Q4 2022 Markforged Holding Corp Earnings Call
[music].
Greetings and welcome to the Mark forged fourth quarter 2022 earnings conference call. At this time, all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now.
My pleasure to introduce your host Austin Bohlig director of Investor Relations. Thank you Austin you may begin.
Good afternoon, I'm, often go like director of Investor Relations.
Holding corporation walking through our fourth quarter and fiscal year 2022 results conference call.
We will be discussing the results announced in our earnings press release issued after market closed today.
With me on the call is our president and CEO , Shai turbine and our CFO Mark Schwartz.
Before we get started I'd like to remind everyone that management will be making statements. During this call that include estimates and other forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements.
These statements represent management's views as of today March six 2023 and are subject to material risks and uncertainties that could cause actual results to differ materially.
Mark Forge disclaims any intention or obligation, except as required by law to update or revise forward looking statements.
Also during the course of today's call, we refer to certain non-GAAP financial measures. There's a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after market close today, which can also be found on our website at investors <unk> com.
I'll now turn the call over to Shai to Ram President and CEO Mark <unk>.
Thank you Austin and thank you everyone for joining us on our Q4 2022 earnings call.
We ended the year strong with a record quarterly revenues as demand for the digital forge continued to grow worldwide. Despite the challenging operating environment.
Rock 2022 we saw more and more manufacturers. So mission critical metal applications on their factory floor using combinations of our metal and advanced composite solutions.
And with our effective cost controls.
We met our earnings per share target, keeping us on our path to profitability.
The long term fundamentals of our business continue to be a powerful differentiator as we gain further momentum in our target markets.
Additionally, supply chain disruption has been a catalyst for growth as manufacturers' shorten their supply chains through industrial point of need production.
I couldnt be more excited about our vision to make manufacturing more resilient and flexible by using did you just unfortunate to address the 43 billion market opportunity available to us today.
A great example of a customer harnessing the innovation digital Forge is Texas based Dixie I Werent works.
They used our solution to achieve an edge in the globally competitive oil and gas industry.
When did they needed to make an engineering change to a critical orient their supplier what are the price that would have made their products too expensive.
Instead, they designed a better and less expensive version of it.
Bart using our X seven printer.
And since then expanded to a fleet of six Mark Ford X seven printers, producing parts onsite in Texas around the clock.
Based on the early success with Mark Forge Dixie expanded even further with our metal ex solution and are now producing critical steel parts with our solution instead of using traditional C N cheese.
This is a great example of how onshoring industrial production at the point of need can be a competitive advantage for manufacturers.
With that said, we still feel a wait and see mentality with our manufacturing customers who are concerned by the macroeconomic uncertainty.
As such we have yet to realize what we see is the full growth potential of our product lineup.
But we are confident that once the world gets out of the cycle. This bottleneck will open up no growth will accelerate we have already taken the required actions to adjust our cost base and ensure we're still in our paas to profitability.
Since the second quarter of 2022 we have taken in nearly $20 million out of our cost structure after giving effect to the two acquisitions completed in 2022.
Notably, we've reduced our cost while investing over $17 million and our innovation pipeline for M&A and R&D.
In the 'twenty to 'twenty three we expect increased operational leverage resulting in a 30 million dollar decline in our cash burn.
Yeah.
Well in the Americas were experiencing delayed purchase decisions as a result of near term macro uncertainty we executed on our growth strategy in both the EMEA and APAC region in the fourth quarter of 2022.
With revenues growing 36% in EMEA and 20% in APAC year over year.
We anticipate that both of these regions.
We again achieved outside growth in 'twenty or 'twenty three.
In the Americas, we are taking actions to optimize our go to market model.
Accelerate the return to growth and anticipate the benefits of onshoring in the years to come.
2022 we made a meaningful progress towards achieving profitable growth.
We materially expanded our addressable market organically through the introduction of the ethics, 'twenty and Inorganically for acquisitions of Teton simulation and digital metal.
