Stratasys Ltd. (SSYS) Q2 2022 Earnings Report, Transcript and Summary

Welcome to the Stratasys' Q2 2022 Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. We ask that you please ask one question and one follow-up, then return to the queue. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Yonah Lloyd, CCO and Vice President of Investor Relations. Yonah, please go ahead, sir.

Good morning, everyone, and thank you for joining us to discuss our 2022 second quarter financial results. On the call with us today are our CEO, Dr. Yoav Zeif; and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the slide presentation is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the Investor Relations section of our website. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including without limitation those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes, and other future financial performance and our expectations for our business outlook. All statements that speak to future performance, events, expectations or results are forward-looking statements. 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, please refer to the risk factors discussed or referenced in Stratasys' Annual Report on Form 20-F for the 2021 year. Please also refer to our operating and financial review and prospects for the 2021 year and for the second quarter of 2022, which are included as Item 5 of that Annual Report and in Exhibit 99.2 to the report on Form 6-K that we are furnishing to the SEC today, respectively. Please also see the press release that announces our earnings for the second quarter of 2022, which is attached as Exhibit 99.1 to a separate report on Form 6-K, that we are furnishing to the SEC today. In order to obtain updated information throughout the year concerning our quarterly results of operations and the risks and other factors that most impact those results, please see the quarterly earnings press releases and our quarterly operating and financial review and prospects, each of which will be attached as an exhibit to a report on Form 6-K that we will furnish to the SEC on a quarterly basis over the course of the year. Stratasys assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The 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 will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif. Yoav?

Thank you, Yonah. Good morning, everyone, and thank you for joining us. Our second quarter results reflect a continuation of our ongoing business momentum. I am proud of the Stratasys team, as we delivered our strongest second quarter in four years. Revenues of $166.6 million were up 13.3% versus the prior year quarter. 16.4%, taking FX into account and ahead sequentially over first quarter. These metrics are in line with our prior outlook. We saw particular trend in system revenue, which grew by over 29% compared to the second quarter of 2021. With year-over-year growth across all printer technologies. Importantly, our balance sheet has us well-positioned with $441.5 million of cash and equivalents and no debt. We are operating in an environment of supply chain constraints, global economic uncertainty on inflation, rising interest rates, and slowing GDP. As we face these challenges, our ongoing laser focus on execution of the business plan continues to help us deliver positive financial results and drive progress towards our stated goal of growing our leadership position in polymer additive manufacturing. The first half of 2022 saw us advance our strategy on several promos. We continue expanding our penetration into applications for aerospace, automotive, healthcare, and fashion with tailored industry-specific solutions for customers like PepsiCo, Toyota, and Rady Children Hospital in San Diego. As noted on our last call, we have launched two new composite-ready 3D printers in Q2, along with the new textile printer for the fashion industry. In addition, we launched GrabCAD software on the origin line of 3D printers and introduce a broad area of new materials. This breadth of manufacturing expertise is leading to new business opportunities. We recently made two exciting announcements in the auto racing industry. Specifically, Stratasys was named a NASCAR competitive partner where we are teaming with NASCAR to provide the first-ever 3D-printed part to be used on all of their next-generation cars. Those cars utilize Stratasys' High-Yield PA-11 material derived from sustainable sources and our manufacturer at Stratasys Direct using our H350 3D printer. Other parts are produced by NASCAR on our Fortus 450mc system. We also became the official 3D printing partner of Toyota Racing Development. Our 3D printed part will be used in the Toyota GR86 vehicle for competition in 2023. Stratasys F370 and the new F370CR system are expected to be utilized at start of this partnership. And similar to the NASCAR relationship, Toyota Racing Development will also utilize Stratasys Direct to print PA-11 parts on the H350. Auto racing is an excellent development proving ground that can ultimately lead to mainstream production runs for millions of consumer and commercial vehicles. We have demonstrated the suitability of the H350 using our SAF technology for producing a wide variety of automotive parts. This can include front wheel, side mirror, electric cable and electrical connectors among many others. As we execute our materials ecosystem strategy, we will be opening up even more automotive use cases. We have seen similar momentum in other areas. In dental, we continue to see strength in the J5 DentaJet line that we launched last year. In Q2, we released an updated version, this doubled the throughput without sacrificing quality, make improvements in resin consumption reduces to both usage and waste and increases the number of part the customer can place on the price rate. And on the medical side, in early July, we released radiometric for our digital anatomy printer, which uniquely let healthcare professionals and medical device company’s visualized 3D printed models under x-ray and CT scan in a unique way. This attention to the need of healthcare professionals is helping us grow our presence in the market. For instance, we recently shared how the University Hospital of Southern Denmark went from a single-material SLA printer to our multi-material, full-color J5 MediJet printer and now the surgeons are saying they no longer want to do surgical procedures without 3D printed guys. I'd also like to add to you that we are progressing on the merger of from MakerBot with Ultimaker and we expect it to close during the third quarter. As we previously announced, once the transaction closes, we will hold approximately 45.6% of the combined company post-merger and will account for the combined company via the equity method rather than by consolidating it within our own results. This change is not expected to have a material impact on our consolidated revenues. I will now turn the call over to our CFO, Eitan Zamir, to share the financial results and update, our outlook for the rest of 2022. Eitan?

