Movella Holdings Inc. Q1 2023 Earnings Call

Speaker 3: Good day ladies and gentlemen, thank you for sending by. Welcome to the Movella's first quarter of 2023 earnings conference call. At this time, all participants are on the list and only mode. After the speakers presentation, they'll be a question and answer session. So as a question during the session, you'll need to press star 11 on your telephone.

Speaker 4: You will then hear an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Lana Adair, please go ahead.

Speaker 5: Good afternoon and welcome to Mavella's first quarter 2023 earnings conference call. Today's discussion will contain forward-looking statements based on the environment as currently seen by the company's management and as such are subject to various risks and uncertainties. Actual results may differ materially. It also contains references to non-GAAP financial measures that the company believes provide for investors'

Speaker 6: useful information to its investors. The Orange release, most recent annual report on the Form 10-K , and under filings with the SEC, each of which are posted on the Bella Zayar website, provide more information on the specific risk factors that could cause actual results to differ materially from management's expectations.

Speaker 7: They also provide additional information on non-gape financial measures, including reconciliation where appropriate, to the corresponding GAAP financial measures.

Speaker 8: Guidance provided today incorporates the order trends that management has seen to date and what they believe today to be appropriate assumptions. Results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and cuts of demand and spending.

Speaker 9: and services, and therefore the company's actual results could differ materially from guidance. And now I'll turn the call over to Movella CEO Ben Lee.

Speaker 10: Thanks, Lana. And thank you all for joining our Q1 2020 to be earnings call. And our first earnings call as a public company. I'm excited to update you on mobile is progress.

Speaker 11: To begin, I'd like to touch upon a few financial highlights before our CFO , Steve Smith, walks through additional details of our first quarter financial performance.

Speaker 12: and pleased to share that we achieved $9.2 million revenue in Q1 of 2023, which is historically our seasonal low quarter.

Speaker 13: While first quarter revenue was 4% lower year over year, our gap gross margins improved by approximately 1,000 basis points from 51% to 61% year over year. We are expecting continued gross margin improvement throughout the fiscal year.

Speaker 14: Importantly, we have a very strong cash position.

Speaker 15: We have 62.1 million cash and cash equivalents at the end of March. We do not anticipate a need to raise additional cash for operations ahead of turning profitable as we expect to reach break even in Q3 of this year and we anticipate becoming

Speaker 16: operating cash for positive in Q4 this year.

Speaker 17: Our strong cash position allows us to provide full attention to executing the launch of new products and expanding customer use cases, which I'll discuss in more detail later.

Speaker 18: environment. Mugala is a global leader in digitizing movement of the human body and of automotimes that mimic human movement. We digitized movement with a highly differentiated full-text solution that integrates sensors.

Speaker 19: visualization software and AI cloud analytics.

Speaker 20: Mobala is best known for XS technology.

Speaker 21: Our extensive products integrate sensors, events, algorithms, and user-friendly software that digitize non-verbal movements of humans and automotons.

Speaker 22: We serve three core markets, entertainment, health and sports, and automation and mobility. This diversity of end markets highlights the broad application of our technology.

Speaker 23: 25 channel partners around the world and growing.

Speaker 24: Our customers include well-known brands such as Electronic Arts, Ubisoft, Marvel Studios, Netflix, Siemens, Honeywell and the United States Olympic team.

Speaker 25: the automation and mobility market.

Speaker 26: as well as our growing network of focused regional distributors, system integrators, and value added resellers that extend our sales coverage globally.

Speaker 27: particularly in the entertainment and health and sports end markets.

Speaker 28: In the entertainment market, we believe Movellet is the gold standard for Hollywood quality motion capture.

Speaker 29: In the film and video game industry, Morales X-Sense motion capture technology has been used to create highly realistic and immersive experiences by digitizing the movements of actors and animating them in real time.

Speaker 30: Our technology enables the lifelike movement of CGI characters and avatars that transport viewers to new and exciting worlds.

Speaker 31: Our products and technology has enabled recent blockbuster movies such as Black Panther, Avatar, and Avatar.

