Markforged Holding Corporation (MKFG) on Q1 2022 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Markforged First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to hand the conference over to Austin Bohlig, Director of Investor Relations. Please go ahead.
Austin Bohlig: Good afternoon. I am Austin Bohlig, Director of Investor Relations, of Markforged Holding Corporation. Welcome to our first quarter fiscal year 2022 results conference call. We will be discussing the results announced in our earnings press release issued after market close today. With me on the call is our President and CEO, Shai Terem and our CFO, Mark Schwartz. Before we get started, I would like to remind everyone that management will be making statements during this call that include estimates and other forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in the call that are not statements of historical facts, should be deemed to be forward-looking statements. These statements represent management’s views as of today May 12, 2022 and are subject to material risks and uncertainties that could cause actual results to differ materially. Markforged disclaims any intention or obligation, except as required by law, to update or revise forward-looking statements. Also, during the course of today's call, we refer to certain non-GAAP financial measures. There is a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after market close today, which can also be found on our website at investors.markforged.com. I'll now turn the call over to Shai Terem, President and CEO of Markforged.
Shai Terem: Thank you, Austin, and thank you all for joining us today to learn more about our Q1 2022 performance. I'm very happy to share that we continue to execute successfully on our plan at both the topline and bottom line. We achieved our growth targets and finished the first quarter of the year at $21.9 million in revenues and non-GAAP loss of $0.08 per share. We continue to feel confident about our momentum and outlook for 2022. The underlying demand trends across all of our business segments are strong. Our customers continue to solve more and more mission-critical applications with our technology. With the increased pressure on supply chains, more manufacturers are realizing the value of additive to help alleviate these concerns and are turning to Markforged for a sustainable solution. This idea is no longer just a buzzword, but a directive coming out of the White House. As you saw last week, the Biden administration announced the Additive Manufacturing Forward Initiative, to encourage companies to adopt 3D printing technologies, to bolster and strengthen their supply chains. Of course, we've already been doing this since our inception. From our beginning, Markforged has been focused on manufacturing applications, enabling de-globalization and bringing production to the point-of-need. We applaud the U.S. government efforts to accelerate adoption and look forward to helping businesses across all industries, transform their supply chains and bring manufacturing back to America. I'm very proud to share the thanks to amazing efforts by our team, production and delivery of the FX20 is on track. We shipped several FX20 systems to our channel partners and customers in the first quarter and we expect the pace of shipments to accelerate in the second half of the year in line with our plans as we have mentioned previously. The FX20 increases our addressable market into larger part size, high-temp resistant material and robust production, and we expect it to have a significant impact on our future, particularly in aerospace and automotive applications among others. As more people see the FX20 in action, we are excited and humbled by the increased interest and positive feedback. Next week, our team will be attending Rapid + TCT and explain the FX20 in North America for the first time. I am spending a lot of time in the field, helping connect people to the power of The Digital Forge. There is this magic aha moment I love when someone holds a strong and accurate part printed on The Digital Forge platform in their hand for the first time. I can literally see the mental gears turning as they begin to imagine the manufacturing problems they can solve with such high quality parts. I can’t wait for our team to bring this energy and FX20 to the trade show floor in Detroit next week. In addition to the FX20 for robust production, we continue to drive our strategy of expanding our addressable market for early stage design with the addition of Precise PLA to our portfolio of materials. This cost-effective, specialized version of polylactic acid, or PLA now enables The Digital Forge to address the full product development life cycle from validation to end use applications all on the same platform. Markforged customer, Zero Tolerance, an injection molding and machine shop used other 3D printers and PLA materials as part of their design phase and were not satisfied with the quality of the results. Now with Markforged Precise PLA that can print reliable and high quality design and move directly into production using Markforged Onyx with continuous carbon for strength, all on the same platform. With the full lifecycle development, the customer told us this is the most reliable additive platform we ever used. It just works. Software has always been a key differentiator for Markforged and core to The Digital Forge solution. So it's natural that our first acquisition is a high value software technology that will add production grade capabilities for our customers. I'm very excited to welcome the Teton Simulation Software company to our team if the deal goes subsequent to the quarter-end. Teton’s SmartSlice technology, automates validation and optimizes far performance for additive manufacturing applications, will integrate it into our Eiger software as a subscription add-on, providing a streamlined workflow, including virtual validation, by replacing time consuming and wasteful physical testing will give customer a better understanding of the strengths of their parts. This technology helps customers in configuring slicing parameters for end user requirements, with a deeper understanding of the composition of