Q4 2023 Stratasys Ltd Earnings Call
Good day and welcome to today's conference to discuss <unk>.
Operator: Good day and welcome to today's conference to discuss Stratasys' fourth quarter and full-year financial results. My name is Kevin, and I'll be your operator for today's call. Our question and answer session will follow the formal presentation. Please see the complete disclaimer at https://sites.google.com or at www.google.com, and we ask that you please ask one question and one follow-up. Now, I'd like to turn the call over to Yonah Lloyd, Chief Communications Officer and Vice President, Investor Relations, for Stratasys. If you're worried, please go ahead.
Fourth quarter and full year 2023 financial results. My name is Kevin and I'll be your operator for today's call. A question and answer session will follow the formal presentation. He may be placed in the question queue at any time by pressing star one on your telephone keypad and we ask you. Please ask one question and one follow up.
And now I'd like to turn the call over to you on to Lloyd Chief Communications Officer, and Vice President of Investor Relations for Stratasys. Mr. Lloyd. Please go ahead.
Yonah Lloyd: Good morning, everyone, and thank you for joining us to discuss our 2023 fourth quarter and full year financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will be available and can be accessed through the Investor Relations section of our website.
Good morning, everyone and thank you for joining us to discuss our 2023 fourth quarter and full year financial results on the call with US today are our CEO Doctor Youll have zeiss and our CFO <unk> tons zamir.
I would like to remind you that access to today's call, including the slide presentation is available online at the web address provided in our press release in.
In addition, a replay of today's call, including access to the slide presentation will be available and can be accessed through the investor Relations section of our website. Please note that some of the information you'll hear during our discussion today will consist of forward looking statements, including without limitation those regarding our expectations as to our future.
Yonah Lloyd: Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes, and other future financial performance and our expectations for our business outlook. All statements that speak to future performance, events, expectations, or results are forward-looking statements. Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed or referenced in Stratasys' annual reports on Form 20-F for the 2022 year and for the 2023 year, the latter of which will be filed with the SEC in the coming few days.
<unk> gross margin operating expenses taxes, and other future financial performance and our expectations for our business outlook all statements that speak to future performance events expectations or results are forward looking statements actual results or trends could differ materially from our forecast for risks that could cause acts.
So our results to be materially different from those set forth in forward looking statements. Please refer to the risk factors discussed or referenced in Stratasys annual reports on form 20-F for the 2022 year and for the 2023 year, the latter of which will be filed with the SEC in the coming few days. Please.
Yonah Lloyd: Please also refer to our Operating and Financial Review and Prospects for 2022 and 2023, which are included as Item 5 of our Annual Reports on Form 20-F for 2022 and 2023. Please also see the press release that announces our earnings for the 4th quarter of 2023, which is attached as Exhibit 99.1 to a report on Form 6K that we are furnishing to the SEC today. Stratasys assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
Please also refer to our operating and financial review and prospects for 2022, and 2023, which are included as item five of our annual reports on form 20-F for 2022 and 2023.
Please also see the press release that announces our earnings for the fourth quarter of 2023, which is attached as exhibit 99.1 to our report on form 6K that we are furnishing to the SEC today.
Stratasys assumes no obligation to update any forward looking statements or information, which speak as of their respective dates.
Yonah Lloyd: As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif.
As in previous quarters today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance.
non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and in today's press release I will now turn the call over to our Chief Executive Officer Doctor Youll have Zeiss you all.
Yoav Zeif: Thank you, Yonah. Good morning, everyone. And thank you for joining us. In the fourth quarter, we once again demonstrated that the diversity of our offerings and the strength of our go-to-market operations can deliver profitable results. We achieved these results in what has continued to be a CAPEX-constrained environment for our customers and a challenging chapter for our industry. I am particularly pleased to report that we delivered another record quarter of consumables revenue, a testament to strong usage of our system. We also achieved our 10th consecutive quarter of profitability on an adjusted basis, which reflects the discipline of our business model that differentiates us in our sector. Stratasys is laying the foundation for meaningful use cases that will significantly contribute to our financial performance. I was sweet of offering features best-in-class technologies that allow our customers to advance their use of additive manufacturing and increasingly broaden applications into manufacturing at scale.
Thank you Donna and good morning to everyone.
Thank you for joining us.
The fourth quarter, we once again demonstrated that the diversity of our offerings and the strength of our go to market operations can deliver profitable results. We achieved these results in what has continued to be a capex constrained environment for our cost.
And a challenging chapter for our industry.
I am, particularly pleased to report that we delivered another record quarter of course.
And silver both revenue.
A testament to strong usage of our assistance.
We also achieved our 10th consecutive quarter of profitability.
Adjusted basis, which reflect the discipline of our business model differentiates us in our sector.
Tried to seize.
Is laying the foundation for meaningful use cases that will significantly contribute to our financial performance our suite.
Both offerings features best in class technologies.
Our customers to advance the use of editing amount of picturing, an increasingly broader application into manufacturing at scale.
Yoav Zeif: As our new branding states, we make additive work for our customers, and we see that playing out every day, whether it is the strong utilization of systems they purchased from us in the past or the continued high level of engagement we see today for new systems incorporating cutting-edge technology. As the macro business environment continues to improve and capital spending patterns return to normal, we expect pent-up demand to re-accelerate growth, particularly in our system sales.
It's our new branding state, we make additive work for our customers.
And we see that playing out every day, whether it is.
The strong utilization of systems.
They purchased from us in the past.
Or in the continued high level of engagement, we sit today for a new system.
Our operating cutting edge technologies.
As the macro business environment continued to improve and capital spending patterns.
Return to normal we expect the pent up demand to reaccelerate growth, particularly in our system sales.
Yoav Zeif: We delivered solid revenues of $628 million in 2023, down 3.7% versus 2022 but up 1.3% after excluding the MakerBot divestiture and the two businesses we divested from our Stratasys direct service bureau, showing remarkable resilience against a severely capex-constrained environment for our customers. We improved our gross margin for the year despite a modest change in revenues, reflecting our focus on cost control and operating efficiency, and we delivered $0.11 in adjusted EPS in 2023. We are confident that as our new technologies ramp up and our operational efficiencies continue, gross margins and profitability will strengthen in 2024 and beyond. We continue to maintain a healthy balance sheet that provides stability through challenging times and Optionality to support our growth through both organic investment and accretive acquisition opportunities.
We delivered solid revenues in 2023 of 628 million down three 7% versus 2022, but up one 3% after excluding the Mako boat divestiture and the two businesses, we divested from our strategy.
<unk> direct service Bureau.
Showing remarkable resilience against a severely capex constrained environment for our customers.
We improved our gross margin for the year. Despite the modest change in revenues, reflecting our focus on cost control and operating efficiencies and we delivered 11% in adjusted EPS. In 2023, we are confident that as our new technologies.
Rent and our operational efficiencies continue gross margin and profitability, which strengthened in 2024 and beyond.
We continue to maintain a healthy balance sheet that provides stability through a challenging time.
And optionality to support our growth through both organic investment and accretive acquisition opportunities.
Yoav Zeif: And, as we shared each year, in 2023, we generated 34% of our revenues from manufacturing, up from 32.5% in 2020. We expect to see this metric grow stronger as global business conditions improve, to a point where the majority of our business will come from end-part manufacturing at scale. Now, let me touch on some of our success stories for the quarter, starting with our industrial business. 35 years ago, our founder, Scott Cramp, invented FDM 3D printing, which remains by far the industry's most popular technology.
And as we shared each year in 2023, we generated 34% of our revenues for manufacturing.
From 32, 5% in 2022.
We expect to see this metric grow stronger as a global business conditions improve.
To a point, where the majority of our business will come from end part manufacturing at scale.
Now, let me touch on some of our success stories for the quarter, starting with our industrial business.
35 years ago, our founders Scott Crump invented SDM three D printing.
Which remains by far the industry most popular technology.
Yoav Zeif: Since its introduction, Stratasys has consistently been the leader for industrial FDM manufacturing. And in the fourth quarter, we brought another major technology innovation to market with the F3300 printer, our first FDM printer on a platform designed to support scalable production.
Since its introduction Stratasys has consistently been the leader for industrial F. D M manufactured.
And in the fourth bullet there.
We brought in another major technology innovation to market with the F 3300 printer, our first FDA a printer.
On a platform designed to support scalable production. They have 3300 double the speed of existing technology with greater reliability and operating efficiency, while being geared towards manufacturing at higher volumes.
Yoav Zeif: The F3300 doubles the speed of existing technology with greater reliability and operating efficiency while being geared towards manufacturing at higher volumes. We have worked closely with our customers for several years to deliver this new system, and I'm proud that Toyota is our first customer. The F3300 can be used for production of parts, fixtures, and prototyping applications to help bring new products to market faster.
We work closely with our customers for several years to deliver this new system and I'm proud that Toyota is our first customer.
They have 3300 can be used for production of spot fixtures and prototyping applications to bring new products to market faster.
Yoav Zeif: Our F3300 pipeline is strong, with accelerating interest and engagement levels, and we look forward to sharing more customers with you. Also, in the automotive industry, we recently launched an initiative to help Daimler track North America, produce more manufacturing support parts, and functional prototypes. By adding our H-350 system, paired with GrabCAD Print Pro to their existing portfolio of Stratasys prints, Daimler expects to see significant improvement in their prototyping and a shift to manufacturing starting this year. Our Neoline of Stereolithography printers had a strong finish to the year, including orders from Whirlpool and multiple service bureaus in the U.S. and Europe. And already in 2024.
Our F 3300 pipeline is strong with accelerating interest and engagement levers and we look forward to sharing more customers.
