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spk07: Greetings and welcome to the Mark Forge fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Austin Boleg, Director of Investor Relations. Thank you, Austin. You may begin.
spk00: Good afternoon. I'm Austin Volek, Director of Investor Relations of Mark Forged Holding Corporation. Welcome to our fourth quarter and fiscal year 2022 results conference call. We will be discussing the results announced in our earnings press release issued after market closed today. With me on the call is our President and CEO Shai Turem and our CFO Mark Schwartz. Before we get started, I'd like to remind everyone that management will be making statements during this call that include estimates and other forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. These statements represent management's views as of today, March 6, 2023, and are subject to material risks and uncertainties that could cause actual results to differ materially. Mark Forge disclaims any intention or obligation, except as required by law, to update or revise forward-looking statements. Also during the course of today's call, we refer to certain non-GAAP financial measures. There's a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after market close today, which can also be found on our website at investors.markforge.com. I'll now turn the call over to Shai Turam, President and CEO of Markforge.
spk05: Thank you, Austin, and thank you everyone for joining us on our Q4 2022 earnings call. We ended the year strong with a record quarterly revenues as demand for the digital forge continue to grow worldwide despite the challenging operating environment. Throughout 2022, we saw more and more manufacturers solve mission-critical metal applications on their factory floor using combinations of our metal and advanced composite solutions. And with our effective cost controls, we met our earnings per share target, keeping us on our path to profitability. The long-term fundamentals of our business continue to be a powerful differentiator as we gain further momentum in our target markets. Additionally, supply chain disruption has been a catalyst for growth as manufacturers shorten their supply chains through industrial point-of-need production. I couldn't be more excited about our vision to make manufacturing more resilient and flexible by using the Digital Forge to address the $43 billion market opportunity available to us today. A great example of a customer harnessing the innovation of the Digital Forge is Texas-based Dixie Iron Works. They used our solution to achieve an edge in the globally competitive oil and gas industry. When Dixie needed to make an engineering change to a critical o-ring, their supplier quoted a price that would have made their product too expensive. Instead, they designed a better and less expensive version of the part using our X7 printer, and since then, expanded to a fleet of six Markforge X7 printers, producing parts onsite in Texas around the clock. Based on their early success with Markforge, Dixie expanded even further with our Metal X solution. and are now producing critical steel parts with our solution instead of using traditional CNC's. This is a great example of how on-shoring industrial production at the point of need can be a competitive advantage for manufacturers. With that said, we still feel a wait and see mentality with our manufacturing customers who are concerned by the macroeconomic uncertainty. As such, we have yet to realize what we see as the full growth potential of our product lineup. While we are confident that once the world gets out of this cycle, this bottleneck will open up and our growth will accelerate, we have already taken the required actions to adjust our cost base and ensure we stay on our path to profitability. Since the second quarter of 2022, we have taken nearly $20 million out of our cost structure after giving effect to the two acquisitions completed in 2022. Notably, we reduced our costs while investing over $70 million in our innovation pipeline through M&A and R&D. And in 2023, we expect increased operational leverage resulting in a $30 million decline in our cash burn. While in the Americas, we are experiencing delayed purchase decisions as a result of near-term macro uncertainty we executed on our growth strategy in both the EMEA and APAC regions in the fourth quarter of 2022, with revenues growing 36% in EMEA and 20% in APAC year-over-year. We anticipate that both of these regions will again achieve outside growth in 2023. In the Americas, we are taking actions to optimize our go-to-market model to accelerate the return to growth and anticipate the benefits of on-shoring in the years to come. In 2022, we made a meaningful progress towards achieving profitable growth. We materially expanded our addressable market organically through the introduction of the FX20 and inorganically for acquisitions of