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

Everyone. I'm Mark Abraham, CEO of Shape Robotics and I would like to welcome you for our presentation of Shape Robotics interim report for the first quarter of 2025. We are excited to share with you our strong start to the year. Some key takeaways and the financial highlights. We had an exceptional start for the year 2025, building on the momentum from a record Q4 last year. In quarter 1, we achieved our best last 12 months' result in the history of Shape Robotics, including a revenue of DKK 337 million. Key takeaways from this quarter include a 100% increase in revenue of DKK 70 million in Q1. Out of this DKK 70 million, DKK 50 million comes out of services revenue, a high contribution margin of 34% and EBITDA of DKK 10 million. We have also achieved a positive cash flow from our combined operating and investing activities, and we are proud to be named in top 30 edu tech companies worldwide. Our growth has been driven by continued expansion in Romania and the increasing adoption of our Techducator concept. The Thinken order secured under our Lenovo 3PO partnership and our solid start to the year position us well to achieve our full year guidance. Now let's dwell deeper into our quarter 1 financial highlights. The revenue, we have reached DKK 70 million, a 100% year-over-year increase. This growth was primarily driven by our expanding operation in Romania, especially to the SmartLab project and sales of services related to new Techducator concept. Comparing quarter 1 revenue '25 to quarter 1 '24, we see an increase from DKK 34.9 million to DKK 69.8 million. Our last 12 months revenue now stands at an impressive DKK 336.7 million. Our contribution margin increased by 211% year-over-year to DKK 24 million. This gives us a strong contribution margin ratio of 34%. High-margin service revenue are the future for our company, which represent now 29% of the total revenue. The quarter 1, 2025 contribution margin of DKK 23.5 million is a significant jump from DKK 7.6 million in the same period of last year. Our last 12 months' contribution margin is also DKK 113.8 million. Looking at the adjusted EBITDA, we have an increase of 250% year-over-year to DKK 10 million. Important, no nonrecurring costs were recognized to adjust this quarter's EBITDA. This was driven by revenue growth, contribution margin and cost optimization activities. Now looking strictly at quarter 1 2025, the adjusted EBITDA was DKK 10.4 million compared to a negative DKK 7 million of last year. But the most important is looking at the last 12 months' adjusted EBITDA, we have a strong DKK 42.2. Now looking at the financial guidance of 2025. Looking ahead, we are confident in our 2025 guidance. We project reported revenue growth of 20% to 35%, targeting between DKK 360 million to DKK 410 million, but our actual Q1 shows a growth of 100%, DKK 69.8 million, puts us exactly on the trajectory explained before. We expect an adjusted EBITDA margin of at least 10%, translating to a minimum of DKK 36 million to DKK 41 million. Quarter 1 was actually 15%, way above target. Our EBITDA margin is guided to be a minimum of 8% or at least DKK 29 million to DKK 33 million. Q1 was actually 15%. Our general assumption for this guidance include Poland becoming a significant revenue contributor, securing financing to enable continued ambitious growth, maintaining a contribution margin in the range of 29% to 32%, 33% and decreasing operational costs in relation to revenue compared to the year 2024. Now let's look at some exciting business updates. In quarter 1, we received the first order of at least 50 Thinken valued at EUR 1.5 million through our Lenovo 3PO partnership. This opens a completely new avenue for distribution and growth for our company. Also, we have announced last year a cost-cutting program started in fiscal year '24 that already is showing very positive results on cash flow and operating expenses. We expect a run rate saving of minimum DKK 12 million to the full year '25. Post quarter 1 developments include: first, a new pilot agreement in Vietnam with the Department of Education in Hanoi meant to equip 20 public schools with our Thinken Mobile inclusive STEAM lab solution. We also are targeting a new partnership in the Middle East with Adowa Alshamel a leading technological retail company based in Riyadh, targeting the huge potential of Kingdom of Saudi Arabia. Revenue composition. Let's look at the revenue composition for quarter 1 2025, divided between services with a high margin, about 21% of our revenue; STEAM solution 61% and Fable Robots, 11%. The others have decreased to 7%. Key points on quarter 1 2025. Our Techducator service revenue reached DKK 14.5 million, which is a 21% total of the revenue. Sales of Fable also increased in quarter 1 2025 with 2% from quarter 1 2024. We also saw significant deliveries to SmartLab equipment in Romania. This in total made us achieve a contribution margin of 34%. Now comparing this quarter to last year. Fable Robots were only 2% last year, STEAM Solutions 70% and services was not even there. Other category was close to 28%. So the contribution margin in first quarter of 2024 was only 22%. If we are to look in a comparison to the last year 2024, the Techducator services were only 7% of the revenue at DKK 22.6 million, Fable Robots were 8%, steam solutions 70% and others to 15%. 12.5% of revenue in the first year 2024 came from outside Romania and was a contribution margin of 32%. Looking at the financial position. Our solid financial performance in quarter 1 and increase in net working capital and comprehensive financing from UniCredit Bank reflect our ability to support expected revenue growth with improved profitability in the year 2025. The net working capital stood at DKK 190 million as of March 2025, up from DKK 89 million last year. We are on track for our expected revenue growth of 20% to 35% for the year 2025 with improved EBITDA profitability. And we also have secured a comprehensive financing and banking facility from UniCredit like it was announced at the end of last year. Our announced cost-cutting program is also progressing very well with an initial positive effect seen in quarter 1 cash flow. We expect a run rate saving to meet our exceeded and communicated guidance between DKK 12 million and DKK 15 million for the full year '25. We also remain committed to ongoing working capital optimization. Now let's look at the investment highlights. Summarizing, we provide intelligent classroom solutions and outstanding educational ecosystems, having equipped more than 2,000 schools with our products. Our Fable Robot is the most famous modular educational robot with more than 25,000 units sold worldwide. We are continuously developing products to scale our business, including a new AI solution, and we have a strong partnership with world-renowned brands, including Lenovo's third-party operator. Our strong growth journey is fueled by 3 cross-border acquisitions in Poland, Romania and of course, the opening of our greenfield company, Shape Robotics Moldova. We operate in a worldwide market with a high demand on educational product and a EUR 13 billion budget estimated from the EU for digitalization of schools and learning and education by the year 2027. To conclude, looking at the investor information, please bear in mind the financial calendar. Our interim report for quarter 2, 2025 will be released on August 27. And the interim report for quarter 3 2025 is scheduled for November 21. As usual, as custom for us, I will also want to invite you to a live streaming Q&A session that I will be hosting on LinkedIn on May 29, starting 5 p.m. I'll be answering questions about quarter 1 interim report, and you can access the session directly on the company's LinkedIn page. Now thank you for your time and attention. We are very optimistic about the future of Shape Robotics as we continue to broaden our impact on global stage.