Stratasys Ltd. Price & Performance (SSYS)

Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different, from those set forth in forward looking statements, we refer to the risk factors discussed or referenced in Stratasys' annual reports on Form 20 F for the twenty twenty three year and for the twenty twenty four year. Will be filed with the SEC within the coming few days. Please also refer to our operating and financial review and prospects 2023 and 2024. Which are included as item five of our annual reports on Form 20 F for 2023 and 2024. Measures. Non GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I'll now turn the call over to our Chief Executive Officer, Doctor. Joav Zeif.

Yohav? Thank you, Yonah. Good morning, everyone, and thank you for joining us. In 2024 and early twenty twenty five, we took several key steps to enhance our leadership and strengthen our position at the forefront of additive manufacturing. Despite the industry wide challenges due to macro headwinds, our recent commitment to rightsize the company and deliver profits and cash flow was executed successfully. Further demonstrating the resilience of our operating model and effectiveness of our team. We also shared with you our strategy to be laser focused on the most compelling applications particularly ones that center around full scale production. As we share each year in 2024, we generated 36% of our revenues from manufacturing. Up from 34% in 2023 and up from just over 25% when we started tracking in 2020. We expect to see this percentage grow every year to a point where the majority of our business will be derived from end part manufacturing. The strength of our offering is our ability to deliver measurable value through best in class solutions that enable our customers to scale their additive manufacturing [indiscernible] [indiscernible] These solutions are the growth engines that we drive our revenue and profits over time.

And our customer trust is reflected in the continued strong levels of engagement despite prolonged capital spending constraints. This challenging environment resulted in revenues being off 6.9% for the year. After backing out divestments, yet our adjusted gross margin for the year expanded by 100 basis points to 49.2% reflecting our continued focus on cost controls and operating efficiencies. Importantly, in the fourth quarter, we delivered $14,500,000 of adjusted EBITDA, and 9.6% margin. And $0.12 adjusted EPS. We remain confident that when capital spending constraint is our operational efficiencies will result in in the coming years. We continue to maintain a healthy balance sheet of $150,700,000 in cash and equivalents and no debt. This provides stability and optionality that will support our growth through both organic investments and accretive acquisition opportunities. This financial strength will be bolstered by the upcoming $120,000,000 investment in Stratasys by Fortissimo Capital. Which is targeted to close in second quarter, At that time, we look forward to welcoming Fortissimo's Founder and Managing Partner, Yuval Coil, to join our Board who brings more than thirty years of successful innovation driven investing experience. Now let me touch on some of our fourth quarter and more recent updates.

Fused the position modeling the technology invented by Stratasys and commercialized under the Stratasys FDM trademark is the world's most popular three d printing technology. And we continue to innovate and enhance its capabilities for production at scale, As an example, in the fourth quarter, we launched the Fotus FDC Filament Dryer. A cabinet system that uses Stratasys Stratasys FDM technology to maintain drying conditions for storage of consumable filament [indiscernible] Increasing printer uptime by up to 2.7 times while eliminating moisture related printing defects. This system designed for continuous operation represents a breakthrough in manufacturing efficiency for our large scale production customers. And is a key addition to our end to end solution that our customers have asked us to deliver. We continue to expand FDM's capabilities to address our target applications. We launched Polycarbonate ESD, a specialized material that addresses critical needs in electronic manufacturing, particularly for tools, and fixtures requiring electrostatic discharge protection. And we have enhanced our UZEM-nine 85 material with expanded layer height capabilities. And new color options These materials are significant enabler for our defense partners that manufacture [indiscernible] And we have already seen an uptick in materials sales to the U. S. Air Force as a result.

