Q2 2024 Stratasys Ltd Earnings Call

August 29, 2024

Speaker Change: Hello, and welcome to the Stratus Q2 2024 earnings calling web task at the Fire Multicis Pinsorny List and only Mode. If any much required operator assistance, please press star zero on your telephone keypad.

Operator: At this time, Malpatice Pins' attorney listened only mode.

Operator: If anyone would require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed in the question Q, and we ask you please ask one question, one follow-up, that return to the Q.

Speaker Change: A question and answer session will follow the formal presentation.

Speaker Change: You may press star one at any time to be placed in the question queue and we ask you please ask one question one follow-up that return to the queue. As a reminder this conference is being recorded.

Operator: As a reminder, this conference is being recorded.

Tyler Lloyd: It's not my pleasure to turn the conference over to Tyler Lloyd, Chief Communications Officer, MVP of Investor Relations.

Speaker Change: It's now my pleasure to turn the conference over to Yonah Lloyd, Chief Communications Officer and VP in the best of relations. Yonah, please go ahead.

Yonah Lloyd: Yonah, please go ahead. Good morning, everyone, and thank you for joining us to discuss our 2024 second quarter financial results. On the call with us today, our CEO, Dr. Zioav Zeif, and our CFO, Eitan Zamir.

Speaker Change: Good morning everyone and thank you for joining us to discuss our 2024 Second Quarter Financial Results. On the call with us today, our CEO, Dr. Zio of Zeif and our CFO, Eitan Zamir.

Yonah Lloyd: 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 also be available and can be accessed through the Investor Relations section of our website.

Speaker Change: 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.

Speaker Change: In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the investor relations section of our website.

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.

Speaker Change: Please note that some of the information you will hear during our discussion today will consist of forward-looking statements.

Speaker Change: Including Without Limitation.

Speaker Change: 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.

Yonah Lloyd: 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 Stratus' Annual Report on Form 20-F for the 2023 year.

Speaker Change: Actual results or trends could differ materially from our forecast.

Stratus: For risks that could cause actual results to be materially different from those set forth and for-looking statements, please refer to the risk factors discussed or referenced in Stratus' annual report on Form 20F for the 2023 year.

Yonah Lloyd: Please also refer to our operating and financial review and prospectus for 2023 and for the second quarter of 2024, which are included as item five of the annual report on Form 20-F for 2023 and an exhibit 99.2 to the report on Form 6-K that we are furnishing to the SEC today, respectively.

Stratus: Please also refer to our operating and financial review and perspectives.

Stratus: for 2023 and for the second quarter of 2024, which are included as item 5 of the annual report on Form 20F for 2023 and an exhibit 99.2 to the report on Form 6K that we are furnishing to the SEC today.

Yonah Lloyd: Please also see the press release that announces the company's earnings for the second quarter of 2024, which is attached as Exhibit 99.1 to a separate report on Form 6-K that we are furnishing to the SEC today. Reports on Form 6-K that are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's operating results and material developments concerning our company. Stratus assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Stratus: Respectively.

Stratus: Please also see the press release that announces the company's earnings for the second quarter of 2024, which is attached as exhibit 99.1 to a separate report on Form 6K that we are furnishing to the SEC today.

Stratus: reports on Form 6K that are furnished to the SEC on a quarterly basis and throughout the year, provide updated current information regarding the company's operating results and material developments concerning our company.

Stratus: Stratacists 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 reconciliation is provided in tables in our slide presentation and today's press release.

Stratus: As in previous quarters, today's call will include GAP and non-GAP financial measures.

Stratus: The non-gap financial measures should be read in combination with our gap metrics to evaluate our performance. Non-gap-to-gap reconciliation are provided in tables in our slide presentation and today's press release.

Yoav Zeif: I will now turn the call over to our Chief Executive Officer, Dr. Yalav Zayf.

Yoav Zeif: Yalav. Thank you, Yona.

Stratus: I will now turn the call over for our chief executive officer, Dr. Yoav Zeif, Yoav.

Yoav Zeif: Good morning, everyone, and thank you for joining us. In the second quarter of 2024, we delivered margin improvement and maintained a healthy balance sheet despite continued softness in hardware sales. Our results reflect the resilience of our business model. The challenges our customers continue to face from our interest rates, macroeconomic uncertainty, and reduced capital equipment spending. We once again delivered growth in consumables that reflected strong utilization for our existing system, demonstrating the power of that recurring revenue stream. It is important to note that the utilization of consumables came primarily from our FDN technologies, validating that our customers are continuing their shift from prototyping to manufacturing applications, helping them more effectively manage costs and drive efficiency.

Yoav Zeif: Thank you, Yonah

Speaker Change: Good morning everyone and thank you for joining us.

Speaker Change: In the second quote, the old 2024.

Speaker Change: We delivered margin improvement and maintained a healthy bond sheet.

Speaker Change: Despite continued softness in Howard Zeif.

Speaker Change: Our results reflect the resilience of our business model.

Speaker Change: The challenges our customers continue to face from our interest rates.

Speaker Change: Macro-economic uncertainty and reduced capital equipment spending.

Speaker Change: We once again delivered growing consumer goals that reflected strong utilisation for our existing system, demonstrating the power of that recurring revenue stream.

Speaker Change: It is important to note that the utilisation of consumables came primarily from our FDN technologies.

Speaker Change: Validating that our customers are continuing their shift from prototyping to manufacturing applications.

Speaker Change: Helping them more effectively, a managed cost and drive efficiency.

Yoav Zeif: This bodes well for the future, as we look to expand on the manufacturing floor with exciting new solutions that we plan to introduce. To ensure we continue to deliver long-term value for our shareholders, our ongoing priority is our commitment to innovation in materials, knowledge, and workflow to address the strongest adoption opportunities, by prudently investing in technology and materials while also streamlining and focusing on key and user applications.

Speaker Change: This builds well for the future as we look to expand on the manufacturing floor with exciting new solutions that we plan to introduce.

Speaker Change: To ensure we continue to deliver long-term value for our shareholders, our ongoing priority is our commitment to innovation in materials, knowledge and workflow to address the strongest adoption opportunities. By prudently investing in technology and materials.

Yoav Zeif: We are positioning strategies for its next phase of growth for our company.

Speaker Change: While also streamlining and focusing on key and user application.

Speaker Change: We are positioning strategies for its next phase of growth for our company.

Yoav Zeif: During and subsequent to the second quarter, we achieved a number of milestones and new product introduction I'd like to share. One of the most exciting successes in the quarter was solidifying our partnership with Aviation Manufacturing Pioneer AMCraft, aligning our two companies' efforts to grow the capability and demand to design and editively manufacture ESAT-certified aircraft sustainment parts. Aviation is a great example of the value that editing manufacturing can bring. Aircraft have long lives and require continuous repair and improvement. The low-volume eye-mix nature of the parts aftermarket presents supply costs and logistical challenges to keep the air and dust producing revenue.

Speaker Change: During a subsequent to the second quarter, we achieved a number of milestones and new product introduction I'd like to share.

Speaker Change: One of the most exciting successes in the world, was solidifying our partnership with Aviation Manufacturing Pioneer AMCraft.

Speaker Change: Aligning our two companies efforts to grow the capability and demand to design an additive human effecture, ESAT certified aircraft sustainment power.

Speaker Change: Aviation is a great example of the value that editing manufacturing can bring.

Speaker Change: [inaudible]

Speaker Change: Aircraft, have long life.

Speaker Change: and require continuous repair and improvement.

Speaker Change: The low volume, I mix nature of the parts after market.

Speaker Change: Breathe in, supply, cost.

Speaker Change: and Logistical Challenges to keep playing in the air and dust producing revenue.

Yoav Zeif: Editing manufacturing helps solve those challenges, often providing improved power design within region and all-demand manufacturing in Aviation hubs, at competitive and often lower cost than traditional supply. AMCraft holds an ESAT-powered 21G production organization approval, making it a qualified provider of air-worldly parts to the aviation industry. Together, we look forward to supporting the development of their global production capability and market awareness.

Speaker Change: Editing Manufacturing helps solve those challenges.

Speaker Change: Often providing improved power design with in-region and all demand manufacturing in aviation hubs. At competitive and often lower costs than traditional supply.

A.M.Craft: A.M.Craft, OLDs, and ESSAP out 21G production organization approval, making it a qualified provider of air-war depart to the aviation industry.

A.M.Craft: Together we look forward to supporting the development of their global production capability and market awareness.

Yoav Zeif: During the quarter, we introduced new staff i.e. deaf printing capability. with the launch of our H350 version 1.5, which provides additional applications and use cases for a growing set of manufacturing and users, without compromising speed or quality. Staff polypropylene for using both the original and the upgraded H350. Developed in partnership with BSS, this exciting new material is designed to provide superior quality and lower cost per unit. The material is ideal for using high volume and manufacturing applications like auto, medical, consumer, sports, and industrial, while maintaining exceptional quality across the entire build.

A.M.Craft: During the quarter, we introduced new stuff IDF printing capabilities.

A.M.Craft: With the launch of our H350 version 1.5, which provides additional applications and use cases for a growing set of an effecturing and uses.

A.M.Craft: Without compromising speed or quality.

A.M.Craft: This updated H350 has recently started shipping.

A.M.Craft: To complement that launch, we announced the commercial availability of a new crowd-breaking material.

A.M.Craft: Saf Polypropylen, for using both the original and the upgraded H350.

A.M.Craft: Developed in partnership with BSF, this exciting new material is designed to provide superior quality and lower cost per unit.

A.M.Craft: The material is ideal for using eye volume and effecturing applications.

A.M.Craft: Like Otto, Medical, Consumer, Sports, and Industrial, while maintaining exceptional quality across the entire build.

Yoav Zeif: In medical, we launch the J5 Digital Anatomy 3D printer, a major step forward to address the growing demand for cost-effective, high fidelity, and atomic model. The new printer will enable hospitals, medical device manufacturers, and research institutions to improve patient outcomes through a non-surgical planning. Streamlining operations and bringing products to market more quickly. We also announced the involvement of the first patient in a landmark clinical study to assess the use of 3D printed models for orthopaedic oncology. We correspond the study with RICO USA seeking to demonstrate potential improvement in surgical outcomes, such as reduced blood loss, shorter operating times under anesthesia, and decreased risk of procedural complications.

A.M.Craft: In medical, we launched the J5 Digital Anatomy 3D printer. A major step forward to address the growing demand for cost-effective icy-delete and atomic model.

A.M.Craft: The new printer will enable hospital medical device manufacturers and research institutions to improve patient outcomes through a non-surgical planning.

A.M.Craft: Streamlining operations and bringing products to market more quickly.

A.M.Craft: We also announced enrollment of the first patient.

A.M.Craft: In a landmark clinical study to assess the use of 3D printed models for auto-pedic oncology. We cost sponsor the study with Rico USA seeking to demonstrate potential improvement in surgical outcomes.

A.M.Craft: Such as reduced blood loss, shorter operating times under anesthesia, and decreased risk of procedural complications. The study is expected to last 12 months and involves up to 150 subjects across three sites.

Yoav Zeif: The study is expected to last 12 months and involves up to 150 subjects across three sites. This is just the latest example of how the power of additive manufacturing is an excellent solution to improve patient outcomes.

Speaker Change: This is just the latest example of how the power of editing and effecturing is an excellent solution to improve patient outcomes

Yoav Zeif: Now, I'll turn to one of the most important parts of our future growth suite of offering. Software, our software provides value to our business and allows customers to work with many different technologies, both ours and others, thereby increasing the overall total addressable market. Software contributes to our revenues as both standalone offering and included when we sell printers. The cornerstone of our software is the GraphCut Print Pro for print preparations and GraphCut Streamline Pro for operations. GraphCut Print Pro is available across FDM, SAS, and most recently, PolyJet. Adding PolyJet adds that large install base of 3D printers to GraphCut.

Speaker Change: Now, I'll turn to one of the most important parts of our future growth, sweet of offering.

Speaker Change: Software, our software provides value to our business and allows customers to work with many different technologies, both ours and others, thereby increasing the overall

Speaker Change: Do that address of the moment.

Speaker Change: Software contributes to our revenues both standalone offering and included when we sell printers.

Speaker Change: The cornerstone of our software is the grab cut print pro for print preparation.

Speaker Change: and Grafcut's Dreamline Pro for Operations.

Speaker Change: Kravka Prinpro is available across FDM, South and most recently, Polyget.

Speaker Change: Edding Polygit.

Ed: Ed, that loud install base of 3D printers to grab cut.

Yoav Zeif: Demand for Print Pro remains robust, with a number of multi-year licenses sold. Gratkat Streamline Pro works with FDM and Polygets Castamel who need to scare 3D printing prototypes, tooling, and end-use paths. We include a software with new printers as part of the initial purchase, and after one year of free trial, the license is available for purchase. Launching the first quote of Streamline Pro has really hit the ground running and is building momentum. Also, as part of our software platform, we introduce part on demand by Grapkat, a new integration that synchronizes the company's software with Stratasys Direct, our part service bureau, allowing Castamel to access its fleet of printers and expanding their network of manufacturing with Stratasys, a pre-certified producer.

Ed: Dement for print flow remains robust, with a number of multi-year license sold.

Ed: Grabcat Streamline Pro walks with FDM and Polygid Customs, who need to scale 3D printing prototypes, tooling and end use paths. We include the software.