Also in automotive, we recently launched an initiative to web.
I'm there.
<unk> North America produced more than affecting support Buck and functional prototypes.
By adding our <unk> hundred 50 system.
We grabbed test train.
To their existing portfolio of Stratasys preemptive Daimler expects to see significant improvement in their prototyping and a shift to manufacturing starting this year.
Our new line of Stereolithography printer had a strong finish to the year.
Clothing orders from real people and multiple service Bureau in the U S and Europe.
And already in 2020 for Bob.
Yoav Zeif: Parts2go, a German service bureau that had two neoprinters, purchased four more systems, enabling them to produce high-quality, accurate, and repeatable parts for their customers' industrial-level applications. We also made further inroads into the Formula One racing community, with multi-unit sales of Neo SLA systems to Toyota, F1 McLaren, and other industry leaders for use in wind tunnel testing and tooling. This is particularly promising, in that it demonstrates our technology's ability to deliver accuracy, consistency, and reliability at the highest level of automotive standards. We expect this will result in transferability to mainstream automotive manufacturers. While the NEO system is exciting for its use in prototyping and tooling today, the real competitive advantage will come with the next version, expected in 2025, which will shift the focus of that technology to end-paltman effects. Further on in the automotive industry, we are increasing our exposure to automotive interior design with our PolyJet technology through collaboration with Mercedes-Benz, Maserati, Volkswagen, and Stellantis.
Bob to go a German service Bureau that had two new printers purchase for more systems, enabling them to produce high quality accurate and repeatable parts for their customers industrial level applications.
We also made further inroads in the Formula one racing community.
With multi unit sales of Neo SLA system to Toyota, if one Mclaren and other industry leaders.
For use in wind tunnel testing and tooling this is particularly promising.
In that it demonstrates our technology's ability to deliver accuracy consistency and reliability at the highest level of automotive standouts.
We expect this will result in transfer ability to mainstream automotive manufacturing.
While the new system is exciting for its use in prototyping and tooling to date the real competitive advantage will come with the next version expected in 2025, which will shift the focus of that technology to end power plant a factory.
Further only in automotive we increased our exposure to automotive interior design with our apologies technology through collaboration with Mercedes Benz Maserati folk so again Este Lantus all in all we are on the path for what we believe will be serial production use cases.
Yoav Zeif: All in all, we are on the path for what we believe will be serial production use cases for the automotive industry. Next, I'd like to provide some highlights on our dental application and Key Mice. Dental continues to be one of the largest and most exciting avenues for the 3D printing industry, and for Stratasys in particular. As a reminder, our activities are focused on dentures and other non-discretionary restorative spending. In 2023, dental will continue to grow, and we expect this trend to accelerate. This growth came in two ways.
So the automotive industry.
Okay.
Next I'd like to provide some highlights.
Our dental applications and key milestones.
<unk> continues to be one of the largest and most exciting growth Avenue for the three D printing industry and for Stratasys in particular as a reminder, our activities are focused on ventures and other non discretionary restorative spending.
In 2023 dental continued to grow and we expect this trend to accelerate this growth came two ways first we further expanded our customer base.
Yoav Zeif: First, we further expanded our customer base with New Product Offerings to address a broader range of applications in a more economically beneficial way, including dentures, implant models, surgical guides, and other parts used in fixed restoration cases. Our Trudent solution rollout during the first quarter of 2023 is a great example of how customers can use 3D printing to replace conventional manufacturing technology. Pairing Trudent resins and workflows with our J5 Dentajet printers allows the creation of a full, permanent, monolithic denture. No other technology in the world is able to provide this at scale.
With new product offerings to address a broader range of applications in a more economically beneficial way, including denim chairs implant models surgical guides and other part used in fixed restoration cases.
I went through that solution rollout during the first quarter of 2023 is a great example of how customers can use three D printing to replace conventional manufacturing technologies.
Bearing through the trade links and workflows with our <unk> Delta just bring to allow the creation of a full permanent monolithic dentures.
No other technology in the World is able to provide these at scale.
Yoav Zeif: This pairing also enables us to lower production costs and labor for labs by more than 50 percent, while improving form, fit, and function for the patient. Leading labs, networks, and dental support organizations, or DSOs, in the US and Europe, who are new customers for Stratasys, have begun deploying this offering to better serve their patients, and have provided us with excellent feedback on clinical outcomes and patient satisfaction. As a real-life example of just how disruptive and impactful Prudent is... Last month, we announced our partnership with Express Dental of Oklahoma at a two-day event where dental services are provided for free to those in need. Over 55 people had their mouths shaved on the first day, and the very next day, went home with a brand new set of dentures. Courtesy of Trude. This level of speed, accuracy, and low cost has never been possible at scale.
This bearing also enable us to lower production costs and labor for labs by more than 50%, while improving form fit and function for the patients.
Leading labs networks, and dental support organizations or Dsos in the U S and Europe.
New customer for strategies have begun deploying this offering to better serve their patients and.
And have provided us with excellent feedback on clinical outcomes and patient satisfaction.
Is it a real life example of just how disruptive and impactful prudent ease.
Last month, we announced our partnership with express dental of Oklahoma at the two day event, where dental services are provided.
432 dosing need.
Over 55 people and their mouth skin on the first date.
And the very next day went home with a brand new set of dentures.
Courtesy of through that.
This level of speed accuracy, and low cost has never been possible at scale and to date, we plan to roll out new business models and partnerships to accelerate adoption of editing manufacturing in dentistry.
Yoav Zeif: Today, we plan to roll out new business models and partnerships to help accelerate the adoption of additive manufacturing in dentistry, and we expect this business to meaningfully accelerate in the years to come as we continue to win business from conventional manufacturing. And second, we delivered growth in dental to our existing customers, expanding their fleet and increasing utilization of our resins on our newest platform. This made a significant contribution to our revenue growth in consumer goods in 2020. Now switching to medical, where some of the most exciting opportunities for future growth are being developed. During the quarter, we announced a partnership with Siemens Healthineers to carry out a landmark research project. This project... is designed to develop new state-of-the-art solutions for the advancement of medical imaging phans for Computed Tomography Imaging.
And expect this business to meaningfully accelerate in the years to come as we continue to win business.
Conventional manufacturing.
And second we delivered growth in dental to our existing customers.
Expanding their fleet and increasing utilization of our resins.
Our newest platform.
This was a significant contribution to our revenue growth in consumables in 2023.
Now switching to medical where some of the most exciting opportunities for future growth are being developed.
During the quarter, we announced a partnership with Siemens healthy nears to carry out a landmark research project. This project is designed to develop new state of the art solutions for the advancement of medical imaging Phantoms full computed tomography.
Mentioned.
Yoav Zeif: These are used around the world to evaluate and ensure the optimal performance of CT scanners. We have also announced that the University Hospital Birmingham in England has been using tailored 3D printing cutting guides to improve surgical outcomes for head and neck cancer patients, produced exclusively using our J5 Medijet printer. This success demonstrates that our technology enables the creation of vital, highly accurate, patient-specific cutting guides ahead of surgical procedures. And I would be remiss if I didn't express my pride in Stratasys winning the medical, dental, or healthcare application category at the Prestige 3D Printing Industry Awards in London in December, where our J5 DentalJet, MediJet, and J850 digital anatomy printers beat out a field of nine Turning to software, we have a long-term plan to monetize our software offering and create new streams of recurring revenue by adding value through new features and products to our free GrubCut Plus, both for use with our own systems and for those who partner with us.
These are used around the world to evaluate and ensure optimal performance of city scanners.
We also announced that the University Hospital Berryman gaming, England as it been using tailored three D printing cutting guide to improve surgical outcomes for head and neck cancer patients produced exclusively using our <unk> medi jet printer.
This success demonstrates that our technology enables the creation of title highly accurate patient specific cutting guidance ahead of surgical procedures.
And I would be remiss, if I didn't express my pride and strategy is winning the medical dental or health care application category.
Prestige three D printing industry awards in London in December.
R J five dental Jeff messages and J 850, digital anatomy printers beat out a field of nine competitors.
Turning to software we have a long term plan to monetize our software offering and create new streams of recurring revenue by adding value through new features and product to our free Grub card platform.
Both for use with our own system and for those who partner with us.
Yoav Zeif: In 2023, we demonstrated early success in our channel's ability to sell software alongside new printers. A major attribute of the new software is the ability to help service bureaus and internal 3D print shops rapidly and accurately estimate the cost and time of printed panels. And we have intensified our effort to expand our subscription software business with the pro version of our popular RubCut software. Grafka Print is used by over 85% of our customers and over 40,000 users worldwide. Graphic Card Print Pro is targeted at helping users achieve 3D printing that is faster, more accurate, and more economical, with the ability to print multiple parts for multiple customers on multiple printers simultaneously.
In 2023, we demonstrated early success of China's ability to sell software alongside new printer.
A major attribute for the new software is the ability to web service bureaus and intend on treaty print shops rapidly and accurately estimate the cost and time of printed pump.
And we have intensified our efforts to expand our subscription software business with the pro version of our popular <unk> software.
So Gulf cut print is used by over 85% of our customers.
And over 40000 Skus.
Worldwide.
Rob Katz Greensboro is targeted at helping users achieved three D printing that is faster more accurate and more economical with the ability to print multiple part for multiple customers on multiple printer simultaneously.
Yoav Zeif: Graphic Adprint Pro is currently available on FDM and SAF systems, and a few days ago, we announced we are now in the process of adding it to PolyJet. We expect to support it across our full suite of technology offerings once we add it to the P3 and NEO in the future. And turning to new materials, we have recently announced our Origin One DLP system, which is building a leading position for the production of manufacturing aids, particularly in the automotive industry. We recently introduced our new SOMOS WeatherX 100 material. This is our first material using SAE automotive industry standards that is tested for weatherability, UV durability, and dimensional accuracy.