their parts who anticipate engineer will utilize our advanced composites, like our continuous fiber reinforcement technology in more critical manufacturing applications. This means deeper utilization of The Digital Forge in critical manufacturing applications and sticky relationships with our customers. As everyone is well aware, challenges across the global landscape continues as the war against Ukraine has escalated. I want to clearly state that Markforged has never done business directly in Russia and does not intend to do so. Our customers continue to navigate the uncertainties this ongoing conflict has created without a clear resolution inside. Between the worsen conflict in Ukraine and more regional COVID shutdowns, we are experiencing along with every other company in the world, continuing disruption to the global supply chain. To date, we have overcome these challenges and remain confident that our team will continue to work creatively to secure supply to meet demand from our customers. I would like to share with you why, especially now I personally believe that Markforged is a very different player in the additive market. First, it's our mission and focus to help our customers solve for high value end-use mission-critical applications, enabling point-of-need production. Second, our Digital Forge platform driven by a advanced composite technology is a reliable, affordable and easy-to-use platform that our customer love. Third, our software infrastructure and our Blacksmith AI engine ensures our platform learns and improves over time. Fourth, thanks to our robust balance sheet and very strong talent base, we are able to accelerate our organic product innovation and continuously increase our addressable market with product like the FX20 and more to come. This results in growing installed base with strong unit economics and leading gross margins. Coupled with a rigorous financial discipline this model would create operational leverage over time. As such, and in spite of many global challenges, we remain confident that our strategy and execution capabilities will continue to support our growth in 2022 and beyond. We will continue to take pride in just doing what we say we are going to do. I now turn the call over to Mark, who will review our financial performance in more details.
Mark Schwartz: Thanks, Shai. I will now review our financial results for the first quarter and update our full-year outlook for 2022. Please note that my comments reflect our non-GAAP results and outlook. For your reference, our earnings press release issued earlier this afternoon and posted to our Investor Relations website includes our GAAP to non-GAAP reconciliation to assist with my commentary. Revenue increased 8.6% to $21.9 million for the first quarter of 2022, compared with revenue of $20.1 million for the first quarter of 2021. Gross profit in Q1 was $11.7 million compared to $12.2 million for the first quarter of 2021. As a result, we generated a gross profit margin of 54% compared to 61% in the first quarter of 2021. Our Q1 gross margin was impacted by increases in freight and logistics costs as well as by the successful launch of the FX20, which added component material and labor costs associated with ramping this new product to commercial production. Certainly, more broadly, rising labor and component material costs continue to exert pressure on cost of goods sold, but against this backdrop, our Digital Forge platform creates a powerful differentiator supporting our gross margin advantage. The Digital Forge unlocks for our customers the ability to produce accurate, high strength, mission-critical parts for manufacturing, as opposed to the more crowded market for single use commoditized, prototyping hardware. Moving on, we incurred $27.1 million in operating expenses during the quarter compared to $20 million for the first quarter of 2021. The year-over-year increase was a planned increase driven largely by accelerated innovation efforts, investment in our go-to-market activities and public company infrastructure costs as we continue to execute on our long-term growth strategy. A significant component of that growth strategy is the capacity to develop multiple products in parallel to achieve our long-term goal of bringing a major new product to market roughly every year. In line with our plan for operating expenses, we continued to grow our research and development teams for the first quarter of 2022, nearly doubling R&D spend to $9.1 million compared with $4.9 million for the first quarter of 2021. For the first quarter of 2022, our net loss was $15.5 million or a loss of $0.08 per share. Now on to our guidance. We reaffirm our 2022 revenue guidance, again anticipating revenue for the year to be within the range of $114 million to $123 million. This represents year-over-year growth of 30% compared to 2021 at the midpoint of that range. With the accelerated commercial ramp of the FX20 expected in the second half of this year, we continue to expect 60% to 65% of our revenues in 2022 will be recognized during the second half of the year. Further, we reaffirm our gross margin guidance for the year, expecting 2022 gross margin to fall within the range of 55% to 57%. While Q2 will continue to present gross margin challenges similar to what we experienced in the first quarter, our outlook for the full-year remains unchanged. We also reaffirm our previous guidance for operating profit and EPS, anticipating an operating loss in the range of $52 million to $57 million for the year and EPS results for the full-year to be a loss in the range of $0.28 to $0.31 per share. Finally, we'd like to reiterate our continuing expectation that our cost controls and our strong balance sheet will carry us through to sustained profitability without the need to raise further capital, even including planned corporate development activities. Since we first publicly provided our revenue and expense forecast, approximately 15 months ago, we have consistently achieved our revenue goals while spending within our expense targets and we plan to continue to adhere to this financial discipline. That concludes our prepared remarks today. Operator, please open up the call for questions.