Additionally, for Origin P3 DRP platform, we have added more than 30 new materials, including validating a new material by Forward AM, specifically designed for injection molding tooling. This exemplifies our commitment to production grade manufacturing solution position in P3 to deliver injection molding quality across various applications from automotive components to precision flow adapters. We also announced several partnership and cast I'm particularly excited to highlight a key customer win with ArcelorMittal, one of the world's largest steel manufacturer. Their adoption of FDM with GrabCAD software at their European Research Center demonstrate the versatility and effectiveness of our solutions. In traditional manufacturing environments. Where they have achieved significant reductions in lead time and enhanced design capabilities for tooling. Previously, unattainable through conventional machining methods. Switching to automotive. Where we continue to set trends, we were named the official three d printing partners of NASCAR This multiyear agreement makes Stratasys the exclusive provider of three d printing solutions for NASCAR. In the creation of parts tools and to aid in accelerating design. This represents further penetration into the racing sector As more parts produced by traditional technologies will now come from our system. In aerospace, 3EOS a leader in electro optic system, announced that it significantly expanded its line of strategy systems Including the addition of multiple FDM three d printers, bringing its fleet to 15 its wide RA of capabilities includes our F-thirty 300 NEO-eight hundred, F900, F770, Origin One Modeds and SaaS technologies. 3E is establishing a dedicated additive manufacturing center to support prototyping, tooling and production.

And its expanded use of additive will allow the company to produce critical components much more quickly. And at a saving of roughly 40% versus traditional manufacturing metal. And to help further drive customer success, we are announcing the promotion of Andreas Langfeld to the position of Chief Revenue Officer. Based in our Germany office, Andy has been with Stratasys for over fifteen years. Since 2018, he has managed our EMEA business transforming it into a stronger contributor under his leadership. And was recently appointed Head of our APAC business as well. As CRO, Andy will enhance our global go to market strategy to help ensure customer satisfaction and retention, and further build on the long term partnership with our resellers ecosystem, With ending this role, we look forward to further strengthening our position and accelerating the wide [indiscernible] of our solutions. Now switching to dental. We were excited that the Trudent resin is available for sale in Europe. As a CE Mark Class one medical device. Prudent is now set to deliver a scalable, efficient and high quality solution for denture production. For dental labs and clinicians across Europe. Which is expected to be nearly a $2,500,000,000 Unity 2028, Interest in the Trudent resin is already strong.

With many customers committed to onboarding early this year. And in our medical business, we recently announced the results of joint research conducted with Siemens Healthineers which demonstrated the unprecedented accuracy of three d printed medical imaging phantoms to replicate human anatomy. By offering patient specific anatomical models that accurately replicate anatomy and pathologies hospitals and imaging centers can enhance the collaboration and performance of CT scanners ensuring more accurate diagnostics improve patient's outcome and lower costs. Turning to software. I'm excited to share some significant developments that strengthen our product offering and demonstrate our commitment to innovation. Our new GraphCAD IoT platform is transformative solution to help our customer improve their utilization and uptime by providing accurate real time data predictive maintenance, This represents a major step forward in digitizing customer interactions across our entire ecosystem, of three d printer. Software and services, And we are pleased to note [indiscernible] now supports all five of our core technologies, This unified software approach streamlines operations for our customers and reinforce our position as a comprehensive end to end solution [indiscernible] To sum up, Time and again, some of our most exciting use cases are in the most demanding environment. And under the most unforgiving conditions from high speed auto racing to space travel to the advancement of state of the art medical techniques.

We continue to deliver differentiated product and solutions to customers as we further penetrate production applications at scale. This stage is set for return to growth based on accelerated adoption of additive manufacturing as macroeconomic conditions [indiscernible] I will now turn the call over to Eitan to share the financial results our initial outlook for 2025. Thank you, Yav. And good morning, everyone.

Our fourth quarter results reflect solid execution against the ongoing backdrop of adverse macroeconomic factors and related pressures. Our customer engagements [indiscernible] And we believe will translate into meaningful growth once headwinds abate, As a reminder, the cost saving initiatives effect primarily we review both the quarterly and annual results, the fourth quarter results are more indicative of the future impact of these initiatives on an annualized basis. In general, our results demonstrate the resilience our diversified offering provides throughout the cycle enabling us to raise our profitability and cash flow expectations for 2025. Now let me dive deeper into the numbers. For the fourth quarter, of $150,400,000 was down 3.8% as compared to the same period last year. Product revenue in the fourth quarter fell by 4.8% to 105,100,000.0 compared to the same period last year. Within product revenue, systems revenue was off slightly declining 1.5% to $46,700,000 compared to the same period last year. As constrained, capital budgets continue to impact customer buying behaviors for new system. Consumable revenue in the fourth quarter was $58,400,000 down 7.3% compared to 63,000,000 in the same period last year. Service revenue was $45,300,000 for the fourth quarter of twenty twenty four.

