SSYS - NASDAQ

Greetings and welcome to the Stratasys Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Yonah Lloyd, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our 2023 second quarter financial results. On the call with us today are our CEO, Dr. Yoav

Thank you, Yonah. Good morning, everyone and thank you for joining us. Before we discuss our results for the quarter, I would like to provide a brief update on the M&A activities taking place. As we announced on July 17, our Board after consultation with its financial advisor and outside legal counsel, unanimously determined that the July 13 revised unsolicited proposal by 3D Systems Cooperation would reasonably be expected to result in a superior proposal, as defined in Stratasys merger agreement with Desktop Metal. To determine whether 3D systems would ultimately make a superior proposal, Stratasys is conducting the necessary due diligence on 3D Systems business and prospects. As the majority of the consideration is based on shares of 3D Systems, we continue to work closely with 3D Systems on the information they have provided, and we'll provide an update at the appropriate time. As the Board continues to support our efforts to maximize value for all Stratasys shareholders, it is important to keep in mind that our Board has not determined the 3D Systems proposal, in fact constitutes a superior proposal. Furthermore, the Board has not changed its unanimous recommendation to pursue the transaction with Desktop Metal and we will continue to work towards closing it. As always, we are focused on pursuing the path that will deliver the greatest value for our shareholders. Our business is strong. As evidenced by our second quarter results. And we are well positioned for continued success, regardless of the outcome of these developments. Additionally, Nano Dimension recently announced that it will no longer pursue its Partial Tender offer to acquire Stratasys, following the offers expiration on July 31, 2023. Nano also announced that it withdraw its Director Nominees for the Stratasys Board at our Annual General Meeting of Shareholders that took place yesterday. We thank our shareholders for their feedback and are pleased that our shareholders voted to re-elect each of Stratasys Director nominees to continue supporting our efforts to execute on our strategy, to deliver significant long-term growth and maximize value for our company and our shareholders. That said, the purpose of this call is to discuss our financial and operating results and we ask that you keep your question to that. Turning to the results. Our strong second quarter results represent another consecutive quarter of solid performance, marked by record recurring revenues form consumable sales and customer service revenues. These results demonstrate the success of our winning strategy, which includes our leadership position in five polymer additive manufacturing technologies, resilient business model and strong financial profile. The work we've done to execute our strategy has put us on track to achieve our medium-term forecast, as a standalone company of generating more than $1 billion in organic revenue in 2026, without significant M&A activity. In addition to making substantial improvements in profitability over the coming years, we believe that this expectation will be further bolstered by the addition of Desktop Metal. Together, we believe, we are positioned to achieve outsized growth and create long-term shareholder value for years to come. We accomplished these results against the ongoing challenging macro backdrop that continues to be marked by slower growth and higher interest rates, as the global economy works to overcome recent period of high inflation. Despite the macro situation, I'm pleased that customer demand and our engagement with both our installed base and new customers is stronger than ever. Our results show that our customer recognize that we offer a unique combination of industry leading polymer technologies, the broadest set of polymer materials, a unified software platform across the portfolio, unmet go-to-market capabilities and excellent customer service. But we are not stopping there. Our suite of technology offering continue to expand, as we broaden our customer reach and gain share particularly in manufacturing applications. Our resilience and recurring business model delivered adjusted gross margin this quarter that was 90 basis points higher compared to the year-ago period and 120 basis points higher sequentially. Additionally, we improved OpEx spending as a percentage of revenue relative to the corresponding period last year. As a result of our efforts and despite the headwinds faced, I am proud that we delivered positive adjusted earnings per share for the eighth consecutive quarter, our vision for the future of additive manufacturing and our leadership position in this industry is more robust than ever. We ended the quarter with a strong balance sheet of over $200 million in cash and equivalents and no debt even after the closing of Covestro asset acquisition. This continues to support our growth through organic investments and accretive acquisition opportunities, including early stage but highly compelling technology driven businesses, which we believe will further improve results, as we leverage our infrastructure and experience to strengthen operations. Now, let me touch on some of the milestones we achieved in the second quarter of 2023. In dental, the second quarter was the first quarter of availability for entry level, J3 Dentajet printer as well as our disruptive digital Dentures Solution, TrueDent. And we are off to a fast start, the new J3 Dentajet for mix trade of various dental parts has seen strong U.S. and EMEA customer response. And as noted last quarter, TrueDent is the only FDA cleared full-color monolithic 3D printed denture solution on the market. We have already sold a number of these systems, including to Posca Brothers, Artisan and Express, three U.S. dental labs, notably the top five producers of denture in the U.S. are either committed or deep within their evaluation process and likely to buy. We are