Ed: With new printers as part of the initial purchase, and after one year of free trial, the license is available for purchase.

Ed: Launching the first quote, a streamline pro, has really hit the ground running and is building momentum.

Ed: Also, it's part of our software platform, we introduce part on demand by grabcat.

Ed: and new integration that synchronizes the company software with Stratosis Direct. Our Power Service Bureau.

Ed: Elown customer to access its fleet of printers and expanding their network of manufacturing with strategies.

Yoav Zeif: And finally, I'm excited to share that we have launched our new Grapkat IoT platform featuring connected service and advanced reporting and alerts. The platform demonstrates our customer's first Stratasys digital transformation capabilities, enabling value-edit services through advanced supervisory, control, and data acquisition. The Grapkat IoT platform offers a high quality software solution that ensures dependable, robust, and secure near real-time data collection. It improves printer uptime, speeds up issue resolution, and boosts value for our Streamline Pro users. These new features have launched on our PolyJet J3 and J5 system, and we expect to expand them across our fleet of printers over time.

Ed: and pre-certified producer.

Ed: And finally, I'm excited to share that we have launched our new GraphCAD IoT platform featuring connected service and advanced reporting and alert. The platform demonstrates our customers' first.

Ed: Stratosis Digital Transformation Capabilities, enabling value-edited services through advanced supervisory, control, and data acquisition.

Speaker Change: The Grabcat IoT platform offers a high quality software solution that ensures dependable, robust and secure near real-time data collection.

Speaker Change: It improves printer uptime.

Speaker Change: Speed up issue resolution and both value for our streamlined pro users. These new features have launched on our Polyjet J3 and J5 system. And we expect to expand them across our fleet.

Yoav Zeif: Now I'd like to highlight some milestones subsequent to the Quoters, and first we announced our plan to move our US headquarters in Eden Prairie to a single, newer, least facility a few minutes away. The new facility provides us with more space to enhance collaboration and creativity while improving efficiencies.

Speaker Change: of Printed Over Time.

Speaker Change: Now.

Speaker Change: I'd like to highlight some milestone subsequent to the quarters and first we announced our plan to move our U.S. headquarters in Eden Prairie to a single newer list facility a few minutes away.

Speaker Change: The new facility provides us with more space to enhance collaboration and creativity while improving the efficiencies.

Yoav Zeif: Given the huge multi-billion dollar total addressable market, dental represents it remains a major area of focus. We recently introduced the Dental Jet XL solution, our latest innovation in dental 3D printing technology. This new printer is high speed, designed to further improve lab productivity and reduce cost. The Dental Jet XL produces simultaneously and at scale highly accurate models for crowns, bridges, implants, and aligners, as well as surgical guides. As a reminder, our Trudent solution delivers a real tangible value proposition for dentures, representing the only monoblock full color solution in 3D printing, creating realistic dentures for patients and driving Zamir, due to its substantial cost saving.

Speaker Change: Given the huge multi-billion dollar total addressable market, then they'll represent.

Speaker Change: It remains a major area of focus. We recently introduced the Denta Jet XL solution, our latest innovation in Denta 3D printing technology.

Speaker Change: This new printer is high speed designed to further improve lab productivity and reduce cost.

Speaker Change: The Dante Jatexel produces simultaneously.

Speaker Change: and its scale, highly accurate models for crowns, bridges, implants and aligners as well as surgical guides.

Speaker Change: [inaudible]

Speaker Change: We're presenting the only monoblock, full-color solution in 3D printing.

Speaker Change: Creating realistic dentures for patients and driving gain-changing economics to our customers.

Yoav Zeif: We are in active discussion with leading dental channels, including some of the largest DSOs in the United States, and look forward to continued strong performance in this industry.

Speaker Change: You do it substantial cost saving.

Speaker Change: We are in active discussions with leading dental channels, including some of the largest DSO's in the United States and look forward to continued strong performance in this industry.

Yoav Zeif: And finally, we recently announced that our collaboration with coal plant has advanced to a pre-clinical trial, where the study will test the ability of printed breast implants to promote the growth of natural tissue and completely degrade over time and without triggering an immune response. This would be a revolutionary alternative for both reconstructive and aesthetic procedures that represent a significant opportunity to serve the three billion dollar breast implant marketplace.

Speaker Change: And finally, we recently announced that our collaboration with Cold Planned

Speaker Change: As advanced to a pre-clinical trial, where the study will test the ability of printed breast implants to promote the growth.

Speaker Change: of natural tissue and completely degrade over time and without triggering an immune response.

Speaker Change: This would be a revolutionary Alternative.

Speaker Change: For both reconstructive and aesthetic procedures that represent a significant opportunity to serve the $3 billion dollar breast implant marketplace.

Yoav Zeif: This is inspiring work, as we push the boundaries of innovation to improve life and advance healthcare.

Speaker Change: This is inspiring work as we push the boundaries of innovation to improve life and advance healthcare.

Yoav Zeif: Now, turning to our board strategic review process. After a comprehensive review of a wide range of strategic alternatives to unlock shareholder value, the board determined that implementing various restructuring actions will best position strategies to maximize value for our shareholders. These actions will support our efforts to retain and build on our additive manufacturing leadership. They will serve to strengthen our industry-leading balance sheet and robust business model to more effectively weather all market cycles, positioning us for outside profitable growth in the years ahead. We expect the restructuring actions to produce approximately 40 million dollars in annual cost savings, beginning in the first quarter of 2025, which is expected to generate an annualized EBDA margin of 8% at current revenue levels.

Speaker Change: Now, turning to our board strategic review process.

Speaker Change: After a comprehensive review of a wide range of strategic alternatives to unlock shareholder value, the bow determined that implementing various retracturing actions will best position strategies to maximize value for our shareholder.

Speaker Change: This action will support our efforts to retain and build on our editing and manufacturing leadership.

Speaker Change: They will serve to strengthen our industry-leading balance sheet and robust business model to more effectively weather all market cycle positioning us for outside profitable growth in the year's hand.

Speaker Change: We expect their structuring action to produce approximately 40 million dollars in annual cost savings. Beginning in the first quarter of 2025.

Speaker Change: Zeif, which is expected to generate an annualized EB-Dar margin of 8% at current revenue levels.

Yoav Zeif: The initiatives are focused on two important areas. The first is to adjust our cost structure to better match current market conditions. Primarily, through a head count reduction of approximately 15% by the end of year, which will drive the majority of the expected savings. Second, we are strengthening our effort to increase market penetration by helping our customers overcome barriers to wider additive manufacturing adoption. We will utilize our scan and breadth of technology to focus our go-to-market effort on the main road drivers of our business. Over the past few years, we have seen continued penetration of additive manufacturing with applications across multiple sectors such as error and auto for tooling and path, dental for various uses, medical for pre-operative needs, and others.

Speaker Change: The initiatives are focused on two important areas. The first is to adjust our cost structure to better match current market conditions.

Speaker Change: Pymerally, through a headcount reduction of approximately 15% by the end of this year, which will drive the majority of the expected savings.

Speaker Change: Second.

Speaker Change: We are strengthening our effort to increase market penetration.

Speaker Change: By helping our customer overcome burial, to wider editing and affecting adoption.

Speaker Change: We will utilize our scale and breadth of technology to focus our go-to market effort on the main world-wide world of our business.

Speaker Change: Over the past few years, we have seen continued penetration of additive manufacturing with applications across multiple sectors.

Speaker Change: Such as Aero and Auto for tooling and path, dental for various uses, medical for preoperative needs

Yoav Zeif: However, penetration is not accelerated as it is. We continuously assess our business operations to ensure that we are optimally aligned with market conditions and have been closely monitoring this prolonged cycle of reduced client capital spending, which is stretching longer than anticipated. We are making it easier for customers to more broadly adopt additive manufacturing by addressing the total cost of ownership, which is largely influenced by material consumption. We are also increasing resources to better educate and support our customers' engineers who are still learning to fully utilize additive manufacturing design and workload benefits. And we will increase our effort to standardize additive manufacturing to better align with traditional manufacturing processes.

Speaker Change: In others, however, penetration is not accelerated as expected.

Speaker Change: We continuously assess our business operations to ensure that we are optimally aligned with market conditions and have been closely monitoring this prolonged cycle of reduced client capital spending.

Speaker Change: which is stretching longer than anticipated.

Speaker Change: We are making it easier for customer to more broadly adopt additive manufacturing by addressing the total cost of ownership.

Speaker Change: which is largely influenced by material consumption. We are also increasing resources to better educate and support our customers' engineers who are still learning to fully utilize additive manufacturing design and workflow benefits.

Speaker Change: And we will increase our effort to standardize editing and effecturing, to better align with traditional manufacturing processes.

Yoav Zeif: We are also focusing on applications where additive manufacturing presents the most compelling benefits relative to conventional methods. Over the past years, we have shared some of this innovation with you, such as the manufacturing-focused F-1300 printer, proven dental solutions such as Trudeon, and our suite of specialized software offerings. These steps are designed to help us align costs with current conditions, build a long-term and significant, more profitable, cash-generating business, and stay agile during downturns, while being ready to respond quickly when customer spending returns. When the right technology is used for the right applications, our customers are happy, and we generate recurring business.

Speaker Change: We are also focusing on applications where editing and effecturing presents the most compelling benefits relative to conventional methods.

Speaker Change: Over the past years we have shared some of this innovation with you.

Speaker Change: Such as the manufacturing focus F-3300 printer

Speaker Change: Proven data solutions such as through them and our suite of specialized software offerings.

Speaker Change: These steps are designed to help us align costs with current conditions.

Speaker Change: Bill the long term and significant more profitable, catch generating business?

Stale Ajay: and Stale Ajay during downturns.

Stale Ajay: Well, being ready to respond quickly when customer spending returns.

Stale Ajay: When the right technology is used for the right applications, our customers are happy.

Yoav Zeif: As an example, one of the world's largest automotive OEMs has purchased dozens of our systems over time and typically sees an ROI on printer purchases within 12 months. So when deployed properly, the technology delivers and can lead to increasing demand over time. As we have noted, consistently in recent quarters, customers' utilization, engagement levels, and demand continue to be strong despite the current purchased constraints of our customers. Our diverse portfolio of hardware, consumable and services, including our part business, strengthens our resilience, especially during extended periods of reduced capital spending. We are confident that once current headwind subsides, we need access to capital; we spare customer spending to more accurately reflect the expressed high demand for our solutions.

Stale Ajay: and we generate recurring business. As an example, one of the world's largest automotives, OEM, is purchased dozens of our system over time. And typically see an ROI on printer purchases within 12 months.

Operator: Webcast. At this time, Malpatice Pins attorney listened only mode. If anyone would require operator assistance, please press star zero on your telephone keypad.

Stale Ajay: So, when deployed properly, the technology delivers and can lead to increasing demand over time.

Speaker Change: As we have noted, [inaudible]

Operator: A question and answer session will follow the formal presentation. You may press star one at any time to be placed in the question Q, and we ask you please ask one question, one follow-up, that return to the Q.

Speaker Change: Consistently in Reason Quarter, Customers Utilization.

Speaker Change: Engagement level and the male continue to be strong.

Speaker Change: Despite the current purchase constraints of our customers.

Operator: As a reminder, this conference is being recorded.

Speaker Change: Our diverse portfolio of hardware, consumable and services.

Yonah Lloyd: It's not my pleasure to turn the conference over to Tyler Lloyd, Chief Communications Officer, MVP of Investor Relations. Yonah, please go ahead. Good morning everyone, and thank you for joining us to discuss our 2024 second quarter financial results. On the call with us today, our CEO, Dr. Zioav 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.

Speaker Change: Recruiting out part business.

Speaker Change: Trenton, our resilience, especially during extended period of reduced capital spending.

Speaker Change: We are confident.

Speaker Change: That was current headwind, subsides renewed access to capital with spare customer spending to more accurately reflect the expressed high demand for our solutions.

Yoav Zeif: While we cannot control macroeconomic factors or end-market conditions, we are committed to managing what we can with a strong balance sheet and disciplined strategy. These decisions reflect our responsibility to both fiscal and human capital, and we are confident that these changes will help us achieve our target of leading this industry and delivering a consistently and more profitable cash flow positive company, proving the strength of additive manufacturing as a foundation for innovation and business.

Speaker Change: While we cannot control macroeconomic factors or end market conditions.

Yonah Lloyd: In addition, a replay of today's call, including access to the slide presentation, will also be available, and can be accessed through the Investor Relations section of our website. 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.

Speaker Change: We are committed to managing what we can with a strong balance sheet and discipline strategy.

Speaker Change: This decision reflect our responsibility to both fiscal and human capital. And we are confident that these changes will help us achieve our target of leading this industry and delivering consistently and more profitable.

Speaker Change: Cashflow positive company, proving the strength of editing manufacturing as a foundation for innovation and business success.

Yonah Lloyd: 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 Stratus' annual report on Form 20F for the 2023 year. Please also refer to our operating and financial review and prospectus for 2023 and for the second quarter of 2024, which are included as item five of the annual report on Form 20F for 2023 and an exhibit 99.2 to the report on Form 6K that we are furnishing to the SEC today, respectively.

Yoav Zeif: While this restructuring actions mark the conclusion of the former strategic review process, the board and management are always open to continue exploring opportunities that would potentially benefit our shareholders.