TITAN simulation and digital metal. We are confident that in the next couple of years, we will see accelerated growth from our enhanced product offering and continue to build operational leverage via strong cost control until we get to profitability. In 2022, we began commercializing the FX20, our largest production-ready composite solution for manufacturers requiring parts of industrial tanks and high temperature resistance. As we mentioned previously, demand for the FX20 has exceeded our expectations. In fact, in its first year of general availability, we received multi-system orders for the FX20 from multiple customers. We continue to ramp FX20 capacity to meet the expected levels of demand in 2023. But while demand was robust, we were short of our FX20 cost target. This shortfall resulted in a decrease of our gross margins in Q4. We expect cost improvements in Q1 and throughout 2023 and intend to reach our production cost target in the next year. We successfully executed on our M&A strategy in 2022, acquiring two companies with products that we expect to expand our addressable market opportunity in 2023 and beyond. The first, Teton Simulation, enables manufacturers to have a greater confidence that their part will meet certain specification in mission-critical applications, removing a key barrier to additive manufacturing adoption. We integrated the technology into the digital forge for a feature known as simulation and rolled out a free beta to all of our customers in Q4. The response from our customers has been positive with thousands of trial registrants to date and part simulated in our software prior to production. We expect to offer simulation as a component of a tiered SAR subscription offering that we plan to launch in Q2 this year. Our second acquisition, Digital Metal, closed in Q3 2022 and expands our addressable market into high-throughput production of precise end-use metal parts, a key long-term growth strategy. In Q1 2023, we plan to launch the PX100, which doubles the speed compared to the previous model up to 1,000 cc per hour and build size up to 10 liters to ensure high volume production of end-use metal parts for lower cost per part. Initial customer reaction has been positive. We expect this line to contribute to our revenue growth in 2023 and beyond. A great example of how digital metal solution has opened new markets for Markforged comes from our customer Distal Motion, a Swiss-based medical device company that manufactures cutting-edge robotic surgical systems. Serial production parts for our metal binder jetting solution are used in real-life medical procedures. This is a great example of how our solution gives manufacturers the flexibility in their supply chains that is needed to make life-changing breakfasts. Manufacturing has changed. We are at the inflection point as manufacturers use our digital forge to deliver more resilient and flexible solutions for the manufacturing store. Supported by our robust balance sheet and strong innovation pipeline, we continue to execute on our strategy towards profitable growth and feel confident in our business fundamentals. With that, I now turn the call over to Mark Schwartz, our CFO, who will offer more details on our financial performance and guidance for the remainder of the year.
spk06: Thanks Shai. Let's turn to our financial results for the fourth quarter and the full year of 2022, as well as our guidance for fiscal year 2023. Please note that my comments reflect our non-GAAP results and outlook. For your reference, Our earnings press release, issued earlier this afternoon and posted to our investor relations website, includes our gap to non-gap reconciliation to assist with my commentary. For the fourth quarter 2022, revenue increased 11% to $29.7 million, compared with revenue of $26.6 million for the fourth quarter 2021. Gross profit for the fourth quarter 2022 was $14.1 million compared to $15.3 million in the fourth quarter of 2021. As a result, we achieved a 47.5% gross profit margin for the fourth quarter 2022 compared to 57.6% for the fourth quarter of 2021. Operating expenses in the fourth quarter 2022 were $29.4 million compared to $26.3 million for the fourth quarter 2021. Research and development expenses in the fourth quarter 2022 increased to $10.7 million compared with $8.8 million in the fourth quarter 2021. Net loss for the fourth quarter 2022 was $13.3 million or seven cents per share based on our weighted average shares outstanding for the quarter of 194.3 million shares. For the fiscal year 2022, our revenue increased 11% to 101 million, compared with revenue of 91.2 million for the full year 2021. We experienced growth across hardware, consumables, and services with the EMEA and APAC regions growing 18 percent and 41 percent respectively for the year as compared to fiscal year 2021. For fiscal year 2022, gross profit was $51.3 million compared to $53.4 million for fiscal year 