also still on track for European availability next year. And have already engaged with the top 10 European denture producers. The feedback has been excellent and we look forward to updating you next year when we receive CE approval and can begin commercialization. As a reminder, denture is an over $5 billion addressable market with only 5% coming from additive manufacturing to date, our leading technology and offerings are designed to further penetrate that impressive TAM and will drive sales in a large and growing segment. On the industrial side, we had a strong quarter for the Stratasys F900, our largest format FDM system, designed for high end parts and tooling applications. Most of the units were sold into aerospace, automotive, and defense verticals. For production part manufacturing, F900 purchases included existing customers such as BMW and Lucid for factory production tooling, the U.S. Air Force and new customers including COMAC, the Commercial Aircraft Corporation of China which purchased two units to begin their path towards FDM flight parts. After a successful beta program, featuring customers in the U.S. and EMEA, we launch our PA12 material for SAF. PA12 is a highly versatile polymer and the most requested material in Powder Bed Fusion. Combining PA12 with the consistency of SAF technology opens up a world of high volume applications that require advanced level of dimensional accuracy with a lower cost per part. Along with our channel partner, TCL Hofmann in Australia, we announced a partnership with Walkinshaw Andretti United racing team to encode the new AM Hub with a new Stratasys Fortus 450mc 3D printer, their second such printer. The team uses 3D printing to prototype and produce parts faster and more accurately, that perform exceptionally well in challenging racing environments. We are proud of the continued progress and contributions our technologies are making in the highly demanding arena of automotive racing all over the world. Also in automotive, we announced that Peugeot has integrated our innovative 3D fashion technology into the interior of its new INCEPTION CONCEPT, achieving a level of resolution not possible using traditional embellishment methods. The car incorporates a revolutionary interior design and features advanced materials produced exclusively using Stratasys J850 textile 3D printer. Turning to medical, in the second quarter we forged a joint development and commercialization agreement with CollPlant Biotechnologies to transform healthcare with industrial scale bio printing of tissues and organs. The initial focus of the relationship will be around development of bio printing solution for CollPlant's regenerative breast implants and represents a $2.6 billion opportunity. Further, the combination of our P3 technology based bio printer, with their RH collagen-based bio inks, is ideal for future innovation and production of additional human tissues and organs. Both companies have agreed to cross promote their respective bio printing products and we look forward to collaborating toward the successful commercialization of CollPlant's novel regenerative breast implants and beyond. Just last week, we celebrated the FDA clearance of Axial3D's automated cloud-based medical segmentation software. As a reminder, we invested in Axial3D, a cloud-based AI driven 3D printing platform that enables easy segmentation of CT and MRI scans for anatomic models. Healthcare providers and medical device company use a cloud service to quickly go from scan to 3D printed anatomic model, without large upfront capital expenses. Therefore the ability and scalability can help accelerate adoption of 3D printed medical models, across thousands of hospitals. This is an important milestone, as the ability to help global medical device manufacturers, deliver patient specific surgical solution, holds the promise of multi-million dollar agreements with them. And the key is speed and efficiency, FDA clearance is expected to provide a major boost towards scaling our production processes. Turning to Slide 9, early in the quarter we announced the revenue generating premium version of our flagship GrabCAD print software. GrabCAD Print Pro, is designed to improve efficiency of the print preparation process for FDM and SAF customers. And we will be extended it to our other 3D printing technologies in the months ahead. We are now automatically attaching it to new FDM and SAF system purchases, we generate a recurring revenue stream. GrabCAD Print Pro, also includes capabilities from our Riven acquisition integrated as accuracy center, which reduces the number of prints in order to achieve even more accurate parts. You may recall, that last year we acquired Riven, an AI Software Company which helps customers quickly create consistently, accurate and use production part at scale. The response is encouraging with several initial purchases during the quarter, including, Boeing over 75 companies are on trial in GrabCAD Print Pro and we have plans to roll out an additional revenue generating software solution later this year. As we continue to focus on adding value for customers, while increasing recurring revenue through significant software enhancements. During the second quarter, we closed the acquisition of Covestro's additive manufacturing materials business, which expands our differentiated 3D printed materials offering in stereolithography, DLP and powders to address more manufacturing industry applications. We welcome their R&D facilities, global development and sales teams around the world, a portfolio of 60 materials for additive manufacturing and their extensive IP portfolio to our leading suite of consumables offering. The addition of Covestro yielded immediate results and contributed to another record quarter of consumable revenues, we expect to introduce new materials resulting from the acquisition later this year. Our technological innovations, best-in-class sales channels and key partnerships are contributing to our effort to build on our meaningful foundations for growth that will drive our industry leadership for long term. I will now turn the call over to our CFO, Eitan