Speaker Change: While history's fluctuating actions mark the conclusion of the former strategic review process, the board and management are always open to continue exploring opportunities that would potentially benefit our shareholders.

Eitan Zamir: Thank you, Yoav, and good morning, everyone. We continue to face the challenges the macroeconomic environment is presenting to our customers, which is driving weakness in their topics spending. Despite the year-over-year decline in revenues, we delivered improved growth margins, thanks in part to strong consumable sales and a relentless focus on cost controls.

Aitan: Over to you, Aitan.

Aitan: Thank you, Yonah and good morning, everyone.

Aitan: We continue to face the challenges, the macroeconomic environment is presenting to our customers, which is driving weakness in their capex spending.

Aitan: Despite the year of a year declining revenues, with delivered improved growth margin.

Speaker Change: Thanks, in part, to strong, consumable self.

Yonah Lloyd: Please also see the press release that announces the company's earnings for the second quarter of 2024, which is attached as exhibit 99.1 to a separate report on Form 6K that we are furnishing to the SEC today. Reports on Form 6K that are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's operating results and material developments concerning our company. Stratus assumes no obligation to update any forward-looking statements or information which speak as of their respective dates.

Eitan Zamir: Now, let me get into the details of our numbers. For the second quarter, consolidated revenue of 138 million was down 13.6 percent compared to Q2 2023. Product revenue in the second quarter was 93.6 million compared to 109.1 million in the same period last year, or down by 14.2 percent. Within product revenue, system revenue was 29 million, down by 40 percent compared to 48.3 million in the same period last year, with a longer sales cycle, a key contributor. Consumables revenue grew 6.3 percent to 64.6 million compared to the same period last year. As Yoav mentioned, the ongoing strong performance of consumables signals that the utilization rates of the systems we have sold remain robust.

Speaker Change: and a relentless focus on cost control.

Speaker Change: Now let me get into the details of our numbers.

Speaker Change: For the second quarter, consolidated revenue of 138 million was down 13.6% compared to Q2-2023.

Speaker Change: Product revenue in the second quarter will 93.6 million, compared to 109.1 million in the same period last year, or down by 14.2%.

Yonah Lloyd: As in previous quarters, today's call will include GAP and non-GAP financial measures. The non-GAP financial measures should be read in combination with our GAP metrics to evaluate our performance. Non-GAP to GAP reconciliation are provided in tables in our slide presentation and today's press release.

Speaker Change: Within Product Revenue, System Revenue was 29 million, down by 40% compared to 48.3 million in the same period last year.

Speaker Change: with longer sail cycle, a key contributor.

Yoav Zeif: I will now turn the call over to our chief executive officer, Dr. Yalav Zayf. Yalav. Thank you, Yona. Good morning, everyone, and thank you for joining us. In the second quarter of 2024, We delivered margin improvement and maintained a healthy balance sheet despite continued softness in hardware sales. Our results reflect the resilience of our business model. The challenges our customers continue to face from our interest rates, macroeconomic uncertainty, and reduced capital equipment spending.

Speaker Change: Concerables revenue grew 6.3% to 64.6 million compared to the same period last year.

Speaker Change: As Yonah mentioned, the ongoing strong performance of consumables signals that the utilization rates of the systems we have sold remain robust.

Eitan Zamir: It is important to note that we expect consumables demand to be resilient for the foreseeable future, despite recent weakness in hardware sales, as the install base continued to be well utilized. Service revenue, including Stradisys Direct, was 44.4 million compared to 50.7 million in the same period last year, reflecting a decrease of 12.2 percent. Absent divestitures, service revenue was down 2.4 percent. Within service revenue, customer support revenue was down 3.8 percent compared to the same period last year. Now, turning to growth margins, gap growth margin expanded to 43.8 percent for the quota compared to 41.5 percent for the same period last year.

Yonah Lloyd: It's important to note that we expect consumables demand to be resilient for the foreseeable future. Despite recent weakness in hardware itself.

Yonah Lloyd: and the install base continued to be well utilized.

Yonah Lloyd: Service revenue, including Stratus' Direct, will 44.4 million.

Yoav Zeif: We once again delivered growth in consumables that reflected strong utilization for our existing system, demonstrating the power of that recurring revenue stream. It is important to note that the utilization of consumables came primarily from our FDN technologies, validating that our customers are continuing their shift from prototyping to manufacturing applications, helping them more effectively manage costs and drive efficiency. This bodes well for the future, as we look to expand on the manufacturing floor with exciting new solutions that we plan to introduce.

Yonah Lloyd: Comfort 250.7 million in the same period last year.

Yonah Lloyd: Reflecting a decrease of 12.2%.

Yonah Lloyd: Absent Day vestitures

Yonah Lloyd: Service Revenue will down 2.4%

Yonah Lloyd: Within Service Revenue, customer support revenue will down 3.8% compared to the same period last year.

Yonah Lloyd: Now turning to growth margins.

Yonah Lloyd: GAP growth margin expanded to 43.8% for the quarter, compared to 41.5% for the same period last year.

Eitan Zamir: Non-GAAP growth margin also grew to 49 percent for the quota compared to 48.5 percent in the same period last year. The improvement versus the prior year period was driven in part by a greater mix of consumables and high margins as Stradisys Direct due to divestitures. Gap operating expenses were 86. 0.5 million, compared to 99.9 million during the same period last year. The reduction in expenses was primarily related to lower costs related to perspectives and potential merges and acquisitions. Defense against hostile tender offer, proxy contest, and related professional fees. Non-GAAP operating expenses were 70.9 million, compared to 72.5 million during the same period last year, due primarily to lower employee-related costs.

Yonah Lloyd: Nondgeb Gross margin, also grew to 49% for the quota, compared to 48.5% in the same period last year.

Yoav Zeif: To ensure we continue to deliver long-term value for our shareholders, our ongoing priority is our commitment to innovation in materials, knowledge and workflow to address the strongest adoption opportunities, by prudently investing in technology and materials while also streamlining and focusing on key and user applications. We are positioning strategies for its next phase of growth for our company.

Yonah Lloyd: The Improvement versus the prior year period will driven in part by a greater mix of consumables and high margins.

Speaker Change: As Transyl Direct, you today vestitius.

Speaker Change: GIF operating expenses were 86 6.

Speaker Change: 4.5 million, compared to 99.9 million during the same period last year.

Speaker Change: The reduction in expenses was primarily related to lower costs related to prospective and potential merges and acquisitions. Defense against hostile tender offer, proxy contest and related professional fees.

Yoav Zeif: The low-volume eye-mix nature of the parts aftermarket presents supply costs and logistical challenges to keep the air and dust producing revenue. Editing manufacturing helps solve those challenges, often providing improved power design within region and all-demand manufacturing in Aviation hubs, at competitive and often lower cost than traditional supply. AMCraft holds an ESAT-Powered 21G production organization approval, making it a qualified provider of air-worldly parts to the aviation industry. Together, we look forward to supporting the development of their global production capability and market awareness.

Speaker Change: Non-gift operating expenses were 70.9 million, compared to 72.5 million during the same period last year.

Speaker Change: Jiu Primarily to Lower Employee Related Costs.

Eitan Zamir: Non-GAAP operating expenses were 51.3% of revenue for the quarter, compared to 45.4% for the same period last year. Regarding our consolidated earnings, GAAP operating loss for the quarter was 26 million, compared to a loss of 33.7 million for the same period last year. Non-GAAP operating loss for the quarter was 3.2 million, compared to operating income of 5 million for the same period last year. The change reflects the lower overall revenue and increase in OPEX and the percentage of revenue, offset somewhat by lower employee-related costs. Gap net loss for the quarter was 25.7 million, or 36 cents per diluted share, compared to a net loss of 38.6 million, or 56 cents per diluted share for the same period last year.

Speaker Change: Non-gap operating expenses will 51.3% of revenue for the quarter, compared to 45.4% for the same period last year.

Speaker Change: Regarding our consolidated earnings.

Speaker Change: GAP operating loss for the quarter was 26 million, compared to a loss of 33.7 million for the same period last year.

Speaker Change: Known Gap operating loss for the quarter will 3.2 million, compared to operating income of 5 million for the same period last year.

Speaker Change: The change reflects

Speaker Change: The lower overall revenue and increase in optics as a percentage of revenue offset somewhat by lower employee related costs.

Speaker Change: Gapnet lost for the quarter was 25.7 million, or 36 cents per diluted chair.

Speaker Change: Compar, to a net loss of 38.6 million or 56 cents per their literature for the San Pyrid last year.

Eitan Zamir: Non-GAAP net loss for the quarter was 3 million, or 4 cents per diluted share, compared to net income of 2.5 million, or 4 cents per diluted share in the same period last year. Adjusted EBDA was 2.3 million for the quarter, compared to 10.6 million in the same period last year. We used 2.4 million of cash in our operations during the second quarter, compared to the use of 23.2 million of cash for operations in the same period last year. Including 3 million of capital expenditures, 3 cash loss for the quarter was negative 5.4 million. We ended the quarter with 150.9 million in cash equivalent and short end deposits, compared to 161.1 million at the end of the first quarter this year.

Speaker Change: Nongap net loss for the quarter was 3 million, or 4 cents per diluted share, compared to net income of 2.5 million, or 4 cents per diluted share in the same period last year.

Yoav Zeif: During the quarter, we introduced new staff i.e, deaf printing capability, with the launch of our H350 version 1.5, which provides additional applications and use cases for a growing set of manufacturing and users, without compromising speed or quality. Staff Polypropylene for using both the original and the upgraded H350. Developed in partnership with BSS, this exciting new material is designed to provide superior quality and lower cost per unit. The material is ideal for using high volume and manufacturing applications like auto, medical, consumer, sports and industrial, while maintaining exceptional quality across the entire build.

Speaker Change: A Justin Dividag was 2.3 million for the quarter, compared to 10.6 million in the same period last year.

Speaker Change: We used 2.4 million of cash in our operations during the Second Quarter, compared to the use of 23.2 million of cash from operations in the same period last year.

Speaker Change: Including 3 million of capital expenditures, 3 cash flows for the quarter was negative 5.4 million.

Speaker Change: We ended the quarter with 150.9 million in cash, cash equivalent, and short-term deposits. Compared to 161.1 million at the end of the first quarter this year.

Eitan Zamir: Our balance sheet remains strong, and we are well capitalized and well positioned to identify and capture value-enhancing market opportunities.

Speaker Change: Our balance sheet remains strong and we are well-capitalized and well-positioned to identify and capture value enhancing market opportunities.

Eitan Zamir: Now let me turn to our outlook for 2024. We expect the ongoing challenging backdrop to persist for the remainder of the year, continuing to cause delay purchases and longer sales cycle. We are optimistic that our hardware sales in the second half will grow as compared to the first half due to our improved pipeline, expected higher government sales, and continued strength in. Based on our first half result and current visibility of our near-term opportunities, we are adjusting our full-year guidance as follows. We now expect full-year 2024 revenue to range between 570 to 580 million. We expect third-quarter revenue to slightly improve sequentially from the second quarter this year.

Speaker Change: Now let me turn to our Outlook 4-2024.

Yoav Zeif: In medical, we launch the J5 Digital Anatomy 3D printer, a major step forward to address the growing demand for cost-effective, high fidelity and atomic model. The new printer will enable hospitals, medical device manufacturers and research institutions to improve patient outcomes through a non-surgical planning. Streamlining operations and bringing products to market more quickly. We also announced the involvement of the first patient in a landmark clinical study to assess the use of 3D printed models for autopaedic oncology.

Speaker Change: We expect the ongoing challenging backdrop to persist for the remainder of the year, continuing to cause delay, purchases and longer sales cycle.

Speaker Change: We're optimistic that our hardware sales in the second half will grow as compared to the first half due to our improved pipeline, expected higher government sales and continued strength in dental.

Speaker Change: Based on the first tough results in current visibility of our near-term opportunities, we are adjusting our full-year guidance as follows.

Yoav Zeif: We also announced the involvement of the first patient in a landmark clinical study to assess the use of 3D printed models for autopaedic oncology. We correspond the study with RICO USA seeking to demonstrate potential improvement in surgical outcomes, such as reduced blood loss, shorter operating times under anesthesia and decreased risk of procedural complications. The study is expected to last 12 months and involves up to 150 subjects across three sites. This is just the latest example of how the power of additive manufacturing is an excellent solution to improve patient outcomes.

Speaker Change: We now expect full year 2024 revenue to range between 570 to 580 million.

Yoav Zeif: We correspond the study with RICO USA seeking to demonstrate potential improvement in surgical outcomes, such as reduced blood loss, shorter operating times under anesthesia and decreased risk of procedural complications. The study is expected to last 12 months and involves up to 150 subjects across three sites. This is just the latest example of how the power of additive manufacturing is an excellent solution to improve patient outcomes.

Speaker Change: We expect third quarter revenue to slightly improve sequentially from the second quarter this year.

Eitan Zamir: From a growth margin perspective, we now expect full-year 2024 to be in a range of 48.7% to 49%. For 2024, we expect our operating expenses to range between 276 to 278 million. We now expect non-GAAP operating margins to be between 0.5% to 1% for the full-year. We anticipate a gap net loss of 106 to 91 million or $1.50 to $1.29 per diluted share, a non-gap net income of 1 million to 4 million or 1.25 cents for the full-year. Adjusted EBITDA is now expected to be in a range of 24 million to 27 million for the year.

