you for the question to date.
Mandy front.
It doesn't matter it doesn't mean that we are the leaders of this company are not looking all over and planning for the future because we're looking what's going on in the capital market and in other markets, but it is clear to us today.
Demand is strong and this is why we built our inventory you can see it in our report we beat out inventory because the demand is strong and we need to meet the demand.
But we're not you know well.
We're not driving blind and of course, we are cautious.
Uh huh, thank God and think of the industry and a good technology. The demand currently is trial.
And as a separate question in a somewhat unrelated area, just but I wanted to follow up on the new products that you've introduced into the textile printing market.
I Wonder if you could talk a little bit about the strategy for this product. It seems like it's a different channel and to what extent is this more of a gradual Ah Ah introduction in terms of.
A flag in this market.
It's a great question.
As I as I mentioned, we have.
For our growth engine there.
The cutting edge technologies five technology, the software that the material this therapy, but not nothing will work if we're not cross the chasm of these industry from prototyping to manufacturing and you can cross the chasm only with use cases and fashion is a great use case.
Huge potential our addressable market is the high end.
Fashion market. So when we're talking about luxury goods high end fashion, because we can do something that no one else can do.
With our colleagues at technology, we can have design, we can work with the best How's the brands in the world.
And and we are already doing it. So we already have some fantastic results and we are talking about.
Because of items like.
Choose and governments that are already there of course with just the beginning of the beginning but we are going to show it in the Milan show I think it's in June .
It's super exciting because its mass market and to be in manufacturing and its remanufacturing with materials getting no. One believed in the world that it is.
Possible.
But we made it happen.
And are you going direct or using a channel partner here.
Oh, we're doing both and we were using also service bureaus because this industry is working a lot with our outsource to.
The high end.
Manufacturers' so.
So we are doing both.
It's really exciting I really invite you to come and see it in the in the Milan fashion show and it's amazing.
Got it thanks very much congrats on the quarter by the way.
Yeah.
Our next question is from Ananda Baruah with loop capital. Please proceed with your question.
Hi, good afternoon, guys and.
Thanks for taking the classroom.
Hi, congrats on the strong execution of them.
Hum.
Welcome.
Could you could you remind that but the extent you can give a thought that odd.
For the second half of the year, so for the remainder of the year.
What you guys are.
We'll be we'll be doing in terms of new products across the platform I think this quarter it came about.
How do you add new products coming out throughout 2020 full.
That'd be great.
Can you please repeat the kind of I'm not sure there's a law degree.
About the new products, we're launching the during the rest of the year.
Yeah exactly yeah.
I know you can only get better.
But at any time.
Yeah. This is great question. Thank you know clear.
We had last week, our manufacturing events experienced travelers is manufacturing and within this event. We were very clear on what are the new product and the focus now is to take what we have and make sure that it's suitable for manufacturing. So it start with two new Montana.
12, and polypropylene and for that.
S. A for the SaaS technology, we have 816 overall numerous 16 new material.
Hello, This is <unk>.
I don't know if the audience I don't want to.
I have to say something that I'm not sure, but 16 material to launch in one year. This is remarkable.
Really remarkable on top of which we are putting all our technologies on <unk>, which is a new a new product. So rough cut would be also in the south and also on the origin and we also have the origin locale, which is suitable for manufacturing with the.
Defense and are there similar industries.
Industries and vertical so we are making sure.
But we are following our strategy, it's not only the cutting edge.
Machine, but you have also the software and the material and the service to be successful from my perspective. This is real.
Additive manufacturing to point, though because it's not about the technology, it's about solving the problem to the customer.
This is 2.0 and you can be to point O E M.
If you have the full solution.
And I'm proud to say that we have the full solution.
That's great.
That's it for me. Thank you said, what really happen looking forward and saying that the rest of the domestic.
Yep.
Thanks.
Our next question is from Noelle Dilts with Stifel. Please proceed with your question.
Hi, guys and again congrats on the good quarter and it seems like you're pretty satisfied with your current hardware technologies and offering them, but can you revisit if there's anything you feel you need to add on that front and if you could just generally speak about your M&A priorities. Thanks.
Yeah.
I know when thank you that's a great question.
We are not satisfied at all we don't that's not our nature here, we're not satisfied with anything.
For each one of our technology, we were five years roadmap to make sure that we will be.
Front of this technology for many years to come and we spent very high level of R&D in order to make it happen.
Having said that and by the way you know five years plan its in our annual operating plan in each one of our technology.
This aside we also understand that we must invest in material and in software and improving our service because we are taking our solution in those technologies to manufacturing.
And it's a completely new set of requirements from the customer side.
That's exactly what we're doing in terms of the technology to get back to your question.
We are investing I think we already mentioned that we have and and we should probably announce it in more detail, but we have an arm that invest in technologies.
To make sure that we are not only innovating internally, but also externally.
To secure our polymer leadership position and we invested in companies like <unk> like 90 labs, like <unk>, which are really.
This is a new generation of Oh for a M and we will make sure that that will be part of our offering as well.
Okay.
Okay. Thanks, Jim.
You didn't ask this question a bit but could you expand a little bit on what you're seeing from a geographic perspective. Thanks.
Geographic trends.
We we.
Put this idea.
The low down in China.
Obviously.
That impacted the entire what we see.
Strong demand from all our geographies.
Very strong quarter for our E mail for our EMEA business, but also in the other businesses are strong demand.
Okay.
Thank you.
Right.
We have reached the end of the question and answer session and I will now turn the call over to CEO Dr. Thiele Dr.
Doctor Youll have a site for closing remarks.
Thank you for joining us looking forward to updating you again next quarter.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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