Relatively flat compared to $45,900,000 in the same period last year. Within service revenue, customer support revenue was relatively flat compared to the same period last year. For the full year 2024, consolidated revenue declined 8.8% to 572,500,000.0 Compared to $627,600,000 in 2023. After backing out the Stratasys Direct Service Bureau the investments, the revenue decline was 6.9%. Product revenue in 2024 was $392,000,000 compared to $433,700,000 in 2023. Within product revenue, system revenue in 2024 was 140,300,000.0 compared to 187,700,000.0 in 2023. Consumables revenue was up 2.3% to 251,700,000.0 in 2024, compared to 02/2023. We expect consumables revenue in 2025 to increase over 2024. For the full year of 2024, service revenue was 180,500,000.0 compared to $193,900,000 in 2023.

After backing out the Stratasys direct service bureau divestments, 2024 service revenue was flat year over year. Within service revenue, customer support revenue in 2024 was flat compared to 2023. Now turning to gross margins. GAAP gross margin was 46.3% for the quarter, compared to 44.7% for the same period last year. Non GAAP gross margin was 49.6% for the quarter, compared to 48.8% for the same period last year. The year over year improvement in gross margin was the result of operational efficiency and cost saving efforts. GAAP gross margin was 44.9% for the full year 2024. Compared to 42.5% for the same period last year. Non GAAP gross margins improved 100 basis points 49.2% for the full year as compared [indiscernible] in non GAAP gross margin was a result of operational efficiency and cost saving efforts. GAAP operating expenses were $79,400,000 for the quarter compared to 64,100,000.0 during the same period last year. As a result, of non recurring revaluation gain that reduced GAAP operating expenses in the fourth quarter of twenty twenty three. Non GAAP operating expenses improved, decreasing to 65,200,000.0 for the quarter. Compared to 74,300,000.0 during the same period last year. As we benefited from our cost saving initiative.

Non GAAP operating expenses were 43.4% of revenue for the quarter. Compared to 47.5% for the same period last year. Driven primarily by the cost savings measures associated with the restructuring plan we announced in the second half of twenty twenty four. The financial effect of which were realized in the fourth quarter of twenty twenty four. For the full year, non GAAP operating expenses were 48.4% of revenue. As compared to 46.2% in 2023, primarily due to lower revenue in 2024. In absolute dollar terms, non GAAP operating expenses were $13,300,000 lower in 2024 as compared to 2023. Due in part to the cost saving measures from our restructuring plan. Regarding our consolidated earnings for the quarter, GAAP operating loss for the quarter was $9,700,000 compared to operating income of 5,700,000.0 for the same period last year. You primarily to the non recurring revaluation gain that reduced GAAP operating expenses the fourth quarter of twenty twenty three, [indiscernible] Non GAAP operating income for the quarter was 9,400,000.0 compared to $2,000,000 for the same period last year. The increase reflects the lower OpEx as a percentage of revenue driven by the cost savings. GAAP net loss for the quarter was $41,900,000 or $0.59 per diluted share compared to a net loss of $15,000,000 or $0.22 per diluted share for the same period last year.

During the quarter, we took a non cash impairment charge of $30,100,000 or $0.42 per share related to our investment in Ultimaker. A key cause for a larger GAAP net loss in the quarter. Non GAAP net income for the quarter was 8,500,000.0 or $0.12 per diluted share. Compared to net income of $1,600,000 or $0.02 per diluted share in the same period last year. Adjusted EBITDA was $14,500,000 for the quarter. Compared to $7,700,000 in the same period last year. This equates to 9.6% EBITDA margins compared to 4.9% in the fourth quarter of twenty twenty three. Regarding our consolidated earnings for the full year 2024, [indiscernible] GAAP operating loss was $85,700,000 compared to a loss of 87,600,000.0 for 2023. Non GAAP operating income for the year was $4,900,000 compared to $12,600,000 in 2023. This equates to 0.9% non GAAP operating margin compared to 2% in 2023. GAAP net loss for the year was $120,300,000 or $1.7 per diluted share. Compared to a net loss of $123,100,000 dollars or $1.79 per diluted share for last year. Non GAAP net income for the year was $4,200,000 or $0.06 per diluted share compared to $7,700,000 or $0.11 per diluted share last year. [indiscernible] Adjusted EBITDA $26,000,000 in 2024, compared to $35,000,000 in 2023.