Speaker 32: and LiaoLiao Crocodile and continue to be the go-to solution for AAA video games.

For example, leading game developer Ubisoft utilizes Motorola's XSense motion capture suits to improve time to market and reduce cost of production by digitizing movements of actors during takes of live scenes and providing precise movement data.

for real-time recording and pre-visualization of character movement. This was highlighted by Nick Doberich, pre-visualization artist at Ubisoft, who provided the following quote for us.

The addition of XN suits to our pipeline has fundamentally changed how we at Ubisoft prototype new features and pre-visualized scenes.

Every week teams from our studio are in the suits and recording data for quick integration into the engine.

The XN suite has saved us time and money while helping us to get stronger ideas executed faster.

I want to thank Nick for this great customer testimonial.

In Q1, we opened the early access application window for obscure.

more or less new all-in-one platform product that provides creators with user-friendly tools to deliver interactive experiences, including real-time human movements for digital avatars during live streaming sessions on well-known streaming sites such as Twitch.

We are encouraged by the strong response to our obscure early SS window, resulting in over subscription by popular live streamers prior to production launch this summer. In the health and sports market.

Hundreds of collegiate and professional sports teams are leveraging our data analytics systems and software.

Our human performance platform powers top athletes, including the US Olympic team. For example, Olympians competing in indoor wall climbing at Tokyo 2020 used our X-Sense bodysuits for training, which allow them to see their animated climb with precise data analytics.

that help the athletes to make adjustments to their form and improve performance time.

Another use case example in health and sports is Toyota.

We are proud to be a long-term partner of Toyota to improve the health, well-being, and safety of industrial athletes in automotive production lines.

Mogalla is an integral part of Toyota's ergonomic process improvement strategy.

supporting Toyota's internal health and wellbeing approach of maintaining and improving the physical and mental health of their staff across Toyota manufacturing divisions.

Additionally, the same Xtense technology used for movies and video games, we are creating motion IP for top athletes. This is an exciting new frontier, enabling them to monetize their signature moves.

Steve Young is a perfect example of a veteran elite athlete excited about technology.

We we enacted with Steve his support to raise highlights.

movements by digitizing them.

our Sensitutium tools are used today by top companies to sense movements of robots and automotoms on land, she hand in the air.

We recently introduced the MTI320, high performance active heading tracker to the market for robots and autonomous vehicle applications.

Our NTI family of high precision sensors enable more efficient movement of automatons by providing real-time orientation and stabilization data.

For example, our customer Gray Orange in India.

which supplies warehouse robots to customers over 30 countries, use this more rather anti-insensors to enable more efficient and more accurate movement of their robots in warehouse environments.

Mobility technology is based on proprietary inertial sensors which are small, lightweight devices that can be attached to the body or to objects to capture movements in three dimensions.

Mobile sensors are incredibly accurate with a high sampling rate that captures even the most subtle movements. But what really sets Mobile apart is our software. Mobile software is designed to be user-friendly and intuitive, allowing developers and creators to capture and analyze movement data quickly and easily.

And with our powerful analytics tools, Movela software makes it easy to turn raw movement data into actionable insights, helping users to optimize performance and improve results. Movela's full stack provider portfolio is protected.

by over 160 granted patents, which provides a strong competitive moat. We continue to invest in the advancement of our products and extending our technology leadership. To drive greater adoption across a variety of use case applications, we have developed

we developed the Movado Dot product, which is a consumerized version of our integrated system of sensors and software.

We launched it at CES a few years ago with a tagline, 5 dots, a million dream applications.

Maloladot sensors in our software development kit save developers the engineering effort of making their own sensors.

so that they can focus their resources on creating amazing apps.

So far, our top third-party developer, TEM, has grown to over 800, many of which are starting to announce exciting products.

serving the health and sports market primarily. For example,

Ularia has gamified physical therapy and rehab using the Movolotl.

Euleria's advanced in-clinic and in-home user-friendly products represent the significant opportunity we see.

for our technology to improve the quality and availability of physical therapy.