Thank you, Yoav, and good morning, everyone. We are pleased to have built upon the strong start we saw for 2022. Revenues were driven by a 29.2% growth in our system sales compared to the second quarter of 2021, continuing the strong trend that is expected to increase sales of recurring consumables and services in the future. And we saw ongoing operating leverage that reflects the strength of our business model. In general, we see continued strength in our business performance as revenue growth drive improved margin and earnings results. For the second quarter, total revenue grew by 13.3% to $166.6 million from the prior year period. On a constant currency basis, total revenue increased 16.4% versus the prior year quarter. Product revenue in the second quarter rose by 15.4% to $115.7 million compared to the same period last year or by 19.4% on a constant currency basis. Within product revenue, system revenue grew by 29.2% to $58.9 million compared to the same period last year and increased by 33.5% on a constant currency basis. System sales reflected the highest second quarter total in four years, strengthened by the continuing ramp of the Origin One and H350 mass production system. Consumables revenue was up by 3.9% to $56.9 million compared to the same period last year and grew by 7.5% on a constant currency basis. Service revenue was $50.9 million, an increase of 9% compared to the same period last year and up by 10.9% on a constant currency basis. Within service revenue, customer support revenue grew 9.1% compared to the same period last year, an increase by 12.9% on a constant currency basis. Now turning to gross margins. GAAP gross margin was 40.5% for the quarter, compared to 43% for the same period last year. Non-GAAP gross margin was 47.6% for the quarter compared to 47.5% for the same quarter last year. Higher systems and consumables revenue and raised pricing, along with operational efficiencies, helped to offset the growth in logistics and material costs, which were mostly attributable to global inflation. GAAP operating expenses were $90.9 million compared to $86 million during the same period last year. Non-GAAP operating expenses were $77.4 million compared to $72.5 million during the same period last year. Non-GAAP operating expenses were 46.4% of revenue for the quarter, compared to 49.3% for the same period last year, as we continue to focus on operational efficiency improvement. The $4.9 million year-over-year increase in operating expenses on an absolute basis was driven primarily by the impact of the Xaar 3D acquisition as well as increased travel and trade show activities and higher commissions based on the higher revenue. Last quarter, we noted that the incremental cost was only 35%. This quarter, we are pleased to note an improved efficiency of our model, where the additional operating expenses reflected only 25% incremental cost instead of the historical range in the mid to high 40%. Regarding earnings, GAAP operating loss for the quarter was $23.5 million compared to a loss of $22.7 million for the same period last year. Non-GAAP operating income for the quarter was $1.9 million compared to a loss of $2.6 million for the same period last year. The difference reflects our business scalability and improved operational efficiencies, which resulted in modest gross margin growth and improve operating margin. GAAP net loss for the quarter was $24.4 million or $0.37 per diluted share compared to a net loss of $20.2 million or $0.31 per diluted share for the same period last year. Non-GAAP net income for the quarter was $1.2 million or $0.02 per diluted share compared to a loss of $1.6 million or $0.02 per diluted share in the same period last year. Adjusted EBITDA of $7.4 million compared to $3.5 million in the same period last year reflected our improved profitability levels. We used $22.8 million of cash in our operations during the second quarter compared to generating $5.6 million of cash from operations in the same quarter last year. The use of cash was primarily driven by deliberately increased inventory purchases of over $20 million. We ended the quarter with $441.5 million in cash, cash equivalents, and short-term deposits compared to $475.6 million at the end of the first quarter of 2022. With our fortress balance sheet and strong cash generation profile, we remain well-funded and well-positioned to capitalize on value-enhancing market opportunities as they are identified. Now, let me turn to our outlook for 2022. I would note that our guidance continues to include full year anticipated contribution from MakerBot, as the announced merger with Ultimaker has not yet closed. Since our last update, currency exchange rates have continued to decline across a number of our key foreign currencies, impacted our outlook for revenues for the second half of the year by $10 million. We expect the timing of such impact to be relatively even across the third and fourth quarter and as a result, are adjusting our full year revenue guidance accordingly. We now expect revenue in a range of $675 million to $685 million and for revenue to continue growing sequentially throughout the remainder of the year. Revenue growth for the second half of the year is expected to be approximately 6% to 7% higher than the second half of 2021, with the fourth quarter anticipated to grow at a higher rate than the third. As I noted earlier, the change in full year revenue outlook is due to declines in currency rates. From a gross margin perspective, we continue to expect full year 2022 to be flat to slightly higher as compared to 2021, with the second half stronger than the first half based primarily on higher revenue. We expect the third quarter to be relatively flat compared to the third quarter of last year. As a reminder, we view the current gross margin situation as temporary. One headwind caused by macro logistics and material issues test, and we continue to execute on our long-term plan, we expect our margins to head back over 50%. In 2022, we now expect our operating expenses to be approximately $18 million to $23 million higher than 2021, primarily due to the impact of owning a 3D for the full year, highest costs that results from higher sales and investment in new growth drivers such as Origin 1 and Healthcare. And despite the higher absolute dollar value year-over-year, we expect our operating expenses as a percentage of revenue to continue improving by decreasing throughout the year. We continue to expect non-GAAP operating margin to be slightly above 2% for the full year. Longer-term, we expect non-GAAP operating margins to achieve double-digit as our growth plan unfolds. We now anticipate a GAAP net loss of $78 million to $69 million or $1.17 to $1.04 per diluted share. And non-GAAP net income of $10 million to $13 million or $0.14 to $0.19 per diluted share. Adjusted EBITDA is still expected to be in the range of $38 million to $41 million and capital expenditures in the range between $20 million to $25 million. We need to monitor global issues that can have an impact. With that, let me turn the call back over to Yoav for closing remarks. Yoav?

