Shapeways Holdings, Inc.

Good day and welcome to the Shapeways first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nikki Sachs. Please go ahead. Thank you.

Greetings, and welcome to Shapeway's first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded. Before we get started, I'd like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of federal security laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, statements regarding our business strategy, future financial and operating performance, projected financial results for the second quarter of 2022, expected growth, impact of recent acquisitions, new offerings, and market opportunity, are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by those forward-looking statements. Accordingly, you should not place undue reliance on these statements. For description of these risks and uncertainties associated with our business, please see the company's SEC filings, including the company's quarterly report on Form 10-Q for the quarter-ended March 31, 2022. The information provided in this conference call speaks only to the broadcast today, May 16, 2022. Shapeways disclaims any obligation, except as required by law, to update or revise forward-looking statements. Also, during the course of today's call, we refer to adjusted EBITDA, which is non-GAAP financial measure. There's a reconciliation schedule showing the gap versus non-gap results currently available in our press release issued after the market closed today, which can be found on our website, shapeways.com. On the call today are Greg Kress, Chief Executive Officer, Jennifer Walsh, Chief Financial Officer, and also available for Q&A is Mika Levy, Chief Revenue Officer. And now I'd like to turn the call over to Greg. Greg, go ahead.

Good afternoon, everyone. Thanks for joining us to discuss Shapeways progress and Q1 2022 financial results. I will begin by providing a business update and share the progress that we've made against our strategic growth plan. Jennifer Walsh, our CFO, will then discuss our first quarter financial results and outlook for the second quarter. Shapeways is a leader in digital manufacturing. We believe we are well positioned and differentiated in a large and fast growing digital manufacturing market. We combine high-quality, flexible on-demand manufacturing with purpose-built proprietary software that enables our customers to rapidly transform digital design into physical products. Since completing our business combination and listing on the New York Stock Exchange in September of 2021, we have focused our investment on the execution of our strategic growth plan. This includes four key growth initiatives, including the expansion of our additive manufacturing capabilities, Executing a comprehensive go-to-market strategy, expanding our manufacturing services offering to include more traditional manufacturing processes, and commercializing our software. To date, we've made progress towards those goals and are excited about the long-term growth and shape. For the first quarter of 2022, our revenues were $7.6 million, slightly ahead of the guidance we provided to you on last quarter's call. We delivered that revenue with strong gross margin performance at 45%. Throughout the quarter, we continue to execute on our additive manufacturing expansion initiatives, which includes the deployment of new hardware from desktop metal. We also invested in our go-to-market expansion initiatives, which includes growing our business development teams, which is targeting mid-market and enterprise customers, both geographically and by vertical. We continue to develop our outsourced supply chain, and to include traditional manufacturing capabilities, which we believe will allow us to capture more share of wallet from our customers over time. And lastly, we continue to make progress commercializing our software offering under the auto brand. We are focused on the first phase of this rollout, which provides small and mid-sized manufacturers the ability to leverage Shapeway software and provide active manufacturing services to their customer without investment. Following the end of Q1, we completed three strategic acquisitions that closely align with our objectives, of accelerating our growth initiatives, which include additive manufacturing expansion, go-to-market development, traditional manufacturing, and software. I'll provide further detail on these strategic acquisitions later in my remarks. I am proud of the progress that we have made maintaining our leadership position in the digital manufacturing industry, advancing our strategy, and executing on the core competencies of delivering low-volume, high-mix production at scale. Our ability to successfully do that has been enabled by our proprietary purpose-built software, which digitizes the end-to-end process. This software removes friction from the ordering process, enabling our customers to easily optimize their files for printability, configure their manufacturing requirements, obtain instant pricing, utilize best-in-class e-commerce tools, create digital inventories, and integrate their own business software directly into Shapeways. digital manufacturing platform through our API to make future purchases more seamless. Our software manages complex workflows, which enable efficient, high-quality manufacturing at scale. This optimizes the labor, material, machine, and overhead costs associated with manufacturing the parts and drives down the cost, maximizing gross profit. Additionally, it tracks every step of the process, allowing for high levels of traceability, data, and insights. The software enables us to efficiently manage dynamic, ever-changing customer requirements at scale. Currently, the majority of Shapeway's revenue comes from providing additive manufacturing services to our customers. We provide them with access to high-quality, industrial-grade additive manufacturing at scale. This allows our customers to utilize innovative manufacturing capabilities without making significant investments internally in CapEx, labor, knowledge, and software. This reduces their risk of investing in the incorrect capability and allows them to shift between a wide range of manufacturing hardware technology materials and finishes based on their needs. Our customers also benefit from Shapeways volume, where they may see a part pricing lower than their internal cost structures. There is a wide range of examples of how customers utilize Shapeways manufacturing services. For example, we have an aerospace customer that develops medical drones for emerging markets, which leverages Shapeways for low volume production for their payload modular device and adaptable parts in their various drone models. This enables them to continuously iterate the design, optimize for weight, and hold minimal inventory. Another example is an innovative NFT creator, which allows our NFT purchasers to access physical representations of the product fulfilled by Shapeways. They've leveraged the Shapeways API to integrate directly with our platform, which allows them to offer physical products to their customers with seamless manufacturing fulfilled by Shapeways. Another example is a large software company that is providing a digital inventory of adaptable accessories to support increased accessibility for customers with disabilities. This allows highly personalized accessories to expand access to their hardware. As we have mentioned on previous calls, we are focused on four growth areas that we believe will enable us to capture and expand market share using our highly scalable digital manufacturing platform and software. I am pleased to report that we have made progress on all