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spk05: Greetings, and welcome to Velo3D reports their second quarter earnings results call. At this time, all participants are in a listen-only mode. A 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. And please note that this conference is being recorded. I will now turn the conference over to Bob Okunski, Vice President of Investor Relations at Velo3D. Thank you, sir. You may begin.
spk06: Thanks, John. I'd like to welcome everyone to our second quarter 2022 earnings conference call. On the call today, we will start out with comments from Benny Buller, CEO of LL3D, who will provide a summary of the quarter, as well as an update on certain key strategic priorities for the balance of 2022. Following Benny's comments, Bill McComb, our CFO, will then review our second quarter 2022 financial results and provide our guidance. As a reminder, a replay of this call will be available later today on the investor relations page of our website. During today's call, we will make forward-looking statements that are subject to various risks and uncertainties that are described in the safe harbor slide of today's presentation, today's press release, as well as our 2021 10-K and Q1 2022 10-Q filings. Please see those documents for additional information regarding those factors that may affect these forward-looking statements. Also, we will reference certain non-GAAP metrics during today's call. Please refer to the appendix of our presentation as well as today's earnings press release for the appropriate GAAP to non-GAAP reconciliations. Finally, to enhance this call, we have posted a set of PowerPoint slides which we will reference during the call on the events and presentations page of our investor relations website. With that, I'd like to turn the call over to Benny Buller, CEO of Vela3D. Benny? Thank you, Bob.
spk00: and I would like to welcome everyone to our second quarter earnings call. Please turn to slide four. Before discussing our strong quarterly result, I want to put into context our success over the last six quarters. We firmly believe our industry-leading growth is being driven by our innovation and product differentiation. Customers continue to look to Velo3D to produce the high-value metal parts they need. As you can see from the chart, We have grown revenue by more than 15 times compared to the first quarter of 2021. This growth has been driven by increasing demand for our industry-leading safari systems. There is a simple reason for that. We offer our customers a technology that is significantly better additive manufacturing solution than what is currently available in the market, enabling customers to print the parts they need, avoiding the compromises they had to do with legacy additive manufacturing. This success is also clearly evident when you compare Velo3D to our peer group, whose revenues have been flat to down over the same period according to context research. As a result, we are on track to become the largest metal additive manufacturing company, possibly as early as the end of 2022. We feel this share gain is a direct result of our go-to-market strategy that is focused on a different market segment than our legacy additive manufacturing peers. Our unique and differentiated technology fundamentally changes the way the aerospace, energy, power, and other industrial segments design and produce their most critical parts, parts that cannot be produced with legacy additive manufacturing technology. Overall, we continue to see a massive and tapped global market opportunity for high-value metal parts. We believe we are extremely well-positioned to capitalize on this trend and remain committed to providing our customers with the technology to meet their expanding additive manufacturing needs. I would now like to discuss the specifics of our results. Please turn to slide five. We were pleased with our Q2 execution as we again posted strong sequential and year-over-year revenue growth, maintained our backlog, and expanded our new and existing customer footprint. For the quarter, Revenue rose 60% sequentially and more than 160% year-over-year, as customer adoption of our SAFIRE technology remains very high. We also posted record revenue despite the delay of a handful of early launch customer systems into Q3 due to supply chain challenges. Demand for both our SAFIRE and SAFIRE access systems continues to grow. We booked $18 million in new orders during the quarter while maintaining a significant backlog of $55 million. Given our first half revenue results, strong second quarter bookings, and shippable backlog for this year, we remain highly confident in achieving a 2022 revenue target of $89 million, a year-over-year growth rate of 225%. Operationally, we executed well as we continued to successfully scale our Sephora DC production at our new manufacturing facility. Our ability to scale production is important as it has a direct correlation to cost reduction and gross margin improvement. Finally, we expanded our product leadership during this quarter with the launch of our Sepharic C1MZ. We believe this is the world's largest