Operator: We will now begin the question-and-answer session. Our first question will come from Brian Drab with William Blair. You may now go ahead.
Brian Drab: Hey. Good evening. Thanks for taking my questions. First, just Mark, can you stick on OpEx just for one second? You mentioned how much it's up year-over-year and the plans going forward and you gave the earnings guidance, but just kind of how can – to the extent that you can, can you give us a sense for where – how each of those lines marketing, sales, R&D, G&A are going to trend and in R&D have you added the people that you need for the year now, or is that still continue to ramp up? Just any detail on OpEx, it would be great.
Mark Schwartz: Yes. Thanks, Brian, and thanks for your question. So as we think about not the near-term, but maybe the mid-term and the longer term, we believe that we've created operating leverage with our model and that will enable as a percentage of revenues our G&A to continue to decline. And that's what puts us on the path toward profitability. Specific to R&D, sales and marketing, maybe G&A, in the near-term, there are some continuing additions to the teams that we're making principally in research and development as we continue to ramp the teams for innovation, but certainly the levels of growth we've experienced over the past four quarters are curtailing and you won't see that continued level of increase. Again, that speaks toward the operating leverage and our ability to start as a percentage of revenue to see each of these lines come down. So there'll be modest increases throughout the year, but nothing like what you've seen over the past four quarters.
Brian Drab: Okay. Got it. And then I'll just ask one more for now. On the FX20, and please correct me if I have this wrong, but I think the last we heard from you was that you had over a couple dozen orders, firm orders and over a 100 opportunities. I'm just wondering how that order book has developed since we heard from you last? Thanks.
Mark Schwartz: Sure. I'll give you an answer and I'm sure Shai can add some color. The order book for the FX20 continues to grow. With more FX20s in the field, more customers are using them, other customers are now able to see the potential of that system. And from our perspective, we're delighted and humbled by what we're seeing from the reaction in the field. So that order book continues and we stand firm on our – what we've said, I know we haven't said a lot about it, Brian, in terms of numbers, but what we've said about our conviction in rolling out that product this year, it's happening and it's happening as we've scheduled.
Brian Drab: Okay. Great. And I'm sure there'll be a lot of activity next week on that order book. Thanks for taking my questions.
Mark Schwartz: Yes. We will be sharing it for the first time at Rapid. And we'll see you there next week I believe, so looking forward to it.
Brian Drab: Yes. I'll see you there. Thank you.
Operator: Our next question will come from Greg Palm with Craig-Hallum. You may now go ahead.
Greg Palm: Yes. Thanks. Good afternoon, everybody. Thanks for taking the questions here.
Mark Schwartz: Sure, Greg.
Greg Palm: Starting with unit sales, I think excluding FX20 unit sales were down on a year-over-year basis, I'm curious, what would they have been up excluding that large transaction that occurred back in Q4 2020 that carried into Q1 2021. Just curious to get your thoughts on unit volume specifically here in Q1?
Mark Schwartz: Yes, for sure. So if we back out Automation Alley from Q1, then we're up a little north of 16% year-over-year. So there was a significant impact. I think the Q1 impact for Automation Alley was around $1.4 million.
Greg Palm: And to confirm it wouldn't just be driven by price, units would've been up as well?
Mark Schwartz: That is correct.
Greg Palm: Okay, good. Gross margin, so kind of understand a lot of the challenges that are out there, are you seeing anything now that's significantly worse than what you saw a couple months ago? And looking ahead, obviously what you did in Q1, it sounds like Q2 commentary will be sort of continued challenges. It puts in a little bit of – more of a whole to get to that guidance for the year. And so it almost implies like you think things are going to improve quite a bit in the second half. So just maybe help us understand your thoughts?
