Desktop Metal Inc. Q1 2023 Earnings Call
Greetings and welcome to the Big scope Metals' first quarter 2020, please financial results call.
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It is now my pleasure to introduce your host Mr. Jay Gibbs co Vice President of Investor Relations. Thank you and you May proceed Sir.
Thank you operator, good afternoon, everyone and thank you for joining today's call with me today are Rick follow up founder and CEO of desktop metal adjacent coal CFO of desktop metal. Please.
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Before we began or refer you to our safe Harbor disclaimer on slide three of the presentation. Today's call will include forward looking statements. These forward looking statements reflect desktop metals views and expectations only as of today May 10, 2023, and actual results may vary materially based on a number of risks and uncertainties.
For more information about the risks that may impact desktop metal business and financial results. Please refer to the risk factor section on Form 10-Q filed this afternoon. In addition to the company's other filings with the SEC.
We have no obligation to update or revise the forward looking statements.
Additionally, during this presentation and the following Q&A session. We may refer to our results on a non-GAAP basis non-GAAP measures are intended to supplement but not substitute for performance measures calculated in accordance with GAAP.
Our financial results release contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measures.
With that it's my pleasure to turn the call over to restful founder and CEO of desktop metal.
Thank you Jay and welcome everyone I'm excited to host you for our first quarter 'twenty to 'twenty three financial results call. This afternoon.
On today's agenda I'll begin with a brief highlights of our first quarter financials.
We're also going to talk about the increasing traction we're seeing from our customer base in three areas, one customers using our technologies and larger numbers too.
Let them from a repeat customer base and three I'll detail, a new growing customer subsegment, representing the unique capabilities of binder jetting.
I'll, then wrap up with an update on our cost reduction initiatives and plans to reach profitability.
And then I'll turn the call over to Jason to provide further color on our financial results and outlook before we conclude and open it up for Q&A.
I'll begin on the top of slide four wood financial result, highlights overall I'm proud of the team's execution on our cost reduction efforts to drive to profitability means what it sees suddenly the lightest quarter of our year.
Revenue for the first quarter of 2023 was 41.3 million representing a five 5% decline over the first quarter of 2020 to.
Reflecting a continuation of the recessionary headwinds we started experiencing in the back half of last year.
Well, we saw some of the forecasted revenue slip out of Q1.
And what still inside of our internal contemplated range.
You'll recall last quarter, we offered a wider 2023 guidance range to accommodate from known as related to the depth and breadth of this recessionary environment.
Continue to pose our customer base and we see a variety of growth opportunities in the near term horizon that validates reaffirming our 2023 revenue guidance.
non-GAAP gross margins were 18% for the first quarter of 2023, expanding 90 basis points for the first quarter of 2022.
In the middle of the first quarter, we announced an additional set of cost reductions and we expect impacts from these efforts will begin to show in the second quarter with most of those benefits starting in Q3.
As these cost reduction actions more meaningfully improved fixed cost absorption in the coming quarters, we're expecting significant gross margin expansion through the balance of 2023.
For the company.
We reduced adjusted EBITDA losses from 41 6 million in the first quarter of 2022 to 20 414 million in the first quarter.
2023.
Which was a $17 1 million dollar improvement year over year with a second tranche of cost reductions to come.
We expect to see a continued positive trend in adjusted EBITDA. This year as we combine significant expense reductions with topline growth to drive sequential improvements to adjusted EBITDA for the balance of 2023.
Way to reaching breakeven by year end.
We're also reaffirming our 2023 adjusted EBITDA guidance as we have a plan to achieve these commitments regardless of the macro conditions, primarily through the announced cost savings plan expansion detailed in February .
Moving on to some business highlights as we detailed on our Q4 call. We expanded efforts to significantly reduce our expense structure and prioritize our path to profitability.
Increasing our cost reduction plan mid February by an additional $50 million.
These actions bring our total annualized cost savings to $100 million and puts us in a very strong position to achieve adjusted EBITDA breakeven by the end of the year.
I'll touch on our progress to date on the following slide.
As you May recall last quarter, we discussed progress across the board in the consumer electronics segment.
We signed a master supply agreement.
First consumer electronics companies in the world.
This projects are going very well and we continue to expand our various consumer electronic relationships.
We believe we will do over eight figures of revenue in this market over the next 18 months.