Thank you, Eitan. We are pleased with our strong first half results and how they position us to execute our plan. We have aligned our business expectations based on the current global macroeconomic conditions. Importantly, 3D printing is uniquely positioned to help our customers addresses an overcome many of the concerns that arise in times like this. With our expanding portfolio, we should continue to capture market share on the factory floor of Fortune 500 companies around the world as a relevance and adoption of 3D printing growth. And as we build on our leadership position, drive growth and improved profitability, we expect to outperform and create long-term shareholder value. With that, let's open it up for questions. Operator?

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Greg Palm from Craig-Hallum. Your line is now live.

Yes, thanks. This is actually Danny Eggerichs on for Greg today. Thanks for taking the questions. I guess just starting off, maybe any further color on what you're seeing in the broader demand, broader demand trends given the current macro and maybe if you could even break that down further into the geographic markets that you serve?

Hi, Danny, good morning. Thank you for your question. We are seeing very nice level of engagements with our customers. And we are focusing on the opportunity. The nice thing with us, of course, we are operating in the same world like anyone else. But in the last two years, we opened up for us new markets. We practically doubled our total addressable market. So despite the fact that outside view, there is -- there are issues, macro issues, supply chain issues, inflation. We, in the micro level, at Stratasys, are seeing double size of the market, which means that we have a very nice space to grow -- to growing. And that's what we are doing, and that's why we have a nice demand. And you can see it also in our guidance.

