We were – 32.5% of our sales were to manufacturing, this year 34%. What does it mean? It means that we are in the right direction. It means that we are taking the right steps. The strategy is working, but it also means that the B2B market in manufacturing is heavily constrained by CapEx. But eventually, the majority of our printed parts will be in manufacturing, green and used parts.
Troy Jensen : Yep, totally agree, and thank you for those numbers. A follow-up here then for Eitan. I know you guys are proud and talk frequently about this 10 consecutive quarters of non-GAAP profits. I’d point out that you’ve also had eight consecutive quarters of negative cash flow from operations. So looking at your guidance, if you guys are going to do 1% to 3% operating margins in any given quarter in any given year, it’s going to imply further cash usage. But can you just talk about cash generation goals or cash flow positive? When do you think we will hit targets like this?
Eitan Zamir : Thanks Troy for the question. So I’ll start saying that in the last two quarters, so Q3, 2023 and Q4, 2023, we actually had positive operating cash flow when excluding one-off payments related to the M&A, including the penalty to DM. So, our business in Q3 and Q4 this year, so not like last year 2023, not in the future, actually proved that the business can generate positive operating cash flow when you exclude these one-offs. Together with that, maybe you saw that or you’ll see in the last two quarters, our inventory levels went down. This trend will continue in 2024. It will improve our working capital for the next year. So to your question, we’re positive about our ability to generate positive operating cash flow in 2024. Excluding one-offs, our business will generate positive in 2024.
Troy Jensen : Awesome. Alright guys, well good luck and keep up the good work here.
Operator: Thank you. Next question is coming from Jim Ricchiuti from Needham & Company. Your line is now live.
Jim Ricchiuti: Hi, thank you. So it sounds like you’re fairly pleased with the progress you are making in the dental market. I wonder if you might be able to share with us what the level of revenues are in this vertical and maybe what the growth rate was last year versus 2022.
Yoav Zeif: So, thank you for the question. We are not sharing the exact numbers. I can only say that we grew significantly in dental, and we are focusing on the restorative sector of the dental market, which practically it’s really non-discretionary. If you have a problem, you have to deal with it. And our focus is denture, and we believe in this area, because we are disrupting the market. We are disrupting the market in a way that creates significant value to each one of the stakeholders. You take the value chain, you start with the patient. It’s simply more convenient, easy to use. We have great results and great feedback. We are talking about tens of thousands of people already working with our dentures, the TrueDent. You take the dentists, we reduced the visits significantly from four to five to one to two.
You take the labs that are producing, we dramatically reduced the cost because we save on labor, so this is the idea for us in dental. Additive manufacturing can transform dental, because practically we are disrupting this market and make it digital, and our focus is on the restorative market. And we are developing unique business models to capture more of this value that we are creating along the value chain to each one of the participants.
Jim Ricchiuti: Thanks for that. Hopefully, down the road, we have a better idea of the contribution it’s making to the business. But maybe to shift gears Eitan, how should we be thinking about Q1 seasonality? Just given Q4 was atypical, right, in terms of the seasonal weakness given the weak capital spending environment. Is Q1 – do we think about Q1 the way we normally would in terms of the seasonal decline from Q4?
Eitan Zamir : Yes, thanks Jim. So the answer is yes. We expect, we believe that the seasonality that is typical to our industry will continue also in 2024 with gradually increase in revenue and profitability throughout the year. So that trend will continue.
Jim Ricchiuti: Okay, thank you.
Operator: Thank you. Next question is coming from Ananda Baruah from Loop Capital Markets. Your line is now live.
Ananda Baruah : Yes, good morning, guys. Good afternoon for you. Thanks for taking the question. I guess, I’d love to get some context for is signposts inside of your key businesses as distinct from macro. If you can give us some context around them, that you are looking for to catalyze adoption in important areas of your businesses. And signposts could be, if even anecdotal, things that your customers or different industry sectors are working on maybe particular, sort of technical thresholds that they are looking for to move beyond to catalyze adoption. That would be awesome. Thanks.
Yoav Zeif: Thank you Ananda for the question. We are catalyzing the adoption by being super frank with ourselves. We are going to manufacturing, but we are going to manufacturing in a structured way. We build the whole structure and framework. What does it mean manufacturing, together with our customers? And we are going one by one to make sure that we are achieving it. And the way to do it goes through two avenues I would say. One is use cases. We identify the use cases where only additive can deliver and we deliver value. The second one, is we do it with our customers. We have a customer advisory board. We do it with our customers, with customers like Toyota, like Siemens, like McLaren, Daimler, the U.S. Government. We make sure that we are not inventing or dreaming about use cases.
We do it with our customers. We develop the end-to-end solution that includes both the hardware, the software, the material, also specific service that they need. We put it all under one umbrella of software and we do it with them. This is the way to ensure adoption, because you are not trying – we are trying to reduce the cost of Toyota Corolla by $50. We are identifying with our customers the applications and the use cases and there are many. I put an example of the denture where we create a significant value. But many other applications like fashion, like aerospace, drones for example. We are working with our customers to design better drones that save on energy and make sure the distance of the drone is much longer. So those types we are doing with our customers and it’s a use case by use case together with the customer.