Graphene Pro is currently available on F D M an SAP system.
And a few days ago, we announced we are now in the process of adding it to Prologis, we expect the supported across our full suite of technology offering.
Once we added to the Peachtree and new in the future.
And turning to new materials, we have recently announced our origin one DLP system.
Which is building a leading position for production of manufacturing eight, particularly in the automotive industry. We recently introduced our new Somos, whether X 100 material.
This is our first material using SAE automotive industry standards that is tested forward air ability UV durability and dimensional accuracy with the introduction of these and additional material. During 2024, we plan to strengthen our position in the.
Yoav Zeif: With the introduction of this and additional material during 2024, we plan to strengthen our position in DLP and open more manufacturing uses. Before I turn the call over to our CFO, Eitan Zamir, a word regarding the strategic review we announced in the third quarter of 2021. The comprehensive process is ongoing, and our Board of Directors is considering and evaluating all avenues to maximize value. As we announced previously, we do not intend to disclose further developments in the strategic review process unless and until we determine that such disclosure is appropriate or necessary.
L P and opened more manufacturing use cases.
Before I turn the call over to our CFO Athens Amir.
Regarding the strategic review, we announced in the third quarter of 2023.
The comprehensive process is ongoing and our board of directors is considering and evaluating all avenues to maximize value.
As we announced previously we do not intend to disclose further developments on the strategic review process.
Unless and until we determine the chart disclosure is appropriate or necessary.
Eitan Zamir: To sum up, even against the challenging backdrop, we continue to deliver differentiated products and solutions to customers across a wide array of end users, setting the stage for increased growth based on accelerated adoption of additive manufacturing as macroeconomic conditions improve. I will now turn the call over to Eitan to share the financial results and our initial outlook for 2024.
To sum up even against the challenging backdrop, we continue to deliver differentiated products and solutions to customers across a wide array of end users.
Setting the stage for increased growth based on accelerated adoption of additive manufacturing as macroeconomic conditions improve.
I will now turn the call over to <unk> to share the financial results and our initial outlook for 2020 for Ada.
Eitan Zamir: Thank you, Yoav, and good morning, everyone. We achieved solid results in the fourth quarter against what has continued to be a challenging backdrop of adverse macroeconomic factors and related pressures. We are confident that the high level of demand we are seeing in our customer engagements will translate into meaningful growth once these headwinds abate. In general, our results demonstrate the resilience our diversified portfolio provides, which led to our 10th consecutive quarter of profitability. Now, let me dive deeper into the numbers. I will note that, after a number of years of volatility, the impact of currency on year-over-year comparisons for 2023 was much more muted. As such, I won't be highlighting comparisons in constant currency. For the fourth quarter, consolidated revenue of $156.3 million was down 1.9% as compared to the same period last year, but it was up 1.3% when adjusted for the diversities of our metal and urethane businesses from the Stratasys Direct Service Bureau. Product revenue in the fourth quarter declined by 0.7% to $110.4 million compared to the same period last year.
Thank you and good morning, everyone.
We achieved solid results in the fourth quarter against what has continued to be a challenging backdrop of adverse macroeconomic factors and related pressures.
We are confident that the high level of demand, we're seeing in our customer engagement will translate into meaningful growth. Once these headwinds abate.
In general our results demonstrate the resilience of our diversified portfolio provides.
Which led to our 10th consecutive quarter of profitability.
Now, let me dive deeper into the numbers.
I will note that after a number of years of volatility the impact of currency on.
The year over year comparisons for 2023 was much more muted.
As such I want to be highlighting comparisons in constant currency.
For the fourth quarter consolidated revenue of $156 2 million was down one 9% as compared to the same period last year.
That was up one 3% when adjusted for the divestitures of our metal and urethane businesses from this chart. This is direct service Bureau.
Product revenue in the fourth quarter declined by <unk>, 7% to $110 4 million compared to the same period last year.
Eitan Zamir: Within product revenue, system revenue was down by 13.7% to $47.4 million compared to the same period last year. Health-constrained capital budgets continue to impact customer buying behavior for new systems. Consumables revenue was up by 11.9% in the fourth quarter, as compared to the same period last year, to a new record of 63 million. The increase reflects continued strong utilization of our customers' existing systems and contribution from the acquisition of Covestro in April 2023. Service revenue was $45.9 million for the fourth quarter of 2023, down 4.6% as compared to the same period last year, excluding the divestitures that took place in our Stratasys Direct business. Service revenue grew 3.6% year over year.
Within product revenue system revenue was down by 13, 7% to $47 4 million compared to the same period last year.
As constrained capital budgets continue to impact customer buying behavior for new systems.
Consumables revenue was up by 11, 9% in the fourth quarter as compared to the same period last year.
To a new record of $63 million.
The increase reflects continued strong utilization of our customers' existing systems and contribution from the acquisition of <unk> in April 2023.
Service revenue was $45 9 million for the fourth quarter of 2023.
Down four 6% as compared to the same period last year.
Excluding the divestitures that took place in Australia through the direct business.
Service revenue grew three 6% year over year.
Eitan Zamir: Within service revenue, customer support revenue grew by 1.6% compared to the same period last year, continuing to reflect solid utilization of existing systems. For the full year 2023, Consolidated Revenue was down by 3.7% as compared to 2022 but was up 1.3% when accounting for the impact of the MakerBot and Stratasys Direct Service Bureau divestitures. Product revenue in 2023 decreased by 4.1% and was down by 1.1%, excluding the maker of divestment. The decline compared to 2022 is primarily due to a reduction in hardware sales that more than offset record consumables. Within product revenue, system revenue in 2023 decreased by 16.4% compared to 2022.
Within service revenue customer support revenue grew by one 6% compared to the same period last year.
Continuing to reflect solid utilization of existing systems.
For the full year 2023 consolidated revenue was down by three 7% as compared to 2022, but was up one 3% when accounting for the impact of the Makerbot and Stratasys direct service Bureau divestitures.
First revenue in 2023 decreased by four 1% and was down by one 1% excluding the makeup of divestment.
The decline compared to 2022 is primarily due to a reduction in hardware sales that more than offset record consumables.
Within product revenue system revenue in 2023 decreased by 16, 4% compared to 2022.
Eitan Zamir: Consumable revenue was another record, up by 8.2% in 2023 compared to 2022. For the full year of 2023, service revenue declined by 2.8% compared to 2022 and was up 1.3% after backing out the two Stratasys Direct divestitures. Within service revenue, customer support revenue in 2023 was up by 4.5% compared to 2022, reflecting continued strong utilization of existing systems by our customers. Now turning to gross margins, GAP's gross margin was 44.7% for the quarter, compared to 43.1% for the same period last year. Non-gap gross margin was 48.8% for the quarter, compared to 48.4% for the same period last year.
Consumable revenue was another record.
Up by eight 2% in 2023 compared to 2022.
For the full year of 2023 service revenue declined by two 8% compared to 2022 and was up one 3% after backing out the <unk> direct divestitures.
Within service revenue customer support revenue in 2023 was up by four 5% compared to 2022, reflecting continued strong utilization of existing systems by our customers.
Now turning to gross margins GAAP gross margin was 44, 7% for the quarter compared to 43, 1% for the same period last year.
non-GAAP gross margin was 48, 8% for the quarter compared to 48, 4% for the same period last year.
Eitan Zamir: The year-over-year improvement in growth margin was the result of better contribution from Stratasys Direct, including higher margins for the lower revenue that resulted from divesting the two businesses from Stratasys Direct, as well as improvement in freight, which more than offset lower hardware growth margins. Gap gross margin was 42.5% for the full year 2020, compared to 42.4% for the same period last year. Non-gap gross margin improved 20 basis points to 48.2% for the full year as compared to 48% in 2022. The full year improvement in non-gap gross margin was a result of better contributions from consumables and Stratasys Direct, along with lower shipping costs, which more than offset lower hardware contributions. Gap operating expenses were $64.1 million for the quarter, compared to $67.1 million during the same period last year, reflecting the reduction of M&A-related liabilities and elimination of operating expenses of the two Stratasys Direct divested businesses. Non-GAAP operating expenses were $74.3 million for the quarter, compared to $72 million during the same period last year.
The year over year improvement in gross margin.
The result of better contribution from our <unk> direct including higher margins for the lower revenue that resulted from divesting. The two businesses from <unk> direct as well as improvement in freight which more than offset lower hardware gross margins.
GAAP gross margin was 42, 5% for the full year of 2023 compared to 42, 4% for the same period last year.
non-GAAP gross margin improved 20 basis points to 48, 2% for the full year as compared to 48% in 2022.
The full year improvement in non-GAAP gross margin was a result of better contribution from consumables and stressing the direct along with lower shipping costs, which more than offset lower hardware contributions.
GAAP operating expenses were $64 1 million for the quarter compared to $67 1 million during the same period last year.
Reflecting the reduction of M&A related liabilities elimination of operating expenses of the two stresses direct divested businesses.
non-GAAP operating expenses were $74 3 million for the quarter.
Third to $72 million during the same period last year.