Speaker Change: from a gross margin perspective, we now expect full year 2024 to be in a range of 48.7% to 49%.

Speaker Change: For 2024, we expect our operating expenses to range between 276 to 278 million.

Speaker Change: We now expect non-gap operating margins to be between 0.5% to 1% for the full year.

Speaker Change: We anticipate a gap net loss of 106 to 91 million.

Speaker Change: or $1.50 to $1.29 per diluted chair and non-gap net income of $1 million to $4 million or $1 to $5 for the full year.

Speaker Change: And just a little bit of, is now expected to be in a range of 24 million to 27 million for the year.

Eitan Zamir: Capital expenditures are now expected to range between 20 to 25 million for the year.

Yoav Zeif: The cornerstone of our software is the GraphCut Print Pro for Print Preparations and GraphCut Streamline Pro for operations. GraphCut Print Pro is available across FDM, SAS, and most recently, Polyjet. Adding Polyjet adds that large install base of 3D printers to GraphCut. Demand for Print Pro remains robust, with a number of multi-year license sold. Gratkat Streamline Pro works with FDM and Polygets Castamel who need to scare 3D printing prototypes tooling and end-use paths.

Speaker Change: Kapita expenditures are now expected to range between 20 to 25 million for the year.

Yoav Zeif: With that, let me turn the call back over to Yoav for closing remarks.

al: With that, let me turn the call back over to you, Al, for closing remarks, you have.

Yoav Zeif: Yoav, thank you, Eitan. In summary, we are continuing to differentiate ourselves during challenging times for industry and makes the house yet necessary adjustment to maintain and accelerate our leading position. Our investment in new and exciting technologies is advancing, as evidenced by the products we are bringing to market that will serve our customers well as they accelerate their adoption of additive manufacturing. We spoke in the past of an inflection point where additive manufacturing graduated from a prototyping niche to becoming a cornerstone of the manufacturing process, and we continue to see signs of this momentum. As we march ahead, we look forward to return to strong growth from the pent-up demand in systems sales when the current environment eases.

al: Thank you, Eitan.

al: In summary, we are continuing to differentiate ourselves during challenging times for industry and makes the house yet necessary adjustment to maintain and accelerate our leading position.

al: Our investment in new and exciting technologies is advancing as evidence by the product we are bringing to market that will serve our customers well as they accelerate their adoption of a redeeming manufacturing.

Yoav Zeif: We include a software with new printers as part of the initial purchase and after one year of free trial the license is available for purchase. Launching the first quote of Streamline Pro has really hit the ground running and is building momentum.

al: We spoke in the past of an inflection point where editing manufacturing graduated from

Yoav Zeif: Also as part of our software platform we introduce part on demand by Grapkat, a new integration that synchronizes the company's software with Stratasys Direct, our part service bureau, allowing Castamel to access its fleet of printers and expanding their network of manufacturing with Stratasys, a pre-certified producer.

al: A prototyping niche to becoming a cornerstone of the manufacturing process and we continue to see signs of this momentum.

al: As we march ahead, we look forward to return to strong growth from the pent-up demand in system sales when the current environment easers.

Yoav Zeif: In the meantime, we will continue to deliver the excellence our customers deserve as industry leaders in technological innovation, service and reliability. Thanks to our robust balance sheet, diversified product and software offering, the cost-saving initiatives we are announcing today and the large and growing opportunities ahead will look forward to delivering relative outperformance and enhance shareholder value.

al: In the meantime we will continue to deliver the excellence our customer deserve.

Yoav Zeif: And finally, I'm excited to share that we have launched our new Grapkat IoT platform featuring connected service and advanced reporting and alerts. The platform demonstrates our customer's first Stratasys digital transformation capabilities, enabling value-edit services through advanced supervisory, control and data acquisition. The Grapkat IoT platform offers a high quality software solution that ensures dependable robust and secure near real-time data collection. It improves printer uptime, speeds up issue resolution and boosts value for our Streamline Pro users. These new features have launched on our Polyjet J3 and J5 system and we expect to expand them across our fleet of printers over time.

al: As industry leaders in technological innovation, service and reliability.

al: and thank to our robust balance sheet diversified product and software offering.

Speaker Change: The cost saving initiatives, we are announcing today.

Speaker Change: and the large and growing opportunities ahead, we look forward to delivering relative out performance and enhance shareholder value.

Operator: With that, let's open it up for questions.

Operator: Operator, thank you, and now I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue.

Speaker Change: We did, let's open it up for questions, Operator.

Speaker Change: Thank you. And now, picking up the question and answer session, if you'd like to be placed in the question queue, please press star one under telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue.

Operator: As a reminder, we ask you, please ask one question and one follow-up, then return to the queue.

Speaker Change: As a reminder, we ask you, please ask one question and one follow-up that return to the Q. Our first question is coming from Greg Palm from Craig Hallum, your life is now live.

Greg Palm: Our first question is coming from Greg Palm from Craig Allen; your line is now live.

Yoav Zeif: Hey, thanks for taking the questions here. A couple of ones. I guess I want to first start with the strategic alternatives process. I know you're formally wrapped it up, but as you look back on it, curious if you learned anything during this process. Presumably, you were talking with lots of industry players, but for example, did you get a better sense of what's needed to drive better profitability across the industry? It's very, you know, more importantly, has your view on consolidation changed at all, just, you know, going forward. Can you just give us a little bit of sense and kind of the process and what you learned.

Yoav Zeif: Now I'd like to highlight some milestone subsequent to the Quoters and first we announced our plan to move our US headquarters in Eden Prairie to a single, newer, least facility a few minutes away. The new facility provides us with more space to enhance collaboration and creativity while improving efficiencies. Given the huge multi-billion dollar total addressable market, Dental represents it remains a major area of focus. We recently introduced the Dental Jet XL solution, our latest innovation in Dental 3D printing technology.

Greg Palm: Hey, thanks for taking the questions here. A couple ones, I guess I want to first start with the...

Dr. Shijik: Dr. Shijik alternative's process. I know you're firmly wrapped it up.

Greg Palm: But as you look back on it, you know, curious if you learned anything or in this process presumably you were talking with lots of

Speaker Change: In this replayers, for example, did you get a better sense of what needed to drive better profitability across the industry more importantly, as your view on consolidation changed at all, just going forward, can you just give us a little bit of a sense of the process in what you learned?

Yoav Zeif: Given the huge multi-billion dollar total addressable market, Dental represents it remains a major area of focus.

Yoav Zeif: Thank you, Greg, for the question.

Yoav Zeif: What we have learned, we will involve in few opportunities, analyze them in depth. Bottom line, we are investing in strategies.

Yoav Zeif: We recently introduced the Dental Jet XL solution, our latest innovation in Dental 3D printing technology. This new printer is high speed designed to further improve lab productivity and reduce cost. The Dental Jet XL produces simultaneously and at scale highly accurate models for crowns, bridges, implants and aligners as well as surgical guides.

Yoav Zeif: This new printer is high speed designed to further improve lab productivity and reduce cost. The Dental Jet XL produces simultaneously and at scale highly accurate models for crowns, bridges, implants and aligners as well as surgical guides. As a reminder, our Trudent solution delivers a real tangible value proposition for dentures representing the only monoblock full color solution in 3D printing, creating realistic dentures for patients and driving Zamir, due to its substantial cost saving. We are in active discussion with leading dental channels, including some of the largest DSOs in the United States, and look forward to continued strong performance in this industry.

Speaker Change: Thank you Greg for the question.

Speaker Change: What do we have learned?

Speaker Change: We will involve in few opportunities, analyze them in depth.

Yoav Zeif: I think this is the bottom line, and this is the key learning from the entire process. We have the right technologies, we have the right focus on the right use cases, we have unique assets, and we better put our money to create share or those value in creating value through the assets that we have. So taking our solution to the market, and I have no doubt, despite the challenges, the macroeconomic challenges and the challenges with the hardware, the strategies is the best company in the industry.

Speaker Change: Bottom line, we are investing in strategy.

Speaker Change: I think this is the bottom line and this is the key learning from the entire process.

Speaker Change: We have the right technologies, we have the right focus on the right use cases, we have unique assets.

Yoav Zeif: As a reminder, our Trudent solution delivers a real tangible value proposition for dentures representing the only monoblock full color solution in 3D printing, creating realistic dentures for patients and driving Zamir, due to its substantial cost saving. We are in active discussion with leading dental channels, including some of the largest DSOs in the United States, and look forward to continued strong performance in this industry.

Speaker Change: and we better put our money to create your or their values in creating value through the assets that we have. Through taking our solution to the market and I have no doubt.

Speaker Change: Despite the challenges, the macroeconomic challenges and the challenges with the hardware, the strategies is the best company to industry.

Yoav Zeif: We still believe in consolidation, but with reasonable multiples and valuations because we still believe in scale. But with the current situation, the board came to the conclusion that we better invest in strategies.

Speaker Change: We still believe in consolidation.

Speaker Change: But with reasonable multipers and valuations, they could still be living scale, but with the current situation, the board came to the conclusion that we better invest in substance.

Greg Palm: Yeah, okay, understood.

Yoav Zeif: And then my second question on the pent-up demand, are you able to quantify exactly what's out there. And, for example, does utilization trends give you any insight into the timeline where certain customers may need to actually be forced to invest in the system. And I know we're all cognizant of the macro and manufacturing cycle and whatnot, but just sort of wondering what kind of visibility you have over the next six or twelve months. So, thank you.

Yoav Zeif: And finally, we recently announced that our collaboration with coal plant as advance to a pre-clinical trial, where the study will test the ability of printed breast implants to promote the growth of natural tissue and completely degrade over time and without triggering an immune response. This would be a revolutionary alternative for both reconstructive and aesthetic procedures that represent a significant opportunity to serve the three billion dollar breast implant marketplace. This is inspiring work, as we push the boundaries of innovation to improve life and advance healthcare.

Speaker Change: Okay, I understand. And then my second question on the pent-up demand, are you able to quantify exactly?

Speaker Change: What's out there? And, you know, for example, does utilization trends give you any insight into, you know, the timeline where certain customers may need to actually be forced to invest in the system. Then, we're all cognizant of the macro.

Yoav Zeif: This would be a revolutionary alternative for both reconstructive and aesthetic procedures that represent a significant opportunity to serve the three billion dollar breast implant marketplace. This is inspiring work, as we push the boundaries of innovation to improve life and advance healthcare.

Speaker Change: Manufacturing Cyclone and whatnot, but just sort of wondering what kind of visibility you have over the next six to 12 months.

Yoav Zeif: So if you know we are not quantifying because this industry falls many times into the threat of promising, but I can share observations from the market. Post COVID, people, both people, customers, businesses, both significant, large quantities of machines, and not all of them were utilized. And now that interest rates are high, they are focusing on ramping up those machines, increasing utilization. And we can see it. We can see that in key use cases, the utilization is going up. It's not an accident that our consumers are increasing, quote-unquote, year over year. We see more utilization in the high-end machines; very strong utilization that we didn't experience in the past.

Speaker Change: So thank you. So as you know we are not quantifying because this industry fall many time into the threat from a thing.

Speaker Change: But I can't share observation from the market.

Yoav Zeif: Now, turning to our board strategic review process. After a comprehensive review of a wide range of strategic alternatives to unlock shareholder value, the board determined that implementing various restructuring actions will best position strategies to maximize value for our shareholders. These actions will support our efforts to retain and build on our additive manufacturing leadership. They will serve to strengthen our industry leading balance sheet and robust business model to more effectively weather all market cycles, positioning us for outside profitable growth in the years ahead. We expect the restructuring actions to produce approximately 40 million dollars in annual cost savings, beginning in the first quarter of 2025, which is expected to generate an annualized EBDA margin of 8% at current revenue levels.

Speaker Change: Tosh Kovid.

Speaker Change: People

Speaker Change: Both people, customers, businesses, both significant loud quantities of machines.

Speaker Change: and not all of them were used to light.

Speaker Change: And now that interest rates are high, they are focusing on ramping up those machines

Speaker Change: Increasing Utilization.

Speaker Change: and we can see that in key use cases the utilisation is going up it's not an accident that our consumer both are increasing.

Speaker Change: Hotel of a quarter year over year with simoutilization in the high-end machines.

Yoav Zeif: And this is by definition also balancing the old install base that we have, and we still increase the number of spools or kilograms that we are selling in material. Once interest rates will be released a bit, I believe we will see this pent-up demand because there are two effects to the increase utilization. One, you will need more machines because there is so much one machine can give you in terms of capacity. But not less important, customer learn how to work with initiative as part of their manufacturing solution. And the moment they are there and the moment more people within the organization know how to operate it, how to design for our initiative, we are in a much better place.

Speaker Change: Very strong utilisation that we didn't experience in the past and this is by definition also balancing the old installed ways that we have and we still increase the number of spools or kilo ground that we are setting in material.

Speaker Change: Warring to a straight.

Eitan Zamir: The initiatives are focused on two important areas. The first is to adjust our cost structure to better match current market conditions. Primarily, through a head count reduction of approximately 15% by the end of year, which will drive the majority of the expected savings. Second, we are strengthening our effort to increase market penetration by helping our customer overcome barriers to wider additive manufacturing adoption. We will utilize our scan and breadth of technology to focus our go-to-market effort on the main road drivers of our business.