2021, reflecting a 50.8 percent gross profit margin in 2022 compared to 58.5 percent in the prior year. We believe we will sustain our strong gross margins as a result of our cost controls and our focus on serving the demanding markets for machinery and automation, maintenance, repair, and operations, and mission critical part production. For fiscal year 2022, our operating expenses were $114.3 million. Our research and development expenses were $37.8 million in 2022. compared with 27.5 million in 2021, as we ramped up our R&D teams consistent with our commitment to accelerate new product time to market. We remain committed to our strategy of increasing our addressable market through product innovation with every software development, system release, or additional material, thus increasing the value of our DigitalForge platform to our customers. For the fiscal year 2022, our net loss was $60.1 million, or $0.32 per share, based on our weighted average shares outstanding of 189.7 million shares. Now onto our guidance. We anticipate fiscal year 2023 revenues to be within the range of $101 million to $110 million. As we cannot predict the macro environment, This guidance assumes a continuation of the existing global economic uncertainties and challenges. As I mentioned before, we expect our strong gross margins to be sustainable, with fiscal year 2023 non-GAAP gross margin expected to be in the range of 47 to 49%. The expense disciplines we exert over our operating expenses will continue to show leverage in 2023. We expect operating expenses to decline as a percentage of our revenue, including the impact of the two acquisitions we completed in 2022, resulting in a non-GAAP operating loss in the range of 55 million to 58 million for the full year. Finally, we expect non-GAAP EPS results for the full year to be a loss in the range of 27 to 29 cents per share. As Shai mentioned earlier in his remarks, since the second quarter of 2022, we have removed approximately $20 million out of our cost structure after giving effect to the two acquisitions completed in 2022. However, our cost controls are not simply the result of realizing cost synergies through M&A. We rationalize our operating expenses through a rigorous prioritization of innovation and customer-facing activities first. Regularly realigning our teams to these priorities promotes operational leverage and a focus on our most important initiatives. Further, in 2023, we expect to reduce our annual cash burn, excluding any potential M&A activities, by $32 million, or 39%, to approximately $50 million. This will be realized through added gross profit from higher revenues, inventory reductions, working capital improvements, and increased yields on our cash and equivalents and short-term instruments. We expect to end 2023 with a balance of approximately $120 million in cash and equivalents and short-term investments. We invested heavily in 2021 and 2022 to create an infrastructure that supports our long-term innovation and go-to-market objectives for profitable growth. We continue to believe our plans are achievable, particularly given the strength of our innovation roadmap, our product portfolio, and disciplined cost controls. We are excited for the future. That concludes our prepared remarks today. Operator, please open up the call for questions.
spk07: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question is from Greg Palm with Craig Hallam Capital Group. Please proceed with your question.
spk04: Yeah. Afternoon, everybody. Thanks for taking the questions here. I guess just starting off with the actual quarter, the geographic disparity was quite large. And I'm just curious if you can go a little bit more detail on what you saw across the various geographies, specifically in EMEA, which was the real standout.
spk05: Sure. So as we shared, Greg, In the US, we still see the sensitivity to the yes or no inflation recession. But other than that, in EMEA, I think once, I think manufacturing there had clear view that would actually manufacture during the winter and energy prices went down, our customers came back into work. And we also had some good changes there on the leadership, which also helped. And I think we saw very good growth there across the entire product portfolio. APAC, I think, is usually a year after what we see in the rest of the world. And I think for them, it's still business as usual. Maybe slight, I would say, decrease in the growth there in Australia. But all in all, I think very good growth worldwide.
spk06: I'll add to that a little bit, Greg, and thanks for the question. EMEA and APAC were unplanned internally for us anyway in Q4. And we anticipate both of these regions will again achieve good growth in 2023. Specifically in APAC, we're seeing success in factory automation and in automotive. I think in EMEA, it's more or less across the board. We see it in defense, in automation, in automotive, et cetera.
