Q3 2023 Markforged Holding Corp Earnings Call
[music].
Greetings and welcome to the Mark forged third quarter 2023 earnings Conference call.
Speaker 1: Greetings and welcome to the Mark Forge third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it.
It is now my pleasure to introduce your host Austin Bohlig. The rest of the director of Investor Relations. Thank you you may begin.
Good afternoon, I'm, often ball like director of Investor Relations, Mark forged holding corporation.
Welcome to our third quarter of 2023 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 terrain, and our acting CFO of <unk>.
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.
Speaker 2: These statements represent management's views as of today, November 13, 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.
These statements represent management's views as of today November 13th 2023, and are subject to material risks and uncertainties that could cause actual results to differ materially.
<unk> disclaims any intention or obligation, except as required by law to update or revise forward looking statements.
Speaker 2: 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.markforged.com.
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 stop Mark forged dotcom.
Speaker 2: I'll now turn the call over to Shai Taram, President and CEO of Markforged.
I'll now turn the call over to <unk>, President and CEO Mark <unk>.
Speaker 3: Thank you, Austin, and thank you, everyone, for joining us on our Q3 2023 earnings call.
Thank you Austin and thank you everyone for joining us on our Q3 2023 earnings call.
Speaker 3: While the medium to long-term opportunity for Markforge to help manufacturers reduce cost and strengthen supply chain resiliency remains intact, we were disappointed with our third quarter results with top line of $20 million.
What the medium to long term opportunity for Mark forge to help manufacturers reduce cost and strengthen our supply chain resiliency remains intact.
Pointed with our third quarter results with top line of $20 million.
Speaker 3: The current macroeconomic uncertainty and increasing interest rates had a material impact on our ability to close deals in the last two weeks of the quarter. As we shared on our October 23rd prayer release, we have also updated our full year 2023 outlook to reflect our current view.
The current macroeconomic uncertainty.
Christian interest rate with no material impact on our ability to close deals in the last two weeks of the quarter.
As we shared on October 23rd Prerelease, we have also updated our full year 'twenty 'twenty free outlook to reflect our current view.
Speaker 3: At our investor day in mid-September, we still believed our 2023 target was attainable. But macroeconomic headwinds dramatically accelerated in the final weeks of the quarter, and we saw delays in several large deals that we had expected to close.
At our Investor day in mid September we still believe our 'twenty to 'twenty three targets or attainable.
Macroeconomic headwinds.
And I think they accelerated in the final weeks of the quarter and we saw delays in several large deals we had expected to close.
Speaker 3: As we progress into the fourth quarter, we believe that the persistent high cost of capital and uncertainty in the macro environment will continue to restrict capital investment in the short term.
As we progress into the fourth quarter, we believe that the persistent high cost of capital and uncertainty in the macro environment will continue to a strict capital investment in the short term.
Okay.
Speaker 3: In light of these headwinds, we remain laser focused on our path to profitability and have accelerated cost reduction efforts to align our operating expenses to match anticipated near-term demands.
In light of these headwinds we remain laser focused on our path to profitability and have accelerated cost reduction efforts to align our operating expenses to match anticipated near term demand.
Speaker 3: These efforts supported our ability to reduce our cash burn in the third quarter to $10 million and end of quarter cash balance of $126 million.
These efforts supported our ability to reduce our cash burn in the third quarter.
10 million daughters, and end of quarter cash balance of $126 million.
Speaker 3: Today, in addition, we're announcing a restructuring initiative that we believe will improve operating efficiencies and strengthen our balance sheet resiliency even further, but without compromising on our ability to innovate and grow to profitability.
Good day.
We're announcing a restructuring initiative.
We improved operating efficiencies.
Strengthen our balance sheet resiliency, even further but.
But without compromising our ability to innovate and grow the profitability.
Speaker 3: This initiative, coupled with other cost reduction efforts, is expected to deliver operating cost savings of approximately $9 to $12 million in 2024.
This initiative coupled with other cost reduction efforts is expected to deliver operating cost savings of approximately $9 million to $12 million in 'twenty 'twenty four.