commercially available metal laser powder bed fusion production system with the capability to manufacture parts that are up to 1,000 millimeter tall and 600 millimeter in diameter at the total part volume of up to 10 cubic feet. We expect to ship our first few systems of this product this quarter and are seeing a strong demand demonstrated as solid bookings from the energy and aerospace industries. I would now like to provide a quick update on our high confidence in achieving a 2022 revenue target of $89 million. Please turn to slide six. As I previously mentioned, our 2022 confidence is driven by the fact that we have significant visibility for this year. In addition, we expect to see ongoing strong demand for both our SEPHAR and SEPHAR-X systems as customers continue to choose our industry-leading technology for their additive manufacturing needs. Similar to last quarter, This chart provides a detailed breakdown of our 2022 revenue expectations by category exiting Q2 versus where we were in Q1 and coming into the year. Overall, as a result of our first half financial performance and Q2 bookings success, we now have more than 95% of our 2022 revenue target already recognized recurring or books for this year. In particular, This improvement was primarily driven by a significant reduction in our year and bookings gap, which declined by seven times sequentially from $21 million in Q1 to $3 million at the end of Q2. In relation to the supply chain, conditions continue to be very challenging, especially in the electronics area. This situation is a daily challenge for us, forcing us to procure inventory much earlier than would normally be needed and delaying the point in time in which we can benefit from our cost improvement initiatives. As Bill will discuss, this will result in a slower improvement in gross margin than we planned. We do not expect any material recovery in supply chain conditions through the balance of the year at this point and have launched new initiatives to minimize the ongoing impact. In summary, Given our first half results, strong bookings activity, and a solid backlog, we are iterating our 2022 guidance of $89 million. Before turning the call over to Bill to discuss our financials, I'd like to conclude my remarks by providing a brief overview of our initiatives to drive production efficiency and improve profitability given our long-term growth forecasts. Please turn to slide seven. First, reducing our bill of material costs. As we have mentioned in the past, we employ an asset-light strategy for production where we utilize subcontractors for a significant majority of our required parts. This has enabled us to reduce the cycle time of production, lower labor costs, and successfully and quickly scale SEPA production. However, we have not completed the migration to a contract manufacturing supply chain for Cefarexi at this point. We are in the process of outsourcing the assembly of complex parts for our Cefarexi system to key suppliers, but currently many of them are assembled in-house. This initiative, combined with our strategy to consolidate suppliers to leverage our scale, will streamline our procurement process, allow us to scale without increasing labor, spending, and improve production efficiency. We expect to see the full benefit of this strategic initiative in the first half of 2023. Second, we have instituted programs to reduce our inventory levels and more efficiently manage our supply chain. Initiatives include further investment to automate and integrate our planning and procurement processes while working with key suppliers to more closely match deliveries to our production schedules. This will enable us to reduce working capital and minimize inventory while maintaining short lead time. Finally, we are focused on reducing production cycle time and lowering overhead costs. This effort is directly tied to scale as we leverage our production experience to accelerate our manufacturing process. This process is further accelerated by our recently instituted continuous improvement learning system in our operations, allowing us to learn more quickly from our mistakes and implement improvements quickly. Additionally, we are investing in training of our production team. In the last few quarters, we have been laser-focused on scaling up our Cefarex-C manufacturing. As we have stabilized Cefarex-C production, we now can invest in training and infrastructure to drive efficiency. These initiatives will have the added benefit of improving overall quality and significantly reducing post-production work in the factory and the field. We believe these investments in operational efficiency are necessary to maintain our strong growth trajectory as well as be critical to improving our margins and reach for profitability. In conclusion, we are excited about our future opportunity and believe we are well positioned to capitalize on the growing demand for high value 3D printed metal parts. We remain confident in our 2022 forecast and look forward to executing on our long-term strategic vision With that, I'd like to turn the call over to Bill to discuss the financials and our guidance.