Yoav Zeif: The initiatives are focused on two important areas. The first is to adjust our cost structure to better match current market conditions. Primarily, through a head count reduction of approximately 15% by the end of year, which will drive the majority of the expected savings. Second, we are strengthening our effort to increase market penetration by helping our customer overcome barriers to wider additive manufacturing adoption. We will utilize our scan and breadth of technology to focus our go-to-market effort on the main road drivers of our business.

Speaker Change: We'll be really a bit.

Speaker Change: I believe we will see this pent-up demand because there are two effects to the increased periodization.

Speaker Change: One, you will need more machines because there is so much one machine can give you.

Speaker Change: in terms of capacity.

Speaker Change: [inaudible]

Speaker Change: No less important.

Speaker Change: Customers learn how to work with additive as part of them on a factory solution.

Speaker Change: and the moment they're out there

Speaker Change: And the moment's more people within the organization know how to operate it, how to design for editing we are in a much better place, because this is one of the most important

Yoav Zeif: This is one of the most important constraints. So, Capix will be released, and we will be there ready to sell. I understand.

Speaker Change: So, capex will be really, and we will be there ready to sell.

Greg Palm: Okay, appreciate that. That's a lot. Thank you.

Eitan Zamir: Over the past few years, we have seen continued penetration of additive manufacturing with applications across multiple sectors such as error and auto for tooling and path, dental for various uses, medical for pre-operative needs, and others. However, penetration is not accelerated as it is. We continuously assess our business operations to ensure that we are optimally aligned with market conditions and have been closely monitoring this prolonged cycle of reduced client capital spending, which is stretching longer than anticipated.

Yoav Zeif: Over the past few years, we have seen continued penetration of additive manufacturing with applications across multiple sectors such as error and auto for tooling and path, dental for various uses, medical for pre-operative needs, and others. However, penetration is not accelerated as it is. We continuously assess our business operations to ensure that we are optimally aligned with market conditions and have been closely monitoring this prolonged cycle of reduced client capital spending, which is stretching longer than anticipated.

Speaker Change: And you're said, okay, I appreciate that, that's a lot.

James Rachute: Next question is coming from James Rachute from the Human Company.

James Rachute: Your line is now live. Hi, thanks. So, it looks like, you know, with the second half, you are assuming sequential and preliminary revenues.

James: Thank you. Next question is coming from James for shooting from him and telling you, line is that what?

James: Thanks, so it looks like, you know, with the second half, you are assuming.

Eitan Zamir: I would have thought your close margin outlook would have been a little better in the second half. So, talk to us a little bit about what drives that. Is that just a higher mix of hardware? And with that, what do the new products contribute to the other margins on the hardware side? Thanks.

James: Sequential Improvement in revenues. I would have thought you were close margin out, like what has been a little better in the second half. So talk this a little bit about what drives that. Is that just a higher mix of hardware? And with that, wouldn't the new products contribute to it?

Eitan Zamir: Thanks, Jim, for the question. So, you actually hit it on the head. When we think about growth margin, first of all, 49% very solid growth margin for Q2. When we think about the second half of the year, it's mainly a mix of hardware, consumable, and services. And, you know, the changes, the differences between, you know, a 49 to 48.8; these are really small differences that can be impacted by different mix, by specific deals. So, we, I think the bottom line is that we believe that the second half of the year and the full year of 2024, we will maintain high growth margin at the 49 levels, which I think is very promising also for the future.

Speaker Change: Edder Margin, so I'm a hard-wifter, I thank you.

Eitan Zamir: We are making it easier for customer to more broadly adopt additive manufacturing by addressing the total cost of ownership, which is largely influenced by material consumption. We are also increasing resources to better educate and support our customers' engineers who are still learning to fully utilize additive manufacturing design and workload benefits. And we will increase our effort to standardize additive manufacturing to better align with traditional manufacturing processes. We are also focusing on applications where additive manufacturing presents the most compelling benefits relative to conventional methods.

Yoav Zeif: We are making it easier for customer to more broadly adopt additive manufacturing by addressing the total cost of ownership, which is largely influenced by material consumption. We are also increasing resources to better educate and support our customers' engineers who are still learning to fully utilize additive manufacturing design and workload benefits. And we will increase our effort to standardize additive manufacturing to better align with traditional manufacturing processes. We are also focusing on applications where additive manufacturing presents the most compelling benefits relative to conventional methods.

Speaker Change: Thanks to you for the questions. So, you actually hit it on the head. When we think about growth margin, first of all, 49% Very solid growth margin for Q2. When we think about the second half of the year,

Speaker Change: It's Maria Mix

Speaker Change: of Hardware, consumable and services.

Speaker Change: and you know that the change is the difference between you know 49 to 48.8, these are really...

Speaker Change: Small difference is that can be impacted by different meanings.

Speaker Change: by specific deals. So we, I think the bottom line is that we believe that the second office of the year and the full year of 2024, we will maintain high growth margin at the 49 levels, which I think is very promising also for the future and when you take into account.

Over the past years, we have shared some of this innovation with you, such as the manufacturing focused F-1300 printer, proven dental solutions such as Trudeon and our suite of specialized software offerings. These steps are designed to help us align costs with current conditions, build a long-term and significant, more profitable, cash-generating business, and stay agile during downturns, while being ready to respond quickly when customer spending returns. When the right technology is used for the right applications, our customers are happy and we generate recurring business.

Yoav Zeif: Over the past years, we have shared some of this innovation with you, such as the manufacturing focused F-1300 printer, proven dental solutions such as Trudeon and our suite of specialized software offerings. These steps are designed to help us align costs with current conditions, build a long-term and significant, more profitable, cash-generating business, and stay agile during downturns, while being ready to respond quickly when customer spending returns. When the right technology is used for the right applications, our customers are happy and we generate recurring business.

Eitan Zamir: And when you take into account the restructuring and the savings that will come from the restructuring as you model the next year, this percentage will even increase further.

Speaker Change: The restructuring and the saving that will come from the restructuring as you model the next year this percentage will even increase further

Eitan Zamir: And just with respect to the hardware pipeline, you picked off a couple of areas where you feel that there's, they give you the confidence in the improvement in the second half, government dental.

Speaker Change: And just with respect to the hardware pipeline, you kicked off a couple of areas where you feel that gives you the confidence.

Eitan Zamir: Talk to us a little bit about where you have more confidence and where it's still a little unsure. Thank you. So Jim, maybe at the start I'll say that when you look on the model on the guidance, we actually use the very, very moderate growth for the second half of the year compared to the first half. When we think about the offering and the changes in the second half, first of all, we have the F3300 that we've just launched, and we expect to be stronger in the second half of the year. We have a trudent that is improving and growing, and some other offerings.

Speaker Change: the improvement in the second half government dental. Talk to us a little bit about where you have more confidence and where it's still a little unsure.

Speaker Change: So, maybe the start I'll say that when you look on the model on the guidance, we actually use the very, very moderate.

Yoav Zeif: As an example, one of the world's largest automotive OEMs has purchased dozens of our systems over time and typically see an ROI on printer purchases within 12 months. So when deployed properly, the technology delivers and can lead to increasing demand over time. As we have noted, consistently in recent quarter, customers' utilization, engagement levels, and demand continue to be strong despite the current purchased constraints of our customers. Our diverse portfolio of hardware, consumable and services, including our part business, strengthens our resilience, especially during extended period of reduced capital spending.

Speaker Change: a growth for the second half of the year.

Speaker Change: and compared to the first half.

Speaker Change: And when we think about the offering and the changes in the second hour, first of all we have the F33800.

Speaker Change: that we've just launched and we expect to be stronger in the second half of the year. We have trudend that is improving and growing and some other offerings.

Eitan Zamir: We also have a better availability to the pipelines for the second half, and we see a stronger pipeline. And maybe last but not least, you know, you're with us with the industry for so many years. There is a second half of the year is usually stronger. So we beg that also into the model. However, when you look at this all in all, very moderate growth for the second half, which, you know, we try to be conservative in our approach. Okay, thank you.

Speaker Change: We also have a better availability to the pipelines for the second house and we see a stronger pipeline and maybe last but not least

Speaker Change: You know, you're with us with the industry for so many years. There is anality, the second half of the year is usually stronger. So we beg that also into the model. However, when you look at this all-enall, very moderate growth for the second half, which...

Yoav Zeif: We are confident that once current headwind subsides, we need access to capital, we spare customer spending to more accurately reflect the expressed high demand for our solutions. While we cannot control macroeconomic factors or end-market conditions, we are committed to managing what we can with a strong balance sheet and discipline strategy. These decisions reflect our responsibility to both fiscal and human capital and we are confident that these changes will help us achieve our target of leading this industry and delivering a consistently and more profitable cash flow positive company, proving the strength of additive manufacturing as a foundation for innovation and business.

Speaker Change: which we try to be a conservative in our approach.

Speaker Change: Ok, thank you.

Koi Jensen: Next question is coming from Koi Jensen from Ketrape Show, Drubilus, now live. Hey gentlemen, thanks for taking my questions here. Maybe a couple of eight on for you, of the $40 million OPEX or the $40 million cost savings for the year. How much is going to be in COG suppresses OPEX? We will not provide the exact details. It will be the 40 million in total. It will be broken or split between COGs and the OPEX. The majority will be in OPEX, naturally, but there will be incremental savings and improvement to growth margin following this restructuring.

Eitan Zamir: Eitan Zamir, Yonah Lloyd,

Eitan Zamir: Thank you, next question is coming from Troy Jensen from Ketra Pitch Road, July and is now live.

Troy Jensen: Hey gentlemen, that thanks for taking my questions here. Maybe a couple of A-Ton for you of the $40 million or the $40 million cost savings for the year. How much is it going to be in cost of the surprises outpacks?

Speaker Change: We will not provide the exact details, it will be the 40 minutes total, it will be a...

Speaker Change: Broken or split between Cogs and the Opx, the majority will be in Opx naturally, but there will be incremental savings and improvement to growth margin following this restructure.

Koi Jensen: Okay, perfect.

Koi Jensen: So another one here for you. You may not be able to answer it. I'm going to throw it out there.

Speaker Change: I'm going to show you how much of your strategic review boiled down to the fact that you still want to dust out metal and is the hope to just wait a year or so and let that nano integrate those guys and then ultimately merge with them.

Yoav Zeif: How much of your strategic review boil down to the fact that you still want a Desktop Metal and it's the hope to just wait a year or so and let that nano integrate those guys and then ultimately merge with them. Obviously, I cannot comment on such a thing. I can only repeat what I said that currently we believe that the right sizing of the company, the focus on our key drivers and use cases, and focusing on adoption, where we have an advantage because of our AEEs and our the fact that we are close to the biggest adopter of this technology, will generate higher value to our shareholders. And now, when starting with 8% EBDA margin, we are quite certain about this 8% EBDA margin.

Eitan Zamir: Over to you, Eitan. Thank you, Yoav, and good morning, everyone. We continue to face the challenges the macroeconomic environment is presenting to our customers, which is driving weakness in their topics spending.

Speaker Change: Obviously, I cannot comment on such a thing. I can only repeat what I said that currently we believe that the right side is in the company.

Speaker Change: the focus on our key driver and use gasey.

Eitan Zamir: Despite the year-over-year decline in revenues, we delivered improved growth margins thanks in part to strong, consumable sales and a relentless focus on cost controls. Now, let me get into the details of our numbers.

Speaker Change: and uh...

Speaker Change: for everything going on adoption.

Speaker Change: We have an advantage because of our AES and our defect that we are close to the biggest adopter of this technology, we generate higher value to our shareholders and our starting with AES percent if you are the margin and

Eitan Zamir: For the second quarter, consolidated revenue of 138 million was down 13.6 percent compared to Q2 2023. Product revenue in the second quarter was 93.6 million compared to 109.1 million in the same period last year, or down by 14.2 percent. Within product revenue, system revenue was 29 million, down by 40 percent compared to 48.3 million in the same period last year, with longer sales cycle, a key contributor. Consumables revenue grew 6.3 percent to 64.6 million compared to the same period last year.

Yoav Zeif: So this is not something we are just throwing on the table. We are certain in our ability to be profitable also from 2024 from Q4 and on 2025, assuming the same levels of revenues.

Speaker Change: We are quite certain about this.

Speaker Change: 8% EBDAMaraging. So this is not something we are just throwing on the table. We are certain in our ability to be profitable also from 2024 from Q4 and on 2025, assuming the same elements of revenue.

Yoav Zeif: So this is really unique in our industry, and we believe that once we see growth coming back—and it will because the pent-up demand is there—EBDA will be even larger.

Speaker Change: So, this is really unique in our industry and we believe that once we see growth coming back and it will, because the pent-up demand is there, EBITDA will be even larger.

Yoav Zeif: All right, one last question for you, Yoav. I'd like to talk a little bit about Bamboo Labs. I mean, it is a company that I started hearing a lot more about. And obviously, this quarter, you guys just filed a patent lawsuit. So can you just kind of talk about the low-end FDM, or do you guys see more competition there? And why so aggressively go after bamboo? And there's so many others that are probably violating technology too.

Speaker Change: Defeat.

Speaker Change: Alright, one last question for you, Yoav. I'd like to talk a little bit about bamboo labs. I mean, it is a company that I started hearing a lot more about.