Products in stores next year that were made where binder jetting machines.
Over time, we project this segment will grow into a multibillion dollar opportunity for desktop metal.
We also launched life suite and end to end software hub that delivers generative AI solutions for additive manufacturing to point out.
Building on the success of our life Center simulation software life suite is a new package of premium software applications with all new functionality that allows users of desktop metal desktop how you take the next one three D printing systems to seamlessly manage their bill preparation printers accessories and processes with success in one cloud based location.
Life said will come standard with most new hardware this year and eliminates the need for users to purchase all of their expensive three D printing software programs to use their equipment.
Aim to Plano is a digital manufacturing process that is ultimately powered by software.
Believe lapsed suite offers the most intuitive and powerful added manufacturing software in the market, allowing us to continue to offer our customers unmatched differentiate a turnkey solutions and extend our lead in additive manufacturing for mass production applications.
A few additions from this quarter include copper C 18, 150, and titanium tactics for for our production system and three or four stainless for the shop system platform.
So one of the industry's largest libraries of production materials.
Turning to slide five we would like to introduce you to a new concept, we call Super fleets that emphasizes high adoption customers that continue to expand utilization over added manufacturing 2.0, that's production solutions.
Well, we have over 7000 customers, including more than 200 with metal and ceramic systems over 370 of them are what we consider super fleet customers.
We refer to as Super fleet as a multiunit customer that has entered mass production phases and uses our technology to produce a high volume of indias parts with three or more systems purchase.
The current financial climate, capturing value and improving utilization and production is more important than ever.
Our Super fleet customers are demonstrating repeat success with our solutions and validate key drivers customer demand trends.
First our mass production solutions have a clear product market fit second our.
Our solutions are consistently delivering high value in ROI to our customers mass production needs and.
Third utilization is increasing our super fleet customers are coming back to buy more systems, eventually leading to higher margin consumable sales.
This is the flywheel in our operating model.
We've highlighted a number of these valued super fleet customers on this slide.
And what's really exciting is the diversity of these customers across all company sizes small to large in both binder jet and photo polymer solutions.
Over the last 12 months some of these customers have really scale their operations.
One example is free from technologies.
Who started with one system only three years ago and today has a super fleet of 25 desktop metal binder jetting machines or light for us on the polymer side did a scaled up to 33 polymer systems being used for printed medical devices.
Or BMW, who know hows parts are in almost every new passenger vehicle using our technology.
We have a dominant market position in the binder jetting space with the largest installed base of systems, a multi year head start the largest binder jet R&D team in the world The largest library of production materials in our patent portfolio, that's the envy of our industry.
It is a very powerful moat growing industry.
To demonstrate this 25% of our binder jetting machines are multi system sites and similarly, 20% off for our polymer systems.
Multi system sites, meaning that I'm gonna original desktop metal system, providing enough value to a customer that isn't nearly one quarter of the cases to date that same customer purchased additional systems and are now in production.
It's also worth noting that our binder jet systems are incredibly productive and when a customer has more than one system and you can see here some have a dozen or more they are processing a high volume parts and those fleets reinforcing the flywheel effect of our model.
We're incredibly proud of these great customer relationships, we've built over the years as we leverage the differentiation in our a M. Two point or mass production technologies to help our customers revolutionize their manufacturing settings.
Building on this concept of repeat customer usage on.
On the following slide Q1 was another successful quarter for our repeat customers repeat customers have been an important part of maintaining our growth at scale through both growing system sales and consistent high margin consumables Robyn.
All customers highlighted on this slide expanded their deployments in the first quarter of 2023.
Desktop metal systems with new orders beyond initial systems.
Even in what is traditionally the lightest revenue contribution quarter or calendar year.
Made progress in Q1 in deepening the number of high value applications with major customers in.
And the traction we're seeing from repeat customers, including Super fleets represents an important measure of the overall success of our solutions.
Now, let me talk to you about some of the Super fleets of the future on the next slide.
We recently announced a renewed focus on advanced ceramic offerings as a result of increased customer demand driven by a wide range of applications and mission critical sectors.
Including aerospace automotive energy consumer electronics, among others in my opinion, we're the best in the World in this segment.
Fighter getting simplifies production of ceramics hard metals carbide assortments that are challenging to fabricate with traditional manufacturing.
Technology gives these manufacturers incredible flexibility in design and material properties.