Yes. Thanks. And then, I guess, just off that, are you surprised to the upside or downside on any geographies, Europe or the Americas or anything like that?

In general, things are going as planned. And the nice thing with Stratasys is that we are very diversified, both in terms of product and geographies. So luckily enough, it's not luck. We plan it, but we planned well, and we are meeting our numbers.

Yes. Okay. And then just moving on to some of the guidance, still targeting double-digit operating margins longer term. Any way you can go into more detail on that, maybe the time line or the level of revenue associated with that, just being that it's a fairly significant jump from this current year estimate of that 2%.

Hey, Danny. That's a very good question. And similar to our message, I believe, the last quarter, the whole story or the main story here is the scalability, right? And we have five technologies, and we are well positioned to grow long term, double digits for the coming years. And with that double-digit revenue growth, the scalability, the ability to bring OpEx in very, very low margin or much lower margin, that's the story here. And actually this quarter, the second quarter just demonstrated, right? So we chose to compare Q2 2022 to Q2 2021, and you look on almost $20 million revenue increase that came with $5 million OpEx, that's 25% OpEx on that incremental revenue, right? So that's the scalability. That's the way to improve gross margins and OpEx as we get bigger, bringing us to the double-digit sale operating profit.

Thank you. Our next question today is coming from Paul Chung from JPMorgan. Your line is now live.

Hi. Thanks for taking my questions. So just on cash flow, you're seeing a drag this year in the first half on inventory investments and other kind of working cap investments. How do we think about cash flow generation in the second half? And can you breakeven or positive for the year after heavy investments in the first half?

Yes. Thanks. That's a very good question. So first, taking -- maybe taking you back to the last eight to nine quarters, right? So after seven quarters with a significant positive operating cash flow, seven consecutive quarters into the second quarter that we have negative operating cash flow. But this is deliberately, that's basically our focus on the demand on meeting our clients' expectations, customer expectations. Keep in mind that we are a global company, we demand everywhere. We want to make sure that we have the inventory in place globally in the different locations available. We're trying to leverage our strong cash position with no debt to -- and even if it means a couple of quarters of a negative operating cash flow in order to meet our demand, in order, by the way, also to improve our gross margin in the future because that will enable us to shift more to sea versus air shipment in the future, being having the right scale of inventory. That's the way we think about it. Obviously, we're very sensitive, we're very cautioned to casual, but this is a temporary deliberate action by the company. And we do see that in the future -- in the later future, we see ourselves again coming back to positive operating cash flow and positive free cash flow in the mid to long-term.

Thanks for that. And then just a follow-up. Historically, it's been quite difficult to kind of break out beyond the $700 million in revenues for the year. You're almost there in 2022, but as we think about 2023, expand on the confidence you have in the product portfolio, any other levers you want to call out? Why is it different this time around? And you mentioned the 50% gross margin target, what's the expected timing of rebounding back to those levels? And are you seeing some evidence of consumables demand, kind of, accelerating? Thank you.

Thank you. Thank you for your questions. I will divide my answer to two. First, I would like to start with the revenues, we are quite confident that we will pass the $700 million and more because we created a growth engine, and we put them in place in the last two years. So, we have the most innovative polymer technologies. We have a great -- more than great, material platform that it's open now, and we will keep strengthening this material platform, and we see more revenues out of it. We have a very strong software platform and a service that is much better -- plus use cases that we'll go one by one and conquer them. So, we have a very clear five years plan and we are very confident that we will be able to achieve it, including passing the $700 million starting with the origin and the South and the RPS. So, we have plenty of room to grow. That's on the revenue side. And if I look at the profitability measure, as we said before, it will take us two to three years, but we'll be there.

Thank you. Next question is coming from Troy Jensen from Lake Street Capital. Your line is now live.

Hey gentlemen. Congrats on the nice results here.

Thank you.

Hey guys, so I want to look at second half guidance here. If you kind of do the math, you're talking about a $21 million increase over last year's second half. So, I'm always curious to know if the base business is growing. So, with this $21 million increase, how much of that is coming -- I guess, you won't tell me how much is coming from the new products, but are you assuming that your base business, your FDM and PolyJet will be growing in the second half over last year second half?