Thank you, Yoav. And good morning, everyone. As Yoav, mentioned, we achieved another quarter of solid results, against a persistently challenging backdrop in our customers capital spending cycles. We are particularly proud of how we improved both gross and operating margins which chose the progress, we continued to make in driving efficiencies across the platform. Overall our results reflect the resilience, our diversified offerings provides the signs of acceleration in sales of manufacturing oriented system and the continued strong utilization of our systems by our customers. Now let me dive deeper into the numbers. For the second quarter, consolidated revenue of $159.8 million was up 2% adjusted for constant currency and make about relative to Q2 2022. In aggregate revenue, was down 4.1% and down 3.7% at constant currency compared to Q2 2022. OEM revenue, which excludes both MakerBot and FDM was up 3.3% at constant currency from prior year period. Product revenue in the second quarter declined by 5.7% to $109.1 million compared to the same period last year and was up 1.5% excluding MakerBot and on a constant currency basis. Within product revenue, system revenue declined by 17.9% to $48.3 million compared to $58.9 million in the same period last year, excluding MakerBot and at constant currency system revenue was down 8.1%. On a sequential basis, system revenues grew 19.4%, indicative of the improving conditions, we see in the market and the continued strong level of engagement we see with our customers. Specifically, we saw strength in automotive, aerospace and government for true production of end use parts as you have noted earlier. Consumables revenue rose by 6.9% to $60.8 million compared to the same period last year and rose by 7.3% on a constant currency basis. And by 10.8% at constant currency, excluding MakerBot. This represents another record level for Stratasys. Service revenue including FDM was $50.7 million essentially flat as compared to the same period last year. After backing out FDM it was up 3.8% and up 4.1% at constant currency. And our customer service revenue was the highest ever a further testament to the growing utilization rates of our systems. Within service revenue, customer support revenue excluding divestitures grew 8% compared to the same period last year and increased by 8.5% on a constant currency basis. Now turning to gross margins, GAAP gross margin was 41.5% for the quarter, compared to 40.5% for the same period last year. Non-GAAP gross margin was 48.5% for the quarter, compared to 47.6% in the same period last year. The improvement in gross margin was driven by lower freight costs, and the divestiture of MakerBot, which helped offset lower year-over-year hardware sales. GAAP operating expenses were $99.9 million compared to $90.9 million during the same period last year. The increase in GAAP operating expenses reflected in large part, our one-time extraordinary costs associated with Nano Dimension's expired partial tender offer and withdrawn proxy contest, 3D Systems proposal and the combination, we announced with Desktop Metal. Non-GAAP operating expenses were $72.5 million compared to $77.4 million during the same period last year. This decrease reflects the divestiture of MakerBot and tight OpEx management, which more than offset the inclusion of Covestro in the quarter. Non-GAAP operating expenses were 45.4% of revenue for the quarter compared to 46.4% for the same period last year. As we continue to focus on operational efficiency improvement, we continue to manage our costs delivering relatively low OpEx to improve. Non-GAAP operating profitability despite the lower revenue reflecting the scalability of our model. Regarding our consolidated earnings, GAAP operating loss for the quarter was $33.7 million compared to a loss of $23.5 million for the same period last year reflecting the one-time extraordinary cost described earlier. Non-GAAP operating income for the quarter was $5 million compared to $1.9 million for the same period last year. The change is attributable to a 110 basis point improvement in non-GAAP OpEx as a percentage of revenue which