Speaker 3: driven by an approximate 10% headcount reduction.
Driven by an approximate 10% head count reduction.
Speaker 3: With that, we remain confident in our long-term growth trajectory. The fundamentals driving manufacturers to reduce costs and seek more resilient and flexible supply chains remain.
We.
We remain confident in our long term growth trajectory.
The fundamentals driving manufacturers to reduce cost and seek more resilient and flexible supply chain remain.
Speaker 3: And as we heard directly from our customers, Ford, Vesta Twin Systems, EZoot, Triumph Aerospace, Musashi Auto Parts, Dana, and Automation Alley at our investor day, the digital forge provides a powerful platform for achieving these goals.
And as we heard directly from our customers Ford that's the swing system is at triumph Aerospace Sushi Autopart Dana.
At our Investor day, the digital forge provides a powerful platform for achieving these goals.
Speaker 3: This strengthens our conviction that as macroeconomic uncertainty clears, Markforge is well positioned for growth.
This strengthens our conviction that this macroeconomic uncertainty clears.
<unk> is well positioned from Congress.
Speaker 3: To expand on one of these examples, Musashi Auto Part, a leading manufacturer of differential gears and assemblies, has gained substantial benefit from its investment in the digital forge.
To expand on one of these examples.
Sachi Ultra park, the leading manufacturer of a differential gears and assemblies has gained substantial benefit from its investment in the beach at Ford.
Speaker 3: Musashi began by printing grippers and other industrial hand effectors using our Mark II and Etalex printers in their Michigan facility.
The Sochi begin by printing Grippers and other industrial and it factors in a mark to enter next painters.
Michigan facility.
Speaker 3: Over 80% cost savings and significant operational efficiencies achieved led Musashi to expand their Mark 4G deployment to three additional facilities across the globe.
Over 80% cost savings and significant operational efficiencies achieved.
Most fashion to expand their mark for deployment to free additional facilities across the globe.
Speaker 3: Musashi now uses DigitalForge for over 40 different manufacturing applications, with over 34 facilities worldwide who are excited about further expansion opportunities with Musashi.
With fashion now uses did you start forge for over 40 different manufacturing application.
34 facilities worldwide, we're excited about further expansion opportunities with discussion.
Speaker 3: In Q3, we achieved another critical milestone towards the future of distributed manufacturing with the launch of the digital source.
In Q3, we achieved another critical milestone towards the future of distributed manufacturing with the launch or the digital source.
Speaker 3: Digital Source is an on-demand parts platform for the licensing and 3D printing of manufacturer-certified parts, when and where they are needed.
Can you just touch source is an on demand parts platform.
The licensing and three D printing.
Factor certified parts.
When and where they are needed.
Speaker 3: without the cost or hassle of physical inventory.
Without the cost or hassle physical inventory.
Speaker 3: What our focus in 2024 is building out the platform. We believe the opportunity for high margin revenue streams will be a growth catalyst in the years to come. As we are already seeing early signs of excitement from customers will help us expand Markforged solution into their own customer base.
When our focus in 'twenty 'twenty four is building out the platform. We believe the opportunity for high margin revenue streams, but it would be a growth catalyst in the years to come.
We are already seeing early signs of excitement from customers will help us expand my quote solution into their own customer base.
Yeah.
Speaker 3: One of our early digital source adopters is BMS, a specialized manufacturer of complex sandblasting machines with over 200 installations worldwide.
One of our early adopters is beyond that.
Especially like the manufacturer of complex and bathroom machines with over 200 installations worldwide.
Speaker 3: Each BNF machine features 60 printed components, which are typically replaced every three to four months.
Each be enough machine features 60 printed components.
Which are typically replaced every three to four months.
Speaker 3: when the machines are running at full capacity. With digital source, BMF customers can print replacement components on site the moment a failure or wear is detected, minimizing downtime as well as shipping and inventory costs.
When the machines are running at full capacity.
Beach that source.
Customers can bridge replacement component onsite, good moment of failure or where it was a decade.