spk04: Yeah, that's helpful. And I'm curious, specific to the FX-20, this somewhat ties back into the geographic question, but can you just comment on where you're seeing the most interest, whether that be geographically, whether that's by, you know, end market or vertical? And I guess, you know, in terms of new versus existing customers, do you have any sense of maybe the breakdown of shipments last year?
spk05: Yeah, we still see very strong demand for the FX20. I would say even better than expected. And I think because it's a very unique product that has some capabilities which are differentiated, We still see a strong demand, even in the U.S. with sometimes the multi-system orders. And yeah, we're still a big believer that this is just the beginning with FX1, and especially as we continue to add more materials into it.
spk04: And just to be clear in terms of the multi-system orders that you alluded to, were those initial multi-unit orders or were those follow-ons?
spk05: Follow-on. So that's why we are a little bit positively surprised. Because it's mainly going into aerospace applications, we expected the certification process to be longer, but we see some cases that it was proven fairly fast and moved into higher-level production even within the first year. So this is why we're a little bit positively surprised here.
spk04: Okay. Makes sense. I will leave it there. That's a lot. Thanks.
spk06: Thanks, Greg.
spk04: Thanks, Greg.
spk07: Thank you. Our next question is from Shannon Cross with Credit Suite. Please proceed with your question.
spk01: Hi, this is Ashley Ellis on for Shannon's today. Mark, could you discuss how much conservatism is baked into your revenue guide? Are you sort of assuming, you know, what you saw in fourth quarter will maybe play out and improve? Are you expecting a lengthening of sales cycles before things get better and then have a follow-up?
spk06: Yeah, I think our guidance, Ashley, thanks for the question, it reflects the uncertainty we're seeing in the market today. So I think, you know, if the economy improves, we could certainly see an improvement in our outlook. But, you know, you've heard us talk about this in the past. We want to share with you all what we're seeing. And so this reflects what we're seeing today in the market.
spk01: Okay, understood. And then for gross margin guidance, it's somewhat surprising you're guiding down for the full year. I mean, just slightly, but could you walk through the puts and takes for gross margin in 23? You know, supply chain's getting better and input costs should be coming down, so what's the offset? And then should we consider 50% sort of the new normal going forward, or do you think you can get back to the high 50%? Which, by the way, 48% is still good, but just surprised. It was just a little bit lower than what we were expecting. Thanks.
spk06: Thanks, Ashley. I think, again, this reflects the reality that we're seeing today amidst the macro uncertainty. I'll answer your second question maybe first. So our long-term target and expectation continues to be gross margins returning into the 55% range, as we've said previously. So that hasn't changed for us. It's the timing of it that has changed. And in terms of the inputs and outputs on gross margin for the year, you know, again, we've talked about it before. FX20, I think Shai mentioned in his prepared remarks, FX20 was a significant contributor to that. It resulted in about a four percentage point impact on our gross margin against where we expect the target cost of the FX20 to be for us. That'll take another year or so to flatten out. I think supply chain pressures are beginning, maybe more than beginning, to be relieved. We're certainly seeing warehousing and freight costs coming down, freight in particular coming back down in line. But we still continue to see a variety of challenges throughout the supply chain. While it has been loosening up, you only need one part of a machine to continue to have a lengthy delay in order to push the delivery of that machine out. So it is still a challenge. We expect these challenges to continue to persist in 2023, absolutely getting better, to be sure, on the supply chain.
spk01: Okay, thank you.
spk07: Thank you. Our next question is from Brian Drab with William Blair. Please proceed with your question.
spk08: Hi, thanks for taking my questions. Um, so just to, uh, first be clear on the profitability target that you said, you know, we're still aiming for profitability, I think in the next couple of years, but what, what, uh, more specifically, uh, are we talking about there? Is it at end of 2024? And, um, and can you just remind me, is that profitable on, on, uh, an EBITDA basis or, or, uh, EPS?