In addition to our existing business, we found ourselves at the epicenter of explosive new markets for digital movement applications. This includes next-gen entertainment, gaming, and live streaming markets. In addition to professional studios,

A growing number of individual influencers are using a product to drive movements of the avatars for live streaming on platforms such as Twitch. We are further enabling this emerging growth market with the recent announcement of our new up-squeer platform for live streamers.

We believe the growth of individual influencers on the obscure platform will accelerate in 2024 and beyond.

As mentioned earlier, our cache position is strong and this gives us the flexibility to to relentlessly drive innovation.

We recently announced a scare early as this is an example of our execution.

We also recently launched Movela's online shop for our homepage. We believe this offering addresses the growing new customer demand to buy online.

and will lead to additional revenue growth for Nueva Luega.

Completing our Gwering Direct Sales Team and Channel Partners Network. Finally, before turning to Steve,

I'd like to comment on artificial intelligence and the macro environment.

We see AI as an enormous quote acceleration opportunity for mobile as existing and new offerings.

This is the reason we hired VJ neck carney, our CTO, over two years ago. VJ was the head of AI in his two prior companies.

For entertainment applications, MoVALA is already leveraging AI to improve our products and user experience with new features, such as dynamic calibration, which improves accuracy as the user moves. Fifthory Celebration Optimization

Here's another example of our AI implementation, which reduces cost and increases capacity.

and with additional AI-enabled product enhancements in development. In health and sports, generative AI will accelerate our ability to develop and offer predictive analytics for performance.

injury prevention, and recovery for both professional athletes and the everyday person.

For example, ScaleFit, a Moogala partner, is working on a more advanced version of ergonomics measurement system for industrial athletes.

using chat GPT to provide assessments and recommendations for workplace design and injury prevention.

The AI product extension now automatically generates highly sophisticated assessment reports as well as individually adaptive measures for ergonomic place design and injury prevention based on the data generated by Movela sensors.

with a roadmap for identifying real-time correction for repetitive stress on the body.

with a row map for identifying real-time correction for repetitive stress on the body. In this example,

Genitive AI is used in conjunction with Movada's existing XSENS integrated sensor and software systems for providing new insights.

and therefore bringing meaning to movement. At the end of the day, AI is a set of algorithms for data pattern recognition.

and the rich data generated and aggregated by mobile sensors and software will benefit from such AI advancements.

This is exactly what we originally envisioned with our company tagline.

bringing it into movement. In terms of the economic and geopolitical backdrop...

We are not isolated from challenges in recent operating environment.

Our customers' rationalization of operating expenses as well as shifts in consumer spending behavior driven by inflationary pressures and ongoing layoffs.

or impacting or near-term forecasts. The bright spot is that we have achieved our nasty listing objectives of establishing a solid cash balance.

in our treasury. This allows us to continue to mindfully invest in new products and technologies during the current period of macro uncertainty.

To summarize, Mogalla is a global leader in the digitization movement and has a highly differentiated full stack platform.

We are an established company with over $40 million of revenue, over 2,000 customers in 2022.

and an experienced management team with a track record of scaling global companies.

The company has a strong cash balance and is uniquely positioned to power multiple fast-growing end markets and applications with the same foundational technology and products, leveraging our patent-rich IP portfolio.

And while this is certainly a growth story, I'm most excited about our strong financial model.

The business as it stands is a very capital efficient with strong high gross margins and is expected to reach breakeven in Q3 this year and profitability in Q4.

With that, I'll turn it over to Steve now to provide an overview of our first quarter 2023 financial results.

With that, I'll turn it over to Steve now to provide an overview of our first quarter 2023 financial results. Steve.

Thanks, Ben, and thanks, everyone, for joining us for Movel's very first quarterly earnings call.

I'll begin with a review of our first quarter, 2023 results, and then provide limited guidance.

Throughout my remarks, I will refer to various non-GAAP measures.