spk02: Thanks, Benny. Moving on to our quarterly financial performance, please turn to slide 9. Revenue for the quarter was $19.6 million, up 60% sequentially and more than 160% year-over-year. The sequential increase in year of sale revenue from $10.2 million to $17.6 million was primarily driven by an increase in the number and ASPs of the Sapphire XC system shift in the quarter. We also had a lease buyout transaction in the quarter. Recurring service revenue was in line with Q1, but we expected to increase in the second half due to higher lease and service revenue from an increased number of systems in the field. On a year-over-year basis, year of sale revenue was up nearly threefold from $6.1 million to $17.6 million, and recurring revenue was up 90% from $1.1 million to $2 million. Gross margin for the quarter was 6%, up from 0% in Q1 and in line with our forecast. Q2 gross margin was impacted by a continuation of the elevated costs affecting Q1 gross margin. These included higher than planned material costs, including higher shipping costs, launch customer pricing impacts, and higher labor and overhead costs. Support service costs also increased substantially due to investments for improved system reliability and building out our network of service personnel. With our service network largely built out, these costs are expected to stabilize for the remainder of the year. Adjusted operating expenses for the quarter excluding stock-based compensation declined slightly sequentially to 22.5 million. R&D expenses were in line with Q1 at 2.5 million as we continued to spend on product development and process technology for new products, new materials, and system productivity and reliability improvements. G&A declined to 6.9 million due to front-loaded costs in Q1. Sales and marketing increased slightly to 5.1 million as a result of the growth of our regional presence in the US and in Europe. GAAP net income for the quarter was $128 million, including a non-cash gain of approximately $154 million related to changes in the fair value of our warrants and earn-out liabilities. On a non-GAAP basis, which excludes these gains, and stock-based compensation expense, net loss was $21 million, and adjusted EBITDA for the quarter excluding the same costs was also a loss of $19.8 million. I'd now like to provide an update on our gross margin expectations for the second half of the year. Please turn to slide 10. As I mentioned, Q2 gross margin was in line with our expectations at 6%. However, the very difficult supply chain conditions experienced in Q2 have changed the duration and timing of some of the factors affecting gross margin and our expected second-half gross margin performance, as shown on the slide, where we compare the beginning of the year and current outlooks. First, while we see no change in the total impact of launch customer pricing through the year, the impact will now be spread more over the full year but some of these shipments will shift to the second half of this year. Our labor and overhead cost savings as a result of the scale up of our production rate are roughly on track with our plan. So we see only a small change to our UN 2022 forecasts on labor and overhead costs, which reflect those expected scale benefits. Where we see a clear deviation between our plan at the beginning of the year and the current outlook, is in regards to our expected savings in billed materials costs. The continued disruption in our supply chain has delayed our ability to realize the billed material cost saving opportunities we originally forecasted. These are now expected to shift to the first half of 2023. This is driven by the following factors. In Q2, we faced an environment of significant component shortages and delivery date uncertainties. In order to ensure the availability of components to meet our production and shipment goals, it was therefore necessary to place orders for significant quantities of materials ahead of production needs in order to build a safety cushion and account for potential delivery delays. While certain components were delayed, deliveries of many components came in ahead of expectations in the quarter. In addition, Further contributing to the inventory buildup, shipments of some completed systems were also pushed out beyond Q2. As a result of both these factors, we now have two to three quarters of supply of most of the components required for the production of our systems. And this inventory, which was acquired at first half pricing, will be used for Q3 and Q4 production. Accordingly, these higher bill of materials costs will continue through Q3 and Q4, and previously anticipated material cost savings will be delayed until first half 2023. In addition, shortages in certain critical components also required us to incur high expedited shipping costs to secure the parts we needed to meet our shipment goals. This added to the impact of billed material costs on gross margin. As a result of these effects, we now expect Q3 gross margin will be in the same range as Q2, and Q4 gross margin will be in the range of 11 to 14 percent. We've taken a number of steps to reduce our material costs and inventory levels. We expect to start seeing inventory leveling off and decrease this quarter, and continuing to decrease in Q4. We expect building material costs to start to drop in Q1 of 2023. Specifically, given our large backlog and confidence in our outlook, we have recently entered into new supply chain partnerships where we leverage our scale, making higher volume, longer-term commitments, and in return, we see reduced per-unit costs for materials and spread out deliveries to reduce inventory levels. We expect to complete more of these types of deals going forward. Despite the challenges I've described above, we remain confident in our ability to drive margin improvement in 2023 and to be roughly EBITDA break-even late next year. Turning to the balance sheet on slide 11, We exited the quarter with a very strong balance sheet with $142 million in cash and very limited debt. Cash usage for the quarter was $44 million. Investment in working capital of $19 million was primarily driven by the increase in inventory I described before. We ended Q2 with an inventory of $62 million and expect inventory to come down in the second half of the year as we draw down our stocks and stagger deliveries. CapEx was $5 million, primarily related to CapEx for lease systems and the completion of our new manufacturing facility, giving us the capacity necessary to meet our growth forecasts. We expect total cash usage in Q3 to be materially lower compared to Q2, driven by a lower investment in working capital. Finally, we recently increased our revolving credit and lease financing facilities with Silicon Valley Bank, from a total of 18 million to a total of 45 million, giving us even more confidence that we have ample liquidity to fund our long-term growth plan. I'd now like to provide our outlook for the balance of the year. Please turn to slide 12. Overall, we were pleased with our performance in the first half of the year and are reiterating our revenue guidance of 89 million for 2022. This reflects our significant visibility strong backlog and belief that we will continue to see strong growth momentum for our technology in the market for the balance of the year. I would also like to highlight that our business continues to evolve as we launch new products and based on trends in customer demand. For example, we are seeing significantly higher ASPs than forecasted, offset by lower unit growth. This is driven by higher demand than forecasted for the higher priced Sapphire XC systems versus Sapphire systems. We're also seeing a material shift in our customer mix towards existing customers versus new customers as the recurring purchase rate from our existing customers is significantly higher than our initial model. Finally, our goal for the balance of the year remains to efficiently scale the company to maximize our growth while focusing on improving our profitability over the next 12 to 18 months. In conclusion, given our continued sales momentum, growing backlog, strong demand for our Sapphire XC system, and solid balance sheet, we are well positioned to capitalize on what we see as significant growth opportunities in the additive manufacturing market in the years ahead. With that, I'd like to turn the call over for questions. Operator?
