Shape Robotics A/S (SHAPE) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to the Q&A session for Shape Robotics Annual Report 2025. I will start the day. I hope everybody has time to connect. I will start the session in 2 minutes. Hopefully, that everybody is here already. I can see that stream has started. First of all, thank you for a very long list of questions that we have received on our Investor Relationship e-mail and also on the social media. And without taking too much of your time, we should start digging into those questions from the beginning. First of all, we have received a question from one of our shareholders. asking why are the customer credit terms so long? Of course, this is one of the topics that has been on the lips of everybody, and we have discussed about this topic before. And this question comes in light, let's say, in parallel with another statement saying that the Romanian payment terms are generally 30 days and it's being considered the legal standard. Well, I can tell you that this information is not correct. There is a recommendation, not a legal standard, and we are operating in business-to-business environment. Therefore, the payment terms are always being established in a contractual relationship between parties. Usually, this 120 days payment terms refer to specifically our main SmartLab project, which is basically funded by governmental grants from the EU recovery and resilience plan. And the payment term for these grants is between 60 and 90 days at the consumer level. So I mean at the school level. So we have to understand that the entire channel from our vendors, our suppliers, motor suppliers, so on and so forth to the school has taken this burden because any school that applies to a grant has to finance that grant only after and pay that grant only after the full installation of our SmartLab or Thinken is occurring on that grant. Therefore, the reality is that, that payment term from the moment of manufacturing to the moment of installation could be even 6, 7, 8 months, okay? So the whole channel covers it. This is very typical for this kind of business to governmental tender relationships. And also, you have to take in consideration the fact that Shape Robotics in the last years has entered into a new dimension of business. First of all, look at the fact that we have doubled the revenue every year, then that made us participate into a larger, let's say, program of partnership with different distributors, vendors, so on and so forth. And generally, payment terms, just to give you an idea for the Thinken product that you see on the left side of me, which is a Lenovo product is minimum 90 days. These are very typical payment terms. The good thing about all this is that Shape Robotics has basically 0 bad debt. So everything is happening in a very well-organized manner. We cannot simply push to change payment terms as they are in very strict frameworks, and we have to follow those frameworks. Second question, of course, I will follow also the questions that we received live. I don't see anything yet. I see that we have around 50 people connected. Thank you for this. The second question was why hasn't the receivable issue been resolved yet? This receivable issue is, I think, artificial in understanding because a significant part of the group revenue comes in the quarter 4. Therefore, when we launch this annual report, you will see that a lot of the receivables come in the last quarter and then automatically, this -- by having this peak -- this seasonal peak, this kind of gives a very unique perspective when it comes to receivables. Everything is in order in this example. We have -- like I said before, we have basically 0 bad debt in this 4, 5 years since we have operated in the market. Another important question, is Shape Robotics at risk of running out of cash or needing a capital raise? The answer is simple, no. We are not about to run out of money. We are constantly working to optimize this liquidity situation, and we have a very important partnership signed in December last year, which is the partnership with UnitCredit Bank. Very important to understand the fact that UnitCredit Bank is our partner and our investor in this sense because they come together with us to create certain special credit facilities and certain solutions so that we can leverage this kind of long payment terms and to help us with our DSO. So this supply chain financing mechanism that we put in place with UnitCredit is extremely well designed and tailored for our needs. And of course, UnitCredit has a much deeper understanding of our pipeline, of our tendering process and of our financial operations. And by them giving a guarantee by signing this contract automatically that this is already even more than an auditor report. It's a recognition of our ability to be profitable and to perform in the market. So the risk, like I said, it's not there because we already have a strong partner in this sense. And why are we asking at the AGM to approve the issue of new shares, we have no specific plans to raise capital based on the shares, but there is a change in the EU prospectus regulation. I will read it because it's quite a technical aspect here. Basically, the threshold to issue new shares has been increased from 20% to 30% in 2024. This is a regulatory change, and this allows us to increase from 20% to 30% without necessarily having a mandate to raise capital. Another question, our development cost being capitalized to inflate earnings. Well, I think the answer