Eitan Zamir: Non-GEP operating expenses were 47.5% of revenue for the quarter compared to 45.2% for the same period last year, driven primarily by our acquisition of Covesta. For the full year, non-GEP operating expenses were 46.2% of revenue, as compared to 45.9% in 2022, primarily due to lower revenue. In absolute dollar terms, non-GAF operating expenses were $8.8 million lower as compared to 2022, due in part to the divestiture of MakerBot, lower commissions, and currency exchange-related costs, partially offset by the addition of Covestro and higher merit compensation. Regarding our consolidated earnings for the quarter, Gap operating income for the quarter was $5.7 million compared to operating income of $1.6 million for the same period last year. Non-GAAP operating income for the quarter was $2 million, compared to $5.1 million for the same period last year. The decrease reflects higher OPEX as a percentage of revenue. Gap's net loss for the quarter was $15 million, or $0.22 per diluted share, compared to a net loss of $2.4 million, or $0.04 per diluted share, for the same period last year.
non-GAAP operating expenses were 47, 5% of revenue for the quarter compared to 45, 2% for the same period last year.
Driven primarily by our acquisition of cholesterol.
For the full year non-GAAP operating expenses were 46, 2% of revenue as compared to 45, 9% in 2022.
Primarily due to lower revenue.
In absolute dollar terms non-GAAP operating expenses were $8 8 million lower as compared to 2022.
In part to the divestiture of Makerbot Lower Commission and currency exchange related costs, partially offset by the addition of <unk> and higher merit compensation.
Regarding our consolidated earnings for the quarter.
GAAP operating income for the quarter was $5 7 million compared to operating income of $1 6 million for the same period last year.
non-GAAP operating income for the quarter was 2 million.
Compared to $5 1 million for the same period last year.
The decrease reflects the higher opex as a percentage of revenue.
GAAP net loss for the quarter was 15 million or <unk> 22 cents per diluted share compared to a net loss of $2 4 million or four cents per diluted share for the same period last year.
Eitan Zamir: Non-GAAP net income for the quarter was $1.6 million, or $0.02 per diluted share, compared to a net income of $4.6 million, for $0.07 per diluted share, in the same period last year. Adjusted EBITDA was $7.7 million for the quarter, compared to $10.7 million in the same period last year. Gap operating loss was $87.6 million compared to a loss of $57.6 million.
non-GAAP net income for the quarter was $1 6 million or <unk> <unk> per diluted share compared to net income of $4 6 million.
Or <unk> <unk> per diluted share in the same period last year.
Adjusted EBITDA was $7 7 million for the quarter compared to $10 7 million in the same period last year.
Regarding our consolidated earnings for the full year 2023.
GAAP operating loss was $87 6 million compared to a loss of <unk> 57.
$2 million for 2022.
Eitan Zamir: $32.2 million for 2022. The wider loss reflects $32.9 million of one-time advisor costs related to M&A activities, as well as various one-time restructuring costs partially offset by the previously mentioned reduction of M&A-related liabilities. Non-GAAP operating income for the year was $12.6 million, compared to $13.5 million in 2022. This equates to a 2% non-GEP operating margin compared to 2.1% in 2022. Gap's net loss for the year was $123.1 million, or $1.79 per diluted share, compared to a net loss of $29 million, or $0.44 per diluted share, last year.
The wider loss reflects $32 9 million of the.
One time advisory costs related to M&A activities as.
As well as various onetime restructuring costs.
Partially offset by the previously mentioned reduction of M&A related liabilities.
non-GAAP operating income for the year was $12 6 million compared to $13 5 million in 2022.
This equates to 2% non-GAAP operating margin compared to two 1% in 2022.
GAAP net loss for the year was $123 1 million or $1 79.
Per diluted share.
Impaired to a net loss of 29 million or <unk> 44 per diluted share for last year.
Eitan Zamir: This increase includes the previously mentioned one-time cost, plus a $13.9 million non-cash impairment related to our 2022 investment in the Makebot merger with Ultimaker, along with the previously mentioned M&A expenses. As a reminder, the 2022 Gap Net Loss included a $39.1 million benefit from the 2022 merger I just referenced. Non-GAAP net income for the year was $7.7 million, or $0.11 per diluted share, compared to $10.3 million, or $0.15 per diluted share, last year. Adjusted EBITDA of $35 million compared to $36.1 million in 2022 reflected our overall lower revenues that more than offset the improvement in margins. We used $7.7 million of cash in our operations during the fourth quarter compared to $18.1 million of cash from operations in the same period last year.
This increase includes the previously mentioned.
One time cost plus a $13 9 million noncash impairment related to our 2022 investments in the make about merger with automakers.
With the previously mentioned M&A expenses.
As a reminder, the 2022 GAAP net loss included a $39 1 million benefit from the 2022 merger I just referenced.
non-GAAP net income for the year was $7 7 million or <unk> 11 per diluted share.
Compared to a $10 3 million or 15 cents per diluted share last year.
Adjusted EBITDA of $35 million compared to $36 1 million in 2022 reflected our overall lower revenues.
More than offset the improvement in margins.
We used $7 7 million of cash in our operations during the fourth quarter compared to use of $18 1 million of cash from operations in the same period last year.
Eitan Zamir: Excluding the one-time costs related to the M&A activity noted earlier, we generated approximately $7 million in operating cash flow. We ended the quarter with $162.6 million in cash, cash equivalents, and short-term deposits, compared to $184.6 million at the end of the third quarter of 2023. Our balance sheet and cash generation profile remain strong, supporting our interest in capitalizing on value-enhancing opportunities as we navigate through the near-term challenges. Now, let me turn to our outlook for 2024 based on the perspective that the softness in global capital purchasing conditions continues to be challenging, but we expect to see improvement in the back half of the year. For comparison purposes, 2023 revenue, excluding divestitures and annualizing Covestro, was approximately $616 million.
Excluding the onetime cost related to the M&A activity noted earlier, we generated approximately $7 million in operating cash flow.
We ended the quarter with $162 6 million in cash cash equivalents and short term deposits compared to $184 6 million at the end of the third quarter of 2023.
Our balance sheet and cash generation profile remains strong supporting our interest to capitalize on value enhancing opportunities as we navigate through the near term challenges.
Now, let me turn to our outlook for 2024 based on the perspective that the softness in global capital purchasing conditions continues to be challenging, but we expect to see improvement in the back half of the year.
For comparison purposes, 2023 revenue, excluding divestitures and Annualizing cholesterol was approximately $616 million.
Eitan Zamir: We expect 2024 revenue to grow to a range of $630 million to $645 million, with revenues growing sequentially each quarter, for watching, to the first. Non-GAAP gross margin for 2024 is expected to improve to a range of 49% to 49.5%, with the second half stronger than the first half, based primarily on the expected rise in revenue throughout the year. In 2024, we expect our operating expenses to range between $292 million and $297 million, slightly higher than in 2023. Continued improvement in profitability is an important objective, and for 2024, we expect to see a return to growth across the profit metric. For 2024, we expect operating income to be in the range of 2.5% to 3.5% of revenue, with the second half stronger than the first half based on the anticipated rise in revenues throughout the year. We expect a gas net loss of $88 million to $72 million, or $1.24 to $1.01 per diluted share, and non-GAAP net income of $9 million to $14 million, or $0.12 to $0.19 per diluted share.
We expect 2020 for revenue to grow to a range of $630 million to $645 million with revenues growing sequentially each quarter through the year, resulting in notably higher revenues in the second half of the year as compared to.
Through the first.
Okay.
non-GAAP gross margins for 2024 is expected to improve to a range of 49% to 49, 5% with the second half stronger than the first half based primarily on the expected rise in revenue throughout the year.
In 2024, we expect our operating expenses to range between 292 million to $297 million slightly higher than 2023.
Continued improvement in profitability.
He is an important objective for 2024, we expect to see a return to growth.
Ross the profit metrics.
For 2024, we expect operating income to be in the range of two 5% to three 5% of revenue with.
With the second half stronger than the first half based on the anticipated rise in revenues throughout the year.
We expect a GAAP net loss of 88 million to $72 million or $1 24 to one one.
Per diluted share.
And non-GAAP net income of 9 million to $14 million or 12 to 19.
Per diluted share for 2024.
Eitan Zamir: Adjusted EBDA for 2024 is expected to be in the range of $40 million to $45 million. We expect to see EBITDA reach 15% of our revenues longer term as our margins improve over time. We expect our capital expenditures for 2024 to range between $20 million and $25 million.
Adjusted EBITDA for 2024 is expected to be in the range of 40 million to $45 million.
We expect to see EBITDA reached 15% of our revenues longer term.
Our margins improve over time.
We expect our capital expenditures for 2024 to range between 20 million and $25 million.
Eitan Zamir: Finally, we expect to deliver positive operating cash flow for the full year, excluding any further one-time costs related to M&A activities. With that, let me turn the call back over to Yoav for closing remarks.
Finally, we expect to deliver positive operating cash flow for the full year, excluding any further one time costs related to M&A activities.
With that let me turn the call back over to you all for closing remarks.
Rob.
Yoav Zeif: Thank you, Eitan. I want to thank our global team for their professionalism and dedication to help drive continued profitability as our business grows and creates long-term value for our customers and all our stakeholders. I am particularly proud of our Israeli employees and their families, many of whom were called to military service for most of the fourth quarter, as well as our employees worldwide who stepped up valiantly to carry the additional workload.
Thank you Ethan.
I want to turn our global teams for their professionalism and dedication.
Well to drive continued profitability.
Our business growth and create long term value for our customers and all our stakeholders.
I am, particularly proud of our Israeli employees and their families.
Many of whom were caused to military service for most of the fourth quarter as.
As well as our employees worldwide, who stepped up valiantly to carry the additional workload.
Yoav Zeif: This effort helped ensure that our business operation was uninterrupted with no material impact. We continue to differentiate ourselves from the sector with the strongest combination of best-in-class technology and unparalleled go-to-market infrastructure and an ongoing focus on operating efficiency. Our customers are currently challenged by micro-conditions that constrain their spending, slowing their pace of purchasing our products that can advance their transition to digital manufacturing. However, we view these challenges as only a delay in the inevitable widespread and faster adoption of digital manufacturing.