Mark Schwartz: Sure. If you recall because I know you hang on every word we say, Greg, if you recall from our first quarter release and call in March, we suggested we see this lasting at least for full-year. And while – perhaps others were commenting that some of these supply chain challenges might start to subside in the second half of the year, we weren't really seeing that, that hasn't changed. We think we're going to continue to be challenged pretty significantly throughout this year, but that's already been factored into our guidance and into our thinking for the year. So for the first part of your question, nothing has really changed. We're not seeing any improvement. I think it's just challenging as it was earlier in the year. But I think because we planned for that somewhat, that it doesn't impact our guidance for the year. We're on plan with where we thought we would be. So you are correct that you do the math and necessarily the second half of the year gross margin would need to be modestly higher than where we are today. That is correct. But if you consider our plans for the year, the growth of our business, the introduction of our new materials, the Precise PLA, the introduction of the FX20 and it ramping into more commercial production in the second half of the year, that meets all of our expectations. So we're – if we thought any different, we would tell you that. I think you know that.
Greg Palm: Yes. Okay, good. Last one, guys did you mention – or Shai, you mentioned forward in your prepared remarks. Do you have any additional thoughts on that, how meaningful that could be not just to Markforged, but the overall industry just to help grow awareness and adoption for additive in general?
Shai Terem: I think it's a little bit too early to say, and we don't have the crystal ball, but it definitely helps to clarify to prove that the demand is out there and people need help. And this is what Markforged is doing. We've been helping our customers with supply chain with mission-critical parts since the day of inception. I can share with you a little bit, if you remember, in 2014 where the – another initiative coming, and at the time, there was significant increase in demand for a couple of years. It's a little bit different now because unlike then when the technologies are not the strongest polymers were ABS plastics and others, Markforged now have Continuous Fiber Reinforcement. We have OnyX with chopped carbon fiber, and we have very accessible and affordable metal solution, which make it much easier to replace parts on the manufacturing floor and you can certify that they will not break. So I think it is different this time and we are going to wait and see.
Greg Palm: Okay. Perfect. I'll leave it there. Thanks, and best of luck going forward.
Mark Schwartz: Thanks, Greg.
Operator: Our next question will come from Troy Jensen with Lake Street Capital. You may now go ahead.
Troy Jensen: Hey, gentlemen. Congrats on the nice results.
Mark Schwartz: Thank you.
Shai Terem: Thanks, Troy.
Troy Jensen: Hey, maybe to start out with Shai. I guess I'd be curious with the various product lines, can you talk about Metal X versus industrial versus desktop, all the platforms seeing growth or is some growing faster than others?
Shai Terem: I would say it's more or less the same. The composite continue to be the lion share. Although metals continue to be strong and it's very obvious as we are replacing traditional manufacturing mode of traditional manufacturing, as you know, with metals, it’s aluminum and steel, but when customer come to us with a problem and we can introduce the advanced composite solution, which is sometimes cheaper, but stronger, lighter, there's no corrosion, there's a lot of advantages then they end up with composite solution. So we see more or less the same, I would say product mix between the freight that we had before.
Troy Jensen: Okay. That’s perfect. Then I’ve got a – on a PLA launch, I mean, I understand customers can kind of swap out materials, but historically a lot of users don't like to. So I guess I'm curious that your opinions on will this promote more system demand also if people opt to kind of keep more material per machine?
Shai Terem: Yes, definitely and especially on the lower-end. So from one end, we increased our addressable market with FX20 robust production, faster, bigger, high-temp materials, et cetera. But on the lower end, we're also expanding our ability to answer kind of the design phase of manufacturing. Until now we have many customers that love our solution as you know because you go and ask them. But they told us look for the design phase, we use cheaper versions because later on we throw it away, but we would love to do it on the same platform. So we said, okay. And we gave them these materials, which are a little bit cheaper, but now they can have the entire life cycle of production from design to the final part done on the same platform and they love it.
Troy Jensen: Yes. Makes sense. Just lastly for me then just on the software side, Blacksmith and fleet manager, I'm guessing it's kind of a too big to break out with respect to revenues, but just can you talk about adoption of those two software applications?