While our core focus is enabling high volume mass production applications in markets like automotive and consumer electronics.
Are able to contribute to high value niche markets like nuclear energy.
It's early innings for the use of binder jetting nuclear but in the past year alone we've sold between five and $10 million of equipment in this new segment.
This is a growing market segment for binder jetting.
Or desktop metal is years ahead of any competitors.
It has deep partnerships with national labs, and leading players like BWXT.
Altra Safe Nuclear Corporation, and other major defense companies.
One of the enabling applications for binder jetting and nuclear <unk>.
Includes the three D printing of nuclear fuel, where they uranium try ISO is fully ceramic micro encapsulate it in silicon carbide and it does not suffer from the dangers of weapons proliferation, because it's refractory ceramic layers limit reprocessing.
This is a major game changer.
This new process has the potential to revolutionize nuclear applications across the board, enabling small modular reactors.
New forms of marine ships and submarines that one day it could be exported to our allies without the risk of proliferation and new forms of propulsion.
For example in January of this year.
DARPA NASA announced a new program for nuclear thermal propulsion rockets that has up to five times, greater efficiencies and chemical rockets or enabling the ground power for the NASA Artemis program.
For those that aren't familiar with Artemis trial Polo program to go back to the Moon.
The nuclear revival is driven by the new IRA legislation.
Australia U K U S Alliance known as August and all are important climate change trends.
It's really exciting stuff to see binder jet use across a multitude of applications ranging from high volume markets like automotive and consumer electronics, and all the way to future space propulsion.
Artemis program.
Takes a differentiated solution to solve these problems.
Shifting to slide eight.
As we've discussed in the past few quarters, a top priority for our company in 2023 as we navigate this year is to significantly reduce our expense structure in order to expand our margin profile and reach adjusted EBITDA breakeven by end of the year.
The team's ongoing operational execution towards achieving this goal has been top notch.
I want to highlight some of the progress we've made.
And 2022 we successfully executed the first tranche of our cost reduction initiatives completing $50 million in annualized savings.
The cost reduction spent both cost of goods sold and operating expenses that weighed more towards the opex side as we saw our expense profile declined sequentially for four consecutive quarters into the first quarter of 2023.
In February of 2023.
That's an additional 50 million in cost reductions expected for 2023, bringing our total annualized cost savings to $100 million.
We will have completed the lion's share of the workforce and facility closures by the end of the second quarter.
We expect the second tranche of cost reductions to have a much more meaningful impact on our fixed cost absorption versus last year's first tranche.
Even though mid quarter timing of the announcement.
We saw minimal impact in the first quarter, but we'll start to see results in the second quarter and to a much larger extent in the back half of 223 facilities.
Facilities reduce the burden on Cogs.
The combination of our cost reduction efforts in the last year puts us in a very strong position to achieve our commitment of adjusted EBITDA breakeven by year end.
Regardless of the macro conditions.
You should also expect to see a continued trend of lowering our cash burn or microsystems quarterly basis with the ultimate goal of reaching cash flow breakeven when our existing balance sheet.
Furthermore.
These actions create a stronger more resilient organization is streamlined the business to yield a more efficient and effective operating model for the long term and with that I'll turn it over to our CFO Jason call Jason.
Thanks, Rick.
On Slide 10, you will see highlights of our financial performance for the first quarter of 2023. Please note, we will be referring to several financial metrics on a non-GAAP basis.
Reconciliation to GAAP data is included in the filed appendix.
Consolidated revenue for the first quarter of 2023 was $41 3 million down five 5% year over year from $43 7 million in the first quarter of 2022.
<unk>, leading revenue drivers, where digital casting solutions and growth in consumables services and subscription offset by weakness in metal Binder Jetting solutions.
Revenue came in a little softer than expected in Q1, but even with ongoing recessionary headwinds was within our range of expectations.
non-GAAP gross margins were 18.0% for the first quarter of 2023 gross margins improved 90 basis points versus the first quarter of 2022, driven primarily by a lower cost structure as well as product mix.
Improving gross margins is a priority for the business. This year and we expect our ongoing cost reduction efforts to yield continued gross margin expansion through 2023 and beyond.
Turning to the following slide non-GAAP operating expenses were 35.0 million for the first quarter of 2023. This represents the fourth consecutive quarter of sequential Opex reductions as we have reduced non-GAAP operating expenses by a total of $17 1 million in first quarter of 2022 include.