Thanks Troy. The long answer or the short one? Do you hear me?

The long please.

Yes. All the businesses are growing, in particularly hardware. The hardware is a driver. Look at our results today, 29% practically in retail, 33% growth in hardware. This is the driver for material and service and it goes across the different technologies. So, both the basetechnologies, FDM and PolyJet, and the new technologies are growing. And for me, the most important thing is they are growing in hardware. So we see more recurring revenues from this growth.

Perfect. All right. Now my follow-up here is, you provided us an update of your operating margin targets to double digits in the long-term. I'm curious to know if you guys will avoid doing dilutive acquisitions, while you guys strive for this higher level of profitability?

Thanks. That's a good question. So, obviously, we're talking about two to three years to get to the double-digit operating income. It will be a mix of doing the right thing for the company. But I can tell you that I think I answered earlier, we really believe that our organic business today, like the platform that we created, the technology, the value proposition, those by themselves, as we grow as we -- as revenue continue to increase double digits in the next year will bring significant incremental operating profit and will get us closer to the double digit.

Thank you. Next question is coming from Wamsi Mohan from Bank of America. Your line is now live.

Yes. Thank you. Good morning. You noted increased TAM now and resiliency in demand, you obviously kept your guide outside of FX. I'm curious to hear a little bit about maybe what your customers are doing with the installed base in terms of usage metrics maybe that can be a way for us to gauge what the demand looks like of your installed base of systems. If you look at consumables growth, there was some deceleration, and I know some of the compares are strange. So -- maybe you can give us a sense what you're hearing from customers around intention in the back half of this year in terms of usage metrics? Are you thinking they're going to remain relatively consistent? Are you anticipating that to either increase or decrease in any significant fashion? And I will follow-up.

Thank you for the question. Let's start with the long-term, because this is what is really important here. What is really important is there is a shift from using our machines for prototyping with very limited utilization to using our machines for real production, even if it's low volume or personalized end-use part, but it is really manufacturing. And we know the trial while manufacturing, machine consume four to five times material than a prototyping machine, which -- this is the essence of everything that we are doing here. And it's a long journey, but we are starting -- we are reporting on it, as you know, every first quarter, and we are step-by-step making these efforts, use case by use case application by application, so it doesn't matter if it changes or line bridges for pre-surgical planning or DAC for automotive or airplanes. This is exactly what we are doing. We're identifying the use cases where manufacturing can benefit from additive manufacturing. And then we come with a full solution and we're opening the market together with our customers. And it will grow year-over-year. As we said, 20%, we committed to 20% year-over-year growth of this portion of our business. This is the big picture. Now when I'm looking at next -- the second half, who knows exactly what will happen, But what we do know that we have five technologies, the largest installed-base in the industry, very strong balance sheet and we become more critical to our customers. So when we look at the inventory that we built up, there means and the fact that they are consuming more material across five technologies, I'm optimistic that we are resilient enough for any market condition.

Okay. Thanks for that, Yoav. And then -- maybe one for Eitan. How much pressure are you currently experiencing from inflation on your gross margins? You're obviously seeing a nice uptick in revenue. You're signaling a lot of confidence in continued revenue growth and you're getting back to 50% gross margins. Is it right to think that you have obviously positive operating leverage as you're getting increased volume on your revenues but then the inflation pressures are more than offsetting that positive leverage in some ways. And so, if we think about the bridge to get to your 50%, are you absorbing like 300, 400 basis points of gross margin headwind right now because of inflation, or are you expecting other levers to get you over to $50 million?

Thank you, Wamsi. So first to answer your -- kind of your last part of the question. When we compare it to Q2 2021, we see roughly a 300 basis point impact, give or take, okay? So 3% on our gross margin year-over-year. However, as you noted, there are a few things that we've done to compensate. One is the higher revenue. So scalability works on the gross margin as well, higher revenue, improve our gross profit with the fixed cost and so on. Second, we did increase prices several times over the last year. So when we compare ourselves to Q2 2021, there was a price increase by us to mitigate to offset the logistics inflation. And there's also the operational efficiencies, we are trying to be more efficient, the higher inventory, the higher production level come with -- make the unit -- the cost per unit naturally lower, and that's part of the scalability. And there's also the FX that has some impact on our gross margin. So when you aggregate all these together and we see we look one, two, three ears ahead, the scalability, the higher revenues and the combination of what I've mentioned should get us to the 50%

Thank you. Next question is coming from Kira McKay [ph] from Stifel. Your line is now live.