Minimizing downtime as well as shipping and inventory costs.
Speaker 3: Continuing our track record of innovation, Markforge announced two new products last week at FormX. The first, the FX10, is Markforge's next generation composite 3D printer for the factory floor.
Continuing our track record of innovation, Mark Ford, you announced two new product last week at topics. The first ethics Tan.
Mark Forge next generation composite freedom printer for the factor it for them.
Speaker 3: building on the precision and reliability of the X7, but nearly twice as large and twice as fast as its predecessor. The FX10 is built to supercharge manufacturing productivity and profitability.
Building on the precision and reliability of the X turbine.
Nearly twice as large and twice as fast as it greatly.
The FX gain is it built to supercharge manufacturing productivity and profitability.
Speaker 3: The excitement in our booth around this product was beyond words.
The excitement in our booth around this product what's behind ward.
Speaker 3: We are already building a backlog of orders as the balance between value and price to our customers is extremely attractive, even under challenging cost of capital times.
We are already building a backlog of orders is good balance between volume and price to our customers is extremely attractive even under challenging cost of capital.
Speaker 3: In addition, we also announced Vega, an ultra-high-performance carbon-fiber-filled back material for 3D-printing aerospace parts.
In addition, we also announced the Vega and ultra high performance carbon fiber field.
Material persuaded thing being aerospace Bart.
Speaker 3: Vega is highly compatible with carbon fiber reinforcement.
Vega is highly compatible with carbon fiber reinforcement.
Speaker 3: Unlocking aluminum strength parts for aerospace applications and high-value tooling.
Walking aluminum strengths Bart for aerospace applications and high value tooling.
Speaker 3: Our Aerospace FX20 customers visiting FormX were highly impressed and eagerly waiting for first shipment.
Our aerospace ethics plenty of customers visiting format were highly impressed.
Waiting for our first shipment.
Speaker 3: Both these new innovations are complementary to the digital forge and further increase our addressable market by helping our customers solve more applications and deliver strong, accurate parts on the factory floor.
Both of these new innovations are complementary could they do set forth.
And further increase our addressable market by helping our customers solve more vacation and deliver strong accurate parts on the factory floor.
Okay.
Speaker 3: So while the current macroeconomics environment is challenging, especially after coming back from FOMNEC last week, we strongly believe that the FX10, the FX20, the PX100, and the digital source, on top of our legacy solution, are meeting critical industry needs to strengthen manufacturing resiliency and supply chain.
So while the current macroeconomic environment is challenging.
Especially after coming back from form mix next week, we strongly believe that the ethics 10 ethics 'twenty, if the X 100, and the deep south source on top of our legacy solution.
Meeting critical industry need to strengthen manufacturing resiliency and supply chain.
Speaker 3: There is clearly pent-up demand, which is waiting for new platforms to start shipping. I am very proud of the one-team effort over the last few years to reach this critical innovation milestone that will position the company for long-term success.
There is clearly pent up demand, which is waiting for new platforms to start shipping.
I am very proud of the one team effort over the last few years to reach this great to cut innovation milestones.
We'll position the company for long term success.
Speaker 3: with strong cost controls in place, and a sharp focus on achieving profitability, we believe our future is bright.
With strong cost controls in place and a sharp focus on achieving profitability. We believe our future is bright.
Speaker 3: With that, I now turn the call over to Asaf Tipori, our Acting CFO , who will offer more details on our financial performance and guidance for the remainder of the year.
With that I'll now turn the call over to assess the board our acting CFO.
Oh for more details on our financial performance and guidance for the remainder of the year.
Speaker 4: Thank you, Shai, and good evening, everyone. I will be covering our financial results for the third quarter of 2023.
Thank you Charlie and good evening everyone.
I will be covering our financial results for the third quarter.
Great.
Speaker 4: Please note that my comments reflect on non-GAP results and output.
Please note that my comments reflect on non-GAAP results and outlook.
Speaker 4: For your reference, our earnings press release issued earlier this afternoon to our investor relations website includes our gap and non-gap reconciliation to assist with my commentary.