spk06: Yeah. So, um, We've said before, and we're not moving off of that statement, Brian, so we're committed to reaching breakeven by the end of 2024. I think the fourth quarter for us, we believe, is an opportunity for us to be profitable for the quarter. Certainly not for the full year of 24, but we would expect that in future years. So that continues to be the direction we're headed. Again, we talk about it all the time. good cost controls in place for some number of quarters now, really since we came public. And we feel like we can manage through any significant changes in the macro environment to continue to meet that target.
spk08: Okay. And then just can we talk a little bit more about gross margin and just with the goal here of trying to understand know where the sources of of improvement could come from you know the the company was you know running at like 58 gross margin and then you know going into 22 and and then 22 originally you're you're expecting 56 and so it's supply chain it's the cost of the fx20 if you could kind of just bridge you know from that original 56 expectation for this year to the 48 level or 47, 48 level we're at now. Um, how, how much is supply chain, how much is FX 20, et cetera.
spk05: Brian, this is Shai. Thanks for the question. Look, I think as you can see on our product portfolio, we are moving upstream into more and more, I would say heavier solution that can help our customers to do real industrial production in the point of need. And these solutions are heavier and they're more expensive. And then your product introduction from that perspective is a little bit more heavier on our balance sheet. And from, it takes time until we get to the normalized cost of them. I said FX20 is a little bit longer than we expected, but we already see the light. I think we took the right actions there. And you see that we are launching a new product now, the PX100, which is a very, very fast binder jetting solution for metal parts. can do up to 1,000 CC per hour. There's also this over half a million dollar solution that we believe will have some impact during 2023. But for both of them, we're already working behind the scenes to ensure that we go back, as Mark suggested, to the 65 plus percent gross margin in 2024.
spk06: Hey, Brian, I'll give you maybe two more concrete data points in support of Shai's comments. So maybe to answer your question specifically, Of that 8% delta between 56 and 48, I think you can divide that almost equally between FX20 and a combination of supply chain and inflation and inflationary pressures that we've seen. And in terms of 2023, yes, we expect cost improvements on the FX20. We are continuing to expect the global supply chain pressures will, but that there will still be some pressure and it will continue to act as a headwind, even if it's more modestly than previously. As an example, Q1, we didn't talk about this in our prepared remarks, but we're expecting our margins to be flat to maybe slightly down in Q1 of this year due to lower revenues that we typically see in Q1. As you know, seasonality in this business is significant. Q1 is often 20 to 25% below previous Q4. But having said that, we expect this sort of to be the trough and that our cost improvements will translate into improved gross margins sequentially throughout 2023 and then beyond.
spk08: Okay. Thanks to both of you. That's very helpful.
spk06: Thanks, Brian. Thank you, Brian.
spk07: Thank you. Our next question is from Troy Jensen with Lake Street Capital Markets. Please proceed with your question.
spk03: Hey, gentlemen, congrats on the good fourth quarter here.
spk07: Thanks, Troy. Thank you, Troy.
spk03: Hey, Shai, I want to ask you a little bit about metals specifically. I mean, I always thought of you as, you know, the carbon-reinforced fiber company and, you know, the Mark II or the X7. But how successful has Metal X been? You know, I kind of want to tie this all into digital metal here. So channel sales, how effective is your channel at selling metal products? Can you talk about maybe the metals? that are currently qualified on the digital metal platform also?
spk05: Sure. I would say our focus is on industrial production, Troy, as we discussed before. And usually in industrial production, we are trying to replace metal parts. Some of these parts can be replaced with advanced composites, and some of them will have to be metal still, especially if they need to go through very high temperatures or very high strength that you cannot get with advanced composites. As I said, still the majority of our solution today is the advanced composites. So still most of our customers come with a metal problem and we are able to solve it with advanced composites. But as you can see from our portfolio, metal is still a very, very important part of it. And with the PX100, we intend to increase maturity, our solution and application into the metal side of it, especially when you talk about high volume production in hundreds or thousands of parts that you need to produce in a very reliable way. and still need to be very, very precise with minor kind of CNC or work after that for post-processing. So metal is still very, very important. It's a very big element of our solution. And because we are going right into the manufacturing floor, sometimes advanced composites is the best solution. Sometimes it's metal.