We are confident that in the next couple of years, we will see accelerated growth from our enhanced product offering and continue to build operational leverage via a strong cost control until we get to profitability.
2022 we began commercializing the ethics 'twenty.
Our largest production ready composite solution for manufacturers, requiring parts of industrial strength and high temperature resistance.
As we mentioned previously demand for ethics 'twenty has exceeded our expectations in fact in its first year of general availability, we received multi system orders for the ethics 'twenty for multiple customers.
We continue to ramp ethics plenty capacity to meet the expected levels of demand in 'twenty 'twenty free.
But while demand was robust we were short of our ethics 'twenty cost target. This shortfall resulted in a decrease of our gross margins in Q4.
We expect cost improvements in Q1 and throughout 2023 and intend to reach our production cost target in the next year.
We successfully executed on our M&A strategy in 2020 to.
Acquiring two companies with products that we expect to expand our addressable market opportunity in 2023 and beyond.
The first Teton simulation enables manufacturers to have a greater confidence that their part will meet certain specification in mission critical applications, removing a key barrier to additive manufacturing adoption.
We integrated the technology into the digital forge where feature known as simulation.
And rolled out a free better to all of our customers in Q4.
The response from our customers has been positive with thousands of drive registrants to date and part accumulated in our software prior to production.
We expect to offer simulation as a component of a tiered our subscription offering that we planned to launch in Q2 this year.
Our second acquisition did you tend to get them close in Q3, 2022 and.
And expands our addressable market into high throughput production of precise and use metal parts are key long term growth strategy.
In Q1, 'twenty 'twenty free we plan to launch the P X 100, which doubled the speed compared to the previous model up to 1060 per hour and bid size up to 10 liters.
To ensure high volume production of end use metal parts for lower cost per part.
Initial customer reaction has been positive and we expect this line to contribute to our revenue growth in 2023 and beyond.
A great example of our digital metal solution has opened new markets for Mark Forge comes from our customer based on emotion.
Swiss based medical device company, if manufacturers cutting edge robotic surgical systems.
Do you read production parts for our metal Binder jetting solution I used in real life medical procedures. This is a great example of how our solution gets manufacturers the flexibility in their supply chain that is needed to make life changing breakfast.
Manufacturing is change we're at the inflection point as the manufacturers use our digital forge to deliver more resilient and flexible solutions for their manufacturing sure.
Supported by our robust balance sheet and strong innovation pipeline.
Continue to execute on our strategy towards profitable growth and feel confident.
Fundamentals.
With that I'll now turn the call over to Mark Schwartz, our CFO , who will offer more detail on our financial performance and guidance for the remainder of the year.
Thanks Shai.
Let's turn to our financial results for the fourth quarter and the full year of 2022.
As well as our guidance for fiscal year 2023.
Please note that my comments reflect our non-GAAP results and outlook.
For your reference our earnings press release issued earlier this afternoon and posted to our Investor Relations website includes our GAAP to non-GAAP reconciliation to assist with my commentary.
For the fourth quarter 2022 revenue increased 11% to $29 7 million compared with revenue of $26 6 million for the fourth quarter 2021.
Gross profit for the fourth quarter 2022.
Was $14 1 million.
<unk> to $15 3 million in the fourth quarter of 2021.
As a result, we achieved a 47, 5% gross profit margin for the fourth quarter 2022.
Compared to 57, 6% for the.
Fourth quarter of 2021.
Operating expenses in the fourth quarter 2022.
Were $29 4 million compared.
Compared to $26 3 million for the fourth quarter 2021.
Research and development expenses in the fourth quarter 2022.
Increased to $10 7 million.
Paired with $8 8 million in the fourth quarter 2021.
Net loss for the fourth quarter 2022.
Whereas $13 3 million or seven cents per share based on our weighted average shares outstanding for the quarter of 194.3 million shares.
For the fiscal year 2022.
Our revenue increased 11% to $101 million.