more than offset the decline in revenues. GAAP net loss for the quarter was $38.6 million or $0.56 per diluted share compared to a net loss of $24.4 million or $0.37 per diluted share for the same period last year. The increase in GAAP net loss was due in large part to the costs associated with Nano Dimension's expired partial tender offer and withdrawn proxy contest, 3D Systems proposals and the combination we announced with Desktop Metal, which are excluded from non-GAAP. Non-GAAP net income for the quarter was $2.5 million or $0.04 per diluted share compared to net income of $1.2 million or $0.02 per diluted share in the same period last year. We are proud to report that this was our eighth consecutive quarter of delivering positive net income on an adjusted basis. Adjusted EBITDA was $10.6 million for the quarter, compared to $7.4 million in the same period last year which reflects a 220 basis point improvement year-over-year on a percentage of revenue basis. As you see on Slide 16, we used $23.2 million of cash in our operations during the second quarter, compared to the use of $22.8 million of cash in operations for the same quarter last year. Use of cash was primarily driven by the timing of annual incentive payments, increases in accounts receivable and costs associated to acquisitions, proxy contests and related professional fees. We ended the quarter with $205.4 million in cash, cash equivalents and short-term deposits which in part reflects the impact of closing Covestro in the quarter. Our balance sheet and cash generation remains strong. Specifically, we are well capitalized and well positioned to capture value enhancing market opportunities as they are identified, including the pending transaction with Desktop Metal. Now let me turn to our outlook for 2023 and the medium term. We are reiterating our revenue guidance of $630 million to $670 million. Due to timing, we anticipate continued sequential quarterly growth this year with third quarter higher than second quarter and the fourth quarter should be our largest. From a gross margin perspective, we continue to expect full year 2023 to be in the range of 48% to 49% with improved year-over-year growth in the second half of 2023. We expect our margins to get back over 50% next year. In 2023, we expect our non-GAAP operating expenses to be in the range of approximately $290 million to $300 million, we continue to expect non-GAAP operating margins to be in the range of 2.5% to 3.5% for the full year. In the medium term, we expect non-GAAP operating margins to achieve double-digit as our growth plan unfold. We anticipate a GAAP net loss of $115 million to $96 million or $1.66 to $1.39 per diluted share. And non-GAAP net income of $9 million to $17 million or $0.12 to $0.24 per diluted share for the full year of 2023. Our GAAP results and thus our outlook includes the one-time extraordinary costs associated with the proxy contest and merger related activities. Adjusted EBITDA is expected to be in the range of $35 million to $50 million for the year. Capital expenditures are expected to range between $20 million to $25 million for the year. Despite the near-term challenges, that persist due to macroeconomic conditions and the corresponding capital investment downcycle by our customers, we are reiterating our medium term targets discussed on our last call. Those targets are for non-GAAP gross margins above 50% and positive free starting next year. By 2026 we continue to expect our revenue from organic growth to surpass $1 billion, with adjusted EBITDA margin, surpassing 15% driven by our innovative growth engines, as we penetrate further into manufacturing and healthcare applications. Please note, these figures are for Stratasys standalone and do not include anticipated benefits from our pending combination with Desktop Metal. In summary, we generated strong financial results against the continued challenging backdrop. And we remain encouraged by the level of engagement with our customers and confident in our long-term growth and profitability potential. With that, let me turn the call back over to Yoav for closing remarks. Yoav?