Reflecting lower revenues that more than offset the improvement in margins. We generated $7,400,000 of cash in our operations during the fourth quarter. Compared to a use of 7,700,000.0 of cash from operations the same quarter last year. This resulted in positive free cash flow the quarter. The improvement was due to improvement in our working capital. And we expect further improvement 2025 As we benefit from fully realizing the cost saving measures from our restructuring plan. For the full year, we generated $7,800,000 of cash from operations compared to using $61,600,000 of cash in 2023. During the quarter, we repurchased $266,000 shares of stock an average price of $7.5 per share for a cost of approximately $2,000,000 We had approximately $48,000,000 remaining capacity on our share repurchase authorization at year end. We ended the quarter with $160,700,000 in cash, cash equivalents short term deposits. Compared to $144,000,000 at the end of the third quarter of twenty twenty four. Our balance sheet and cash generation profile remains strong supporting our interest to capitalize on value enhancing opportunities. As Yag mentioned, our strong balance sheet and cash position are set to be further enhanced with a prospective $120,000,000 investment from Fortissimo.

Now let me turn to our outlook for 2025. That the global softness in capital equipment purchasing continue. We expect 2025 revenue to be in a range of $570,000,000 to $585,000,000 with revenues growing sequentially each quarter through the year. Resulting in higher revenues in the second half of the year as compared to the first. We expect the first quarter to have the softest revenue and margin profile. On a relative basis to the rest of the year. Non GAAP gross margin for 2025 is expected to be in a range of 48.8% to 49.2% with the second half stronger than the first half, based primarily on the expected rise in revenue, throughout the year. 2025, we expect our non GAAP operating expenses to range between 54 to $257,000,000 Continued improvements in profitability is an important objective And for 2025, we expect to see growth across the profit metrics. For 2025, we expect non GAAP operating margins to be in the range of 4% to 5% of revenue. With the second half stronger the first half, Based on the anticipated rise in revenue, throughout the year. We expect a GAAP net loss of $680,000 to $53,000,000 or $0.93 to $0.72 per diluted share Non GAAP net income of $20,000,000 to $26,000,000 or $0.28 to $0.35 per diluted share.

For 2025. Adjusted EBITDA for 2025 is expected to be in the range of 7.8% to 8.5% of revenue. Or $44,000,000 to $50,000,000 We expect our capital expenditures for 2025 to range between 25,000,000 and $30,000,000 Finally, in 2025, we expect to deliver improved operating and free cash flow at higher levels than 2024. With that, let me turn the call back over to Yal for closing remarks. [indiscernible] Thank you, Eitan. Before we move to questions, I want to take a moment to acknowledge our global team. Their professionalism dedication and hard work continues to drive strong customer engagement and excitement for our solutions. I have personally met many of our key customers across over the last few months, The restounding message is that the increased use of additive manufacturing in their businesses is most certainly expected once spending constraints are lifted. We also see and feel the enthusiasm and excitement at all of the largest trade shows and industry events. There is no question that when our solution ramp and deliver the exceptional capabilities our significant growth and corresponding operating leverage and margin expansion will follow. We have taken the difficult but necessary step to right size the business for today.

Without sacrificing R and D resources for innovation, and while maintaining the ability to scale quickly as capital spending eases. We believe that as the next growth phase of additive manufacturing emerges, we are well positioned to lead For today, and into the future, we are excited for 2025 and beyond [indiscernible] With that, let's open it up for questions. Operator, Thank you. We'll now be conducting a question and answer session. Our first question is coming from Greg Palm from Craig Hallum. Your line is now live.