This effort helped ensure the tower business operation was uninterrupted with no material impact.
We continue to differentiate ourselves from the sector with the strongest combination of best in class technologies and.
An unparalleled go to market infrastructure and an ongoing focus.
On operating efficiencies.
Our customers are currently challenged by macro conditions that constrain their spending slowing their pace of purchasing our product that can advance their transition to digital manufacturing at scale.
However, we view these challenges as only a delay in the inevitable widespread and faster adoption of additive manufacturing.
One need only look at the continued high utilization of existing systems and the strong levels of engagement to share. Our optimism. We are excited for what 2024 and beyond <unk> as we continue to lay the foundation.
Operator: One need only look at the continued high utilization of existing systems and the strong levels of engagement to share our optimism. We are excited for what 2024 and beyond holds for Stratasys as we continue to lay the foundation for Expanded Applications to Drive Accelerated With that, let's open it up for questions, operator. You will now be conducting a question and answer session. As a reminder, we ask that you please ask one question and one follow-up. Would you like to be pleased? Please press star 1 on your television.
For expanded applications to drive accelerated growth.
With that let's open it up for questions operator.
Thank you, we'll now be conducting a question and answer session. As a reminder, we ask you. Please ask one question and one follow up if you will.
He places the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue. Once again Thats star one to be placed in the question queue and we ask you. Please ask one question and one follow up our first question is coming from Greg Palm.
Operator: Information tone. We'll end. Press Star Q. Once again, that's Star 1.
Danny James Eggerichs: Let me ask you, please ask one question.... Yeah, thanks. This is Danny Eggerich on for Greg today.
Craig Hallum. Your line is now live.
Yeah. Thanks, This is Danny <unk> on for Greg today.
Danny James Eggerichs: I guess I'll just start with consumables. Pretty strong quarter, obviously a record number. Doesn't sound like it, but any signs point to potential drawdowns on inventory at customers, or you feel like you have pretty good visibility there and I think you can continue that kind of growth throughout 2024. And then, I guess, what was the cholesterol contribution in the quarter? Hi Danny.
I guess I'll, just start with consumables pretty strong quarter, obviously a record number.
It doesn't sound like it but any signs pointing to potential drawdowns on inventory at customers or you feel like you've got pretty good visibility there and and then.
And you can continue that kind of growth throughout.
Throughout 2024, and then I guess, what was cholesterol contribution in the quarter.
Hi, Dan.
Eitan Zamir: So maybe I'll start, it's eight, and I'll start from the end. Coventro, as we've mentioned in the past, it's roughly four to five million a quarter. And we're in that range, also in Q4 2023. And we believe that the next year will be similar, if not growing. And then on the second question, maybe, Thank you for the question, Danny.
Maybe I'll start it's eight outside from the and cholesterol.
I believe we've mentioned in the past, it's roughly $4 million to $5 million a quarter and we were in that range also in Q4 2023, and we believe that the next year will be similar if not growing.
And then on.
The second question on maybe.
Yeah.
Jumping in here.
Thank you for the question des.
So.
Yoav Zeif: So I think actually it's a reason for celebration, because consumables are the indication that someone is really using our equipment and that additive manufacturing is adding value. And that's what we are doing at Stratasys. So it's a record $63 million of consumable disk warfare, $246 million for the entire year.
I think it's actually it's a reason for celebration.
As an industry.
Because consumables.
The indications that someone is really using our equipment.
And that additive manufacturing is adding value.
And Thats, what we are doing in further.
Record $63 million of consumer goods this fall there.
46 million for the entire year.
Yoav Zeif: And the most important thing that we see increase in machine utilization, and it's so important because consumables are the key to really penetrate manufacturing because you have more materials, you penetrate more applications, and more use cases. We just introduced a new material for the origin, which means that we open up completely new applications for durability, applications where you need durability, you need better performance, you need better materials, you need better parts. This is an essential part of our strategy, and we see that it works. On top of that, we also see that Corvestro is adding value to Stratasys across different technologies because the way they work is a conventional material that we adopted for our origin platform, and it's also, of course, contributing to the gross margin because we have a higher gross margin on material. So to sum up, material is key to penetrate into manufacturing.
And the most important thing that we see increase in machine utilization.
And.
It's so important because consumable are the key to really penetrate manufacturing because you have more material to penetrate more applications and more use cases, we just introduced a new material for the origin. It means that we open up completely new applications.
Or where their ability or application, where you need durability, you need better performance you need better material they need better power that this is essential part of our strategy and we see that it works.
On top of it.
We also think that covers drove is adding value to stratasys.
Across different technologies, because the way their acts.
Is a collateral material that we adopted for our origin platform and it's also of course contributing to the gross margin because we have a higher gross margin on material. So to sum up material is key to penetrate into manufacturing it brings more.
Yoav Zeif: It brings more growth margin, and we see that it's growing with and without Covestro. And we believe that it will keep growing going forward. Yeah, no, that's good. That makes sense. Maybe just switching to systems.
Higher gross margin and we see that it's growing with and without cholesterol and we believe that it will keep growing going forward.
Yeah no. That's that's good that makes sense, maybe just switching to systems. Thank.
Danny James Eggerichs: I think you had mentioned that you're kind of expecting maybe a bounce back in demand in the second half. Is that baked into the 2024 revenue guidance? And if so, by how much?
Thank you had mentioned that you're kind of expecting maybe a bounce back in demand in the second half.
Is that baked into 2020 for revenue guidance and if so how much.
So definitely it is part of the plan.
Yoav Zeif: So definitely, it is part of the plan. But in a very thoughtful way where we make sure that, like we were exactly within the guidance in 2023, we want to make sure that we are exactly within the guidance again in 2023. So when we say a number, it is banked, but it also has a high level of certainty. And when you talk about certainty, hardware is the most sensitive offering that we have in this industry. And it's across the board, not just us. All players are seeing it.
But.
Yeah.
I know a very in a very thoughtful way.
We make sure the <unk>.
Like we were exactly within the guidance in 2023, we want to make sure that we are exactly within the guidance volumes also in 2024.
So when we say a number it is banks.
But it also is high level of certainty.
And when you're talking about certainly hardware practically is the most sensitive offering that we have in this industry.
And it's across the board both as all players.
Seeing it is sensitive offering because.
Yoav Zeif: It's a sensitive offering because it's sensitive to the macro backdrop, to the economic uncertainty, and also to their interest rates. It creates capex constraints with the largest companies in the world. However, I believe it is not a long-term phenomenon because there is so far you can postpone investment if you are competing in your market. For example, take an automotive player.
The macro backdrop to the economic uncertainty.
Also today our interest rate.
It creates capex constrained with the largest companies in the world.
However, I believe it is not a long term phenomenon.
Because there is so far you can postpone investment if you are competing in your market taken automotive player at.
Yoav Zeif: In the end, they will need to invest in new lines. They will need to invest in new designs. They will need to compete with EV that is coming from the East.
At the end they will need to invest in new lines, they will need to invest in new designs, we need to compete with EV that is coming from the east.
Yoav Zeif: So we see this pent-up demand, and we believe that the situation that we are facing now is only temporary. And the moment we start seeing some recovery, and we're talking about recovery, we see the, you know, kind of spring of recovery. Very small signs, but they are there.
So we see this pent up demand.
And we believe that.
The situation that we are.
Facing now.
It's only temporary.
And the moment, we will start seeing some recovery and we're talking about recovery, we see that kind of the spring of recovery.
A very small signs, but they are there we see a flattening sales cycles in some in some.
Yoav Zeif: We see flattening sales cycles in some hardware. It's an even shorter sales cycle. We see an improved pipeline, mainly for the second half. And we also see PMI, the Purchasing Manager Index, a bit better, mainly in the US. It's the first time in January that the PMI index crossed the 50 range.
Hardware, it's even shorter sales cycles, we see improved pipeline, mainly for the second half and we also see a P.
TMI the purchasing manager index a.
A bit better mainly.
Mainly in the U S. It's the first time in January that the PMI index crossed the 50 range.
Yoav Zeif: And that means that the U.S. B2B market is not contracting anymore. It's not growing yet, but it's not contracting. So we believe that all those good signs would create the first step of recovery and then release...
And it means that U S. <unk> market is not contracting anymore, it's not growing yet, but it's not contracting.
So we believe that all those good signs would create the first steps of recovery and then released.
Yoav Zeif: The pent-up demand that is still there. And we have this F3300 exactly on time. And we are going to launch it. And Q2 begins at the end of Q, around Q2.
The pent up demand that is still there.
And we have this F 3300 exactly on time.
And we are going to launch it in Q2, we began.
The end of Q around.
Q2.
Yoav Zeif: To address this center, so practically, in one sentence, we worked really hard over the last two years of, you know, tough macroeconomic conditions to make sure that we were ready to capture this pent-up demand. Yeah, understood. That's all very helpful. I'll leave it there.
Ready.
To address this pent up demand.
So practically in one sentence, we worked really hard over the last two years.
Tough macroeconomic conditions to make sure that we are ready to capture this pent up demand.
Yeah understood. That's all very helpful. I'll leave it there thanks.
Danny James Eggerichs: Thanks. Thank you. Troy Jensen, Sheldra, Linus L.I.
Thank you next question is coming from Troy Jensen from Cantor Fitzgerald. Your line is now live.
Troy Donavon Jensen: Hey gentlemen, I think that's a good result here and I love all this. I'm on the same page as you guys. Thank you, Troy. I think I heard part of it, but if you could clarify that, that would be great.