Thank you, Eitan. Our customers appreciation and adoption of 3D printing continues to grow, as we are an increasingly essential part of the efforts to bring more agility, flexibility and profitability to the global manufacturing operations. I also want to acknowledge and thank the employees of Stratasys. They have furthered the execution of our strategy with excellence, helping to make Stratasys the healthiest and the strongest growing business in our industry. We look forward to the future and we remain unwaveringly committed to delivering on our plans, as we seek to generate long-term value for our shareholders. With that, let's open it up for questions. operator?

Thank you. Before we open the floor for questions. Our Chief Executive Officer, Yoav

Thank you, operator and good morning everyone to join us. Before we begin Q&A as an update on 3D, I want to be very clear. We have been meeting with an exchanging significant information with 3D as part of our deciding if 3D combination can result in a superior proposal to the one we signed with Desktop Metal. We have had a number of joint meetings and exchanges of information and have more already scheduled. So, we can arrive at an informed decision as soon as practical. As always, there can be no certainly that a transaction will result and note that we have a signed agreement with Desktop Metal. We believe these things are best done privately and constructively and as I said, we aren't going to be taking any questions on M&A. Now, let's get to our earnings, which illustrate the progress we have made and now, operator, please open it up for questions.

Thank you. [Operator Instructions] Our first question comes from Greg Palm with Craig-Hallum. Please go ahead.

Yes, hi. Thanks everyone. Thanks for taking the questions. I guess, just starting off with maybe the quarter and the outlook. I'm just curious, just in terms of visibility levels, what's changed. What's the same anything better getting worse than a few months ago? And just maybe relative to some of the peers or others that play in the capital equipment space a little bit better results. So, I'm just curious in terms of the outperformance where it's coming from?

Thank you, Greg, and good morning. So, no doubt that the entire industry is operating in a challenging environment, because we are in a deflection point. We are moving to manufacturing, but manufacturing players are facing also economic challenges and put kind of breaks on their CapEx. So, all of us are operating in a challenging environment. However, the nice thing in Stratasys that we are very diversified, and we are providing a full solution across the product development life cycle, but also across verticals, which allow us to be quite diversified and on top of it. We have very clear set of growth engine. The first thing that happened over the last three years that we almost tripled our addressable market. Then, we also made some acquisitions that suddenly, we see them in the market and they are contributing both revenues and profitability. So when you put this together the Covestro and strong material offering that we have and the growth in consumables and recurring revenues, plus new offering in dental plus new launches that we will have this year. And put everything together into one, strong infrastructure in the market of go-to-market and an amazing network of partners that feed us with information about the market to very strong systems, we have good visibility for H2. We have good visibility, and we see at the light at the end of the tunnel. And starting in the U.S., it's a bit better. You can see, it also on our hardware sale that significant improvement from Q1 which above 19%, 19.4% improvement from Q1. So, when you put everything together there growth engine, the acquisition the go-to-market and the infrastructure that we have, we are such a structured company. We have good visibility for H2, and that's why we kept our guidance.

Okay, great. And just in terms of guidance next year. And in one of the M&A slide decks you put out some base case and downside case scenarios for Stratasys as a standalone business, and I just wanted to maybe dig into that a little bit further, because the base case 20 plus percent growth relative to this year at the midpoint. And even in a downside case, pretty strong double-digit growth. So, I know that's not guidance per se, but what gives you maybe the visibility next year that you think you can reaccelerate growth - to that extent?