Compared with revenue of $91 2 million for the full year 2020 one.
We experienced growth across hardware consumables and services.
With the EMEA and APAC regions, growing, 18% and 41% respectively for the year as compared to fiscal year, 2020 one.
For fiscal year 2022, gross profit was $51 3 million.
Paired to $53 4 million for fiscal year 2021.
Reflecting a 58% gross profit margin in 2022.
Compared to 58, 5% in the prior year.
We believe we will sustain our strong gross margins as a result of our cost controls and our focus on serving the demanding markets for machinery and automation maintenance repair and operations and mission critical part production.
For fiscal year 2022 our operating expenses were $114 3 million.
Our research and development expenses were $37 8 million in 2022, compared with $27.5 million in 2021, as we ramped up our R&D teams consistent with our commitment to accelerate new product time to market.
We remain committed to our strategy of increasing our addressable market through product innovation.
With every software development system release or additional material.
Thus, increasing the value of our digital forge platform to our customers.
For the fiscal year 2022, our net loss was $60 1 million or <unk> 32 per share based on our weighted average shares outstanding of 189 7 million shares.
Now onto our guidance.
We anticipate fiscal year 2023 revenues to be within the range of $101 million to $110 million.
As we cannot predict the macro environment. This guidance assumes a continuation of the existing global economic uncertainties and challenges.
As I mentioned before we expect our strong gross margins to be sustainable.
With fiscal year 2023, non-GAAP gross margin expected to be in the range of 47% to 49%.
The expense disciplines, we exert over our operating expenses will continue to show leverage in 2023.
We expect operating expenses to decline as a percentage of our revenue, including the impact of the two acquisitions, we completed in 2022.
Resulting in a non-GAAP operating loss in the range of 55 million to 58 million for the full year.
Finally, we expect non-GAAP EPS results for the full year to be a loss in the range of 27 to 29 cents per share.
As Sean mentioned earlier in his remarks since.
Since the second quarter of 2022, we have removed approximately $20 million out of our cost structure.
After giving effect to the two acquisitions completed in 2022.
However, our cost controls are not simply the result of realizing cost synergies through M&A.
We rationalized our operating expenses through a rigorous prioritization of innovation and customer facing activities first.
Regularly realigning our teams to these priorities for most operational leverage and to focus on our most important initiatives.
Further in 2023, we expect to reduce our annual cash burn, excluding any potential M&A activities by $32 million or 39% to approximately $50 million.
This will be realized through added gross profit from higher revenues inventory reductions working capital improvements and increased yields on our cash and equivalents and short term instruments.
We expect to end 2023, with a balance of approximately $120 million in cash and equivalents and short term investments.
We invested heavily in 2021 and 2022 to create an infrastructure that supports our long term innovation and go to market objectives for profitable growth.
We continue to believe our plans are achievable, particularly given the strength of our innovation road map, our product portfolio and disciplined cost controls we are excited for the future.
That concludes our prepared remarks today.
Operator, please open up the call for questions.
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One moment, please while we poll for questions.
Okay.
Yeah.
Okay.
Thank you. Our first question is from Greg Palm with Craig Hallum Capital Group. Please proceed with your question.
Yes, good afternoon, everybody. Thanks for taking the questions here I guess, just starting off with the actual quarter.
The geographic.
Parity was was quite large and I'm just curious if you can go a little bit more detail on what you saw across the various geographies specifically in EMEA, which was the real standout.
Sure Yeah, so as we shared Greg in.
In the U S. We still see the sensitivity to the yes or no inflation recession.
But other than that in EMEA I think ones.
I think manufacturing there.
A clear view that would actually manufacturer during the winter and energy prices went down.
Our customers came back into work.
We also had some good changes there on the leadership, which also helped.
I think we saw very good growth there across the entire product portfolio.
APAC I think it's usually a year after what we see in the rest of the world.
For them, it's still a business as usual.
It may be slight.
I would say.