Eitan Zamir: As Yoav mentioned, the ongoing strong performance of consumables signals that the utilization rates of the systems we have sold remain robust. It is important to note that we expect consumables demand to be resilient for the foreseeable future despite recent weakness in hardware sales, as the install base continued to be well utilized. Service revenue, including Stradisys Direct, was 44.4 million compared to 50.7 million in the same period last year, reflecting a decrease of 12.2 percent. Absent divestitures, service revenue was down 2.4 percent. Within service revenue, customer support revenue was down 3.8 percent compared to the same period last year.

Speaker Change: and obviously this quarter you guys just filed a patent, a lawsuit so can you just kind of talk about the low end, the FDM, or you guys see more competition there and why still it restlessly go after bamboo and there's so many others that are probably violating technology too.

Yoav Zeif: In general, we, by a divesting make-a-bot, made a statement that we are not lying in the low-end FDM market. We are not there. We are going for the industrial FDM market, which requires different standards, different power properties, and different materials. And we don't want even to compete there. Having said that, our shareholders deserve a return on their investment in innovation. We need to take care of our shareholders. And this is part of our commitment to safeguarding our intellectual poverty. We filed this complaint, this file against Bamboo in Texas. And we believe that no one can use our IP.

Speaker Change: In general, we...

Speaker Change: By a divesting make-up, made a statement that we are not lying in the low end FDM market. We are not there, we are going for the industrial FDM market, which required different...

Speaker Change: Stand out, different part property, different materials, and we don't want even to compete there. Having said that, I will share all there, deserve.

Speaker Change: Return on their investment in innovation.

Speaker Change: We need to take care of our shareholders and this is part of our commitment to safeguarding our intellectual poverty.

Eitan Zamir: Now, turning to growth margins, gap growth margin expanded to 43.8 percent for the quota compared to 41.5 percent for the same period last year. Non-gap growth margin also grew to 49 percent for the quota compared to 48.5 percent in the same period last year. The improvement versus the prior year period was driven in part by a greater mix of consumables and high margins as Stradisys Direct due to divestitures.

Speaker Change: We find this complaint, this file in Gersbambu, in Texas.

Speaker Change: and we believe that...

Yoav Zeif: We're talking about 10 essential patents without paying on it. This is our commitment both to the industry and to our shareholders. All right.

Speaker Change: No one can...

Speaker Change: Use our IP, and we're talking about 10 essential patterns.

Speaker Change: Without paying for it.

Speaker Change: This is our commitment both to the industry and to our shareholders.

Yoav Zeif: I'm good.

Yoav Zeif: Good luck in the second half, gentlemen. Thank you.

Eitan Zamir: Gap operating expenses were 86. 0.5 million, compared to 99.9 million during the same period last year. The reduction in expenses was primarily related to lower costs related to perspectives and potential merges and acquisitions. Defense against hostile tender offer, proxy contest, and related professional fees. Non-gap operating expenses were 70.9 million, compared to 72.5 million during the same period last year, due primarily to lower employee related costs. Non-gap operating expenses were 51.3% of revenue for the quarter, compared to 45.4% for the same period last year.

Speaker Change: All right, I'm good, good luck in the second half, gentlemen.

Operator: As a reminder, that's star one to be placed in the question queue.

Jacob Stepan: Our next question is coming from Jacob Stepan from Lake Street; your line is out live. Thanks for taking my questions. I guess I just wanted to touch on the restructuring initiative as well. I guess when you kind of think about the 15% workforce reduction, is that kind of a broad-based workforce reduction, or I guess are you kind of realigning some of these resources within the company and making broader kind of cuts? Any comments that would be helpful? Thank you for the question.

Speaker Change: Thank you as a reminder that star ones we place in the question queue.

Speaker Change: Our next question is to move from Jacob's to find from least for your line as our life.

Speaker Change: Hey guys thanks for taking my questions

Speaker Change: Um, I guess I just wanted to touch on the restructuring initiative as well. I guess when you kind of think about the...

Speaker Change #100: 15% workforce reduction. Is that kind of a broad base workforce reduction or, I guess, are you kind of realigning some of these resources within the company and making broader kind of cuts? Any comments that would be helpful?

Yoav Zeif: The restructuring is; I will take it in a short sentence. It's strategy-led restructuring. It's not across the board. It's not blind. We have a strategy. We are sharpening our strategy based on current market conditions. And we are focusing on adoption.

Speaker Change #101: Thank you for the question.

Speaker Change #102: The restructuring is...

Speaker Change #103: I'll take in the showtains sentence, it's...

Speaker Change #104: Stratagy, Lead, Restructuring. It's not across the ball, it's not blind.

Eitan Zamir: Regarding our consolidated earnings, gap operating loss for the quarter was 26 million, compared to a loss of 33.7 million for the same period last year. Non-gap operating loss for the quarter was 3.2 million, compared to operating income of 5 million for the same period last year. The change reflects the lower overall revenue and increase in OPEX and the percentage of revenue, offset somewhat by lower employee related costs.

Speaker Change #104: We have a strategy.

Speaker Change #104: We are sharpening our strategy based on current market condition

Yoav Zeif: What does it mean? We're narrowing the focus to proven use cases, to education and enablement, and to complete wall flow that will be integrated into the standards of our customers, with a much better TCO based on better prices of material. So this is the strategy. Now we're structuring the old company based on this strategy to make sure that we have the right profitability profile, which doesn't exist in our industry.

Speaker Change #104: and we are focusing on adoption.

Speaker Change #104: What does it mean? We're narrowing the focus to proven use cases to education and enable men.

Speaker Change #104: and to complete wall flow this will be integrating to the standards of our customers with a much better TCO.

Speaker Change #104: Based on better prices of material, so this is the strategy, now we are structuring the old company based on this strategy to make sure that we have the right for ability profile, which doesn't exist in our industry.

Eitan Zamir: Gap net loss for the quarter was 25.7 million, or 36 cents per diluted share, compared to a net loss of 38.6 million, or 56 cents per diluted share for the same period last year. Non-gap net loss for the quarter was 3 million, or 4 cents per diluted share, compared to net income of 2.5 million, or 4 cents per diluted share in the same period last year.

Yoav Zeif: Stratasys Ltd. I don't want to say we are the only profitable, but probably one of the rare companies that are profitable in our industry, even in this challenging time. I really increase over time.

Speaker Change #104: I don't want to say we are the only profitable but probably one of the rare companies that are profitable in our industry even in this

Jalen Jing: Jalen Jing time.

Jalen Jing: and we are talking about...

Jalen Jing: certainty in this profitability. Again, 8% of the margin, cash flow positive.

Eitan Zamir: Adjusted EBDA was 2.3 million for the quarter, compared to 10.6 million in the same period last year. We used 2.4 million of cash in our operations during the second quarter, compared to the use of 23.2 million of cash for operations in the same period last year. Including 3 million of capital expenditures, 3 cash loss for the quarter was negative 5.4 million. We ended the quarter with 150.9 million in cash equivalent and short end deposits, compared to 161.1 million at the end of the first quarter this year.

Jalen Jing: and starting with a profitability in Q4, not promises for the next five years.

Yoav Zeif: This is only the starting point.

Jacob Stepan: Got it. Okay.

Jalen Jing: [inaudible]

Jacob Stepan: And I guess, you know, as a kind of a follow-up here, following the guidance in 24 here, you know, essentially we're going from flat year-over-year revenue growth to down 9%. I just want to get your kind of confidence gauge on the medium-term target of 1 billion in revenue in 26%.

Speaker Change #106: Got it, okay, and I guess, you know, as a kind of a follow-up here.

Speaker Change #107: Following the guidance in 24 here, you know, essentially we're going from flat year over year revenue growth to down 9%. I just want to get your kind of confidence gauge on the medium term target of 1 billion in revenue in 26.

Yoav Zeif: So maybe at the start, I just want to remind you all that if you go back to our Q4 2020-3, Erniemple presentation, we actually reminded everyone about certain divestments that we did during 2023. So when you convert 2020-4 to 2023, just to make sure that you bake into that the 616 million that we provided you back then in Q4, which is the fair comparison to 2023. Still, there is a reduction, which is driven by the hardware challenges that you all mentioned earlier.

Speaker Change #107: Zeif

Speaker Change #108: So, maybe I just want to remind you all that if you go back to our Q4 2020 street, earning call presentation, we actually reminded everyone about certain investments that we did during 2020-23.

Eitan Zamir: Our balance sheet remains strong and we are well capitalized and well positioned to identify and capture value enhancing market opportunities.

Speaker Change #109: So when you convert 2024 to 2023, just make sure that you're baking to that year.

Eitan Zamir: Now let me turn to our outlook for 2024. We expect the ongoing challenging backdrop to persist for the remainder of the year continuing to cause delay purchases and longer sales cycle. We are optimistic that our hardware sales in the second half will grow as compared to the first half due to our improved pipeline expected higher government sales and continued strength in Based on our first half result and current visibility of our near-term opportunities, we are adjusting our full-year guidance as follows.

Yoav Zeif: 161 million that we provided you back then in Q4, which is the fair comparison to 2023. Still, there is a reduction, which is driven by the hardware challenges that Yoav mentioned earlier.

Yoav Zeif: I do want to highlight and to emphasize the considerable business. Both in Q1 and in Q2, we show the nice growth year over year in considerable business, and we expect the improvement in considerable revenue to continue in the second half of the year. And I think that's a very critical point when you compare 2023 to 2024. That's recurring business that also emphasize the utilization of our systems, especially the high end, and the one that goes to manufacturing, and that's where we gave the confidence for the future.

Speaker Change #110: I do want to highlight and to emphasize the consumable business in both in Q1 and in Q2 we show the nice growth year over year in consumable business and we

Speaker Change #110: Expect.

Speaker Change #110: The Improvement.

Speaker Change #111: In concert will arrive a new to continue in the second half of the year and I think that's a very critical point when you compare 2023 to 2024.

Eitan Zamir: We now expect full-year 2024 revenue to range between 570 to 580 million. We expect third-quarter revenue to slightly improve sequentially from the second quarter this year. From a growth margin perspective, we now expect full-year 2024 to be in a range of 48.7% to 49%. For 2024, we expect our operating expenses to range between 276 to 278 million. We now expect non-gap operating margins to be between 0.5% to 1% for the full-year.

Speaker Change #111: That's recurring business that also emphasize the utilisation of our systems, especially the high end and the one that goes to manufacturing.

Yoav Zeif: As to the longer term growth, I think we were very careful considering the last few quarters about the future or the further future. And that's why we emphasize that the measures that we took with this restructuring is basically, as you have mentioned, create certainty of meaningful profitability and meaningful operating cash flow already in 2025, regardless of future growth and regardless of improvement in the macro environment that will create growth.

Speaker Change #112: and that's when we get the confidence for the future. As to the longer term growth, I think we're very careful considering the last few quarters about the future or the further future and that's why we emphasize that.

Speaker Change #112: The measures that we took with this restructuring

Speaker Change #112: [inaudible]

Yoav Zeif: It's a temporary thing. Got it.

Eitan Zamir: We anticipate a gap net loss of 106 to 91 million or $1.50 to $1.29 per diluted share, a non-gap net income of 1 million to 4 million or 1.25 cents for the full-year. Adjusted EBITDA is now expected to be in a range of 24 million to 27 million for the year. Capital expenditures are now expected to range between 20 to 25 million for the year.

Yoav Zeif: Thanks, guys. Thank you.

Speaker Change #113: Yeah, thanks guys.

Brian Drab: Next question is coming from Brian Drab, from William Blair, who is our lives. Thank you for taking my question. I just, you know, I've wanted to ask you to speak a little bit about the potential impact and how you're thinking about, you know, the risk of making cuts.

Speaker Change #113: Thank you next questioners coming from Brian Drab from William Blair, Illinois as well as life.

Brian Drab: I thank you for taking my questions. I just, Yoav wanted to ask you to speak a little bit about the potential impact and how you're thinking about the risk of making cuts.

Yoav Zeif: Thank you. Fox, obviously necessary cuts that will be near-term, clearly positive for margins, but the potential impact on revenue growth. You know, you've had this level of OPEX that has been like 46 to 48% of sales for years. And you know, I think many are under the impression that you needed that level of OPEX to sustain the new product development, to sustain the go-to-market capability and the channel management, et cetera, that you need that level of spending to sustain that growth. So how should we think about that?

Yoav Zeif: Um, obviously necessary cuts that will be, you know, near-term clearly positive for margins but the potential impact on revenue growth, you know, you've had this.

Yoav Zeif: With that, let me turn the call back over to Yoav for closing remarks. Yoav, thank you, Eitan.

Yoav Zeif: Level of OPEX.

Yoav Zeif: In summary, we are continuing to differentiate ourselves during challenging times for industry and makes the house yet necessary adjustment to maintain and accelerate our leading position. Our investment in new and exciting technologies is advancing as evidence by the products we are bringing to market that will serve our customers well as they accelerate their adoption of additive manufacturing. We spoke in the past of an inflection point where additive manufacturing graduated from a prototyping niche to becoming a cornerstone of the manufacturing process and we continue to see signs of this momentum. As we march ahead, we look forward to return to strong growth from the pent-up demand in systems sales when the current environment eases.

Speaker Change #115: that has been like 46 to 48% of sales for years. I think many are under the impression that you needed that level of opx.

Speaker Change #116: Just to sustain the new product development, to sustain the go-to-market capability, and the channel management, etc. You need that level of spending to sustain that growth. So how should we think about that?