Hey, gentlemen, congrats on the good results here and I Love all this pent up demand comment.
On the same page with them.
Thank you throw out that quickly yep Yep very welcome. So quickly you did you give the percentage of sales that are going into production applications I think I heard part of it but if you could clarify that'd be great.
Yes. Thank you for the question.
Yoav Zeif: Yes. Thank you, Troy, for the question. So, we have a very simple laser sharp strategy. We are going for the mono effect.
We have a very simple lasers up strategy, we are going for manufacturing and were going for manufacturing.
Yoav Zeif: And we are going from manufacturing with new technologies, very innovative, like the F3300, that really disrupts the FDA market, with new use cases like DENCARE, with consumables, that open up new applications with differentiated software, we can talk about that later, and with SDM as a tool. So when we are looking at that, Practically, what we are saying is that the entire market is ready for us to really get into the new area of editing... and Eddie Mannby.
New technology very innovating like the F 3300.
Really disrupt the FDA market with new use cases like the Gen then Karen with consumable.
That open up new applications.
Differentiations hopefully we can talk about it later and we are.
SDN as it tool.
So when we are looking at that.
Practically what we're saying.
Debt.
Yeah.
Tayo market is ready for us.
To really get into the <unk>.
A new area of editing monitors.
Okay.
Additive manufacturing.
We are measuring this call because if you are not we are measuring it because if you are not measuring it all this is a one big story.
Yoav Zeif: We are measuring it because if you are not measuring it, all this is one big story. So we are taking each one of those drivers and measuring how it helps us to get into manufacturing. We were 32.5% of our sales were to manufacturing this year. What does that mean?
So we are taking each one of those drive her and we are measuring how it helps us to get into one of <unk>, we were 32, 5% of our.
We are to manufacturing this year 34.
What does it mean it means that we are in the right direction. It.
Yoav Zeif: It means that we are in the right direction. It means that we are taking the right steps, the strategy is working, but it also means that the B2B market in manufacturing is heavily constrained by capitalism. But eventually, the majority of our printed parts will be in manufacturing. A great adjustment.
It means that we are taking the right steps the strategy is working but it also means that the <unk> market in manufacturing.
Is heavily constrained by Capex.
But eventually the majority of our printed.
We'll be in mono sector greed and use box.
Troy Donavon Jensen: Yep, totally agree. And thank you for those numbers. I'll follow up here, then for Eitan.
Yeah totally agree and thank you for those numbers a follow up here I know you guys had crowd and talk with them about this 10 consecutive quarters of non-GAAP profits.
Eitan Zamir: I know you guys are proud and talk frequently about this 10th consecutive quarter of non-gap profits. But I'd point out that you've also had eight consecutive quarters of negative cash flow. So, you know, looking at your guidance, if you guys are gonna achieve one to 3% operating margins in any given quarter, in any given year, it's gonna, you know, imply further, you know, cash use. Can you just talk about cash generation goals? Haskell positive when you think we'll hit. Thanks, Troy, for the for the question. So, are you such as saying that, um...
Point out that you've also had eight consecutive quarters of negative cash flow from operations.
Looking at your guidance that you guys are going to do 1% to 2% operating margins in any given quarter any given year. It's been a you know imply further cash usage.
Can you just talk about cash generation goals are cash flow positive.
It's hard to say.
Thanks, Troy for the for the question so.
Our side, saying that.
Eitan Zamir: In the last two quarters, so Q3 2023 and Q4 2026, we actually had positive operating cash flow when excluding one-off payments related to the M&A, including the penalty to the M. So our business in Q3 and Q4 this year, so not like last year, 2023, not in the future, actually proved that the business can generate positive operating cash flow when you exclude these one-offs. Together with that, maybe you saw, but you'll see in the last two quarters, our inventory levels went down. This trend will continue in 2024,
In the last two quarters. So Q3 2023 in Q4, <unk>, we actually had positive operating cash flow.
When excluding one off payments related to the to the M&A, including get the penalty to them.
Our business in Q3 and Q4 this year, so not blockbuster three or not.
In the future.
Can you prove that the business can generate positive operating cash flow when you exclude these one offs.
Together with that.
Maybe you saw it but youll see.
And then in the last two quarters, our inventory levels went down this trend will continue in 2024, it will improve our working capital for the next year or so.
Eitan Zamir: It will improve our working capital for the next year. So to your question, we're positive about our ability to generate positive operating cash flow in 2024, excluding one of our businesses will generate positive cash flow in 2024. Awesome.
To your question.
Positive about our ability to generate positive operating cash flow in 2024.
Excluding one offs our business will generate positive in 'twenty four.
Okay.
Awesome, Thanks, guys and good luck and keep up the good work.
Troy Donavon Jensen: All right, guys. Well, good luck and keep up the good work. Thank you. All right. Thanks.
Thank you. Your next question is coming from Jim Ricchiuti from Needham <unk> Company. Your line is now live.
Alright. Thank you so it sounds like you're fairly pleased with.
Yoav Zeif: All right. Thank you. So it sounds like you're fairly pleased with progress and marketing. I wonder if you would be able to share with us what the level of revenues is, what the growth rate was last year. Thank you for the question. We are not sharing the exact numbers.
What's the progress youre, making in the dental market I Wonder if you would.
You might be able to share with us what the level of revenues are.
In this vertical and maybe what the growth rate was last year versus 2022.
So thank you for the question.
Yoav Zeif: I can only say that we grew significantly in the dental market, and we are focusing on the restorative sector of the dental market, which is really non-discretionary. If you have a problem, you have to deal with it, and our focus is Dan Chair.
We are not sharing the exact numbers I can only say that.
We grew significantly in dental.
And we.
We are focusing on the restorative.
Sector of the dental market.
Which practically it's a.
Really non discretionary if you have a problem you have to deal with it.
And our focus is dense here.
Yoav Zeif: And we believe in this area because we are disrupting the market in a way that creates significant value for each one of the stakeholders. So you take the value chain, you start with the patient, it's simply more convenient, easy to use, we have great results and great feedback. We are talking about tens of thousands of people already working with our dentures, TruDent. You go to the dentist; we reduce the visit significantly, from four to five to one to two.
And we believe in this area because we are disrupting the market we are disrupting the market.
In a way that creates significant value to each one of the stakeholders.
Let's take the value chain you start with the patient.
Simply more convenient easy to use we have great results and great feedback we are.
Talking about tens of thousands of people are already working with out there.
Ventures, the truth, if you take the dentists, we reduced significantly from four to 5 million% to 1% to two you take the labs that are producing we dramatically reduce the cost because we save on labor. So this is the idea for us in the entire additive manufacturing can transform dental it was practically <unk>.
Yoav Zeif: You take the labs that are producing; we dramatically reduce the cost because we save on labor. So this is the idea for us in dental. Editing manufacturing can transform dentistry because, practically, we are disrupting this market and making it digital.
We are disrupting this market and make it digital and our focus is on the restorative market and.
Yoav Zeif: And our focus is on the restorative market, and we are developing unique business models to capture more of this value that we are creating along the value chain for each one of the participants. Thanks for that.
And we are developing unique business model to capture more of this value that we're creating along the value chain to each one of them.
Okay.
Got it thanks for that hopefully down the road, we have a better idea.
Yoav Zeif: Hopefully, down the road, we have a better idea. But maybe we should shift gears, Eitan. How should we be thinking about Q1 seasonality? Q4 was atypical in terms of seasonal weakness given the weak capital spending environment.
The contribution, it's making to the business, but maybe shift gears anytime.
How how should we be thinking about Q1 seasonality just given Q4 was a typical right in terms of the seasonal weakness given the weak capital spending environment.
Eitan Zamir: Q1. Think about Q1 the way we normally would in terms of and Ulta Klein. Yes, thank you. The answer is yes. We expect, we believe that the seasonality that is typical to our industry will continue also in 2024 with, you know, a gradually increasing revenue and profitability throughout the year. So that trend will continue. Thank you. Ananda Baruah.
Is Q1 do we think about Q1 the way we normally would in terms of the the seasonal decline from Q4.
Yes, Thanks, Jim.
So the answer is yes they are.
We expect we believe that the seasonality that is typical to our industry will continue also in 2024.
With.
Gradually increase in revenue and our profitability.
Profitability.
Throughout the year.
So that trend will continue.
Okay. Thank you.
Ananda Prosad Baruah: Yeah, good morning, guys. Good afternoon for you, and thanks for taking the questions. I guess. You know what I'd love to get some context for is... signs, https://www.youtube.com, you know, in important areas of your businesses. And, you know, signposts could be, if even anecdotal things that your customers or different industry sectors are working on maybe particular, you know, sort of technical thresholds that they're looking for to move beyond to catalyze adoption. That'd be awesome.
Thank you. Your next question is coming from Ananda Baruah from loop capital markets. Your line is now live.
Yeah. Good morning, guys, Hey, good afternoon for you and thanks for taking the question.
Yes.
I'd love to get some context for is a sign probably inside of your key businesses.
As distinct from macro.
You can give us some context around them.
You're looking for to catalyze adoption.
In important areas of your business.
Seinfeld it could be yes.
If even anecdotal things that you.
You know your customer or a different industry sectors or are working on may be particular, you know sort of technical thresholds.
They're looking for.
To move beyond catalyze adoption that'd be awesome. Thanks.
Yoav Zeif: Thank you, Ananda, for the questions. We are catalyzing the adoption by being and being out, and being super frank with ourselves. We are going to manufacturing, but we are going to manufacturing in a structured way. We build a whole... Structure and framework. What does it mean manufacturing together with our customers, and we go one by one to make sure that we are achieving it? And the way to do it goes through two avenues, I would say.