Reconciliation to Gap and NONGAP is available on our earnings press release and on our investor relations website. Because this is our first earnings call, it's a public company throughout my remarks. I'll share additional details of the business and walk you through how we calculate non-GAAP measures .

I want to remind everyone that we went public in February of 2023.

Accordingly, there are charges associated with the GO public transaction that skews some of the figures. I'll provide additional color on that as I walk through the results.

First, let's begin with a high-level review of our business model.

We served three distinct markets, entertainment, health and sports, and automation and mobility.

In the entertainment market, we derive our revenues from the sale of an integrated suite of sensors, or hardware, and right-to-use software licenses. Keep in mind that our software only operates with our sensors.

and our sensors must use our software.

In the health and sports market, we sell a very similar integrated suite of sensors.

markets and market we sell a very similar integrated suite of centers and software.

Plus, we have a SaaS-based athlete management system, or AMS. In the automation and mobility end market, we sell sensor modules with integrated firmware embedded on the devices. In other words, there are no separate software sales currently within this market. Our global customer base is diversified.

for the balanced regional and end market exposure. Our revenue includes no customers accounting for more than 5% of revenue.

from the Americas.

and 36% from the Asia Pacific region in the first quarter of 2023 as compared to 38% from EMEA

27% from the Americas and 35% from the Asia Pacific region for 2022.

The entertainment and market accounted for 41% of revenue in the first quarter of 2023, and 40% of revenues in 2022.

with our motion capture technology being used by top film and gaming companies such as Electronic Arts or EA, Netflix, and 20th Century Studios.

Lavella's health and sports end market accounted for 33% of revenues in Q1 and 32% of revenues in 2022, with over 500 professional, semi-professional, and Division I NCAA teams using our athlete management and or movement analytics systems and software.

using our proprietary sensors in various warehouse robotics, autonomous off-road vehicles such as smart farming equipment, and other applications. Note that the same underlying sensor fusion technology and hardware design is used across all of these industry verticals.

Now I'll dig a bit deeper into the details of the first quarter 2023 results, beginning with the revenue.

Net revenue for the quarter was $9.2 million, a 4% decrease compared to the same period last year and 24% sequentially. A revenue profile typically includes an element of seasonality generally lower in the first quarter, highest in the second half of the year.

The drop was mainly resulted in the seasonality component plus the ongoing macro-environmental dynamics that mentioned earlier.

We generated gap gross profit of 5.6 million, representing gross margin of 61%. This compares to gap gross profit of 4.8 million and gross margin of 51% in the first quarter of 2022.

The increase in gross margins due to our continued focus on product cost, favorable foreign exchange, and generally lower post-pandemic material and component costs.

As Ben mentioned, we anticipate continued growth margin improvement throughout 2023.

Non-Gabb growth margin for the quarter was 64%, compared to 63% in the first quarter of last year, the change due to the same reasons mentioned in the GAAP number. Turning to the operating expenses, we remain keenly focused on investing in new products and technologies to drive top-line growth, ROI, and shareholder value.

GAAP operating expenses this quarter told us $15 million, inclusive of a $4.7 million impairment of intangibles. This compares to $10.3 million in Q1-22 and $16.5 million in Q4-22. Q4 included a $7.2 million intangibles impairment charge.

The Q1 2023 impairment charge was required due to the share price drop experienced immediately after our NASDAQ listing, resulting in our market capitalization being less than our book value. This drop occurred on a small float for reasons that are frankly unclear. We continue working with various institutions to create an efficient market for our stock as trading restrictions lap.

Note these impairment charges are non-cash accounting entries. Sales and marketing expenses in Q1 totaled $3.5 million, essentially emailed the same quarter last year and up about a million sequentially due to international employee costs. We sell our products through our direct global sales force.

regional channel partners around the world. These channel partners are a network of bars, distributors, and other value added resellers. The number of whom is more than doubled over the past 24 months and accordingly are in various stages of growth. In 22 approximately

39% of Movela's revenues were from channel partners, and the balance was from our internal or direct sales force. In Q1 2022 and Q1 2023, the channel partners generated 36 and 35% of revenues respectively, and our direct sales team generated the balance.