Hi, guys. Thank you for taking my questions. My first question was on the slide of – the J5 DentaJet, you mentioned that you're seeing significant dental sales, particularly in EMEA. I was wondering if you could provide any other color on demand in the dental area in the other regions, North America, Europe?

Thank you for the question. We are building stronger dental portfolio and additive manufacturing. And we can do it because we have five technologies, very strong portfolio of materials and its knowledge and expertise in dental historically, and we are now leveraging it. We have a portfolio both in [indiscernible] is disruptive. The ability to print everything, every different application of the same trade plus the ability to expect and different materials, this is very unique and disruptive in the market. This is the PolyJet [indiscernible] then we have the DLP, which I believe the best part, the best accuracy in the business. And as the RPS, which is a territory, geography, large format that will help us to get into the aligner business and other dental applications. So, what we are focusing now is on building the material portfolio that we go with those three technologies, supporting them with application engineers and unique service offering. We started to build a unique service offering, it's not like our regular service. And when you put everything together, the speed, the yield, the quality that we will be able to provide to our customers, plus disruptive solutions that you will see in the future, really disruptive solutions that you will see in the future that we are working on it, I be will be a leading player in dental offering, starting with the dental care.

Thank you. And my follow-up question was on the slide on non-GAAP margins. We're seeing -- you guys have seen a very good improvement in the service gross margins sequentially and year-over-year. Just kind of wondering if you could provide any color on what's really driving that improvement in the service gross margin?

Thank you. the improvement on gross margin in the service is driven by price increase that we had generated, as well as deals -- and deals that came with better gross margin that's more and more positively impact our gross margin on service. These are the two main element that improved the gross margin on the service business.

Thanks. The next question is coming from Brian Drab from William Blair. Your line is now live.

Hi, thanks for taking my question. I was wondering if you could maybe give a little more color on MakerBot, just to help us model -- help everyone model. You said immaterial impact on revenue, I'm just wondering what is the definition of material in this case? And you're going to see that revenue come out of -- since you're reporting the equity method come out of your topline. So, can you give us any more color on that and also what does that do for profitability? I imagine that has at least -- I guess maybe it's you're going to say, it's material, but a small step-up in margin after divest -- or after this move?

Thank you, Brian. And as we mentioned previously, we're waiting for the deal to close and the timing of the deal close will impact the -- our results for the rest of the year. So in that regard, we’ll get back to you after deal close, and we'll update on the numbers. However, to one of your comments, one of your points, the MakerBot business, the exclusion of the MakerBot business will improve our margin for the rest of the year.

And just irrespective of the timing of it, you can't comment on how generally -- how this business is doing on a level of revenue?

Not at this time, but we'll update later.

Thank you. Our next question is coming from Ananda Baruah from Loop Capital. Your line is now live.

Hey. Thanks guys for taking the question. Yes. Just two quick ones, if I could. Could you talk about where you're still seeing the supply constraints the most? And then I have a quick follow-up. Thanks.

Hi, Ananda. Thank you. No, nothing new here. Lockdown in China is there, some releases here and there, traffic jam in US ports and overall a shortage, mainly in electronics and some raw materials because of the war. So its huge aspect, I would say. And we are working broadly with our team. I want to thank my operation team. We didn't miss a penny this quarter, despite the fact that it's a war out there in supply chain. We are investing in increasing the inventory. We are willing to pay in order to deliver -- to pay and leverage our strong balance sheet in order to deliver value on time to our customers and ensure that we can supply them. I believe it will release gradually, because it's part of the cycle.

And would you consider -- that's really helpful context. And would you consider the supply -- like, sort of, collectively things to be easing at all yet?

Not yet, but our expectation is by end of year we’ll see it becoming easier. And I'm optimistic. I have an optimistic nature. It's good for any manufacturer. So look on the bright side.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

So thank you for joining us. Looking forward to updating you again next quarter.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.