Shai Terem: Yes. As you said, it's still relatively very, very small compared to the total revenue, but they are enablers. So when we talk about enterprise accounts that have multiple systems in multiple continents, and like Vestas, for example that you saw probably in the video, they require it, that you must have this part of your real manufacturing production process, you need to ensure that the same part will be produced no matter where it is, if it's here, or if it's another continent, you must have the same part, need to control access to the system, you need to ensure the same part is being printed. So we see the adoption continues especially with the bigger accounts. And I think now with the Teton Simulation, we can take it even to the next level and really certify and help them get the right conviction right out of the gate that the part that they're looking for will have the right requirements.
Troy Jensen: Perfect. All right, guys. Congrats again, and keep the good work.
Shai Terem: Thank you, Troy.
Mark Schwartz: Yes. Thanks, Troy.
Operator: Our next question will come from Jim Suva with Citigroup. You may now go ahead.
James Suva: Thank you. Not talking about shipping costs, but raw material costs like aluminums, metals, polys, carbons. Are you like changing the way you do it now? I'm just not talking about pricing, but like now contracts saying indexed to like a priced amount or something, or just like adjust it as the customer comes back to buy more. I'm just kind of wondering if there is any structural changes going on since raw materials have unprecedentedly been quite volatile?
Mark Schwartz: Yes. It's a good question, Jim. We're doing everything that others are doing. So we've talked a bit before about buying ahead, buying in bulk. We are signing longer term contracts with certain vendors to secure source of supply and to secure pricing. We're doing that now actually with the FX20 components as we're moving into commercial production. So moving from the fives and tens and twenties into greater volumes, so yes, we are doing some of that. I thought your question was moving in a different direction. I'll answer that, if you don't mind. I thought you were asking maybe are we thinking about redesigning some of these parts out of our systems. And the answer to that is no, at least not currently.
James Suva: Thank you. And then my follow-up, earlier you talked about regional trends. I'm just kind of wondering about as the quarter progressed in Europe, did you see a bit of a pause in some of the Eastern European countries for industrial just given the unfortunate uncertainty of the conflict war area over there? And if so, kind of what are they telling you hopefully for things like to get settled out before they come back or are they just still investing in CapEx in your product despite the unfortunate Russia-Ukraine conflict? And I'm not talking Russia-Ukraine specifically, I'm talking about the bordering countries and such.
Shai Terem: Yes. I would say in general that we started seeing some delays in Q1 right as this terrible event start to take place. We don't see a positive change yet there, but as you know our business is global, so I think we still be able to grow on plan with this, but there's definitely impact there. And we hope it's going to get better there very soon and get resolution.
Mark Schwartz: Yes. What I would add to that, Jim is, Shai highlighted, there's a lot of uncertainty, and we've seen some customers, particularly in EMEA, push out orders. But the underlying demand trends for additive solutions, I think more broadly remains strong and we have confidence in hitting our full-year revenue targets that remains intact.
James Suva: Thank you for the details and clarifications. It was greatly appreciated.
Mark Schwartz: Thanks, Jim.
Shai Terem: Thank you.
Operator: Our next question will come from Noelle Dilts with Stifel. You may now go ahead.
Noelle Dilts: Hi, and thanks. Sticking with that geographic theme of questioning for a moment, could you comment on the strength that you saw in APAC in the quarter? And then just kind of as you look out to the year and your volume expectations, I guess sort of any changes in how you're thinking about the regional trends and where some of that growth will come from? Thanks.
Shai Terem: Sure. So I think in APAC, first, we have very strong leadership and amazing team, and they're doing just phenomenal work. In addition, as you know, APAC was under a lot of pressure with COVID for a long time. And especially for us, the biggest two countries there is Japan and Australia that were under a lot of shutdowns, but as this starting to a little bit open up, we definitely see the impact. We see more customers face-to-face more trade shows, et cetera, which definitely helps to accelerate the transaction to the final stage. Going forward, we believe we're going to continue to see the growth on all geographies. The supply chain challenges today are everywhere. And when we come and try to help our customers to overcome them, they really need it. So we start to see customers that have digital libraries with kind of the Markforged solution with thousands of parts now that they print on demand – thousands of parts that they print on demand versus parts that used to stay on the shelf, but now you cannot get them. So I think this is a definitely a driver that helps us grow everywhere in the world currently. I don't see it changing any anytime soon.