Our DA expenses were $2.9 million versus $3.5 million in the same period last year, consistent with our ongoing actions to contain operating expenses and drive the highest value initiative.

has been articulated earlier. Our engineering focuses on developing.

new movement digitization technologies, including hardware, software, and artificial intelligence, and to bring the obscure platform market.

G&A expenses totaled $4 million in Q1, inclusive of $500,000 of expenses associated with our NASDAQ listing in February 23.

versus $3.3 million for the same period last year and $4.5 million last quarter, which included $400,000 of go public expenses during that quarter. Our gap loss from operations for the quarter was $9.4 million, including $4.7 million non-cash intangibles charged.

quarter was positive $15.5 million or earnings of 51 cents per share. This compares to a net loss of $6.3 million or a loss of $1.38 per share in Q122 and a gap net loss.

of $15 million or $2.41 per share in Q4.

or $2.41 per share in Q4 2022.

The Q1 2023 gap net income includes an additional $7.9 million of expense associated with the GoPublic transaction costs, including banking,

and gain on the venture link notes and pathfinder warrants of $31.9 million and $1.4 million respectively.

Due to the derivative nature of the venture link node for BLM with Francisco Partners.

and the Pathfinder outstanding warrants on our balance sheet. ASC 825 requires that we revalue the instruments each quarter.

that these are simply non-cash accounting entries. It did not really imply very much relative to the underlying strength of the business.

Adjusted EBITDA, which excludes certain expenses such as stock compensation, amortization, depreciation, and certain one-time costs or gains like the VLN valuation adjustment, was negative three million dollars for the quarter compared to negative.

$3.1 million in the same period last year and negative $1.2 million in Q4 of 22. The Q1 2023 adjusted EBITDA amount includes approximately $500,000 of incremental public company costs that were not included in Q1 of 22. Please refer to our press release for a full description.

of items excluded for the purposes of adjusted EBITDA. Turning to the balance sheet, we ended the quarter with $62.1 million in cash and equivalents compared to $14.3 million at the end of last year.

We are in a strong cash position due to our February 2023 NASDAQ listing, of which, through a series of transactions, raised $60.3 million in net proceeds.

providing an ample cash runway to support our sales and marketing initiatives in R&D investments well beyond the expected Q3 2023 adjusted EBITDA breakeven.

Now I'd like to share a broader outlook and guidance, beginning with some color on our operating environment.

revenue pipeline including rising interest rates.

escalations in the Ukraine conflict, high inflation, bank failures, and unprecedented layoffs in the tech sector, causing our customer project delays.

we are positioning ourselves to manage continued pressure on our top line this year.

Fortunately, as both Ben and I have articulated, we are in a strong cash position which we expect will allow us to navigate this environment, maintain focus on new product introductions, and expand our global markets.

Each quarter we will provide revenue guidance for both the current quarter and full year. For clarity we are on a calendar year basis.

For the second quarter of 2023, we expect revenue in the range of $9 million, plus or minus $200,000. And for the full year, 2023, we expect revenue in the range of $44 to $47 million.

of 2023, we expect revenue in the range of $9 million, plus or minus $200,000. And for the full year 2023, we expect revenue in the range of $44 to $47 million. Additionally,

We are reiterating our expectations to achieve adjusted EBITDA breakeven in Q3 2023, which we view as an immutable imperative.

In summary, while the challenging macro environment weighed on our first quarter top line performance, we remain on track to achieve a near-term adjusted EBITDA breakeven.

then profitability driven by our continued gross margin expansion, prudent expense management, and focus on the expected highest ROI projects.

We believe our results, combined with our expectations, reflect the strength of our business and our ability to execute on our strategy amidst an uncertain macroeconomic environment.

Looking ahead, we remain focused on driving growth and delivering value for our shareholders. With that, I'll turn back to Ben for his closing comments, and then we'll open up the call to take questions from the analyst community. Thank you all again for joining us today on our first earnings call as a public company.