spk05: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Brian Drab with William Blair. Please proceed with your question.
spk01: Hi, thanks for taking my questions. I wanted to just start by asking for some of the information that you provided in previous slides. I don't know if there's a change in level of disclosure that you want to give going forward, but can you tell us anything about number of shipments in the quarter, total unit shipments, number of new customers, Number of total customers, you know, a couple of my favorite slides are not in the deck here. I'm just curious about that.
spk00: Brian, you're right. They are not in the slide, and I appreciate that they were favorite because they were quite unique, and most companies don't provide them. What we found is they also are extremely favorite to our suppliers, to our competitors, sorry. It contains a lot of very sensitive competitive information, and we decided to replace these metrics with more conventional metrics of backlogs, bookings in the period, et cetera.
spk01: Okay. In the quarter, did you ship – You shipped XC systems, I guess, and I'm wondering if you shipped XC systems to more than one customer. Can you say that?
spk04: Yes.
spk01: You shipped it to multiple customers in the quarter. Correct. And then I guess I'm just curious what you said some of the orders to the or shipment to the flagship customer or your strategic customer were delayed. Is there a difference in the in the systems or is there a reason why some were delayed and some weren't?
spk00: Yeah. So, uh, so the reality is, uh, uh, we, we, as you, as you notice, we have a very large backlog and we have a lot of customers that are in a real urgent demand for those systems and real urgent need of those systems. And, uh, we, uh, tried, uh, to ship even more systems. We bought inventory and we even started on more systems with the hope that we'll be able to ship more systems, but we just were not able to ship all the systems that we wanted. So in terms of the bookings, we had the demand to even much significant larger quarter than we had, but we just couldn't get all the components we needed to deliver to all the customers that we needed. So we Unfortunately, we're not able to ship all the systems to the launch customers that we wanted to.
spk01: My last question is a high-level question, Benny. This has been such a hard year, obviously, and it continues to be such a hard year, unusual time. If there's a situation where supply chain loosens up, you have all these lessons that you've learned about how to build the machine, and the manufacturing efficiencies that come with that, where 2023, things get much easier for you. It seems like the demand is there. The challenge has really just been manufacturing it and getting the parts that you need to manufacture it. I don't want to oversimplify it, but it seems like you're kind of spring-loading this to where it could start to look relatively easy compared with 2022 once we get through a couple more quarters.
spk00: So, you're absolutely right, but I want to correct just one impression. So, we do not immediately see the external supply chain condition easing up. I don't have the visibility to predict that. I do see that our act is getting much better together. So, as we are ramping up this FRXC production that we and we're stabilizing the production of that. We now have much more attention to invest in infrastructure activities. And specifically, we have been consolidating suppliers and signing more strategic agreements with suppliers where suppliers provide us larger assemblies with more quality controls at a much better cost allowing us also to improve the cycle time in our production. So we also kind of improved our planning activities and procurement activities, as well as the program management of our suppliers and the procurement. So all those activities combined, which is helping us to get to a much better visibility and much better execution in dealing with the supply chain problems. Unfortunately, the supply chain problems do not disappear. and every day we see new kind of surprises. But if you get the surprises two, three months before you need the material, it's much better than if you get that two weeks before you need the material. So as we are getting better at that, and as we are dealing with this crisis for longer, we feel more confident in being able to deal with the challenges of the supply chain.