initiatives. First is the continued expansion of our additive manufacturing capabilities, including investments in new hardware, technologies, materials, finishes, and certifications to support enterprise customer needs. We have launched several new capabilities that are already helping us expand our global manufacturing footprint across metals, elastomers, polymers, composites, wood, and digital casting applications. And we anticipate continued investment in this area to drive growth. This launch of new capabilities does impact near-term margins, but we expect that these new added manufacturing capabilities will be valuable sources of new revenue. Second, we are continuing to accelerate our go-to-market strategy. expanding beyond our historic self-service sales model to have a more comprehensive strategy. We have made investments in our marketing, business development, and user application teams that are already showing results. We see strong progress in part qualification and validation orders. We've closed multi-year contracts and increased our sales pipeline with mid-market and enterprise customers. With this expanded strategy, we are uncovering new and exciting opportunities that require outbound business developments and user application resources to support. This will enable us to expand into key verticals like industrial, medical, automotive, and aerospace. Third, we are focused on expanding our manufacturing services beyond additive capabilities to offer our customers more traditional manufacturing services like CNC, injection molding, and sheet metal. We expect to scale these manufacturing capabilities through our outsourced supply chain partners while making minimal investments in internal manufacturing capabilities. We plan to focus our investment in both software and supply chain development to support these additional manufacturing methods. By offering these manufacturing methods to our customers, we have the ability to capture more share of wallet and increase market penetration. Our final growth initiative is the continued commercialization of our software. Last year, we introduced Auto and began a phased rollout of this purpose-built software platform. The Auto software offering enables other manufacturers to leverage Shapeway's digital manufacturing software platform for their own business needs. This will enable them to improve accessibility by moving online and removing friction from their ordering process, increase their profitability by capturing efficiency through digitization at the end-to-end process, and expand their manufacturing capabilities by leveraging and outsource supply chain versus making those investments internally. The initial phase of the auto software rollout, which has already begun, provides traditional manufacturers with the ability to offer added manufacturing services without investment, allowing them to expand their manufacturing capabilities, generate new revenue streams, and grow profitability through our white-labeled solution. Future phases of this rollout will include the further digitization of their internal manufacturing processes, and the ability to create and manage a supply chain. Our target customers are small and mid-sized manufacturers who don't have the ability to make the investment to digitize their processes or invest in new innovative manufacturing capabilities. So by providing them access to Auto, we can leverage our software platform to support them in their digital transformation. This has the potential to create multiple new revenue streams for Shapeways, allowing us to grow our manufacturing business and also create a SaaS revenue model. As mentioned earlier, since closing Q1, we completed three strategic acquisitions. We expect each of these acquisitions to accelerate our growth initiatives and advance our long-term growth plan, helping us to seize market share, capture talent, develop new go-to-market channels, expand our customer base, and capture more customer share of Wallet. We expect two of these acquisitions to help enhance our software strategy by adding immediate features to our auto software platform and helping to accelerate future phases of the offering. The first of these is MSG. MSG's core business is to enable custom parts manufacturers the ability to grow their business by making it easy for them to be discovered on its cloud-based request-for-quote management platform. They also help buyers to find the best possible manufacturer that fits their needs through a set of supplier and buyer marketplaces. Their focus on more traditional manufacturing is is expected to accelerate our traditional manufacturing growth initiative by enabling supply chain development efforts and give us the ability to leverage the thousands of manufacturers that are on the platform to fulfill Shapeway's customers' needs. This is also expected to accelerate the commercialization of our software platform, Auto, by integrating their RFQ process into our platform and the ability to offer Auto software to their installed customer base. The second acquisition that we completed was MakerOS. MakerOS offers a SaaS service to facilitate design, prototype, and production processes for manufacturers and service providers. MakerOS has a scalable platform and advanced tools and bring complementary features to the auto software platform, including enhanced project-based coding, project management tools, and customer collaboration and communication tools. The third acquisition that we completed was LinearAMS. Linear AMS supports injection molding manufacturing applications, tooling, and manufacturing production through additive manufacturing and is an expert in conformal cooling which leverages additive manufacturing to dramatically improve injection molding cycle time. We are excited to have Linear AMS join Shapeway to help accelerate our additive manufacturing expansion, go-to-market expansion, and traditional manufacturing growth initiatives. Linear AMS expands our additive manufacturing capabilities with new hardware, materials, finishes, and certifications. It enables further go-to-market expansion with additional business development and user application expertise and brings deep customer relationships and key verticals that we expect to build upon. It also deepens our expertise in traditional manufacturing methods, specifically in injection molding. These are just a few examples of how Shapeways can accelerate our growth plan through strategic acquisition, which can enable us to aggressively drive market share consolidation, capture talent, develop new go-to-market channels, acquire new customers, expand customer share of wallets, and drive gross profit optimization. As we continue to see the market shift towards the digitization of manufacturing, these are the types of acquisitions we plan to continue targeting. We have a robust pipeline of small, tuck-in, and larger acquisitions that could accelerate our strategic plan and be accretive to our equity stories. We believe that we are approaching an inflection point in the overall adoption of digital manufacturing solutions and that Shapeways is well-positioned to capture that demand. We have developed a roadmap to help us accelerate our vision, and we're making meaningful steps towards executing on that plan. Lastly, we have continued to develop and build out our leadership team. We've added great talent across all functions and filled key leadership roles in finance, legal, operations, and commercials. I would like to welcome our new team members and thank the entire Shapeways team, our investors, and all our stakeholders for the trust and support. Jennifer will now discuss our financial results in more detail.