In summary, Mogalla remains very capital efficient with high gross margins. I'm proud of our team's execution this quarter.

Our strong cash position will allow us to continue to provide full attention to executing the launch of new products and expanding customer use cases globally going forward.

And with that, we'll open the line for questions. Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To enjoy a question, press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question coming from the line of...

Can you provide us with what you expect the next quarter to look like as well as the full year? Which segments are you expecting to drive most of the growth in the second half?

Yeah, Jeremy, this is Dan. Let me take those questions. So our end market breakout is consistent with previous year.

And it's pretty consistent with our expectations as well. Generally, we see over time the entertainment segment to be growing slightly faster than the other segments. But overall, we expect the breakout will roughly be relatively consistent.

Great. And then, I guess next, if you could look at the gross margin expansion you expect for the next couple of quarters or in the near term, can you give us maybe more granularity in terms of what kind of range you're targeting near term and what the key drivers of this might be? I would assume it's maybe more software sales or coupled with – Money-to- traditional knives

the cost reductions that you talked about earlier? Yeah, great question Jeremy. This is Steve. Look, I'd expect a couple of points per quarter improvement in our gross margin. As far as the drivers, they're going to be we're continuing to focus on getting better costs from our suppliers as well as as we grow we will experience.

slightly better manufacturing costs. So those are the keys that will improve that as we move forward.

Great, and maybe one last question, you know, with the new obscure platform, you mentioned, you know, oversubscription. Is there some way to quantify this and maybe are there applications for this platform that you see beyond live streaming and also any kind of competitive?

during this early access period, which saw more users sign up than we anticipated by a lot. I'm not in the ability to talk about numbers yet, but it's a lot more than we anticipated.

In terms of application beyond live streaming, first of all, we're very focused on live streaming. We believe this will be the first of its kind in terms of a one-stop shop total solution with the

a sensor system which was essentially the only game in town, combined with the marketplace that enabled real-time movements of avatars initially on Twitch. So we're very focused on that initially, and we believe that it's got

of literally anybody that has an avatar that want to have real-time human communications of their nonverbal body language via their anime avatars. So you can imagine beyond live-streaming anybody who want to be.

interacting on the video call or in any type of virtual world could be a user of this new system.

Great. Thank you. Go ahead. Yes, that was very helpful. Thank you. Yeah, that's it. Thank you.

Great. Thank you. Yes, that was very helpful. Thank you. Yeah, that's it. Thank you. Okay. Thank you.

Thank you. And our next question coming from the line of Mike Latimore with Northern Capital. Your line is open. You're welcome.

Great thanks you. You can got some on the first earnings call herebas like.

In terms of the sales force and channels, how do you think about the growth of each of those this year? I know you think you ramped them up a fair amount last year, but how are you thinking about just kind of growth of sales headcounting channels this year?

You're asking how we expect to see the sales growth by the channel partners? Is that the question? No, just sales headcount growth and then separately channel partner growth. Okay, yeah, we'll continue to grow our channel partners. We more than doubled it over the last 24 months and they're becoming more productive as we go along. So you're hearing the whole, you know, the game world from a business standpoint. Keep the SEO, the onboard business management and the fit and everything else, and then as we grow again, agents and boxes run and make sales better. So let's just get started,Which Visa Motorelect is your favorite brand?

they'll be going through a certain period of gestation or growth as they, the newer ones will sell less than the ones that have been around a long time. Now as far as our sales staff itself, we'll continue to grow that throughout the year. That's one of our areas of focus is to continue to grow our sales staff. But I will couch that with saying.

It's not going to get in the way of us breaking even in the third quarter. Yeah, let me let me add to that. Don't forget that we have just hired a new VP of marketing. It's a new role, Bill Pestili. He just bought it on Monday.

So, you know, one of the reasons we hired them, of course, is we have this exciting launch of a brand new platform into an emerging market, which we need a his background in influencer and creator marketing. But we also launched a.

just a couple of months ago, Soft launched our Movela online shop. For the first time, customers are able to buy online. And with the newer generation, and with the new hybrid model, we see more and more requests to just buy online.