Well you are right.
The press release issued earlier this afternoon.
Investor Relations website include our GAAP and non-GAAP reconciliations.
With my commentary.
So let's begin.
Speaker 4: In line with our preliminary announced results, revenue for Q3 was $20.1 million compared to $25.2 million in the third quarter of 2022.
In line with our preliminary announced results for.
For Q3 was $20 1 million compared to $25 2 million.
Third quarter of 2022.
Speaker 4: The revenue decline was driven by stronger-than-expected macroeconomic headwinds that delayed orders towards the end of the quarter.
The revenue decline was driven by stronger than expected macroeconomic headwinds.
Delayed orders towards the end of the quarter.
Speaker 4: Revenue for the first nine months of 2023 was $69.6 million compared to $71.3 million in the first nine months of 2022.
Revenue for the first nine months of 70 plaintiffs rate was $69 $6 million compared to $71 3 million.
First nine months of 2022.
Speaker 4: In spite of the lower sales volume, gross profit margin for the quarter was 46.9% compared to 49.2% in the third quarter of 2022.
In spite of the lower sales volume.
Gross profit monitoring for the quarter was 46, 9% compared to 49, 2% in the third quarter was 22.
Gross margins were also impacted by the continued ramp of the ethics 'twenty production, which is expected to continue until mid 2024.
Speaker 4: Gross margins were also impacted by the continued ramp of the FX-20 production, which is expected to continue until mid-2024.
Speaker 4: Our operating expenses were $24.9 million for the third quarter of 2023, down from $28.5 million in the third quarter of 2022. This improvement in operating expenses is a result of our continued effort to reduce operating expenses and our commitment to incremental efficiencies.
Our operating expenses were $44 9 million for the third quarter of 2023 down from $28 5 million in the third quarter of 2022.
This improvement in operating expenses.
As a result of our continued to absolutely reduce operating expenses.
And our commitment.
Mental efficiency.
Speaker 4: Net loss for the third quarter of 2023 was $13.8 million or a loss of $0.07 per share based on our weighted average shares outstanding for the quarter of $197.4 million.
Net loss for the third quarter of 2023 was $13 8 million or a loss of seven cents per share based on weighted average shares outstanding for the quarter also hungry for $97 4 million.
Speaker 4: our net cash used in operating activities in the first nine months of 2023 decreased by 25.3 million or approximately 39 percent from the first nine months of 2022.
Our net cash used in operating activities in the first nine months of 2023 decreased by $25 3 million or approximately 39% from the first nine months of 2022.
Speaker 4: our cash, cash equivalents, and short-term investments were $126 million as of September 30, 2023, down from $136 million at the close of second quarter, 2023.
Our cash cash equivalents and short term investments.
We're a 126 million as of September 32023.
<unk> from <unk>.
And $56 million at the close of our second quarter 2023.
Speaker 4: We expect our cash utilization to continue to decrease with time as a result of higher revenue, continued focus on out-of-tax management, and working capital efficiencies.
We expect our cash utilization to continue to decrease with time.
As a result of higher revenue continued focused on Opex management and working capital efficiencies.
Now moving onto our guidance.
Speaker 4: The uncertain macro environment and relatively high cost of capital have weighed on our customers' purchasing behavior more than expected. Therefore, we are maintaining our revised revenue guidance of $90 to $95 million.
The uncertain macro environment.
Relatively high cost of coffee.
There's a weight on our customers' purchasing behavior more than expected therefore.
Therefore, we are maintaining our revised revenue guidance of 90 to 95 million.
Speaker 4: We expect gross margins to be within the range of 47% to 48%, still within the range of our previous guidance.
We expect gross margins to be within the range of 47% to 48%.
Staying within the range of previous guidance.
Speaker 4: As previously communicated, we are committed to balance between revenue and expenses. As such, we have recently announced a restructuring initiative that together with other cost reduction efforts are expected to generate annualized OPEX cost reduction of $9 to $12 million in 2024 based on our 2023 OPEX range of approximately $104 million.