Thank you Alex for the question.
We are catalyzing the adoption.
By being.
No.
Superior Frank with ourselves, we are going to manufacturing, but we are going through and affecting in a structured way we paid that all of us.
Our structure and framework what does it mean manufacturing together with our customers and we are going one by one.
To make sure that we are achieving and the way to do it goes through two avenues. One is use case that we identified the use cases, where only additive can deliver and we deliver value. The second one is.
Yoav Zeif: One is use cases. We identify the use cases where only additives can deliver value, and we deliver value.
Yoav Zeif: We do it with our customers. We have a customer advisory board. We do it with our customers, with customers like Toyota, like Siemens, like McLaren, Daimler, the U.S. government. We make sure that we are not inventing or dreaming about use cases. We do it with our customers. We develop the end-to-end solution that includes both the hardware, the software, the materials, and also a specific service that they need. We put it all under one umbrella of software, and we do it with them. This is the way to ensure adoption because you are not trying, and we are not trying to reduce the cost of the Toyota Corolla by $50.
As we do it with our customers we have a customer advisory board, we do it with our customers with customers like Toyota like Siemens like Mclaren gain there the U S government, we make sure.
But we are not inventing.
Or dreaming about use cases, we do it with our customers. We develop the end to end solution that includes both the hardware the software. The materials also specifics service that they need we put it all under one umbrella of software.
And we do it with them.
This is the way to ensure adoption because.
You are not trying we're not trying to reduce the cost of Toyota corolla by $50.
Yoav Zeif: We are identifying with our customers the applications and the use cases. And there are many, you know. I gave an example of the denture where we created significant value. But many others... applications like fashion, like aerospace drones, for example.
We identified with our customers the applications and the use cases and there are many with an example, the denture hallway created significant value, but many are there.
Applications like fashion like Aerospace drones. For example, we are working with our customers to design better drones that save on energy and make sure the distance.
Yoav Zeif: We are working with our customers to design better drones that save on energy and make sure the drone's distance is much longer. So those are the types of things we are doing with our customers, and it's use case by use case. Together with the customer, for example, the EV, we are working with customers on a solution, a lighter solution for electric vehicles, and so on and so forth. The key here is to do it with your customer. Fair use case where only additives can do it.
The drone is much longer so those tasks, we are doing with our customers and it's a use case by use case.
With a customer for example to EV, we are working with customer only on solution licensed solutions for electric vehicles, and so on and so forth.
Key here do it with your customer.
Use case, where only additives can do it as a good example is also Toyota and F 3300.
Yoav Zeif: A good example is also Toyota and F3300. So that's super helpful. It gave me an idea for a follow-up, really, will get at maybe unpacking a little bit more of the heart of my question. That's a really good teaser.
So that's super helpful and <unk>.
They gave me.
It gave me an idea for a follow up which I think really well.
Well get at Navy Unpacking, a little bit more at the heart of my question that that's a secret Super good Tee up.
Ananda Prosad Baruah: And this might be a little bit of a challenging question, just because I'm sure different industries, different customers in different industries are in different places. But I guess, is there any general context you can provide around..., in the process you just described, how much until you really can catalyze revenue opportunities in your key segment, how much is more dependent on..., you guys forwarding the technology, to take care of the thresholds, versus how much of it is you have the technologies sort of relatively close to where they need to be to be dangerous? It's really a matter of time and just getting into the design cycles and going through the design cycle process, which I know can take some years depending on the category, and that's it. It's a great question, very hard to relate to because the average will kill everything. It's like every application and every use case is a story by itself.
And this might be a little bit of a challenging question because I'm sure it's different industry different customers in different industries.
Are in different places, but I guess is there any general contact you can provide around in the process you just described.
How much until you really can catalyze.
The revenue opportunity in your in your key segments.
How much is more dependent on.
You guys forwarding technology to take care of the thresholds.
Versus how much of it is you have the technologies will be sort of relatively to where they need to be to be dangerous.
Only a matter of time and just getting into the design cycles and going through the design cycle process, which I know can take some years, depending on on category and that that's it for me. Thanks.
Alright, it's a great question.
Very hard to relate to because everage will kill everything here.
Like every application and every use case to historic rates.
Yoav Zeif: Some applications, some use cases, we already have the full solution end to end. Take dentures, for example. You need tooling, jigs, and fixtures; we have the right software, we have everything, it's ready. It's about the customer adopting it based on their site. You take other applications; we still have a way to go, like, you know, in medical, for example, in fashion; we have a way to go to make sure that the customers are really adopting it together with us, with the connectors, for example. We are there, but the customers still need us to hold their hand.
Some applications. Some use case, we already have the full solution end to end take the dentist. For example, you take tooling jigs and fixtures we have the right software we have everything it's already it's about the customer are adopting it based on their cycles.
Other application, we still have a way to go like medical for example.
In fashion, we have a way to go to make sure that the customers are really adopting it together with US is our connectors. For example, we are there, but the customers still need asked all these headings.
Yoav Zeif: But demand is strong. We see the engagement because the customer, this customer advisory board that I mentioned, they wouldn't spend days without it if they wouldn't understand and realize that there are things that they can do with editing that they cannot do with anything else. And it is creating a competitive advantage for them. So I'm not going to give you an average.
But demand is strong.
We see that engagement because.
The customers this customer advisory board that I mentioned, they wouldn't spend days without if they wouldn't understand.
And.
There are things that they can do with anything that they cannot do with anything else and it is creating competitive advantage for them.
So I'm not going to give you an average I can just say that one.
Yoav Zeif: I can just say that one. We engage and we are working with customers at different levels, depending on the different use cases. But we are not talking about 10 years or 15 years; it's not something which is, you know, it's not biological. It's not like we need to wait for someone to grow up 15 years.
We are engaging and we are working with customers in different level depends on the different use.
Use cases, but we are not talking about 10 years or 15 years.
Not a something with us.
Not a biological it's not like we need to wait some want to grow up 15 years, it's something that can take between.
Yoav Zeif: It's something that can take between, one year or a few months to, maximum three years, maybe a little bit more for those applications that we are focusing on. And the second thing is that the demand is there, and it's kind of the growth paradox. We are struggling as an industry, taking step by step by step, but we are progressing in the right way. And at the moment, they will adapt it either for the new cycle or for a new product. We will see growth coming in a big way. Yes. Yeah, we've seen that before.
One year or a few months to maximum three years, maybe a little bit more of those applications that we are focusing and the second thing is that the demand is there and it's kind of the growth paradox.
We are struggling as an industry take step by step by step, but we are progressing in the right way.
And the moment.
They will adopt it either in the new cycle or for new product.
We will see the growth coming.
<unk> yeah, Yeah, we've seen it before that is super helpful. I really appreciate it.
Yoav Zeif: That's super helpful. Thank you. Thank you. Next question is coming from Brian Drab from William Blair. Your line is now live. Hi, good morning. This is Blake on behalf of Brian.
Thanks.
Thank you. Thank you. Your next question is coming from Brian Drab from William Blair. Your line is now live.
Hi, Good morning. This is Blake on for Brian I, just wanted to ask about the revenue guidance can you talk you mentioned that you used.
Brian Paul Drab: I just wanted to ask, you know, about the revenue guidance. Can you talk? You mentioned that you set out guidance that you can hit. Can you talk about the different dynamics that you have that get you to the high end versus the low end of the range? Hi Blake.
Set out guidance that you can can you talk about the different dynamics that you get that get you to the high end versus the low end of the range.
So treatment.
Hi, Brian.
Sorry.
Yeah.
Hi, Blake.
Eitan Zamir: So I'll touch on some of the trends that kind of help us think about the low and the high end. One is the launch of the F3300, which is going to be a significant growth driver in 2024. We've not launched it yet, as you know, but we actually see huge demand and a significant backlog that is starting to pile up. So a successful year for F3300 can take us from the low end to the high end. So that's one growth engine. The other one, which hopefully you have mentioned earlier, is consumable.
So I'll touch on some of the trends that help us think about.
The low end to high end one is.
And launch.
The F 3300 that is going to be a significant growth driver in 2024.
We have not launched it as you know, but we actually see a huge demand and a significant backlog that start to pile up so.
Successful year for our favorite three onwards can take us from the low end to the high end, so thats one a growth engine.
The other one that hopefully you all had mentioned earlier is consumable that's something that we.
Eitan Zamir: That's something that we have high certainty that it will continue to grow in 2024, but of course, it depends. Software is another growth engine that takes time to reach the high revenue level that starts to be very meaningful, but still, something that comes with very high margins and increased significantly in 2023. We believe that the trend will continue. And, of course, above all, there is also the macro question that, of course, can impact whether we are at the lower or the high end or somewhere on that scale based on what the macro will be in 2024.
We have high certainty that it will continue to grow in 2024.
Got it.
Of course it depends.
Software is another growth engine that it.
It takes time to to reach them.
The high revenue levels that start to be very meaningful but still.
<unk>.
But still something that comes with very high margins and increased significantly in 2023, we believe that the trend will continue and of course.
Above all there is also the macro question that of course can impact yeah.
Whether we are at the lower or the high end or somewhere on that scale based on the what the macro will be in 2024.
Yoav Zeif: Yeah, and to add to what Eitan said from a more, you know, strategic perspective. When we come up with such type of guidance, it's based on the foundations that we build. We truly believe that we are ready to capture the next phase of growth, like I talked with Ananda. And we are ready because, practically, we are leaving the industry in terms of performance and customer preference. We are growing, yes, not a lot, but in a declining market. We have record consumable sales with higher utilization.