Yes. Thanks. Hey, everyone. Maybe just a little bit more kind of color on kind of what you're seeing out there in the marketplace, customer feedback given everything going on? And then can you just kind of help us a little bit more with kind of the cadence of of the year. It sounds like revenue building sequentially, but any more detail on how that looks from a modeling standpoint would be helpful. Hi, Greg. Thank you for the question. If you have That's a super important question. Because we are in a time period of a downturn in our industry, and everything looks dark and great. This is not the case with our customers. Just three weeks ago, had a customer advisory board in Florida the top corporate in the world, the leaders of additive manufacturing in those companies, 14 of them, And we are forgetting as an industry as a capital market we are forgetting the basics and the value proposition of additives. Because in manufacturing, there are requirements that only additive can deliver. For example, low volume, high mix. Special geometries and assembly of parts, consolidation of parts, ensure the supply chain resiliency. Personalization, improve sustainability, Only additive can do it.

And especially in a world of uncertainty and geopolitical tension, and trade wars. So we are still focusing on the [indiscernible] and the constraint of capital expenditure that we forget that long term the world will benefit Manufacturing will be digital and this digitization process will benefit the entire industry. When we are talking with customers, back to your question, they are [indiscernible] Focus on what you're doing. Reliability, accuracy, [indiscernible] the effectiveness of our equipment the total cost of ownership and enable our engineers to use more additives. So I'm very optimistic Yes. We feel the short term constraint but over time, I see us going out of there and our customers are happy with our solution. The F-three 300 has great feedback we expect to sell more in 2025. We expect to expand our reach within those same customers by doing to new sites It will be gradual. Because we are in a downturn period. But it has nothing about the long term of this industry or even the mid short term.

Yes. Okay. That's helpful. And then as it relates to the gross margin guide for '25 specifically, I'm wondering what are you building in, in terms of negative impacts or headwinds from either logistics or tariffs. Obviously for the year it implies a lower gross margin relative to the run rate in the second half of twenty four. So I was just curious if you can give us a little bit of what your built in assumptions are?

Thanks, Greg, for the question. It It's Eitan. So first of all, I'll start saying that our actual 2024 was in 2024 was 49.2% which is an improvement of 100 basis points compared to last year And I think you followed for quite many years. That's a very solid gross margin for Stratasys and also general for the industry, which enable us to grow and also to invest to grow the business further. Now as far as it concerned with 2025, I'll say a few things. First of all, we kept the gross margin in very similar level for 2025. But then it's a mix of different things. We continue to invest, of course, in the business and in growing the business. And in the production On the other hand, there will be some savings from the [indiscernible] many significant part of that was already achieved. But there are still some savings that will will come in 2025. The mix of products, of course, impact 2025 gross margin But overall, as you can see, very solid continue to be 49 in the 49 level, which is very good and very promising for the future. And within 2025, when you think about the quarter in 2025, it will improve sequentially quarter by quarter throughout 2025.

Maybe a word about the tariffs, Yav. So I think the tariffs has two sides. One is how it impacts us. And the other one is how it impacts our customers. In terms of us, we have I would say thank God, but it's thanks for a long time of vast majority of what we are doing is in a secured zone. So we are quite immune Most of our FDM is being produced in The U. S. So it has no the tariff has no impact on it. And the rest of our production, most of it is in Israel, which has a free trade agreement. And FDM is our largest business and U. S. Is our largest region. So we are in a good shape. Regarding the tariffs. And I'm looking at our customers on the other side, this is a huge opportunity for us. Because no matter how what's the level of the tariff, if you bring the machine to the specific country and you [indiscernible] onshore near the customer, you don't pay the tariff.

Which we see here a global opportunity just a week ago, yeah, a week ago. I was with a large Actually, large logistic customer and they see the uncertainty and they have an interest to see how they are creating capabilities in additive to handle the uncertainties, the geopolitical tension, the potential broken supply chain and also the impact of tariffs. And this is coming from our customers. Yes.