Thanks, Greg. For the question. It's Eitan. And so, as I start related to the two models, keep in mind that some of the drivers that Yoav related to, are the same answer for these questions, right. The acquisition of Covestro that's something that did not impact our revenue at the beginning of the year in 2024 is going to hit full year and we believe that we can grow that business when you think about the acquisition of Origin,

Okay, thanks for the help. I'll hop back in the queue.

Thank you. Our next question comes from Shannon Cross with Credit Suisse. Please go ahead.

Thank you very much. I also wanted to talk a bit about what you saw during the quarter and guidance. We just got off the 3D Systems call where they talked about pushed out orders that they saw during the quarter, which been closed in July, but they're seeing further push-out. So I'm just wondering maybe if you can talk about linearity during the quarter, are you seeing delays in terms of order rate and maybe, I don't know if you can just sort of contrast it to. I don't know if its different product sets - that 3D system has versus yours, but again it's kind of a tale of two cities, in terms of the commentary during the call. And then I have a follow? Thank you.

Hey, Shannon good morning. Thank you for your question. So, we definitely see longer sales cycle, but we don't see significant push of orders going forward. And I guess it's also related to our diversification - geographically across different customers, but also the improvement in the U.S. So, the U.S. is still - the overall economy is shrinking, because you can see it in the purchasing manager's index, but it's less severe than it was in the past, in the last three, four quarters. So kind of the wave of economic challenge and move to the other side of the ocean, and we are U.S.-based 60% of our revenues. So, we do see much better customer engagement very strong, especially in the U.S. So, the demand is there with a longer sales cycle, but we specifically didn't see a push in order to the next quarter to your question.

Okay. Thank you. And I'll see if you can answer this, we'll try it, you're undergoing initial integration work, looking at Desktop Metal. I'm just curious as you're doing that. Has anything changed in terms of what you saw going into the acquisition. Are you - are there like, what areas are you thinking are most complimentary, just kind of curious as to how that's going?

So we don't see any change and we still believe in what we announced and published about the complementary of those two businesses. So Desktop Metal are bringing the best metal solution that if there will be a metal solution in mass production it will be Desktop Metal for sure and they bring amazing position in dental, they are the leader in digital casting which is large format part of metal and they are super innovative. And when you combine this with Stratasys polymer leading position, with Stratasys go-to-market which is the best in the industry and with Stratasys infrastructure, we see great complement directly between the two companies and that's why we signed the agreement.

Okay. Thank you so much.

Thank you. Our next question comes from Brian Drab with William Blair. Please go ahead.

Hi, thanks for taking my question. I just wanted to clarify on Covestro, just how much that contributes to growth and how you think about that with respect to organic revenue growth because this company was acquired - the deal was closed on April 5, and so that you get a full quarter than in the second quarter Covestro revenue, it's about 3 points of growth. I'm just wondering, how are you thinking about this roughly 3 points of growth with respect to which - I think you said today 2% organic revenue growth for the company for the quarter. Is that in there?

Hi, Brian. So first to relate to your question about Covestro, you're right. The deal closed at the beginning of April and contributed $4.6 million for the quarter. We believe that business will grow already in 2023 and anticipated further growth in 2024. That business complements our other businesses. Our go-to-market can leverage that business, so we see a significant growth and good business from Covestro. I will add to that, that our consumable business. And keep in mind that Covestro is entirely consumables grew even without Covestro when you compare year-over-year, which I believe that was part of your question. So, our business grew further with Covestro but also without Covestro.

And you made the statement 2% organic revenue growth, excluding FX and MakerBot and I didn't - if I exclude Covestro's organic been down 1%, is that fair. I mean that should be an acquisition revenue, right. I'm just trying to clarify, I'm just a little confused.