As previously communicated we are committed to balanced between revenue and expenses.
As such.
We have recently announced the restructuring here.
Together with other cost reduction efforts are expected to generate annualized opex cost reduction of $9 million to $12 million in 2024 based on our 2023 Opex range.
Ultimately our hunger thing Paul.
Speaker 4: Furthermore, we remain committed to continuously optimize our cache utilization.
Furthermore, we remain committed to continuously optimize our cash utilization.
Speaker 4: Our operating loss for the year is expected to be within the range of $59 to $61 million, including a one-time restructuring cost of approximately $900,000.
Our operating loss for the year is expected to be within the range of $59 million to $61 million, including a one time restructuring cost us approximately 900 K.
Speaker 4: EPS loss per share is expected to be between $0.26 and $0.28 including the restructuring cost.
EPS loss per share is expected to be between 26 and 28.
Including the restructuring cost.
Speaker 4: With our recent product introductions and excitement that it has generated, we are confident in our ability to grow and increase our market share in 2024 and beyond.
We have a recent product introductions and excitement.
Generation, we are confident in our ability to grow and increase our market share in 2024 and beyond.
Speaker 4: Furthermore, we are confident that the cost reduction measures that we have taken together with our growth trajectory keep us on a path for profitability.
Furthermore, we are confident that the cost reduction measures, we have taken together with our growth trajectory keep us on a path for profitability.
Speaker 1: That concludes our prepared remarks today. Let's please open up the call for questions. Thank you.
That concludes our prepared remarks today, let's please open up the call for questions.
Thank you and ladies and gentlemen at this time well be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question comes from Greg Palm with Craig Hallum Capital Group. Please state your question.
Speaker 5: Yeah, thanks for taking the questions. Just starting off with.
Yeah. Thanks for taking the questions just starting off with <unk>.
Speaker 5: Kind of what you saw end of quarter, I'm just curious if you can give us a little bit more.
What you saw end of quarter I'm, just curious if you can give us a little bit more.
Speaker 5: you know, color on, you know, whether, you know, a, you were, you know, relying on, you know, several large orders that didn't close, whether, you know, it was certain kind of end customers or end verticals that you saw the most weakness, maybe just a little bit more detail on, on sort of what, you know, kind of, kind of drove the end of quarter weakness. And just to be clear.
No color on you know whether you know a you were relying on several large orders that didnt close whether it was certain kind of end customers around verticals that you saw the the most weakness maybe just a little bit more detail on and sort of what you know kind of kind of drove the end of quarter weakness and just to be.
Or did some of those orders that get delayed have those closed here in Q4 are those still getting pushed.
Speaker 5: Did some of those orders that get delayed have those closed here in Q4 or are those still getting pushed?
Speaker 6: Thank you, Greg. Yes, so as we indicated previously, some of the large deals that we were expecting to close at the end of the quarter unfortunately got delayed.
Thank you, Greg and yeah, so as we indicated previously.
And some of the large deals.
And that we're expecting to close in the quarter, Unfortunately got delayed and.
Speaker 6: Mainly due to the macro uncertainty, I would say, and mainly in AIPAC and the Americas, as you can see from the detailed performances.
Mainly due to the macro uncertainty I would say and mainly in APAC and the Americas.
America as you can see from the good performances.
Speaker 6: A prior question, some of them already closed in Q4, but a bigger portion of them got delayed into 2024.
A very question some of them already closed in Q4, but a bigger portion of them got delayed into 2024.
Speaker 6: And it was fairly large deals that were fully funded and we were expecting them to close based on the knowledge that we had. But the owners and the decision makers decided in the last second to pull out due to the sentiment and the uncertainty on the macro environment and they asked to wait until the next quarter or even 2024.
And it was pretty large deals that were fully funded.
We were expecting them to close yeah.
And the knowledge that we had and by the owners and the decision makers decided in the second half.
To pull out and.
Due to the sentiment and the uncertainty in the macro environment and they asked to wait until the next quarter or even 2024.