And the growth there in Australia, but all in all I think very good growth and it worldwide.
I'll add to that a little bit Greg and thanks for the question.
EMEA and APAC.
We're on plan internally for us anyway in Q4, and we anticipate both of these regions will again achieved good growth in 2023.
Specifically in APAC, we are seeing success in factory automation and in automotive.
I think in EMEA.
More or less across the board, we see it in defense in automation in.
Automotive et cetera.
That's helpful and I'm curious specific to the FX <unk>.
This somewhat ties back into the geographic question, but can you just comment on what Youre seeing.
The most interest whether that be geographically, whether thats by end market or vertical and I guess in terms of new versus existing customers do you have any sense of maybe the breakdown of shipments last year.
Yeah, we still see very strong demand for the ethics, Lenny I would say even better than expected.
Because it's a very unique product that has some capabilities, which are differentiated we still see a strong demand even in the U S growth with sometimes multi system orders.
Yeah, we've been a big believer that this is just the beginning.
With their fixed wing and especially as we continue to add more materials into it.
And just to be clear in terms of the.
Multi.
System orders that you alluded to.
Were those initial multi unit orders or were those follow ons.
Follow on so that's why we are a little bit positively surprised.
Because it's mainly going into aerospace applications, we expect that the certification process to be longer.
But we see some cases that was proven fairly fast and moved into higher level production.
In the first year. So this is why we are little bit positively surprised here.
Okay.
I will leave it there that's a loss picks.
Thanks, Craig.
Thank you. Our next question is from Shannon Cross with Credit Suisse. Please proceed with your question.
Hi, This is Ashley Ellis on for Shannon Ste.
Mark could you discuss how much conservatism is baked into your revenue guide are you sort of assuming no. What you saw in fourth quarter well. It may play out improved are you expecting a lengthening of sales cycles before things get better.
Yeah, I think our our guidance actually thanks for the question.
It reflects the uncertainty we're seeing in the market today.
So I think.
You know if the economy improves we could certainly seen improvement in our outlook, but.
You know you've heard you've heard us talk about this in the past we want to share with you all what we're seeing.
And so this reflects what we're seeing today in the market.
Okay understood and then for gross margin guidance is somewhat surprised that you're guiding down for the full year I mean, just slightly but.
Could you walk through the puts and takes for gross margin in 'twenty. Three is that supply chain is getting better and input costs should be coming down. So what's the offset and then she would you consider 50% sort of the new normal going forward or do you think you can get back to the high 50%, which by the way 48% is still good but just surprised there's just a lot lower than what we have.
We're expecting thanks.
Thanks, Ashley I think.
Again this reflects the reality that we're seeing today amidst the macro uncertainty I'll answer your second question, maybe first so our long term.
Our target and expectation continues to be gross margins returning into the 55% range as we've said previously.
So that that hasnt changed for us its the timing of it.
That has changed and in terms of the B inputs and outputs on gross margin for the year.
Again, we've talked about it before FX 'twenty I think Sean mentioned in his prepared remarks, Epic's 'twenty was a significant contributor to that.
It resulted in about a four percentage point impact on our gross margin against where we expect the target cost of the FX 'twenty to be for us that will take another year or so to flatten out.
I think supply chain pressures are beginning.
Maybe more than beginning to be.
Relieved.
We're certainly seeing.
Warehousing and freight costs coming down freight in particular coming back down in line.
But we still can see continue to see a variety of challenges throughout the supply chain, while it does while it has been a loosening up.
You only need one part of a machine to continue to have a lengthy delay.
In order to to push the delivery of that machine out. So it is still a challenge. We expect these challenges to continue to persist in 2023, absolutely getting better.
To be sure on the supply chain.
Okay. Thank you.
Thank you. Our next question is from Brian Drab with William Blair. Please proceed with your question.
Hi, Thanks for taking my questions.
So just to first be clear on the profitability target that.
You said you were still aiming for.