Yoav Zeif: Thank you, Brian, for the question. You know, there is something that makes me a bit, you know, awake at night: this balance between short-term profitability and long-term growth. And I think that the key here is that the restructuring is not across the board. This is strategy-led restructuring. That's the way to make sure that we are managing the impact of the restructuring on growth, and we will maintain growth, especially when we will see recovery or an improvement in the business cycle.

Speaker Change #116: Thank you Brian for the question.

Speaker Change #116: I'm Yonah Lloyd, I'm Yonah Lloyd, I'm Yonah Lloyd,

Speaker Change #117: Make me be a bit awake at night, it is balanced between

Speaker Change #118: Show them of the ability and long-term growth and I think that the key here is that the restructuring is not across the board

Speaker Change #119: This is strategy, let's re-fructuring. Let's do a make sure.

Yoav Zeif: In the meantime, we will continue to deliver the excellence our customers deserve as industry leaders in technological innovation, service and reliability and thank to our robust balance sheet, diversified product and software offering the cost-saving initiatives we are announcing today and the large and growing opportunities ahead will look forward to delivering relative outperformance and enhance shareholder value.

Speaker Change #119: that we are managing the impact of the restructuring on growth and we will maintain growth, especially when we will see recovery or improvement in the business cycle. So how are we doing it?

Yoav Zeif: So how we are doing it? It's clear to the purpose of the restructuring is to create a whole new value, but it has to go both hands through very clear strategy that create value and profitable profile of our PNL. So the way we do it, we narrowing the focus. We focus on what we believe is proven, and we'll create growth, and those are the proven use cases that we have, and we will invest more in customer-facing activities to ensure adoption of those use cases.

Speaker Change #119: Eitan Zamir, Yonah Lloyd, Yonah Lloyd, Yonah Lloyd, Yonah Lloyd,

Speaker Change #119: It's clear that the purpose of the refructuring is to create an audio value

Speaker Change #120: But it has to go both hands, screws.

Speaker Change #121: Very clear strategy that creates value and profitable.

Speaker Change #122: Profile or Faupianil.

Speaker Change #123: So the way we do it, we narrowing the focus.

Operator: With that, let's open it up for questions. Operator Thank you, and now I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue. As a reminder, we ask you, please ask one question and one follow-up, then return to the queue.

Speaker Change #123: We focus on what we believe is proven and we'll create growth and those are the proven use cases that we have.

Speaker Change #123: and we will invest more in customer-facing activities to ensure adoption of those use cases.

Yoav Zeif: The second thing is about the status where we are in the development of our technological platform. We have five platforms. We invested a lot to make them reliable and ready for manufacturing. I can say now with a lot of confidence that we have five technologies that are ready for manufacturing. FDM is unique. No one can do large part for error and auto in this type of power performance like us. If I look at the DLP, we have the best part in the industry: bulky, accurate for industrial users. If I look at staff, we have the best, the closest nearest to injection-molding parts, small medium parts, in terms of definition and in terms of performance than anyone else.

Speaker Change #123: The second thing is about the status where we are in the development of our technological platform.

Greg Palm: Our first question is coming from Greg Palm from Craig Allen, your line is now live. Hey, thanks for taking the questions here. A couple of ones.

Speaker Change #123: We have five platforms, we invested a lot to make them reliable and ready for manufacturing. I can say now...

Speaker Change #123: With a lot of confidence, if we have five technologies that are ready for manufacturing, FDM.

Yoav Zeif: I guess I want to first start with the strategic alternatives process. I know you're formally wrapped it up, but as you look back on it, curious if you learned anything during this process presumably you were talking with lots of industry players, but for example, did you get a better sense of what's needed to drive better profitability across the industry? It's very, you know, more importantly has your view on consolidation changed at all, just, you know, going forward.

Speaker Change #123: is unique. No one can do large part for error and auto in this type of part performance like us. If I look at the DLP, we have the best.

Speaker Change #123: Part in the industry bulky, accurate, for industrial users. If I look at stuff, we have the best.

Yoav Zeif: Can you just give us a little bit of sense and kind of the process and what you learned. Thank you, Greg, for the question. What we have learned, we will involve in few opportunities, analyze them in depth. Bottom line, we are investing in strategies. I think this is the bottom line and this is the key learning from the entire process. We have the right technologies, we have the right focus on the right use cases, we have unique assets, and we better put our money to create share or those value in creating value through the assets that we have.

Speaker Change #123: The closest nearest to injection molding part small medium part in terms of definition and in terms of performance in anyone else, if I look at SLA.

Yoav Zeif: If I look at SLA, we are the most reliable player, both on terms of material and machine, and you can see it in the F1. We are the majority of the Formula One industry.

Speaker Change #124: We are the most reliable player both in terms of materials and machines and you can see in the F1, we are the majority of the familiar one industry.

Yoav Zeif: You look at Polyges. We are leading the way in dental in monoblock dentures approved by FDA. So, our technologies and our platforms are ready. Now, we need to focus on the adoption, and practically what we are doing by this is sharpening the strategy and securing the growth. On top of it, we are maintaining the R&D ratio as a percentage of revenue. So, we were very careful with those cuts, and at the end we are balancing between profitability and growth, and we believe that profitability is crucial to show that this industry is delivering value. We start with 8% EBD and positive cash flow, but it will grow.

Speaker Change #125: Look at Polygia!

Speaker Change #125: We are leading the way in dental, in monoblock dentures approved by FDA, so our technologies and our platforms are ready, now we need to focus on their adoption.

Speaker Change #125: and practically what we are doing by this is sharpening the strategy and securing the growth. On top of it, we are maintaining the R&D ratio as percentage of revenue.

Yoav Zeif: So taking our solution to the market, and I have no doubt despite the challenges, the macro economic challenges and the challenges with the hardware, the strategies is the best company in the industry. We still believe in consolidation, but with reasonable multiples and valuations because we still believe in scale, but with the current situation, the board came to the conclusion that we better invest in strategies. Yeah, okay, understood.

Speaker Change #126: So, we were very careful with this redose cut and

Speaker Change #126: At the end we have balancing

Speaker Change #127: Between Profitability and Growth, and we believe that Profitability is crucial to show that is industry in delivering value. We start with an interest at EVIDian positive case flow, but it will grow. And the target is to be and to digital and we will be there.

Yoav Zeif: And the target is to be in the two digits, and we will be there.

Yoav Zeif: Okay, thank you very much for those thoughts. I'll leave it there for now.

Yoav Zeif: Thanks.

Speaker Change #128: Thank you very much for those thoughts. I'll leave it there for now. Thanks.

Operator: Thank you.

Yoav Zeif: And then my second question on the pent up demand, are you able to quantify exactly what's out there. And for example, does utilization trends give you any insight into the timeline where certain customers may need to actually be forced to invest in the system. And I know we're all cognizant of the macro and manufacturing cycle and whatnot, but just sort of wondering what kind of visibility you have, you know, over the next six or 12 months.

Ananda Baruah: Next question is coming from Ananda Baruah from Loop Capital Market for Lyon. Is that live? Yes, thanks, guys. Thanks for taking the question. We really appreciate it. Yoav, I just wanted to ask a follow-up on sort of comments you made to an earlier question around utilization. Is there any useful way to think about where utilization of, I think you made mention of some of the machines that were sold, are encoded to maybe those incremental machines that are in your strategic install base? Where the utilization of those are, it's even anecdotally just to give us some sense of what that normalization process might look like.

Speaker Change #129: Thank you, next question is coming from Nanda Brooah from Luke Capromarchic for Lines in our life.

Nanda Brooah: Thanks guys, thanks for taking the question, really appreciate it, Yoav, I just wanted to ask a follow-up on sort of...

Speaker Change #131: Comments you made.

Nanda Brooah: and earlier question around utilization, is there any useful way to think about where utilization of, I think you made mention of some of the machines that were sold during COVID, to maybe those incremental machines that are in your strategic and solve base.

Yoav Zeif: So, thank you. So if you know we are not quantifying because this industry fall many time into the threat of promising, but I can share observations from the market. Post COVID people, both people, customers, businesses, both significant, large quantities of machines, and not all of them were utilized. And now that interest rates are high, they are focusing on ramping up those machines, increasing utilization, and we can see it. We can see that in key use cases, the utilization is going up.

Nanda Brooah: What where the utilization of those are, it's even anecdotally just to give us some sense of what that normalization process might look like and then I just have a quick follow-up as well, thanks.

Ananda Baruah: And then I just have a quick follow-up as well. Thanks.

Yoav Zeif: It's very hard to follow because not all of the machines of the industry are not all our machines. Although we have dozens of thousands of machines connected, where you can follow utilization, it's hard to follow because some of the most attractive or those machines that have our utilizations are actually in verticals like defense, where you cannot follow it. But we are following the material sales. And when we follow the material sales, no doubt that the growth is coming from manufacturing and use funds and tooling and less from rapid prototyping. So there is a shift that we can follow.

Speaker Change #132: It's very hard to follow because not all of the machines of the industry, not all our machines, although we have dozens of thousands of machines connected where you can follow the utilization.

Speaker Change #132: It's hard to follow, because some of the most attractive or those machines that have a utilizations are actually in verticals like defense, where you cannot follow it.

Yoav Zeif: It's not an accident that our consumers are increasing, quote-unquote, year-over-year. We see more utilization in the high-end machines, very strong utilization that we didn't experience in the past. And this is by definition also balancing the old install base that we have and we still increase the number of spools or kilograms that we are selling in material. Once interest rates will be released a bit, I believe we will see this pent-up demand because there are two effects to the increase utilization.

Speaker Change #132: But we are following the material sales and when we follow the material sales, no doubt that the growth is coming from.

Speaker Change #132: Manufacturing and use part and tooling and less from rapid prototyping. So there is a shift that we can follow.

Yoav Zeif: I got it. And so quick follow-up there. Is there any useful way to think about what the install base looks like today? Say relative to 2020. And the reason why I picked 2020 is because that was the revenue drop, 520 million. And now you're coming off of, say, a new day, just over 600 million. And so trying to see if there's anything useful to believe around MEX, you know, kind of new strategic useful install base next slide today relative to 2020. Thanks. That's everything. No doubt. Less small boxes, more big boxes. And big boxes usually go from manufacturing because you don't put $300,000 to $500,000 on rapid prototyping.

Speaker Change #133: I got it and so quick follow up there, is there any useful way to think about it?

Speaker Change #134: What the install days?

Speaker Change #135: Look to like today, say relative to 2020 and the reason why I've fixed 2020 is because that was the revenue trough 520 million and now you're coming off of saying new day, guess over 600 million.

Yoav Zeif: One, you will need more machines because there is so much one machine can give you in terms of capacity. But not less important, customer learn how to work with initiative as part of their manufacturing solution. And the moment they are there and the moment more people within the organization know how to operate it, how to design for our initiative, we are in a much better place. This is one of the most important constraints. So, Capix will be released and we will be there ready to sell. I understand. Okay, appreciate that. That's a lot. Thank you.

Speaker Change #136: is trying to see if there's anything you sort of blame around me, you know, kind of new strategic useful install base mix-wise today relative 2020 thanks that is something.

Speaker Change #137: No doubt, less small boxes, more big boxes.

Speaker Change #138: and Big Boxes usually go from an effecturing, because you don't put 300,000 to 500,000 dollar on rapid throttle deck.

Yoav Zeif: No doubt.

Yoav Zeif: This is the install base. This is the change in the install base. And by the way, this is our strategy. As I said, we are not competing with Bamboo Lab on the low end. This is the Maker Boat, multi maker space. They would do great there, but this is not ours. Thank you.

Speaker Change #139: No doubt, this is a day stop, this is a change in the economy.

Speaker Change #140: And by the way, this is our strategy as I said, we are not competing with Bamboo Lab on the low end. This is the make-up boat, we'll see make-up space, and they will do great there, but this is not our space.

James Rachute: Next question is coming from James Rachute from the Human Company. Your line is now live. Hi, thanks. So, it looks like, you know, with the second half, you are assuming sequential and preliminary revenues. I would have thought your close margin outlook would have been a little better in the second half. So, talk to us a little bit about what drives that. Is that just a higher mix of hardware? And with that, what is the new products contribute to the other margins on the hardware side?

Speaker Change #140: [inaudible]

Speaker Change #140: Up.

Greg Palm: Next question is a follow-up from Greg Palm, from Craig Hallam. Ry line is now live. Yeah, thanks. Just on the restructuring, can you confirm what level of revenue you are expecting the eight percent? Is it based on Q2? Is it based on second half? Is it based on the full year?

Speaker Change #141: Thank you, and next question is a follow-up from Greg Palm from Crank Island, who are in his life.

Greg Palm: Yeah, thanks just on the restructuring.

James Rachute: Thanks. Thanks, Jim, for the question. So, you actually hit it on the head. When we think about growth margin, first of all, 49% very solid growth margin for Q2. When we think about the second half of the year, it's mainly a mix of hardware, consumable, and services. And, you know, the changes, the differences between, you know, a 49 to 48.8, these are really small differences that can be impacted by different mix, by specific deals.

Speaker Change #142: Can you confirm what level of revenue are you expecting the 8% is it based on Q2, is it based on 2nd half, is it based on the full year I guess?

Eitan Zamir: I guess, I'm having a hard time, I guess, only getting the eight percent just based on, you know, a $40 million of annualized run rate. And just to be clear, is that do you see that run rate in Q1 or is it exiting Q1 or just specific on the timing as well?