Noelle Dilts: Okay. Great. Thank you. And then could you just revisit sort of how you're thinking about cash usage for the year and anything notable we should keep in mind as we're modeling, as you sort of pick up growth in the back half of the year or anything we should think about from a working capital perspective? Thanks.
Mark Schwartz: Yes. Sure, Noelle. I think there is probably two things to comment on there. One is Q1 given the first half of the year tends to be the lowest in terms of revenue quarter one and quarter two, and bonuses and other things being paid out in Q1 tends to be the most cash outlay of the year. So we're not on a run rate of burning the cash we burned in Q1. In fact, we have great control over our expenses and we're on plan for the year. The second I would highlight is with the acquisition of Teton, you or others might think, well, gosh, that's going to add a cash burn to the company. And it will, but it's a very, very modest cash burn, a small team, they also were fiscally responsible and even factoring that in, we're not changing our guidance for the year.
Noelle Dilts: Thanks very much. Appreciate it.
Mark Schwartz: Sure, Noelle.
Operator: Our next question will come from Rod Hall with Goldman Sachs. You may now go ahead.
Roderick Hall: Yes. Hi, thanks for the question. I wanted to come back to the Teton acquisition and maybe see if you could talk a little bit how that strategically fits into the business and how you see that augmenting the opportunities that you've got in the business, so just qualitatively on that. And then I wanted to come back to the working capital question. Just looking at your inventory days, they did bounce up quite a bit for good reasons I'm sure given the supply chain situation. Just curious what you think is going to happen in inventory days from here. Do you expect that to kind of trend down from here? Do you think it goes up again in Q2? And then likewise these days payable went down quite a bit and just any color on that, or is that just kind of normal ebbs and flows of the business quarter-to-quarter? Thanks a lot.
Shai Terem: Thank you, Rod. So I will take the Teton question and I assume Mark will help on the working capital. So Teton, Teton has a very easy-to-use and very accessible software that helps evaluate how to build the part and that will give you the strength and the points you need. As you know, Markforged, we have the Continuous Fiber Reinforcement, which is critical and if you want to build parts, which are stronger than aluminum. Now today, in order to get the certification you want, sometimes you need to print the part, tested, printed, tested with this software. Our customers can avoid all of this testing and do a simulation and evolution of how strong will be the part depending where they put the continuous fiber inside the part. We believe that it will help to strengthen the position that we have in the market with the Continuous Fiber Reinforcement. It'll give our customers the ability to adopt even deeper the technology into more manufacturing application and in a cheaper and easier way instead of doing multiple prints and testing, you do it once and you know what's going to be the outcome. So we believe that it will have a very positive impact on our total adoption. And the way that we're going to try to monetize it, as we said, we're going to add another subscription – kind of software subscription into our offering that will give our customers the ability to use it, and really ensure that they have the right part in their hands in the first time.
Mark Schwartz: Yes. Rod was your working capital question related specifically to Teton, or maybe you can rephrase that.
Roderick Hall: No, Mark, I was just looking at the balance sheet metrics and days of inventory were 114 up from 82 and they haven't really been that high for a while. But everybody’s inventory is going up. So it's not surprising. It's just a question of, does the – did the days of inventory maintain that sort of level? Do they trade down from there? Just trying to figure out if we're at a peak on inventory or do you think the inventory goes up a little bit more? And then likewise on days payable, that's down, look at like just over 30 days down sequentially, and I'm just wondering, does that anything that went on there that caused your days payable to come down or is that just normal seasonality?
Mark Schwartz: Yes. So on the inventory, we have been building inventory, and so you shouldn't expect that the current level we have will continue as a percentage of revenue. We'll burn that off as we move forward. And you'll see that sort of drift back down into maybe more historical normalized levels for us. In terms of the AP, I think, what you're seeing is closer to a new normal for us. One of the areas that we have shored up as we've become a public company is on that side and being a little bit more responsive to our vendors. And so I think you're likely to see the levels where we are now as a percentage to stay fairly flat.
Roderick Hall: Great. Okay. Appreciate it. Thank you.
Mark Schwartz: Yes. You're very welcome.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Shai Terem for any closing remarks.
Shai Terem: Thank you very much, everyone for joining us and looking forward to see you maybe next week in Rapid.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