Sequentially by $3 million from fourth quarter of 2022.
First quarter 2023, non-GAAP operating expenses as a percentage of revenue was 85%, which is a year over year improvement versus 119% in the first quarter of 2022.
We've executed lender 2022 cost reduction initiative and expect to see a continued trend of improving expense structure. Throughout 2023 is the second tranche of 50 million in cost savings more meaningfully impacts results, especially in the back half of 2023.
Turning to slide adjusted EBITDA for the first quarter of 2023 was negative $24 4 million improving by $17 1 million compared to the first quarter of 2022.
Adjusted EBITDA was in line with our expectations in the quarter as we expect more meaningful sequential improvements to EBITDA throughout 2023, as we combine the incremental $50 million in cost savings announced in February with higher revenue contributions, especially in the back half of 2023.
We are right on track to fulfill our commitment to achieve adjusted EBITDA breakeven before year end, regardless of the macro environment.
Cash also came in as expected ending the quarter at $149 8 million.
And cash cash equivalents and short term investments.
We were able to reduce our operating cash burn from $56 3 million in the first quarter of 2022 to $37 3 million in the first quarter of 2023.
We're in a solid position based on our internal cash forecast and we expect ongoing expense reduction efforts will drive significant sequential cash flow improvements, even if recessionary headwinds persist.
We ended the quarter with $98 2 million in inventory higher than when we exited Q4 2022 as a result of sales coming in softer than we expected in the first quarter along with the impacts of closing six production facilities.
We still expect our messaging from last quarter to remain true.
We intend to monetize inventory over the next several quarters in order to free up working capital and provide further improvements to our cash position and you should see better progress over the balance of 2023.
And finally, moving to our 2023 financial outlook on slide 14.
First quarter revenue was a little softer than expected the results were still in line with our range of expectations.
In addition demand remains strong across our portfolio of solutions and customer engagement trends give us confidence for the balance of 2023, even if ongoing macro environment challenges persist.
As a result, we are reaffirming our revenue expectations of $210 million to $260 million for 2023.
We also continue to expect adjusted EBITDA in the range of negative 50 to negative $25 million for 2023.
First quarter adjusted EBITDA was in line with our expectations and we anticipate adjusted EBITDA in the second half of 2023 significantly outstripped the first half.
As we've consistently committed we are driving significant continued improvements to our expense profile in order to achieve adjusted EBITDA breakeven before the end of the year, regardless of the macro environment.
With that I'll turn the call back to Rick for his closing remarks.
Thank you Jason I'll wrap up on slide 15, I Didnt manufacturing is driving the future of mass production, we remain focused on our strategic priorities for 2023 we're laser focused on getting the company profitable.
Giving the business to meet these commitments.
I'm very proud of the team's execution to drive $50 million of cost savings in 2022, and I'm confident this next $50 million in 2023 will deliver continued improvements in our cost structure in order to drive margin expansion and achieve adjusted EBITDA profitability before the end of the year.
Customer engagement remains very strong across our a M. Two point on mass production portfolio with growing repeat customer cohorts validating we're delivering for our customers missions.
And finally, we continue to mature as a company and drive important operational improvements across the board in order to streamline the business create a more resilient organization and strengthened desktop metal for the long term.
In closing, we will be relentless in leveraging our competitive advantages to drive adoption and the added manufacturing market and extend our leadership in this space in order to capitalize on the next stage of this market's secular growth opportunity and we're extremely well positioned to scale.
With that let's open up the call for some questions operator.
Thank you very much sir.
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The first question comes from Greg Palm from Craig Hallum Capital. Please proceed with your question Greg.
Yeah. Thanks, So I wanted to start with the revenue outlook I kind of a two part question I guess number one can you quantify how much revenue you know slipped from from Q1 and I'm not sure if you've if you've booked it already in Q2 or if it's just been kind of pushed out or deferred and then sort of more of a <unk>.
General comment.
Comment you reiterated the guide it's still a pretty wide range. So I guess you know now that we're I don't know a couple more months and into the ear relative to when you put that guidance out any sort of puts or takes in terms of you know low end of that range versus sort of mid in some of the demand indicators you're looking at.
Thank you Greg.
I mean, I think it it's in the.
Mid single digits.