Profitability I think in the next couple of years, but what what more specifically.
Are we talking about there is that at the end of 'twenty 'twenty four and and can you just remind me is that profitable on.
An EBITDA basis or or our EPS.
Yes so.
We've said before and we're not we're not moved.
Moving off of that statement, Brian So we're committed to reaching breakeven by the end of 'twenty 'twenty four I think the fourth quarter for us.
We believe it is the opportunity for us to be profitable for the quarter certainly not for the full year of 'twenty four but we would expect that in future years. So that continues to be.
The direction, we're headed again, we talk about it all the time, we've had good cost controls in place.
Or for some number of quarters now really since we since we came public and and we feel like we can manage through any significant changes in the macro environment to continue to meet that.
That target.
Okay and then.
Can we talk a little bit more about gross margin and I'm just too.
With with the the goal here of trying to understand.
What were the sources of of improvement could come from.
The company was.
You know running at like 58% gross margin and then yeah.
Going into 'twenty, two and then 'twenty two originally youre expecting 56% in.
The supply chain, it's the cost of the ethics 'twenty. If you could kind of just bridge you know from that <unk>.
Original 56% expectation for this year to the 48 level or 47 48 level. We're at now.
How much is supply chain, how much of that takes 20 et cetera.
Yeah, Brian This is Chuck Thanks for the question look I think as you can see on our product portfolio. We are moving upstream into more and more I would say heavier solution that can help our customers to do real industrial production in the point of need.
And the distributions are heavier and they are more expensive and then new product introduction from that perspective is a little bit more heavier on our balance sheet and from there. It takes time until we get to the normalized cost of them I'll say the ethics money is a little bit longer than we expected, but we already see the light I think we took the right actions there.
And do you see that we are launching a new product <unk> 100, which is a very very fast binder jetting solution for metal parts.
Can do up to 1060 per hour. This also just over half a million dollar solution.
It would have some impact during 2020 free but for both of them, we already working behind the scenes to ensure that we go back.
Mark suggested to the 55 plus percent gross margin in 2024.
Hey, Brian I'll give you maybe more two more concrete data points in support of <unk> comments.
So maybe to answer your question specifically.
Of that 8% Delta between 56, and 48 I think you can divide that almost equally between FX 'twenty and a combination of supply chain inflation inflationary pressures that we've seen.
And.
Terms of 2023.
Yes, we expect cost improvements on the FX 'twenty.
We are continuing to expect that.
Global supply chain pressures.
But that there will still be some pressure and it will continue to act as a headwind even if it's more modestly than than previously as.
As an example, Q1, we didn't talk about this in the in our prepared remarks, but we were expecting our margins to be flat to maybe slightly down.
In Q1 of this year due to lower revenues that we typically see in Q1.
As you know seasonality in this business has significant Q1 is often 20% to 25% below.
The previous Q4.
But having said that we expect this sort of would it be the trough and that our cost improvements will translate into improved gross margins sequentially throughout 2023, and then beyond.
Okay. Thanks, both of you that's very helpful.
Thanks, Brian Thank you Brian .
Thank you. Our next question is from Troy Jensen with Lake Street Capital markets. Please proceed with your question.
Hey, gentlemen, congrats on a good fourth quarter here.
Thanks Raj Heathrow.
Hey, Scott I wanted to ask you a little bit about metals, specifically I mean, I've always thought of you as you know the carbon reinforced fiber company and you know the mark to market.
And then but how successful has metal that spin.
Kind of want to tie this all into digital metal here. So.
Channel sales, how you know how effective has your channel that's selling metal products can you talk about maybe the metals.
Currently qualified on the digital platform.
Sure I would say our focus is on industrial production Troy as we discussed before and usually in industrial production, we are trying to replace metal parts.
Some of these parts.
Be replaced with advanced deposits and some of them would have to be met those steel.
Especially if they need to go through a very high temperatures are very high strength that you cannot get with advanced composites.
The majority of our solution today.