It seems like it could be a big opportunity. I will leave it there. I look forward to seeing you all next month at Rapid Fix. Thank you. Thanks, Greg. Thank you. Next question is coming from Brian Drapp from William Blair. Your line is now live.

Good morning, guys. This is Tyler here for Brian. Thanks for taking my questions. Just starting off, I wanted to know know you're mostly exposed to The U. S. But is there anything to note for organic revenue growth in 2025? There any anticipated FX headwinds or recent divestitures that we should think about Then I'll have a follow-up.

Thanks, Taylor. So other than a relatively small impact of one of the SDM businesses, the Stratasys direct businesses that we divested in the middle of twenty twenty four, There is nothing significant as far as it's concerned with divestments or inorganic as you model. On the FX side, of course, we do have business in Europe. And based on how the euro behaves throughout twenty twenty, twenty twenty five that would have some impact. And we're also operating in countries like Israel. However, We normally and I think we've discussed this in the past, we hedge a significant part of our exposure on the most significant currencies that are not U. S. Dollar, So the impact is relatively Okay. Thank you. In your slides, you said the dent market opportunity by 2028 is 2,500,000,000.0 That's on a global basis, correct? And then could you provide your estimate of the total TAM today? And how will you capture more share in this market? And what differentiates you from other additive competitors? Thank you. Thank you, Tyler, for the question. So we are very proud in our denture solution. Particularly, we're the one innovating a new solution for denture, which is monoblock dentures which very high aesthetic low price, and the ability completely to transform the business model of dense shares which today dentists don't like dentures.

To be honest, because it's between six to eight meetings, more than and you need to come back and see the time that the patients feel that it's really fitting, the dentist already lost a lot of money. And we are coming with a new solution with a very large service like €500,000,000 in Europe, and another €5,000,000,000 to €6,000,000,000 in The Americas.

And we are the leader here in terms of being ahead of the industry in terms of the technology We believe that it will still be gradual over next year. But we have also large plans how to penetrate the market. Already signed several large dentures with several large venture companies. [indiscernible] the adoption of dental is so core to our three d printing industry, we believe that we will be able together with some organic and inorganic moves to create a position ahead of competition and ahead of the entire dental industry because practically we are disrupting it. And it's an industry that knows how to adopt [indiscernible] And now we are timing with a very simple high end solution. We are very optimistic.

Okay. Appreciate it. I'll pass it along. Thank you. Our next question is coming from Troy Jensen from Cantor Fitzgerald.

Your line is now live. Hey, gentlemen. Congrats on the fourth quarter results. Thank you. Hey, Tula. I guess maybe Eitan for you. Consumables were down 7% year over year, but they've also been down consecutively three consecutive quarters here on a sequential basis. And I'd guess the installed base has been growing right as you're shipping systems into the customer. So can you just touch about consumables and why they declined three consecutive quarters? Sure. Thanks, Troy.

So maybe I'll start saying that I think that in the last year, throughout the discussions with analysts on the earnings call, we always discussed a range of consumable a quarterly average kind of run rate Q4 was lower than that average run rate But it was like I consider Q4 as an outlier It does not reflect, it does not represent what we see for the future for the quarter of twenty twenty five. Actually in 2025, we're already more than two months into the quarter. We actually see that we're back on track to levels that are similar to last year. And will be higher than the Q4 numbers that we announced today. And when I think about the full year of 2025, we expect [indiscernible] And that I think also address your question. Expect 2025 full year to be higher than the 2024 full year and that's after 2024 was already higher by $56,000,000 from the full year of 2023. So we do see utilization increasing and we do expect 2025 to have overall higher consumable compared to 2024. Great, perfect.

And also for you, Eitan, I just want to talk about long term investments is down $40,000,000 sequentially.

What's in that? Is this all just equity investments? Is there any financial instruments And is the $32,000,000 loss that you talked about, is that the reason for the $40,000,000 decline?

Thanks, Troy. So So this one item is largely related to our equity investments. In Ultimaker As you remember, we divested that business point five years ago. And that was part of our strategic decision to not to play out on the low end and to focus on manufacturing and mass production. So that's a business that we do not control. But of course, from an accounting perspective, we have to take our share in that situation and that's what we did, but it's nothing more than that.