is quite obvious. We are an R&D company, and Ed-tech company and the investments that we do have to utilize, and we have to keep up with the investment in the field, especially in the field of AI and new development of technology. Everything is done under IFRS criteria. So we have just to look at other companies that was in the market. We are around 16% to 17% capitalization out of revenue when the market standard is around 25% to 30%. So these development costs are not inflating earnings at all. This is a normal procedure that we follow like any other software development company does or hardware development. Another question, can investors trust the numbers. Of course, these are financial audited statements and prepared under international standards. So this question, I think, that is very simple -- is a very simple answer. We continue. In the meantime, I will check whether there is some kind of update on the live stream. I can see that. So the sixth question, why have salaries and executive compensation doubled? Well, there are 3 primary reasons. First, in order to support the growth opportunities the company had to grow. And of course, we had to hire new people and also we have new financial administrative, logistic operational costs that we have to take in consideration. Also, we have to take into consideration the fact that we have incorporated fully last year, Shape Robotics Poland, former Skriware. So this comes with also a burden and an investment burden for us. third, there is an executive compensation package that is DKK 4.2 million, which out of this 60% is an earn-out agreement that came as a compensation package because it's a technicality in the way we presented is the earn-out agreement that was part of our acquisition of Story Kids in 2022- sorry, 2021, so many years have passed since then. Our seventh question. Isn't Shape Robotics too reliant on Romania and a few large customer -- customers. Romania has been a strong market, and it's a market where we managed to pilot a lot of our technologies. We are not reliant on the Romanian market. We are reliant on European market. We are a European company that works and operates in good faith in the Edu-tech market. And basically, everything that we are doing is following the leadership of the EU Schoolnet foundation in the EU funds. So therefore, we are expanding with European expansion drives, okay? Education has all been a priority for the EU funding campaigns in different horizons, not necessarily in the recovery resilience plan, and this is somehow I will try to answer also the potential to receive but always comes into let's say, discussion if the funding continues after the '27. Of course, if European Union still continues and the European drive still continues, this will continue. So this is a priority at the level of 27 countries, and we have to take it as it is. There is no way to discuss this, okay? So also, we have a very big ambition to diversify our market. And you can see that also in the annual report that we have started around 12% increase in different territories that come outside the European Union and outside projects from Romania and Poland and Moldova. Okay. I have -- I see that there are some live questions. I will come to them afterwards. Shouldn't Shape Robotics low growth to reduce risk. This is a question that I think that we have already answered another Q&A. And we have presented the very clear guidance also for the year 2025. We basically have to follow the European Union funding. Therefore, our growth goes together. The funding goes together with our expansion. And therefore, we don't see the growth as being a risk therefore, reducing the slowing of the growth will not be risk at this level. Why do key announcements appear first on LinkedIn? Well, this is -- I don't consider that the key announce appear on LinkedIn at all, announcements due to regulatory process appears exactly on the channels that are -- key announcements appear on the channels that are regulatory. What we are trying to do is to lead the campaign of information also to social media so that our shareholders and partners be up to speed to day-to-day evolutions not necessarily wait from 1 announcement to the other. This is somehow of response from our side. regarding the level of transparency that is desired by many of our shareholders. Another question mostly the question that we have inherited for a while and talk a change of leadership. And in the last weeks, we have still continued to receive questions regarding the former CEO, our good friend, André Fehrn. I have expressed it every time. The door for André was always open here. We have always been very transparent and very correct when we discuss about his leaving, and should he ever choose to come back or choose to join us. He has the tools, he has the open door to do that, and he has all our full support. Therefore, I think these are questions that we can address at the AGM. We can discuss about these things. And I truly wish to know you and to see you at the AGM, and I hope a lot of the esteemed investors that are partnering here will visit us at the AGM and all the details have been publicly set there. And all these discussions can be done also at the AGM. Now some of the more difficult questions, why is the stock falling despite hitting revenue target? Well, as a company, we are focused on running business and delivering what is promised. It's very difficult for us to talk about stock price, to talk about market condition to talk about the whole