Speaker 6: With that, as you can see, we came back from FormNext, which was fairly successful, so we are starting to build the confidence back.
Okay with that.
As you can see we came back from full mixed.
Which was a fairly successful.
So we are starting to build the confidence back.
Speaker 5: Got it. Okay. And, you know, one item that that
Got it okay.
And you know one item that that maybe.
Speaker 5: maybe stood out to us was was consumables. You know, I wouldn't think of consumables as having.
Maybe stood out to US was was consumables you know I wouldn't think of consumables is having.
Speaker 5: nearly the same magnitude of volatility, and that was a lot lower, both on a year-over-year and a sequential basis. What kind of drove that? How much of that was based on the other phenomenon you saw going forward, just in terms of usage rates of the installed base out there? Are you seeing a significant difference in recent months versus where we've been trending before?
Nearly the same kind of magnitude of you know sort of volatility and that was a lot lower both on a year over year and a sequential basis. So you know what what kind of drove that how much of that was you know based on the other phenomenon you saw it and you know going forward just in terms of usage rates.
Of all the installed base out there or are you seeing a significant difference you know in recent months versus you know where we've been trending before.
Speaker 6: Thank you. I think there are two points around that. The first one, usually when our customers buy from us printers, they immediately also buy materials. So when there is a significant drop in the purchasing of printers, that comes a point in time of reduction of the purchase of materials.
Thank you Arthur I think there are two eh.
Kind of points around that the first one.
Usually when our customers buy from us a printer. They immediately also buying materials. So when there is a significant drop in the purchasing the printers with it comes a point in time, that's a reduction of the purchases of materials.
Speaker 6: The second, which I think is for your question, we do not see a drop in utilization.
And the second and Jeff for your question, we do not see a drop in utilization.
Speaker 5: As you know, we are still a small company, so a point of time could move a few pallets right or left with our channel partners that usually sell the materials through them. As such, it was a point of time. We already see a recovery right after the end of the quarter, and utilizations stay in the right direction. We do not have any concerns on that front. I will get back in the Q&A.
But as you know where do you see that as more companies. So that point of time could move a few pilots right now.
With our channel partners that you said the mature through it through them.
And as such was appointed time, we already see a recovery right. After the end of the quarter and do you think that they should stay in the right direction. So we don't have any concerns that that trend.
Understood.
All right well I'll get back in the queue best of luck. Thanks.
Thank you Greg.
Thank you. Our next question it comes from Jacob Stefan with Lake Street Capital markets. Please state your question.
Speaker 7: jacob
Speaker 2: Hey, guys, thanks for taking my questions. Maybe I'll just touch on the restructuring initiative a little bit. Could you help us kind of think about what percentage of the 9 to 12 million comes out of the model? And, you know, how that lays out over 2024.
Hey, guys. Thanks for taking my questions.
Maybe I'll just touch on the restructuring initiative, a little bit could you help us kind of think about.
What percentage of the $9 million to $12 million.
Comes out of the model.
How that lays out over 2024.
Speaker 4: So, yes, thanks for the question. So, we're looking at a reduction of $9 to $12 million from a run rate of $104 million, approximately in OPEX. The reduction is going to...
So yeah. Thanks for the question. So we're looking at a reduction I'll say $9 million to $12 million from the run rate of $184 million.
<unk> okay.
They read that the reduction is going to be a cross.
Speaker 4: across the board and we're across all departments without any compromise on our ability to grow and innovate. So it's across the all departments and we are well positioned and encouraged with the outlook for 2024.
Across the board and.
Where across all departments.
Without any compromise in.
Our ability to grow and innovate.
He took crusty all departments.
When physicians patients and encourage with the outlook for 2024.
Speaker 8: Okay, and maybe I could just get a better sense on kind of the quarterly.
Okay, and maybe I could just get a better sense on kind of the quarterly.
I guess.