Okay. But the $80,000,000 is that all just equity in Ultimaker or is there other things on there? There? Where do you see 80? In the balance sheet, the long term investment category.

No, that's so we invest in Quite many minority investments, but each one of them is a very small portion similar to to what you see others are doing and these are opportunities that we're involved with and when it become more interesting and relevant, we decide whether we want to increase our position or not.

Got you. So it's all equity, not financials. Okay. And then for you all, just can you talk about this acquisition targets? Obviously, you're raising more capital and you guys are profitable and have a decent balance sheet. So hardware, software, materials, I mean, what interests you most?

Whatever we'll announce shareholder value more. And we have a strategy very clear strategy We are very proud of the boat of confidence from Proticimo They are really well established and successful investors in technology and innovation And remember, they decided to invest in Stratasys with a significant premium and a lock up. It's a sign that there are opportunities out there and the best operator to capture those opportunities is strategies. And by the way, we also demonstrated it because we committed at the end of Q3 last year After tough start of H1, we committed to savings. We were committing we committed to profitability and cash flow and we delivered on all of them. 49.6% margin, dollars 7,400,000.0 of cash flow It doesn't exist in our industry. We are the top performer and operator in this industry. And then you combine it with an investor that sees sees the opportunities in the market and says, where I should put my money in order to capture those opportunities. You want to put your money there are execution capabilities and in a company that is consistent because you look at our guidance, we are growing, yes, slowly but we have a strong business model We secure the $40,000,000 of savings that we committed to And next year in our guidance, measure by measure, we are better year over year Now we just need to wait to the manufacturing sector to come back to normal and you will see growth, you will see growth in revenue, then you see profitability.

And there are plenty of opportunities out there and we learn a lot about this industry over the last few years. Really, We have had the opportunity to widespread due diligence across the industry.

So we have good understanding what's going on out there. Who are the right targets and which one of them will better support our long term strategy and create a lot of value to our shareholders in the short term and in the long term And you know also market prices of the assets are more favorable these days. So when you combine the operational capabilities the profitable model that we have with the recurring revenue the strong balance sheet now is Fortissimo. With focused strategy on manufacturing and use case. And the overall proven abilities of three d printing Trust us, this is the right solution and we know and we have a plan What to do with the money?

Thank you. As a reminder, that Our next question is coming from Jim Ricchiuti from Needham and Company. Your line is now live. Thanks. Most of my questions have been answered, but I just want to follow-up on the way you're viewing 2025, it sounds like you're assuming obviously continued challenging market conditions. And does that offset benefits from new products? And maybe if you could talk a little bit about the market verticals perhaps more confidence in? It sounds like dental being one of them, but don't want to put words in your mouth, in which markets you might be more cautious on or geographies?

Thank you, Jim.

Yes, we are cautious and what we see is a soft market. This is the reality. But it's only a cycle. There are ups and downs in these cycles. We are now in a down period. But as I said, Fundamentals of the value proposition of three d printing is there. And the customers No, it's Okay. This is the most important thing. Then getting to 2025, we have quite good [indiscernible] we have confidence in our guidance but it takes into consideration the softness of the market. So we have fiber visibility. We see the customer engagement Even in such a downturn, 14 this is just an example, 14 Top executives from 14 top corporate came from all over the world to Florida to sit with us and tell us what they are looking from our solutions. So there is an engagement there. We are also improving our offering constantly. As you said, there are new product This year, a lot of focus on material and software and we believe this is very profitable part of our business And again, the current geopolitical situation in 2025 is a great tailwind for the industry and for us. A great tailwind.