situation, okay? We are always close to the community. We appreciate the fact that the community has been always -- we are a community-driven share, and there is also a question here from Christen Hansen does Shape Robotics have an anchor investor. And who is that? Shape Robotics is a company that has started on first note. And the investors that we have today and the main market are mostly the same. We have been supported heavily by fundamentally invest. We have been supported heavily by the founders and by the shareholders that started this company, for instance, Moises, myself, so on and so forth. We have been part of this journey from the beginning. But the more important part we have been supported by the community. The community is the same. We are talking to the same people, but the regulatory context is different. So everybody that we see commenting on share, we are following all the comments. We are listening to what you are saying, but we are basically the only thing that we can do is to focus on the business. And whatever you wish to see in our business we take in consideration more or less. And if that can be applied, we follow those advices. And we always want to be closer to that community. But this is the situation right now, and we have to follow exactly the path that we have to follow on the main market. We are a main market company. We have to follow the rules of being a main market company. Shape is not anymore the same company that started 5 years ago. We have doubled the revenue every year. We have encountered many ups and downs in that process. We're still here. We are still delivering on our promises. And of course, we are close to your investors, and we are appreciating your support, and we really want to be closer and more open to you, but you have to keep in consideration the fact that this is also regulatory. So one of the questions that I keep on receiving was to share information about our pipeline or our tender procedures. And I think that the answer is quite complicated here. We are also in a competitive environment. And the fact that we are a publicly listed company, we share a lot of the information that also cuts the competitive edge for us. Therefore, we have to be transparent and regulated, transparent, but also we have to keep our competitive edge and we have to keep as much as possible the project inside our company and under secrecy and under protection when it comes to the competitive edge. I think that the chart is going crazy André here. Hi, André. Yes. So I think that for now, the questions have been answered mostly. I will give another 5 or 6 minutes, let's say, if anybody would like -- let's say, Alex Wu, one of our steam partners. Share price developing? Is everything going according to plan? How do we explain the significant decline in the share price? What do you believe is not yet reflected in the market. Again, I cannot talk about share price. What I can talk is that the fundamentals of the company are here, we are growing, we are expanding. And I will tell you something very important from our point of view. Everything that we have started in 1 or 2 years has become profitable. The last quarter that we have delivered was the best quarter ever with high profitability. Therefore, we have to take in consideration that there is also an element of time. We have to give time for the investments in Poland to happen, we have to have -- to give time for the investments in Moldova to happen, but we also have to look at the fact that the first investment we did in Romania are highly profitable. Therefore, our recipe functions. And of course, yes, we still have a lot of things to improve we have run a very -- we have started together with the Board to look at things that we can optimize ourselves and to increase rentability of the business. Everything that we're doing is towards the shareholder value and creating shareholder value. Therefore, you have to trust the process and you have to trust the timing. We have always delivered, and this is going to happen also -- I have some questions that also come into my screen right now, and sometimes they get confused on the 2 screens. So hopefully, I can get that question from my colleagues. If not, I will look on the laptop. Thank you, André, for your support. Let's see who else. Okay. I think that this covers all are there any questions coming separately, should we have any other -- there is one -- because I'm a little bit delayed, that's why I apologize if the stream is a little bit delayed. The question about the anchor investors, I answered already to that question. So I hope this kind of concludes the situation. Again, I really want to make a short summary of everything that is happening in the last weeks and months. It is important for you to understand that we are here and we are doing our job to the maximum capacity. Everything that is happening in the market is according to our planning, payment terms, payment conditions, everything is subject to improving. The fact that we have the strongest financial institution in Europe backing us, it's self-explanatory in many cases. And I think that the share price does not reflect our position in the market. That's what I can comment, and I hope that I can see you also in person. I invite you again to the AGM. Some of you we have met in person before last year. I will be there, and we will present also some new achievements in the R&D part. And thank you very much again for your support, and I hope to see you soon in person. Thank you again.