And if just to add to eight and set for a more.
Strategic perspective.
When we are coming with such type of guidance. It's based on the foundation that we've built we truly believe that we are ready to capture the next phase of growth.
<unk> talked with Ananda.
And we are ready because practically we are leading the industry in terms of performance and customer preference. We are growing yes, not a lot but in a declining market. We have record consumables sales with higher utilization, we increased our market share over the last three years.
Yoav Zeif: We have increased our market share over the last three years. We demonstrate financial, actually unique financial stability in terms of profitability, gross margin, no debt, cash flow, and we have a strategy with five growth engines of the new technologies, the new use cases, the consumables, the software, and SDM as a driver into manufacturing. And we built over the last three years foundations like the go-to market, the diversified portfolio, the relationship with our customers, Siemens and Toyota and the U.S. government of the world that make us ready for this. That's why we have the, you know, the comfort and the confidence to come with that guidance in a tough time, because we are ready. Understandable; I appreciate all the color.
We demonstrate financial actually a unique financial stability in terms of profitability gross margin no debt cash flow.
And.
We have.
Our strategy with five growth engines of the new technologies, the new use cases, the consumable the software and SDM is a driver into manufacturing and.
And we built over the last.
Three years foundations like the go to market.
Diversified portfolio there.
Our relationship with our customer the Cmos and the Toyota and the U S government of the world that makes us ready for this that's why we have to.
The comfort and the confidence.
To come with that guidance in a tough time.
Because we are ready.
Because we are ready.
Understood I appreciate all the color and then just lastly for me.
Brian Paul Drab: And then, just lastly for me, you guys talked about a couple opportunities with the P3 systems in Origin with new materials and software. Can you update us on progress with Origin and those systems? At the time of the acquisition, you know, you said you expected up to $200 million in incremental revenue within five years. Since you're a little over halfway, I was just wondering if you had an update on that progress.
So you guys talked about a couple of opportunities with the <unk> systems and origin with new materials and software can you update us on progress with origin and no systems at the time of the acquisition. You said you expected up to $200 million of incremental revenue within five years, essentially youre a little over.
Halfway I was just wondering if you had an update on that.
Our progress and then what markets are you seeing the most demand for those systems.
Yoav Zeif: And then what markets are you seeing the most demand for those? Definitely the market for the origin and the stuff which our Arrowhead for, Manufacturing, the market, our industrial market, high-end, high-part properties, very demanding, and that's what we are doing, both P3 and SAF are focusing on the high-end market, the automotive, the aerospace, and high-end industrial, because no one can match the quality of the part that we have We have used them for the last two years to make them much more reliable.
Definitely the market for the origin and the staff, which our.
Arrowhead for.
Manufacturing the market our industrial market.
Hi.
<unk> properties very demanding and Thats, what we are doing both peachtree and SaaS.
Are focusing at the high end market, the automotive to aerospace and high end industrial because no. One can match the quality of the path that we have we.
We used the last two years to.
To make them much more reliable I can say that now they are meeting all strategy stand out and are aligned with the standards of FDA.
Yoav Zeif: I can say that now they are meeting all Stratasys standards and are aligned with the standards of FDM, which we are very proud of. And now, it's all about materials, because we want to open up new industrial applications. So, it's the WeatherX, which is very unique in the market. You know, you can put it outside in the sun, in the rain, and it will work.
Which we are very proud of.
And now it's all about materials, because we want to open up new industrial applications. So the weather Ax, which is very unique in the market you can put an outside in the sun in the rain.
Sure.
Yoav Zeif: And same with SAF, it's the P12, new materials like polypropylene in the future, where only SAF can do it because of the thermal control that we have. So it's a very simple strategy. We go for high-end industrial, this is Stratasys; we go for the high-end. We go with those technologies that put a lot of energy and brain into the innovation of those systems, and we do it with unique materials. Got it. Thank you. I'll pass it along.
And same with <unk> the <unk> well.
New materials.
Materials like polypropylene in the future. We are only soft can do it because of the thermal controls that we have.
Very simple strategy. We go for high end industrial this is strategy we go for the audience.
We go into those technologies that we put a lot of energy and brain into the innovation of those systems and we do it with unique materials.
Okay.
Got it thank you I'll pass it along.
Yeah.
Thank you. Your next question is coming from Jacobs to fall from Lake Street. Your line is now live.
Brian Paul Drab: Next question. Hey, guys, thanks for taking my questions. Apologies if this has been asked already. I'm just jumping between calls this morning.
Hey, guys. Thanks for taking my questions apologies. If this has been asked already I'm just jumping between calls this morning, but maybe you could talk about the some of the bigger platform systems. You know they have $383 50, and just kind of compare the sales cycles.
Jacob Michael Stephan: But maybe you could talk about some of the bigger platform systems, you know, the F3300, H350, and just kind of compare the sales cycles, and also just kind of the demand pipeline of that of the Origin and kind of Neo. Thank you Jacob for the question. No doubt, the bigger the system...
And then also just kind of the the demand pipeline of that of the origin and kind of knee systems.
Yeah.
Thank you Jacob.
Christian no doubt the bigger the system.
Yoav Zeif: The longer the fail cycle, the easier it is, also where we shine as Stratasys because this is our focus. What we promise and deliver to our customers is reliability, part property, and a lower cost per part. And then we see, nice, I would say nice but a bit longer cycle that can, you know, safe tranquility in Stratasys can go, one month to practically five months, and a large deal, even a year, deals like with the government and others. But on average, the nice thing that we see since Q4, Q3, Q4 last year, the second derivatives of the spin cycle are better. So it's flattening, and in some hardware and some types of products, also shortening the space cycle. F3300, I'm happy to share.
The longer the sales cycle is an easy one.
But.
Also is where we shine a strategy.
Because this is our focus.
What we promised and delivered to our customer is the reliability.
The cloud from the lower cost per pound and then we see.
Nice I would say I would say nice, but a bit longer sales cycle.
Can you know say cycle in Stratasys can go from one month to practically five months or six months.
And in large deal even a year like this is like with the government and others, but on average the nice things that we see since Q4 Q3 Q4 last year that the second derivatives of the sales cycle.
He is better so its flattening.
And in some hardware and some type of product also shortening sales cycles.
3300.
I'm happy to share.
Yoav Zeif: It is a bit easier because it's disruptive, and it creates a lot of excitement in the market because we are bringing something that doesn't exist. We are bringing large format FCA with all the qualities of Stratasys, but double the speed and almost half the cost. It's an expensive system, but the ROI is very short because of it, and there are new things that customers can do that they couldn't do with other machines. So, Despite the fact that it's a high-cost, high-priced machine, we see better sales cycles, at least at the beginning.
A bit easier because it's disruptive and it's created a lot of excitement in the market because we are bringing something that doesn't exist. We are bringing large format SCM with all the qualities of strategies, but double the speed and almost half the cost.
It's an expensive system, but the alloy is very short because of it.
So and there are new things that the customers can do they couldnt do it other machine so.
By the fact that it's a high cost high priced machine we.
We see better sales cycle at least at the beginning.
Jacob Michael Stephan: Got it, that's helpful. And then maybe just one more, you know, kind of vertical related, what are you seeing in the kind of the aerospace market? www.youtube.com or the link in the description box.
Yeah.
Got it that's helpful. And then maybe just one more you.
You know kind of vertical related.
What are you seeing in kind of the aerospace market.
It seems like Theres been a lot of investment and focus around this market, but maybe you could just kind of touch on your strategy there and also.
Any progress that you've made.
Yoav Zeif: This is one of our top verticals; it's nothing new here. And it's one of our top verticals because of our quality and experience there and the really unique knowledge and solutions that we are bringing. We also, we're the first to introduce new materials into this area and to certify them together with certified bodies, starting with the U.S. But the most important thing that we are delivering there, we have real success on the ground with the government, with NAVAIR and with the Air Force and with NASA, and we have an advisory committee of just a few. Advisory Committee, I mean Customer Advisory Committee, where leading figures from the industry are contributing what is really needed for them. So, bottom line, aerospace: we have, I don't want to say number one, but probably a number one position there, supported by the experience of the government, and customers that are developing with us unique applications together. We are practically partnering on projects, and we believe that the new FDM platform will be the leading solution for.
He is one of our top vertical it's no nothing new here.
It's one of our top vertical because of our quality.
<unk> experienced there and really unique knowledge and solutions that we're bringing we're also where the first one to introduce new materials into this area and to certify them together.
We certified bodies.
Starting with the U S. But the most important thing that we are delivering data we have.
Real success on the ground with the government.
<unk> and <unk>.
With the Air Force and with NASA, and we have all advisory committee that a few.
Advisory Committee I mean customer Advisory committee that are leading figures from the industry are contributing what is really needed for them. So bottom line aerospace we have.
I would say number one, but probably number one position there.
Supported by the experience from the government.
Customers that are developing with us unique applications together with positive partnering on project.
And we believe that the new SDN platform.
He will be leading.
Yoav Zeif: That's helpful. Thanks for the color. Good luck going forward here, guys. We have reached the end of our question and answer session. I'd like to turn the floor back over to Yoav.
Our solution for aerospace.
Yeah.
Got it that's helpful. Thanks for the color good luck going forward here guys.
Thank you we reached end of our question and answer session I would like to turn the floor back over to you off for any further closing comments.
Yoav Zeif: Thank you for joining us. I look forward to updating you again next fall. This concludes today's teleconference and webcast. You may disconnect your line afterward. Have a wonderful day!
Thank you for joining us looking forward to updating you again next quarter.
Okay.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day we thank.
For your participation today.