spk03: Hey, Shai, can you remind me, I didn't see it on your new investor slides, but does Digital Metal have its own furnace too, or do you just work with partners?
spk05: We work with partners on that front. We currently produce and develop the printing technology and some of the work before and after the print for the preparation of the powder, et cetera, and the center is a partner.
spk03: All right, perfect. Then switching gears to just a follow-up on FX20, is it currently just two materials that are qualified on the platform?
spk05: No, we have more than that. We have some of the onyx materials. We have the ultem. We have continuous fiber. and we will continue to add more materials.
spk03: I guess something in high temp specifically, outside of old temp?
spk05: You will please allow me to share with you the new product. But I can tell you that we did not stop releasing new materials into the FX20, and because it's a hot chamber and has a lot of potential, so some of them will be high temp materials.
spk03: Okay, understood. Good luck, guys.
spk05: Thanks, Troy. Thank you so much, Troy.
spk07: Thank you. Our next question is from Jim Suva with Citigroup. Please proceed with your question.
spk09: Thank you. On your prepared comments, you mentioned some gross margin challenges associated with the rollout. I believe you said it was the FX20. Can you help us understand why was that? Was that like you had to expedite the end product for shipping or parts were in shortage and you had to go to the extra market? scalper market or secondary market, or was it like reworking or acceptances or installations, or what were the challenges with the FX20?
spk05: Yeah, thanks for the question. I think first, there's definitely the combination because in the beginning of 2022, supply chain was still a big challenge. And even just to get the parts, we had to go through bidding wars and pay a lot more than usual for the parts. But I think more than that, usually in a new product introduction, it takes time until you stabilize the product. And that's why you produce in smaller batches. And usually in smaller batches, you don't get the scale. You don't get the scale and the cost efficiency, which we expect to see building up through 2023. So I think that's the majority of it, I would say, going into 2023. But we already see the light from that perspective.
spk06: Yeah, just to add a little bit maybe more color to that, Jim. and thanks for the question. I think number one, inflation hit us to a greater degree than we expected. We mentioned middle of last year, and this is tempered somewhat, but we were paying, you know, $100 for a part that should have cost us $10. Some of that has absolutely come back down, but we're nowhere near our target on material costs yet. And to that point, a little bit further, when you're buying materials for production at a certain cost, you have to bleed through all of those materials before you reach a lower material cost on the next procurement cycle. And then the second is labor isn't where we want it to be yet. The cost of labor has increased due to inflation over the last year, 18 months, as we were thinking through this late last year. And we're not as efficient yet in our labor as we need to be. And there's a path forward in both of those cases, but it's going to take us some time to get there.
spk09: Thank you. And then the reason I asked that question about the FX-20 rollout is as we look ahead to on your slide deck number 10 about the PX-100. the rollout of that, I'm just wondering your full year sales and margin guidance, does it include similar inefficiencies of the rollout and the ramp as expected, or is it expected to have a smoother rollout just so we can kind of monitor it as it rolls out in 2023 for the PX100?
spk06: So, yes, we are anticipating similar, but I also would expect to answer your question both ways, that it should be smoother for us because the unit volumes are expected to be lower in that product early on. So I think, you know, just how we procure materials for that will be a little bit different than we do for other product rollouts.
spk09: Great. And my last question is, I see you're giving quarterly guidance as well as full year guidance. Is that due to better visibility, more supply chain, being able to calibrate it better, or helping investor expectations be more aligned with kind of how you see them? I'm just kind of curious about, you know, the slight change of giving additional details, which I'm sure the investing community will appreciate.