Okay. Now there is kind of the entire political environment is kind of looking for what's next. But it will be stable. And it will be a new state of the world. In this new state of the world, The basic value proposition [indiscernible] because with geopolitical dynamics, with uncertainty, with this type of world it's a great support for additive. And I'll give you now example for this vertical. Because that's a great question. Definitely dental because this is a vertical of early adopters and we focus on dentures, we believe the best solution there. [indiscernible] it's all about aerospace and defense. Because the world is highly concerned about the stability and the budget of aerospace and defense, are skyrocketing. And we see more also in Europe. [indiscernible] in aerospace and defense spare parts. Then it's about tooling, which is a huge opportunity to $12,000,000,000 market. And we are the leader also in tooling And I would say those are the three. Aerospace Defense [indiscernible] Okay. Thanks for that color. When you talk about pipeline visit, And you talk about the way you're viewing second half, first half. Do you actually have relatively good visibility that gives you the confidence about second half or are you just assuming like a lot of folks that we see some improvement in the macro environment?

So it's both. We believe macro will be better in the next because of less uncertainty. Things will be clear.

But we also have a pipeline. And we have stages in the pipeline. And we have probabilities of this pipeline. The unknown is the same cycle. Over the last two point five years, the sales cycle increased for the entire industry and also for But with the current sales cycle, we have good visibility and that's the way we build our guidance. Who knows? We don't have the crystal ball.

If sales cycle will double themselves, probably we'll not be in a good shape. But if they will reduce and get back to normal, we'll be in a better shape. And what is important that we are solid and strong also with flat revenue. That's the way we build the company. So We achieved our commitment in a challenging environment We have really Unheard of EBITDA in our industry our industry with a strong business model With improved performance also in a soft market, what we expect for next year. Now I think for a minute what will happen once the manufacturer sector will be back To normal because at the end you need to manufacture. It, then it's a completely different story.

Got it. Thank you.

Thank you. Next question is coming from Nanda Barula from Loop Capital Markets. Your line is now live.

Yes. Hey, good afternoon, guys. Congrats on the solid results here. I guess a bigger picture one if I could to the extent that you guys have thought about this or have had conversations about this, This whole idea that's popped up over the last twelve months more prominently, AI factories, and factory automation with Gen AI if that continues and an idea that continues to be propagated, [indiscernible] If that were to manifest as that [indiscernible] how does like what impact does that have on On your your production businesses, does it help it? Does it hurt it? Is it neutral? Just in any context around that, we'd just love to get your early thoughts on that.

Thank you, Ananda, for the wishes and also for the questions. AI is essential for us. We acquired the company called Reven. That developing an AI. We have already a product correct the deviation of the Bausch scan it, you put it back and we bid a big database and you can practically anticipate the deviations of the printing and correct it before printing. But this is only one example. We have a whole set of use cases that we are working on this.

Based on Riven, we build a group of people that are focusing on AI And I believe AI will be essential in additive manufacturing and also the transition within manufacturing, taking a step back and looking at the big picture. The transition from analog manufacturing to digital manufacturing has to go somehow through three d printing. Because we are versatile, we are working with a file and AI can beat the file. AI can manage the files. So this is like an integral part of the future. The future of manufacturing goes with AI. And we are one of the tools that will make this transition much easier. And we are investing in it, I'll give you a few use cases, for example, predictive maintenance, is an important thing that we important features that we are working on it.

It's AI can do amazingly well there because we have all the data from the machine because we have this just launched this new IoT platform, it's in the script. And we discussed it with our customers [indiscernible] What do they want to see in AI? And we have a whole list and we focus on three of them, of course, I will not share it here.

But we are working with our customer to enable them to adopt additive and digital manufacturing together. AI centric production system, will strongly support additive, I have no doubt.

And that includes thanks for that detail. And that includes the increased use of robotics and manufacturing processes as well? I assume Yes. And by the way, robots the whole robot [indiscernible] is our significant customer of us because we you need to change the end of arm replacement and to be versatile with the functionality of the robot and most of them are doing it three d printing mainly with FDM.

Thank you. We've reached the end of our question and answer session. I'd turn the floor back over for any further or closing comments. [indiscernible] Before thanking everybody, I want to invite everybody that is online to visit us at the rapid show in April in the throat, we will And I'll demonstrate very important solutions there and also many of our customers will be there So you can hear from our customer first hand what do they think about processes So thank you for joining us. Looking forward to updating you again next Thank you. That does conclude today's teleconference and webcast. Let me connect your line at this time and have a wonderful day.