So we have not promoted our workshop yet. We're in the still soft launch space. So the reason I mention that is in addition to our existing growing network of channel partners and our direct sales force, now we just added a spare avenue for revenue growth.

Yep, that makes sense, great. On the product service mix.

How do you think about that this year and then I guess longer term to come on that? Yeah, what's included in that might be in the services part. You're going to have the SAS software as well as any kind of. And our services, so I would expect to see that creeping up over time.

as we move more towards a SAS based model with our NVM software. But again, as we talked about before, that will take some time to just say.

towards the SAS-based model with our NBM software. But again, as we talked about before, that will take some time to just date. OK.

And I guess just last on the DOT product and the developer community, how do you think about the kind of revenue potential there? You know, when does that start to emerge in a more material way? It seems like there's a lot going on there. Yeah. So, we have two developments.

communities. One is the ones that are on top of our full body suits, you know, that's linked in the window. And I mentioned in the press release that, or in the talk earlier, that we have

a skill fit who's a company in Germany, a developing lot of AI products on top of it. So that's one community that's, we booked them within our channel partners, categorize their value, adding, reselling our full body products.

The other developed community, I think, the one that you're referring to is a more than a dot DOT community. So while we have not, and don't plan to break our revenue for this specific product yet, what I can't tell you is that.

This third party developer community is growing every quarter. The number we mentioned, the most recent number is, it's more than 800 now. Now to be in mind, that most of them are still in the product and or market development phase, right? So since the time we announced, especially the ones that sign on, you know, in the last couple of years, it takes an average of two years for these third parties to develop their.

complete product. So guys like Euleria in Italy, which is focused on rehab, is more mature, I would say, in the funnel of developers. And they are very much in the POC, the public concept stage in several countries for their product. We're really excited about it.

Others are less mature. So net net, we expect our developers as they announce product to be – to start ramping up meaningful revenue next year. Okay. Very good. Thanks. Thanks.

So, net net, we expect our developers as they announce product to be – to start ramping up meaningful revenue next year. Okay. Very good. Thanks. Best of luck. Thank you.

Thank you. And our next question coming from the line of Raju Vintra, Raju Gil from Needham Ulanis Open. Yes, thanks for taking my questions and congrats on the recent IPO in the first quarter as a publicly traded company. Just a question on the annual guidance for 2023 and then

more of a kind of a long term question on 2024 and beyond. So, with the guidance, you'll still grow year over year, but it does imply a fairly significant ramp in the second half relative to the first half. So I guess my first question is,

Could you maybe elaborate a little bit specifically on what's happening with spending patterns, not only at the consumer, but maybe with some of your larger customers in the entertainment or sports area, besides just interest rates and think of nature? What's going on in terms of the spending patterns?

and then how do we think about what will drive the second half RAM? Yeah, maybe let me address that first and then can Steve...

that we can have a few numbers to chime in. So our typical seasonality reflects a stronger revenue during the latter half of the year, and that's been very consistent historically for us.

So, you know, the way we set our guidance, by the way, it's our first public company guidance for the year.

in this very uncertain macro is, you know, we think in the assessment of what the macro headwind is and, you know, what Steve and I and our management team is lying is, we've affected in about 20% headwind than macro. So that's the top end of the guidance. Then we looked at...

pipeline bottoms up and our final analysis suggests that we are on track to see similar seasonal patterns this year. And of course we'll continue to grow the pipeline in the coming quarters.

Steve, do you want to talk about what was our last year? Members? Yeah, just to look at the last year, well, to the seasonality, we did about 24% higher and the second half of the year.

And as Ben alluded to, we've been fairly consistent with the second half of the year being higher than the first half of the year. In approximately the same range.