spk06: Yeah, thanks, Jim. So we continue to be focused on annual investments. And really, even the long-term, you've heard us talk, both Shai and I, about this long-term journey that we're undertaking. It's still in the early inning. So we focus on annual. And I think, to your point, we've given a little bit of color, maybe on gross margin and some other areas on the quarter. But our intent and our go-forward plan is to really focus on the year. You know, I think maybe take that a step further. When we think about this current year of 2023 and then beyond, you know, we mentioned getting back to a 55% plus gross margin. We also think that, you know, we will get back to 25% plus year over year growth. Given the demand and the interest we see from from not only our existing products but from the new products that we've shared with customers, as well as this paradigm shift we're seeing in manufacturers. They're increasingly seeking to be more resilient, increasingly seeking more reliable supply chains. As we've said, we're very excited about the outlook. We just want to get past this current level of uncertainty. in the marketplace.
spk09: Great. And my last point is, you mentioned profitability 2024. I think, to be clear, you fully said break-even end of 2024, not the full year. And is that on an operating income adjusted or EBITDA or EPS, or how do you actually define the break-even 2024 comment?
spk06: We'll look at that as... as Q4, not for the full year, as you said. That's correct. And we're looking at it on a non-GAAP basis.
spk09: Great. Thank you so much for the details. It's appreciated.
spk06: Yeah, thanks, Jim. Thank you.
spk07: Thank you. Our next question is from Noelle Biltz with FEMA. Please proceed with your question.
spk02: Hi, guys. Good afternoon. Hi, Noelle. Hi. I recognize that, you know, kind of the trends in your field expected EBITDA and cash flow will sort of move hand in hand. But any additional thoughts or guidance you can give us on how you're thinking about sort of managing cash as you move through 2023 and sort of how you're thinking about where you'd like the balance to be as you move toward the end of the year? Thanks.
spk05: Sure. So Noel, first, thank you for the question. I think, as you can see, we are still very confident about our fundamentals, and we don't think they're changing. Maybe even for the better with all the insurance coming back and manufacturing needs to build more resilience into it, and I think we're part of the solution. With that, there is still uncertainty around yes or no to this inflation recession, and we already took the right adjustment to our cost basis to ensure that we will get to the break-even point in the end of 2024, as we discussed before. We shared before that we believe we'll get there with a very strong balance sheet. And as you can see from some of the comments that Mark shared before, we're looking to reduce materially the cash burn during this year. So if we're finishing this year with about 168, and we are currently expecting about 50 million burn rate this year versus about 120 last year. So it's significant reduction in the cash burn. And we believe this will continue once we'll be able to meet the full potential of the growth with our new product portfolio.
spk02: Okay, great. Thanks. And then just in terms of your R&D investments, anything you can sort of highlight in terms of priorities or things you're sort of excited about for 23, you know, whether that's on the software front, materials, hardware, you know, any thoughts on sort of how you're prioritizing investments? Thanks.
spk05: Sure. This is a great question. Thank you so much. So as you can see, over the last two years or so, we more than doubled, I think, our R&D investment. And if you take M&A into it, we're even more than that. And the outcome of it is a very strong pipeline of innovation. So you can see that we are starting the year already with launching the PX100 and launching simulation and putting it into a tier-sus model with software and service into our customers. But we believe it's only the beginning. And you can probably assume if we invest more in R&D, our product portfolio innovation pipeline is accelerating. And we shared before publicly that we intend to release a new product almost every year. So it's coming. So we are very, very excited when we see what we have coming this year and in 2024 about our ability to really help our customers to move real production to the point of need on every manufacturing floor, wherever they are.
spk02: Thanks very much. Thank you, Noel.
spk07: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Shai Talon for any closing comments.
spk05: Thank you very much, everyone, for joining us, and looking forward to a great year.
spk07: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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