spk01: Okay, thank you very much.
spk00: Thanks, Brian.
spk05: And our next question comes from the line of Wamsi Mohan with Bank of America. Please proceed with your question.
spk04: Hi. Thank you for taking my question. This is actually John on behalf of Wamsi. I'm just curious, how would you characterize the current demand environment in Europe with the ongoing geopolitical conflict that's going on in Europe, does that change the previously expected demand trajectory?
spk00: So the vast majority of our business has been in the United States, and we are at kind of very early growth phases in Europe. So for us, what we're mostly dealing with is the fact that the vast majority of the customers in Europe still don't know us. There is a lot of questions and there is a lot of credibility that we need to build with the market kind of on the other side of the pond. So this has been the main driver for the fact that things take long in acquiring customers in Europe, but we see a very strong interest. from the European market and we see a very strong need from European customers. It's just that the sales cycles of the first customers have been long. We also had some very good successes in Europe recently. So I don't see the signs that Europe is kind of receding into a recession. and the demand there is dropping. It's just that we are on this phase of proving ourselves and getting traction in this market. These are the first successes we have in this market right now.
spk04: Understood. Okay. And I know you said you are not going to disclose the customer information, acquisition information, but if I remember correctly, last quarter you did mention that Europe will account for material portion of the new customer account. Would that still hold true? Yes. Okay, got it. And just as a quick follow-up, just want to jump over to gross margin. I know you mentioned various initiatives to offset these macro headwinds, but if I look beyond 2022, so to speak, when should we, you know, when do you expect to reach the previously stated gross margin target of about 30%?
spk00: So, I can, I will, so the initiatives, that will drive the bill of material down and will help us with the gross margin. Some of them will hit in Q1, and some of them will fully get into effect in Q2. So I would predict that by Q2 we should be at 30%. I think in Q1 we'll be somewhere close to that, but I think still less than 30%. Bill, you agree?
spk02: Yeah, we've got to work our way through this high-cost inventory that we acquired. We have begun to do these deals, these more strategic partnerships, which will bring cost reductions. But, you know, the rate – that material will begin to be supplied in the fourth quarter, but it won't really impact the P&L until the – The first quarter of next year and then. You know, I I think we want to be. Careful not to give any official guidance on 2023 this far in advance, but you think. Q2 or thereabouts is a reasonable guesstimate.
spk04: OK, understood. Thank you so much.
spk05: And our next question comes from the line of Jim Rashudi with Needham & Co. Please proceed with your question.
spk03: Hi, thank you. Did you provide any detail on the addition of backlog as it relates to XC versus the legacy Sapphire?
spk00: We did not provide the backlog breakdown, but... The vast majority of the backlog is CFRXC and CFRXC1MZ. We actually have a very significant CFRXC1MZ backlog as well as CFRXC1MZ backlog. But the vast majority of that is CFRXC and CFRXC1MZ.
spk03: Okay. Thank you. Thank you, Benny. Bill, I appreciate the commentary on second half gross margins and how we should be thinking about it, and I may have missed it, but did you provide any color about OpEx looking out to the second half?
spk02: Do we need to be... I didn't, Jim, but I'm happy to. Look, we think, you know, flattish to very modest growth. You know, most of our incremental... Obviously, we'll be increasing VET count But the bulk of that incremental labor cost is going to production and customer service, which are part of gross margin, part of cost of goods sold. So the incremental labor cost hitting OPEX is pretty limited.
spk03: Got it. Are you taking any pricing actions just in light of the you're seeing in terms of dual material components and whatnot, labor?
spk00: We did not. We did not take pricing actions. And the reason why we didn't take pricing action is strategic. We believe that the market for our product and for our solution is going to increase as we drop the costs for our customers of that. So we are on a mission to drop the cost of this and to provide lower and lower costs for our customers. So as we see the opportunities for dropping the cost, we prefer to focus on that and reaching the price targets that we plan for and that our customers plan for. as opposed to increasing the price.