Speaker 4: impact of that, I mean, are we thinking, you know, Q1 is, we see the majority of the 9 to 12 million, and Q2, Q3, Q4, kind of steps down to get to the, I guess. Yeah, of course. When you look at the numbers, so basically the bottom line is that the OPEX run rate would be between 90 to 95 million annually. It should kick in in Q1 2024.
The impact of that.
Are we thinking you know Q1 is we see the majority of the 9% to $12 million.
In Q2, Q3, Q4 is kind of steps down.
Well I guess, yes of course.
You look at the numbers and so basically the bottom line is that the opex run rate will be between 92 and 95 million annually.
Kick in in Q1 2024.
Speaker 4: And obviously, there's a certain level of fluctuation between the cues given.
And obviously theres a certain level of fluctuation between the Qs you given.
Speaker 4: given the events that we have and the sales marketing and so on.
Given the events that we are winning.
Sales marketing and so on.
Speaker 4: So, but the annual run rate would be 92 to 95 million.
So, but the annual run rate would be 20 $92 million to $95 million.
Speaker 8: Okay, got it. And I just want to touch on the services, you know, revenue is up 33% year over year. Could you just kind of touch on the, you know, strength, what you're seeing in the services business is that, you know,
Okay got it.
And I just wanted to touch on those services.
Revenue was up 33% year over year could you just kind of.
On the.
Strength, what youre seeing in the services business.
Is that.
<unk> digital forge.
Speaker 6: Jacob, if you remember, about a year ago, we talked about changing our service model to subscription and adding to it the tools around software with simulation and the automated inspection. We are starting to see the fruits of it. We are starting to see a higher level of attach rate right out of the box when people are buying the printers, but also a higher level of renewal rate.
Yeah, Jacob if you remember about a year ago, we talked about the changing our service model to subscription and adding to it the tools around software with simulation and the automated inspection.
And we are starting to see the fruits of it. So we tend to see higher level of attach rate right out of the box when people are buying the printers, but also a higher level of renewal rate.
Speaker 6: and I think this is where it's starting to kick in. So we did some revisions to this model about a year ago, we announced it, and now we're starting to see the fruits of it.
And I think that's where it turned into kick in.
So we did some revisions to the smoking, but a year ago, we announced it and now we're starting to see the fruits of it.
Okay.
Speaker 1: Okay. I think that's all the questions I had. Best of luck going forward here, guys. Great seeing you last week. Thank you, Jacob. Thank you. And just a reminder to ask a
Okay. I think that's all the questions I had a best of luck going forward here guys, great seeing you last week.
Thank you Jacob.
Thank you and just a reminder to ask a question press star one on your phone to remove your question from the queue Press Star two on your phone.
Our next question comes from Brian Drab with William Blair. Please state your question.
Speaker 9: Hi, guys. Good evening. This is Blake Keating on for Brian . If I could just ask, can you guys provide some additional details about the FX10 backlog you guys mentioned in the preparing remarks? Are these existing customers looking to upgrade from the X7 or add to the fleet? Or is it new customers who are beginning to use 3D printing?
Hi, guys. Good evening. This is Blake Keating on for Brian.
If I could just ask.
Can you guys provide some additional details about the ethics 10 backlog you guys mentioned in the prepared remarks are these existing customers looking to upgrade from the X seven or add to the fleet or is it new customers, who are beginning to use three D printing.
Speaker 6: Thank you for your question. It's actually both. We're just coming back from Formnext and if you can see videos of the event, it was very, very impressive and encouraging.
Thank you for your question and it's actually both yeah. We were just coming back from a form next year.
It's a you can see videos of the event it was very very impressive and encouraging.
Speaker 6: Right after we launched it, we had hundreds of potential prospects reaching out into the printer trying to touch it.
Right. After we launched it we had hundreds of potential trusted kind of reaching out into the printer trying to touch it.
Speaker 6: And so we currently see backlog of existing customers, but also new customers, which are really interested in this solution. We're already looking on dozens of orders.
So we currently see backlog of existing customers, but also new customers.
Which are really interested in.
We see a solution we're already looking at dozens of orders.