Speaker Change #143: I'm having a hard time, I guess, only getting the 8% just based on, you know, a 40 million dollar of annualized run rate and just to be clear, is that you see that run rate, in Q-Warner or is it exiting Q-Warner just specific on the timing as well.

Eitan Zamir: Thanks, Greg, for the question. So, first to answer your first question, the eight percent is based on the, let's say, mid-range of the annual guidance. And so that's when you bake, I'm not sure which calculation you made, but when you bake into our current EBDA levels, the savings that will be achieved, just keep in mind that the 40 million will not be achieved in one shot; it will be achieved over time. However, in 2025, we're going to utilize the entire value or the entire benefit of those savings.

Speaker Change #144: Thanks Greg for the question. So first to answer your first question.

James Rachute: So, we, I think the bottom line is that we believe that the second half of the year and the full year of 2024, we will maintain high growth margin at the 49 levels, which I think is very promising also for the future. And when you take into account the restructuring and the savings that will come from the restructuring as you model the next year, this percentage will even increase further. And just with respect to the hardware pipeline, you picked off a couple of areas where you feel that there's, they give you the confidence in the improvement in the second half, government dental.

Speaker Change #145: The 8% is based on the semi-drange of the annual guidance.

Speaker Change #146: and so that's when you bake, I'm not sure which calculation you made, but when you bake into our current.

Speaker Change #146: Ibida level.

Speaker Change #146: The Assettings that will be achieved, just keep in mind that the 40 million will not be achieved in one shot, it will be achieved over time. However, in 2025 we're going to utilize.

Speaker Change #146: the entire value or the entire benefit of those savings. Keep in mind that next year we will have some investments in the business, so the model or the assumption, and again I'm not sure which calculation you did.

Eitan Zamir: Keep in mind that next year we will have some investments in the business. So the model or the assumption, again, I'm not sure which calculation you did, bake also deals into the model. Hopefully clarified, it will help you build your model. Thank you.

James Rachute: Talk to us a little bit about where you have more confidence and where it's still a little unsure. Thank you. So Jim, maybe at the start I'll say that when you look on the model on the guidance, we actually use the very, very moderate growth for the second half of the year compared to the first half. When we think about the offering and the changes in the second half, first of all, we have the F3300 that we've just launched and we expect to be stronger in the second half of the year.

James Rachute: We have a trudent that is improving and growing and some other offerings. We also have a better availability to the pipelines for the second half and we see a stronger pipeline. And maybe last but not least, you know, you're with us with the industry for so many years, there is a second half of the year is usually stronger. So we beg that also into the model. However, when you look at this all in all, very moderate growth for the second half which, you know, we try to be conservative in our approach. Okay, thank you. Thank you.

Speaker Change #146: Bake all four also deals into the model.

Speaker Change #146: Hopefully it's clarified.

Speaker Change #147: and it will help you build your mother.

Operator: We reached out to our question and answer session.

Yoav Zeif: I'd like to turn the floor back over to any further closing comments. Thank you for joining us. Looking forward to updating you again next poll there. Thank you.

Speaker Change #148: Thank you for joining us. Looking forward to updating you again next quarter.

Operator: That does conclude today's teleconference and webcast.

Operator: You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change #149: Thank you, it does conclude today's teleconference and webcasts you may disconnect your line after this time and have a wonderful day. We thank you for your participation today.

Speaker Change #149: [inaudible]

Koi Jensen: Next question is coming from Koi Jensen from Ketrape Show, Drubilus, now live. Hey gentlemen, thanks for taking my questions here. Maybe a couple of eight on for you, of the $40 million OPEX or the $40 million cost savings for the year. How much is going to be in COG suppresses OPEX? We will not provide the exact details. It will be the 40 million in total. It will be broken or split between COGs and the OPEX. The majority will be in OPEX naturally, but there will be incremental savings and improvement to growth margin following this restructuring.

Yoav Zeif: Okay, perfect. So another one here for you, you may not be able to answer it, I'm going to throw it out there. How much of your strategic review boil down to the fact that you still want a desktop metal and it's the hope to just wait a year or so and let that nano integrate those guys and then ultimately merge with them. Obviously, I cannot comment on such a thing. I can only repeat what I said that currently we believe that the right sizing of the company, the focus on our key drivers and use cases and focusing on adoption, where we have an advantage because of our AEEs and our the fact that we are close to the biggest adopter of this technology will generate higher value to our shareholders and now when starting with 8% EBDA margin and we are quite certain about this 8% EBDA margin.

Yoav Zeif: So this is not something we are just throwing on the table. We are certain in our ability to be profitable also from 2024 from Q4 and on 2025, assuming the same levels of revenues. So this is really unique in our industry and we believe that once we see growth coming back and it will because the pent up demand is there EBDA will be even larger.

Yoav Zeif: All right, one last question for you, Yoav.

Yoav Zeif: I'd like to talk a little bit about bamboo labs. I mean, it is a company that I started hearing a lot more about. And obviously, this quarter, you guys just filed a patent lawsuit. So can you just kind of talk about the low-end FDM or you guys see more competition there? And why so aggressively go after bamboo? And there's so many others that are probably violating technology too. In general, we, by a divesting make-a-bot, made a statement that we are not lying in the low-end FDM market.

Yoav Zeif: We are not there. We are going for the industrial FDM market, which requires different standards, different power properties, different materials. And we don't want even to compete there. Having said that, our shareholders deserve return on their investment in innovation. We need to take care of our shareholders. And this is part of our commitment to safeguarding our intellectual poverty. We filed this complaint, this file against bamboo in Texas. And we believe that no one can use our IP. We're talking about 10 essential patents without paying on it. This is our commitment both to the industry and to our shareholders.

Operator: All right. I'm good. Good luck in the second half, gentlemen. Thank you. As a reminder, that's star one to be placed in the question queue.

Jacob Stepan: Our next question is coming from Jacob Stepan from Lake Street, your line is out live. Thanks for taking my questions. I guess I just wanted to touch on the restructuring initiative as well.

Yoav Zeif: I guess when you kind of think about the 15% workforce reduction, is that kind of a broad-based workforce reduction or I guess are you kind of realigning some of these resources within the company and making broader kind of cuts? Any comments that would be helpful? Thank you for the question. The restructuring is, I will take it in a short sentence. It's strategy led restructuring. It's not across the board. It's not blind.

Yoav Zeif: We have a strategy. We are sharpening our strategy based on current market conditions. And we are focusing on adoption. What does it mean? We're narrowing the focus to proven use cases, to education and enablement and to complete wall flow that will be integrated into the standards of our customers, with a much better TCO based on better prices of material. So this is the strategy. Now we're structuring the old company based on this strategy to make sure that we have the right profitability profile, which doesn't exist in our industry.

Yoav Zeif: Stratasys Ltd. I don't want to say we are the only profitable but probably one of the rare companies that are profitable in our industry even in this challenging time. I really increase over time. This is only the starting point. Got it. Okay.

Yoav Zeif: And I guess, you know, as a kind of a follow-up here, following the guidance in 24 here, you know, essentially we're going from flat year over year revenue growth to down 9%. I just want to get your kind of confidence gauge on the medium-term target of 1 billion in revenue in 26%. So maybe at the start, I just want to remind you all that if you go back to our Q4 2020-3, Erniemple presentation, we actually reminded everyone about certain divestments that we did during 2023.

Yoav Zeif: So when you convert 2020-4 to 2023, just to make sure that you bake into that the 616 million that we provided you back then in Q4, which is the fair comparison to 2023. Still, there is a reduction, which is driven by the hardware challenges that you all mentioned earlier. I do want to highlight and to emphasize the considerable business. Both in Q1 and in Q2, we show the nice growth year over year in considerable business, and we expect the improvement in considerable revenue to continue in the second half of the year.

Yoav Zeif: And I think that's a very critical point when you compare 2023 to 2024. That's recurring business that also emphasize the utilization of our systems, especially the high end, and the one that goes to manufacturing, and that's where we gave the confidence for the future. As to the longer term growth, I think we were very careful considering the last few quarters about the future or the further future. And that's why we emphasize that the measures that we took with this restructuring is basically, as you have mentioned, create certainty of meaningful profitability and meaningful operating cash flow already in 2025, regardless of future growth and regardless of improvement in the macro environment that will create growth. It's a temporary thing. Got it. Thanks, guys.

Brian Drab: Thank you. Next question is coming from Brian Drab, from William Blair, who is our lives. Thank you for taking my question.

Yoav Zeif: I just, you know, I've wanted to ask you to speak a little bit about the potential impact and how you're thinking about, you know, the risk of making cuts. Thank you. Fox, obviously necessary cuts that will be near-term, clearly positive for margins, but the potential impact on revenue growth. You know, you've had this level of OPEX that has been like 46 to 48% of sales for years. And you know, I think many are under the impression that you needed that level of OPEX to sustain the new product development, to sustain the go-to-market capability and the channel management, et cetera, that you need that level of spending to sustain that growth. So how should we think about that? Thank you, Brian, for the question.

Yoav Zeif: You know, there is something that make me a bit, you know, awake at night is this balance between short-term, profitability, and long-term growth. And I think that the key here is that the restructuring is not across the board. This is strategy-led restructuring. That's the way to make sure that we are managing the impact of the restructuring on growth, and we will maintain growth, especially when we will see recovery or an improvement in the business cycle.

Yoav Zeif: If I look at staff, we have the best, the closest nearest to injection-molding parts, small medium parts, in terms of definition and in terms of performance than anyone else. If I look at SLA, we are the most reliable player, both on terms of material and machine, and you can see it in the F1. We are the majority of the Formula One industry. You look at Polyges. We are leading the way in dental in monoblock dentures approved by FDA.

Yoav Zeif: So, our technologies and our platforms are ready. Now, we need to focus on the adoption, and practically what we are doing by this is sharpening the strategy and secure the growth. On top of it, we are maintaining the R&D ratio as percentage of revenue. So, we were very careful with those cuts and At the end we are balancing between profitability and growth and we believe that profitability is crucial to show that this industry is delivering value. We start with 8% EBD and positive cash flow, but it will grow. And the target is to be in the two digits and we will be there.

Yoav Zeif: Okay, thank you very much for those thoughts. I'll leave it there for now. Thanks. Thank you.

Ananda Baruah: Next question is coming from Ananda Baruah from Loop Capital Market for Lyon. Is that live? Yes, thanks guys. Thanks for taking the question. We really appreciate it. Yoav, I just wanted to ask a follow-up on sort of comments you made to an earlier question around utilization. Is there any useful way to think about where utilization of, I think you made mention of some of the machines that were sold are encoded to maybe those incremental machines that are in your strategic install base?

Ananda Baruah: Where the utilization of those are, it's even anecdotally just to give us some sense of what that normalization process might look like. And then I just have a quick follow-up as well. Thanks. It's very hard to follow because not all of the machines of the industry are not all our machines. Although we have dozens of thousands of machines connected where you can follow utilization, it's hard to follow because some of the most attractive or those machines that have our utilizations are actually in verticals like defense where you cannot follow it.

Ananda Baruah: But we are following the material sales. And when we follow the material sales, no doubt that the growth is coming from manufacturing and use funds and tooling and less from rapid prototyping. So there is a shift that we can follow. I got it. And so quick follow-up there. Is there any useful way to think about what the install base looks like today? Say relative to 2020. And the reason why I picked 2020 is because that was the revenue drop, 520 million.

Ananda Baruah: And now you're coming off of say a new day, just over 600 million. And so trying to see if there's anything useful to believe around MEX, you know, kind of new strategic useful install base next slide today relative to 2020. Thanks. That's everything. No doubt. Less small boxes, more big boxes. And big boxes usually go from manufacturing because you don't put $300,000 to $500,000 on rapid prototyping. No doubt. This is the install base.

Ananda Baruah: This is the change in the install base. And by the way, this is our strategy. As I said, we are not competing with bamboo lab on the low end. This is the maker boat, multi maker space. They would do great there, but this is not ours. Thank you.

Greg Palm: Next question is a follow-up from Greg Palm, from Craig Hallamry line is now live. Yeah, thanks. Just on the restructuring, can you confirm what level of revenue are you expecting the eight percent? Is it based on Q2? Is it based on second half? Is it based on the full year? I guess, I'm having a hard time, I guess, only getting the eight percent just based on, you know, a $40 million of annualized run rate. And just to be clear, is that do you see that run rate in Q1 or is it exiting Q1 or just specific on the timing as well?

Eitan Zamir: Thanks, Greg, for the question. So first to answer your first question, the eight percent is based on the, let's say, mid-range of the annual guidance. And so that's when you bake, I'm not sure which calculation you made, but when you bake into our current EBDA levels, the savings that will be achieved, just keep in mind that the 40 million will not be achieved in one shot, it will be achieved over time.

Eitan Zamir: However, in 2025, we're going to utilize the entire value or the entire benefit of those savings. Keep in mind that next year we will have some investments in the business. So the model or the assumption, again, I'm not sure which calculation you did, bake also deals into the model. Hopefully clarified, it will help you build your model. Thank you.

Operator: We reached out to our question and answer session. I'd like to turn the floor back over to any further closing comments. Thank you for joining us. Looking forward to updating you again next poll there. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Q2 2024 Stratasys Ltd Earnings Call

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