Yeah.
More than five.
You know five to 8 million that they'd probably slipped into.
Into Q2.
And so we will continue to work.
To execute I would say it was not.
The easiest quarter.
That we've had to date I think maybe as I as I digested, sometimes when you've got this type of environment, you've got customers that that decided to.
Delay some decisions they print parts with service bureaus that use our equipment or our partners or you know really.
Sharpen their their their.
There are peso until until they move forward, but we still see very good signs of demand and growth.
Growth for the year and we are.
Like the position that we are competitively and we feel like we're going to.
By year end up being a better position than most of the companies in our space.
Okay. I appreciate that that color I wanted to move along to consumer electronics, you you provided a little bit maybe a little bit more detail this quarter on kind of what you're seeing in I guess, a few questions related to that.
You're you're expecting you know eight figures of revenue over the next.
18 months Oh.
A pretty wide range, depending on what numbers you chose.
But can you confirm do you actually have you know P. Owes you know in hand, and you know maybe timelines for deployment of systems and then just you know I think there was a major consumer electronics company that you know it was a customer in Q1, we worked with burned out.
Yeah. So we worked with I would say that's up for companies in that in that space in a variety of programs and we.
We feel really good about the number that we laid out in terms of revenue and have a number of our contractual commitments to deliver equipment.
Over the next 18 months in that range and I'd love to be able to say more about it and that's just companies launch their products and they show up on stores, you'll be able to pick them up and play with them and so you won't be able to tell that there were three D printed but are they the good news is that three D printing in that segment enables you to use.
Better materials you can.
Reduce your carbon footprint.
Not having to.
The rebuilt chips to make banks you have.
Many benefits in terms of being able to open up space for.
You know the.
More either a thinner device or.
Or a more battery space. Many advantages you can do.
When using additive and in that segment, especially as new new products get launched a new form factors.
That's going to be.
The more exciting thing over time so.
It's not the only thing we do we are very strong in a lot of things within automotive with things going on in aerospace we have parts in jet engines now we've got.
This segment.
The what we talked about in nuclear is also a really exciting opportunity where we did.
Between five and $10 million in the last 12 months and we expect that to continue to grow that's a segment for us where we're the only company in the world that does that and yeah. So we were right.
That about our business and the what we're doing with customers to make them successful.
Got it but just to confirm you know if you're you know I guess expecting.
Okay.
We are we expect to be in products.
Okay understood of production. This is production we've been working in this area for some time.
It's it's the work we're doing in that space and salt production and just parts.
Okay.
I guess just last one you know lots of you know commentary on EBITDA breakeven and I think you used the term regardless of macro environment. You know I I guess you know if we assume that the macro gets significantly worse here does that mean, there's additional levers that you can pull to achieve that.
Break even or you know is there a certain level of revenue that you you sort of need to feel comfortable with to achieve that.
Yeah, I'd say across.
Reaffirming the guidance range and across every element of that guidance range. We believe we can achieve that target.
The levers we have at our disposal are polled them, we're all being deployed they take a little time to land, it's consistent what we said last quarter.
But we are we believe across that range because of a breakeven about India.
Thank you. The next question comes from Josh Parker's Puckeridge Winski from Morgan Stanley . Please proceed with your question Josh.
Good afternoon guys.
So Rick I wanted to dig in a little bit more on the the revenue weakness if you wouldn't mind and I think there were a few mentions of the recessionary pressures I guess, maybe elsewhere in either kind of the factory floor automation space.
You are seeing pretty healthy bookings a lot of backlog growth I think you know people, probably celebrating supply chain improvement more than talking about demand.
Any other color that you can provide in terms of the end market.
You know maybe anything geographically that you could kind of flesh out where you're seeing the weakness or what or what you're watching for specifically on kpis, because I think the broader macro at least in the industrial space. Once he has then been pretty healthy so far.
Yeah, I mean, I think that we do technology, especially when.
People are making a decision to adopt the new process.
You know that that's one of the considerations that happens, especially when when a market has credit tightens and you've got a lot of our equipment costs more than a million dollars to get it to get it going and I think people make decisions that let's say, let's just hold on FERC quarter before we spend on that Capex, especially.
With the Capex.
Financing being a little bit more more expensive, but the customers that have technology. They continue a byproduct and so we see repeat the man so where the ROI has been demonstrating the companys figured out why this is really a fantastic way to too.