spk03: And I can appreciate that, Benny. And last question that I have, I'll jump back in. As we think about the funnel for next year and building backlog, everyone's being affected by supply chain, presumably your competitors as well. Do you feel there's any risk that some customers are just given the challenges that you're facing, is resulting in perhaps some customers that are maybe... You there, Jim? Yeah, all I was asking was, sorry, was just that given the supply chain challenges, as you build the funnel for next year, are you seeing any signs that customers are maybe looking at alternatives for perhaps some vendors that are not facing as acute a supply challenge? Or is it the backlog that you're building looks pretty secure as you think about the first half of next year as well?
spk00: So, you know, the easy way to, so I will answer your question in two ways, right? One, the backlog is keep growing. and our penetration to the market and market share keeps growing. The easy way to think about your question is in terms, and the effect it has on customers is on lead time. And one of the reasons why we didn't, why there is a disproportional high Cefar XC backlog as opposed to Cefar is because our lead time on Cefar production is relatively short. Definitely less than 10 weeks that we can deliver to customers. Our lead times right now for customers that purchase Sephora XC system is in the order of 16 weeks or so. And so with 16 weeks, we didn't have customers that basically said, this is too long for us. We are going to switch with someone else. So that may be the... the direct question to your answer. No, that's very helpful, Fadi. That's very helpful. You know, if the lead time was 25 weeks, that may have been different. But right now, the lead time is very reasonable. Okay. Thank you. Thanks, Jim.
spk05: And as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Troy Jensen with Lake Street Capital. Please proceed with your question.
spk07: Hey, gentlemen. First off, congrats on the nice quarter here.
spk05: Thanks, Troy.
spk03: Thank you.
spk07: Hey, so maybe for you, Benny, I know you talked about contract manufacturers, you know, producing your printers. I know the contract manufacturer is also a target customer base for you too. So curious to know your traction that you've had kind of penetrating that customers.
spk00: Yeah. So, uh, A very significant portion of our market is to contract manufacturers. I would estimate that about half of our printers go to contract manufacturers, and we keep growing this segment. I think that we see a lot of repeat sales that we are doing going to contract manufacturers. We see pretty strong utilization in the last few quarters. with contract manufacturers driving more purchases. So we see this segment growing very solid. And one of the reasons for that is that we see a lot of customers, OEMs, that need parts that do not have the capability, the will, or the strategic directive to invest in vertically integrated manufacturing capability in additive and instead really need a supply chain. So our development of a diverse, copy exact, scalable supply chain is extremely reassuring for those customers and is enabling for those customers to rely on a very professional supply chain that is actually a traditional high-quality supply chain that is now empowered with additive as opposed to kind of a pure-play additive service bureau business that we have seen in the past.
spk07: Benny, do you differentiate between contract manufacturers and service bureaus? And what I mean by that is I think of a service bureau as a machine shop, right, that's kind of printing parts for local customers. When I think contract manufacturers, I'm thinking, you know, Jabil and Flextronics and some of the big players out there. Do you differentiate when you talk about... Go ahead.
spk00: Yeah, I do, and I'm glad that you asked me because when I talk about this with our team and with our customers, my definitions are slightly different. So to me, contract manufacturers are people that are doing build-to-print work for production purposes for end users. And yes, in some cases, this could be very large companies like Jabil and Flextronics, and in some cases, this could be $100 or $50 million companies that are employing a sophisticated fleet of CNC machines with a lot of quality control in that. So to me, that's what I call contract manufacturers. What I think of service bureaus when I think of service bureaus is companies that employ fleets of 3D printers. And the vast majority of those actually will have a negligible amount of machining capability with CNC machines. machining, as well as quality controls, as well as manufacturing experience and real-life production experience. So when I say contract manufacturer, we are focused on the first group of people, and we are really not working with the second group of people.
spk07: Understood. Okay. And on the one MZ, I mean, I'm pretty sure it's going to be the largest customer, but can you just confirm that you've got multiple customers for the MZs?
spk00: The XC1MZ has been ordered by a number of customers. We announced it last quarter, and the first shipments of the system will be this quarter. The first two shipments will be to the same customer, and then next quarter there will be for a few more customers.
spk07: Okay. All right, guys. Well, congrats on the good results, and keep up the good work.
spk06: Thanks, Chuck. Thank you.
spk05: Thank you. At this time, we have reached the end of the question and answer session, and I'll now turn the call back over to Benny Buller for any closing remarks.
spk00: So I want to thank everyone on the great questions and on listening to our earnings call. We are extremely excited going forward, and we'll be glad to follow on with anyone specifically with more questions. Thank you, everyone.
spk05: Thank you, everyone. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
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