Yes. So I believe we provided both so we provided the Covestro revenue in order for you to be able to model, so you have the MakerBot which is much more significant that was divested in August 2022 and I believe we provided and that's why I mentioned the growth in the consumable with and without Covestro but to your question, the 2% includes Covestro.

I may have just missed that you did it both ways. Okay. And Covestro should help margins somewhat right, that you're cutting - kind of cutting out the middleman, and not having to pay the markup on these many consumables that you source from them in the past?

Correct. Covestro is a healthy business as far as is concerned with the profitability. Yes.

Great. Okay. Thanks for taking my question.

Thank you. Our next question comes from Troy Jensen with Lake Street Capital Markets. Please go ahead.

First off, gentlemen, congrats on a really nice results.

Thank you, Troy.

So Yoav maybe for you. Dental I know is a big focus for you guys. I guess, to me I think about two different kind of applications. So there's PolyJet for dentures, and then [SLA] for more like aligners. Which one do you think it's kind of like better for you guys or the near-term opportunity or when you talk to dental market is it one more than the other?

Good morning. Maybe I'll take a step back and I'll start with our dental offering. We completely replenished our dental offering over the last three years and we today have the broadest technological offering in dental because we are offering PolyJet what we call Dentajet, and also J3 Dentajet and J5 and those are by far the leading inkjet machine in dental. Focusing on dental with great cost profile, with versatility, with flexibility, with the ability to print different application on the same tray that's on the PolyJet. Then we have the DLP with all the advantages of our P3 technology which mainly it's the best surface finish in the industry in DLP. And the meaning of it and there are some applications like splints, where you need this surface finish where we are really leading in terms of value to their end customers. And last but not least, we have the SLA offering and also in the future, I believe also the SAF will be able to contribute to the aligners. So the SLA and the SAF can be a great solution with great cost per part for the aligners business. So this is like the overall portfolio. Our belief is that in the long term the winners will be the PolyJet and the DLP, also in aligners by the way. Although we are investing and we have other solutions for aligners, we believe that that will be the solution and this is where we are investing. And in the short term no doubt that it's those two technologies starting with the denture application, which is unique to Stratasys. It's IP protected, you need to Stratasys no one else in the world can print monolithic denture in one print without the labor needed in order to glue the two [indiscernible], it's a transformation and we will improve the material as we go and we believe it will be a standard - the next standard standout in denture and you will see, which is a $5 billion market only in the U.S. So we are very optimistic about this, it can be much bigger than Stratasys as a whole. And on top of it, of course our DLP which we invest a lot in order to make sure that DLP is becoming really plug and play in dental.

Awesome, very detailed. Thank you. My follow-up I just asked on the SAF stuff. You talked about Nano-12 coming out here, which I agree is a bigger market than Nano-11 for you guys and big opportunity, but just are you still in kind of limited shipments with SAF and when do you think that's going to more contribute to bigger revenue growth.

We've made amazing improvement and progress with SAF over the last six months. Mainly on two aspects of the SAF one is the PA12 which is like, by far increases our addressable market because this is the standard, the PA12. But on top of it we, together with our software solutions and we talked about it in the script, we improved accuracy dramatically and we keep making improvements and we have it in SDM and customers are coming to see, but we have a very deliberate introduction of the machine, everybody needs to go through our SDM to make sure that he knows how to operate these. We are highly optimistic about this machine because no one has the value that we can deliver to customers in terms of cost per pound and accuracy.

Awesome. Yoav, thank you. Good luck with all this merger stuff.

Thank you, Troy.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Yoav

So thank you very much everybody that joined the call. It's a pleasure to be part of this industry and to lead it as the most healthiest strongest company in the industry with the eight consecutive quarter of profitability. And I want to thank our teams for making it happen. And thank you for joining us, and I'm looking forward to updating you again next quarter.