Now, we talked about the macro headwind that we've taken with bacteria about 20%. We talked about our pipeline is right now on track and sufficient to get us to the top end of our guidance. However, the macro is uncertain. We would not have invested in our desert data.

including the launch of our nation online store.

the launch of our new obscure platform in the summer, and we continue ramp up in our developer and channel network, which doubled in the past year. They're all in gestation. Now, keep in mind that although we have these tailwinds, we have not assumed any real meaningful contribution.

from these new initiatives this year, which could provide upside if any of them gain traction sooner than our expectation. But even after factoring in the potential for more delays...

And more macro, you know, we believe there is a clear path to our 23 revenue target. Yeah, and just add to that, through Q1, we saw growth through the quarter in our funnel. That's 3Q1. And we do have a win rate that's approaching 50% that we've seen for quite a while now.

be approaching 50%. We feel very confident that we can achieve these projections. Appreciate all those details. We were kind of looking into 2024 where hopefully we get some stabilization in the macro.

What would you describe as the major growth drivers across those three end markets and other new revenue opportunities in the past you talked about metaverse or or move that a health.

Can you talk about how you're looking at 2024 and do you have visibility into the pipeline for those projects? Yeah. So we have visibility into projects that we're working on. You know, you think about the metaverse...

that you have an avatar into a virtual world when you're interacting with others.

So not only that, we are powering it with 4-4 ahead on the obscure platform ourselves, and see additional multiple new revenue streams contributing in 24.

But keep in mind that anybody that has an avatar in whatever metaverse outside of obscure will need it, will need our system to drive real-time human movement.

Now we position ourselves as the picks and shuffles of human body movement in the metaverse. So however that develops I think would be helpful.

In terms of digital health.

There are a couple of things that we're doing and some of them we're doing with our partners. We are instituting a beta phase of what we call motion cloud reports, which gives you confidence in how you have made the point of pleasure.

more meaning to visualization for agility reports, for knee reports. So that serves the digital health market. And we're seeing some early positive feedback, and we will see meaningful growth next year on that part of digital health on our own.

In addition to that, recently I mentioned a number of partners, including Yularia in Italy, which we're partnering with them to expand their solutions. That gamified rehab. We're seeing good traction, particularly with...

popular countries and we're helping them to introducing it to new markets. So I think that's going to have some good traction next year. The other one I mentioned that I'm allowed to mention is GaleFit, which is focused very much similar to our recent press release with Toyota.

on the field of ergonomics, which focuses on repetitive stress on the body and to prevent that kind of injury. And for the welfare, both health and mental of what both Toyota and Skeleton call industrial athletes.

at the end of the day.

people are more interested in how do I prevent an injury or a health issue than to treat it in rehab. So I think AI will really help us accelerate that.

And to just last question from me, Steve, I appreciate the details on the gross margins improving a couple points or quarter. Can you talk a little about the op-ax? How do you see the op-ax trending kind of now post the IPO?

Yeah, well, we're hiring additional people and we're making sure we keep that as efficient as possible. I don't expect to grow meaningfully throughout the year. You know, we did have a big chunk of impacts in the 1st quarter associated with going public. You know, they had to pay a lot of accountants, a lot of lawyers, et cetera.

as part of that transaction. That should largely, if not disappear, we should see a lot of it going away as we move forward. So on the G&A side, I should see that go down or at least be contained. Sales and marketing should creep up a bit as we hire additional people. But we'll be building the channel as well as the internal sales force.

And then on the R&D side, there we're focused on the highest ROI projects. And I don't anticipate that we'll add a lot of op-ex to R&D.

Appreciate it. Thank you. Thank you. I'm showing no further questions in the queue at this time. I would now like to send a call back over to Mr. Bentley for any closing remarks. Yeah, thank you everyone for joining. Morgana's first earnings call is a public company.

I think together we just made history. We have a very exciting quarter ahead of us as we prepare for the production launch this summer of our brand new obscure platform. With our strong cash position and expanding gross margin, we will continue to focus on execution. scoopapa.org

of our highest ROI products and customer growth. Ladies and gentlemen. Thank you, everyone. Ladies and gentlemen, Dr. Kastner, conference for today. Thank you for your participation. You may now disconnect.