Speaker 6: What's really nice about this printer is that it's building up on the Legacy X7, the reliability of the solution, but also the price point. So the price point here is around $100,000.
What what's really nice about this printer that is building up on the legacy X seven the reliability of the solution, but also the price points and so depressed my theory that run 100000 and daughters.
Speaker 6: which is a very good sweet spot to our channel partners, but also to our customers, especially in times like this with.
She is a very good sweet spot to our channel partners, but also to our customers, especially in times like these with them.
Speaker 6: you know, very strength cost of capital environment, a sub $100,000 solution can easily pass the bar, for example, much better than the FX20 in times like this.
Very extreme cost of capital on the environment.
100000, and donor solution can easily pass the bar for example, they're much bigger than that because when you're in times like this.
Speaker 9: Understood. Appreciate the color. And then just building on that, do you anticipate the launch of the digital source that could cannibalize some of these new the demand from the new customers that you're seeing for newer products like the FX 10, PX 100 or FX 20?
Understood appreciate the color and then just.
Building on that do you anticipate the launch of the digital source.
That could cannibalize some of these new the demand from the new customers that you're seeing for newer products like the FX, Tien Dx 100 or epic 'twenty.
Speaker 6: Actually, exactly the opposite. The digital source was launched successfully and actually last week in Formnext, we officially started the GA. We see a lot of traction from big OEMs that are looking to this solution. And what we've seen for the first step is that these big OEMs are pushing our solution into their supply chain or into their customer base.
He actually exactly dealt with at the teacher source. It was launched successfully in actually last week inform next we officially started the G H.
We see a lot of traction from a big Oems that are looking into the solution and what we've seen for the first step.
Are these big Oems are pushing our solution into their supply chain or into their customer base. So what we actually seen in reality is increased adoption of R. R.
Speaker 6: So what we actually seen in reality is an increased adoption of our digital source, the printers and materials and software, and not the cannibalization of it.
Sure.
What's sort of the printers and materials and software.
And not take any bit addition of it it's actually very impressive.
Yeah.
Speaker 9: Understood. And then just lastly, I know you guys have kind of mentioned that you expect, you know, you're encouraged by what you're seeing so far for 2024, but can you provide additional detail on how we should think about growth in 2024? Are you, you know, you kind of touched how you're going to balance revenue growth and profitability, but is there any more focus with the macro where it is on profitability, or how should we think about that?
Understood and then just lastly, I know you guys have kind of mentioned that you expect you're encouraged by what you're seeing so far for 2024 can you provide additional detail on how we should think about growth in 2024.
You've kind of touched how are you going to balance revenue growth and profitability, but is there any more focused with the macro where it is on profitability or how should we think about that.
Speaker 6: Yeah, so I would say the macro uncertainties are still out there, and we cannot control them with that.
Yeah, So I would say the macro uncertainties are still out there and and.
We cannot control than we.
With that especially coming out of Forum next week.
Speaker 6: Especially coming out of Formnext, we are coming with a very strong product portfolio, which is complementary to our legacy product portfolio, and we really believe that we can still grow even in a tough environment, especially because some of the new products are in the right price points.
We are coming with a very strong product portfolio.
Which is complementary to our legacy product portfolio and we really believe that we can still grow even in tough environment.
And especially because some of the new products are in the right price point and.
Speaker 6: So we believe we're in the right direction, but the final will be decided by the macro environment and how it clears up.
So we believe we're in the right direction, but you know that.
The final will be decided by the microenvironment and how it clears up.
Got it I'll pass it along thank you.
Thank you.
Thank you.
Speaker 1: Ladies and gentlemen, there are no further questions at this time. I'll hand the floor back to
Ladies and gentlemen, there are no further questions at this time I'll hand, the floor back to management for closing remarks.
Speaker 6: Thank you very much everyone for joining us on our call and we're looking forward to seeing you in our next quarter. Thank you. Thank you. This concludes today's call.
Thank you very much everyone for joining us on our call and looking forward to see you in our next quarter. Thank you.
Thank you. This concludes today's conference all parties may disconnect have a good day.