Is it that Vince composites did most of our customer come with the Minto problem and we are able to solve it with advanced composites, but as you can see from our broad portfolio of metal is still very very important part of it and with the VX 100, we intend to increase materially our solution and application into the metal side of it, especially when we talk about high volume production.
And hundreds or thousands of parts that.
But you need to producing a very reliable way and still need to be very very precise with minor kind of CMT or work after that football persisting. So metal is still very very important its a very big element of our solution and because we are going right into the manufacturing floor, sometimes advanced composites is the best solution, sometimes it's Michael.
Yeah.
Hey, <unk> can you remind me I didn't see it on your new investor slides, but does a digital and that will have its own furnaces to or are you just work with partners.
We work with partners on that front and we currently produce and develop the printing technology and some of them.
Work before and after the brand for the preparation of the powder et cetera, and the century the pocket.
Okay. Perfect then switching gears to just a follow up on FX 'twenty.
As it currently just to materials that are qualified on the platform.
And we have more than that we have some of the onyx materials, we have the old term continuous.
Continuous fiber and we will continue to add more materials I.
I guess, I guess I'm thinking high counts specifically outside of all town.
You you will please allow me to share it with you.
[laughter].
But I can tell you we did not stop releasing your new materials into their fixed 20, and because it's a hot chamber and has a lot of potential. So some of them will be high tech materials.
Okay understood and good luck guys.
Thanks, so much for.
Thank you. Our next question is from Jim Suva with Citigroup. Please proceed with your question.
Thank you.
Your prepared comments you mentioned some gross margin challenges associated with the rollout I believe you said it was the FX 'twenty can.
Can you help us understand why it was that was that like you have to expedite the end product for shipping or parts were in shortage and you have to go to the extra market.
Scalper market or secondary market or was it like reworking, where acceptances are installations or what were the challenges with the FX 'twenty.
Yes.
Thanks for the question I think first there was definitely the combination because at the beginning of 2022 supply chain was still a big challenge and even just to get the parts. We have to go through bidding wars.
And pay a lot more than usual before the park.
But I think more than that usually in the new product introduction. It takes time until you stabilized the product and its why you produced in smaller batches and using it as more of a bet just don't get the.
The scale and you don't get the scale and the cost efficiency, which we expect to see.
Building up through 2023.
Thats the majority of it I would say going into 2020 free, but we already see the light.
From that perspective, yes, just to add a little bit maybe more color to that Jim.
And thanks for the question I think.
Number one inflation.
Hit us to a greater degree than we expected.
We mentioned middle of last year, and this is tempered somewhat but we were paying $100 per part that she would cost us $10. Some of that is absolutely come back down, but we're nowhere near our target on material costs yet.
And to that point, a little bit further when you're buying materials for production at a certain costs you have to bleed through all of those materials before you reach a lower material cost on the next.
The next procurement cycle and then the second is our labor isn't out where we want it to be yet.
The cost of labor has increased due to inflation over the last year 18 months as we as we were thinking through this.
Late last year.
And we're not at the we're not as efficient yet in our labor as we need to be and there are there is path forward in both of those cases, but it's going to take us some time to get there.
Yeah.
Thank you and then the reason I asked that question about the ethics 'twenty rollout is as we look ahead to on your slide deck number 10, and about the P X 100, and the rollout of that I'm just wondering your full year.
Sales and margin guidance does it include similar inefficiencies of the rollout and the ramp as expected or is it expected to have a smoother rollout just so we can kind of monitor it as it rolls out in 2023 for the PX 100.
So yes, we are anticipating.
Similar but I also would expect him to answer your question both ways that it should be smoother.
Because the unit volumes are.
I expect it to be lower in that product early on.
So so I think were you know just how we procure materials for that will be a little bit different than we do for for other product rollouts.
Great and my last question is.
I see you are giving quarterly guidance as well as full year guidance is that due to better visibility more supply chain being able to calibrate it better or helping investor expectations be more aligned with kind of how you see them just kind of curious about the slight change of giving additional details which are.