Make product they they move relatively quickly we do see a healthy demand I was just pulling one of our customers yesterday that it makes a parts of service using our technology. They see pretty healthy demand. So you know I think what you'll see is just a.
Related to <unk>.
Yeah, I would say that the behavior that you may see in companies as you have rates increase, but but it sort of comes and goes on a on a quarter by quarter.
And then shrinking of the of the.
The order.
Order cycle for or the sales cycle for our for our type of products. It it was around.
Around Q3 of last year that was when we started to see.
The people talking about potential recession or hard landing that that you saw some of that manifests itself.
In.
Our sales cycle and then you know it's been somewhat.
No.
Uh huh.
Bearing over the last two.
Two quarters, but I expect that also to go the other way when.
They stop raising rates and then eventually when they start lowering rates. So we you know besides that backdrop, we do see healthy demand for our products in a tunnel projects. So we have an increasing number of projects in.
Bookings and all the things it's more of a.
You know when when things get when people pull the trigger on things that I think is some of what we saw in <unk>.
Q1, I don't have more the psychology of that but I feel very good about the amount of activity, we've got going on with the company and maybe Jason that's more color or additional thoughts on it.
Thanks and.
A number of things we're working on in Q1 to move relatively quickly into Q2 and.
We started Q2 with it so.
Yeah.
Yeah.
Okay, but there's no like end market or geographic commonality, where you saw the push outs it was.
It's sort of yeah, a little bit more randomized or geography.
We we I don't think we saw a geography or geographic change in our businesses first.
In the past quarters, it's been relatively similar the.
I wish we had a stronger presence in Asia, and that's something that will build over time, but.
I would say so.
Got it that's helpful. And then just following up on the cost side, obviously big focal point right. Now you guys have referenced several times.
Have you kind of you know some of these exciting growth ambitions you know good conversations big customers equating those you can't even name yet.
The the focus on costs, just wondering when the when the Todd glasses shifts there.
Yeah, So I think.
I'll talk about maybe unpack cost a little bit I think some of this we've spoken about on prior calls, but I think the way we think about that as.
We were sort of scaled for growth at a level that wasn't materializes as you go back to the middle of last year and so we've taken a lot of effort on the cost side, you really reduce that fixed cost base. We're in the midst of closing six production sites.
What comes with that is you will find that will be less volatile as revenues the margin volatility will be less volatile than the revenue is especially when it drops below $50 million that you saw in <unk> of last year now this <unk>.
Those are being enacted across to heal and we really expect to see the savings from that later in the year. They also have a buildup of inventory I think monetizing that inventory is going to be a big element of it is those kind of opportunities play into that we've got inventory in some of these spaces, where the demand is expected to come from and it's going to help us accelerate that inventory drawdown.
And we expect that to be a big benefit on the cost side as well.
Got it I appreciate the color.
Yes.
Next question comes from Ashley I guess from Credit Suisse. Please proceed with your question.
Actually.
Hi, Thank you for taking my question I'm on for Shannon today.
Within your end markets is there any market, that's maybe doing better or worse than the other.
Absolutely I mean, I think that that dental.
It's been a very strong market for us and we have best in class technology, there the printed casting technology.
<unk> has been benefiting from our efforts to re sure into do part consolidation on large components, we have a very strong.
Our business on defense that I would say is outpacing the growth in any other areas that we have in the company, it's probably our fastest growing segment right now and I would say Smes.
They'd have a higher difficulty getting credit or announcing this new technology. They may they may think about it twice before they buy it and then we connect them with our service bureaus or partners that make parts that can support them for awhile and then automotive we have.
The trend in vehicle Oems that are starting to.
Use.
Try to do something similar to Tesla with.
Giga casting on the body in white space and one of the things that our technology can be used for is to arrive at the shape that you need to before you cut all the die cast tooling and we work.
Companies like us they use our systems to do things like that before before they would.
Cut the die cast tooling, so that as other companies replicate that type of process. It it is going to open opportunities overtime and in the market. So I would say.
Lots of lots of areas.
Project development that that can yield significant.
The the areas that are stronger versus weaker I think smbs are are hurting a little bit defense is extremely strong and our stuff is all in between anymore.