I'm sure the investing community will appreciate.
Yeah. Thanks, Jim So we continue to be focused on.
On annual and really even the long term.
Heard us talk she goes shine I about this long term journey that we're undertaking its still in the in the early innings. So we we focus on annual.
And I think to your point, we've given a little bit of color.
Maybe on gross margin and some other areas on.
On the quarter, but our intent.
And in our go forward plan is to really focus on the year.
I think it's.
Maybe ill take that a step further.
Sure.
When we think about when we think about this this current year of 2023 and beyond.
We mentioned getting back to a 55% plus gross margin.
We also think that we will get back to 25% plus year over year growth.
Given the demand and the interest we see from from not only our existing products, but from that from the new products that we've shared with customers.
As well as this this paradigm shift we're seeing and manufacturers.
They are increasingly seeking to be more resilient.
Creasing, the seeking more reliable supply chains.
We.
As we've said we're very excited about the outlook, we just want to get past. This this current level of uncertainty.
In the marketplace.
Great and my last point is you mentioned profitability 2024, I think to be clear you fully set.
<unk>, even and 2024 not the full year and is that on a operating income adjusted EBITDA or EPS or how do you actually define the breakeven.
Breakeven twenty-four comment.
We'll look at that as.
Q4, not for the full year as you've said, that's correct and we're looking at it on a non-GAAP basis.
Great. Thank you so much for the details let's appreciate it.
Yeah. Thanks, Jim Thank you.
Thank you. Our next question is from Noelle Dilts with Stifel. Please proceed with your question.
Hi, guys good afternoon.
Hi, Louis.
Hi, I recognized that you now are.
Kind of the trends in your expected EBITDA and cash flow well, what sort of hand in hand, but.
Any additional thoughts or guidance you can give us on how you're thinking about sort of managing cash as he moves through 2023 and.
Sort of how youre thinking about where you'd like the balance to be as you move towards the end of the year.
Sure so.
Thank you for the question.
I think as you can see we are still very confident about the fundamentals and we don't think there maybe even for the better with all the onshore and coming back in manufacturing needs to build more resiliency into it and I think we're part of the solution.
And with that there is still uncertainty around gets unnoticed inflation recession, and we already took the right adjustment to our cost basis to ensure that we will get to the breakeven point and the end of 'twenty four.
Before we shared before we believe we can get there with a very strong balance sheet and as you can see from some of the comments that mark shared before we're looking to reduce materially the cash burn.
During this year. So we are finishing this year with about 168, and we are currently expecting about $50 million.
Burn rate this year versus about 120 last year.
<unk> reduction in the.
Cash burn.
And we believe this will continue once we will be able to meet the full potential of the growth we don't do a broad portfolio.
Okay, great. Thanks.
And then just in terms of your R&D investments anything you can sort of highlight.
And in terms of priorities or things are sort of excited about 423.
You know whether that's on the software front materials hardware.
Any thoughts on sort of how you're prioritizing investments.
Sure. This is a great question. Thank you so much so as you can see over the last two years or so we more than doubled our R&D investment and if you take M&A into it.
More than that and the outcome of it is a very strong pipeline of innovation.
We are starting the year already with launching the P X 100, and launching simulation and putting it into a tier so smoothly with software and services to our customers, but we believe it's only the beginning.
And you can probably assume if we invest more in R&D.
Product portfolio innovation pipeline is accelerating and we shared before publicly that we intend to release, a new product almost every year. So it's coming so we're very very excited when we see what we have coming this year and in 2024 and both our ability to really help our customers.
The move real production to the point of need on every manufacturing for wherever they are.
Thanks very much.
Thank you Noel.
Thank you there are no further questions at this time I'd like to hand, the floor back over to <unk> for any closing comments.
Thank you very much everyone for joining us and looking forward to a great year.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Yeah.
Okay.