Thanks for all the details and then for revenue how should we think about linearity and pointing to a really strong two H. So should we think of tukey, maybe being flattish and then if we look at the Super data, which you've given us a very interesting how much revenue do you think is locked in for the coming year.
That's it for me thanks.
Yeah, I mean I think.
I have to think about it in terms of how much revenue is locked in I mean, the one benefit of our architecture is a razor razorblade model you install a fleet of systems and then the next year. When you show. The next group of systems. They have a compounding effect because they consume materials and those that just want to be better.
Better.
Gross margins.
No.
The other part of that question I think I would say.
Two Q seasonally historically, it's been a stronger quarter for us, we're not going to get into guiding the individual quarters, but.
I'll leave at that.
I think you should if history portends that we expected it will it should be an up quarter announced last quarter.
Yeah.
Yeah.
Thank you.
Next question if a final question from Greg Palm from Craig Hallum Capital. Please proceed with your question Greg.
Yeah, I guess I just wanted to ask maybe more of a broad question on on consumer electronics and you'll keep in mind. This is this is sort of broadly speaking, but why all of a sudden are you seen increased interest from this segment and I guess more specifically related to binder jet.
Why does binder jet makes sense, you know and in lieu of relative to let's say laser sintering.
Okay. So laser sintering is not even close to the cost structure in that segment right parts costs or.
$1000, a kilo in in Binder jetting, there 120th of cost, but in the consumer electronics space. What people use is a machining CNC machining, so they'll make a bill of material a block and then that'll get machined into a housing component.
The downside though.
<unk> is that all of the chips have to be re melted to make their parts.
And you have a dichotomy where that the higher performance and higher stiffness or those that you use that would be it would have higher hardness and be more scratch resistant that better it would there actually harder and take longer to machine are more expensive to machine. So what you can do with binder jetting is Hugh you conform those parts.
And.
There is no virtually no waste from the process. So all of the materials actually goes into making that part. So you have a much lower.
Energy footprint and as a result, much lower greenhouse foot greenhouse gas footprint and you can use because its formed with powder metallurgy, you can use materials that will have.
The higher stiffness by volume or better mechanical properties, which allows you to open up thin out regions other parts and open up space for more battery and new geometries that would be.
Cost prohibitive or very difficult to machine in few setups. So those are some of the reasons that you'd you'd want to be.
Binder jet apart.
Also you would delay something called to lock, where you you get closer to the.
As you get closer to the launch of a product you you kind of make any more changes, but with printing you have more flexibility on your supply chain.
Also you need a lot less equipment in order to make the same volume of parts and as you're trying to make our supply chain more flexible and potentially move out of a region. This allows you to.
Have a dramatically higher flexibility.
So there are many reasons.
Most 90% reduction on a on the greenhouse with inside at lower cost.
And better geometry, and better material properties for many many reasons and some materials like titanium you can't even recycle the chips into a new block you'd have to refine the metal to remove the oxygen.
So.
There's a lot of advantages to doing this with binder jetting.
Yeah, I mean, that's interesting and you rattled off a whole lot of its advantages is there a sort of a single water or top one that's driving more of the increased interest now I guess, that's that's where my question is is what it is why though what's sort of shifting their attention.
Different customers are doing different things and it varies per customer.
Okay.
Alright, thanks for the follow ups.
Awesome.
Thank you Ms Christian mingle her finance from actually and that's from Credit Suisse. Please proceed with your question.
Hi, Thanks, I just wanted to confirm does the 2023 revenue range assumes a range of contribution from the consumer electronics number that you referenced in the slides.
I'm trying to kind of paint the picture of.
What one of those sub segments, that's going to be very large looks like over the next 18 months, but.
Okay understood. Thanks.
And.
Do you want to.
Yeah, just to clarify your question earlier, when you were talking about revenue, you're referring about sequential quarter over quarter.
Thank you at this time would be no further questions I'd now like to turn the call back to Vic first for closing remarks. Thank you Sir.
Wonderful thank you very much.
Really want to thank everybody again for joining our call. This afternoon and as always I want to thank the entire desktop metal theme and family for their passion and focus to begin 2023.
Look forward to speaking again with everyone next quarter. Please don't hesitate to reach out if theres any additional questions or if you'd like to come visit us here in Burlington, Massachusetts. Thank you.
Thank you very much Sir ladies and gentlemen that does conclude today's teleconference. Thank you very much for joining US you may now disconnect.
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