Stratasys Ltd. (SSYS) Earnings Call Transcript & Summary

Hello, and welcome to the Stratasys Q2 2021 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Yonah Lloyd, Chief Communication Officer and Vice President, Investor Relations. Yonah, Please go ahead.

Good morning, everyone, and thank you for joining us to discuss our 2021 second quarter financial results. On the call with us today are our Chief Executive Officer, Dr. Yoav Zeif; and our Chief Financial Officer, Lilach Payorski. I 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 will 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 2020 year, which we filed with the SEC on March 1, 2021. Please also refer to our operating and financial review and prospects for the second quarter of 2021, as well as the press release that announces our earnings for the second quarter of 2021, which were attached as exhibits to 2 separate reports 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 are attached as exhibits to reports 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. Now, I would like to 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 today. Today, I will walk you through the highlights of the second quarter and some recent developments. I will then discuss our ongoing progress to expand our leadership position in the polymer 3D printing market, producing and delivering the most innovative next-generation technologies that address the fastest-growing manufacturing application. Lilach will then provide financial details for the quarter and give an update on our outlook before we take your questions. The second quarter continued to show accelerating growth for our company. The 3D printing industry is moving towards providing full-scale digital manufacturing platforms at mass production levels, rather than being primarily a prototyping tool. Stratasys is at the forefront of this shift with our best-in-class solution for this high-value market opportunity. The company's quarter was highlighted by 25% year-over-year revenue growth, well above our previously shared expectations and driven by growth of 32% in hardware and 39% in consumables, offset by slower growth in our parts business, due primarily to the relatively slow recovery of the aerospace market. While we are pleased to have produced our third consecutive quarter of sustained revenue growth, we know that it is critical to continue to invest in technology, software, materials and talent to further enhance our leadership position and to drive future profitability. Our business momentum and customers' manufacturing operations are nearing full recovery from the pandemic as evidenced by both consumables and services revenues returning to near 2019 levels. We are seeing good reception to 3 recently launched systems, the DentaJet and MediJet, specifically for health care sector and the RPS stereolithography systems that we acquired in Q1. We are also seeing excellent market reaction to our new carbon fiber material for the F123 series. Importantly, we realized year-over-year growth across all of our regions and business line. With notable strength from EMEA and the Americas. During the second quarter, we achieved several important milestones to drive our strategy. As we mentioned on our prior earnings call, we hosted our Manufacturing Experience Event that was attended by over 4,500 customers, resellers and partners. At the event, we provided details on 3 new manufacturing focused product offerings that will play an integral role in our future growth. This includes the Origin One, a best-in-class photopolymer 3D printer that received a top-to-bottom optimization upgrade to improve serviceability, performance and utilization. The H350 powered by selective absorption fusion, or SAF technology, and build for true thermoplastic mass production of consistently accurate end-use parts. And the F770 designed with the longest fully-heated build chamber in FDM, but simple to use as our other popular F123 printers. During the quarter, we also strengthened our health care offerings with the launch of our J5 MediJet medical 3D printer. This printer meets the highest standards in terms of running biocompatible materials and sterilization protocols. It is designed for anatomical models, surgical guide and any production part in a medical environment, such as tooling, it is 510k-approved with leading medical segmentation software and has multi-material capabilities. On the dental side, due to our latest technology expansion, we are now the only company with a full technology portfolio, PolyJet, P3 by Origin and stereolithography that enable us to address and develop the most suitable solutions across the dental industry. This allows us to best match the right solution for each customer type. PolyJet offers multi-materials and mixed tray printing, allowing for different dental parts on the same tray. P3 offers industrial scale and the wide materials system, all while providing better cost per part. And in fact, the J5 DentaJet printer launched in Q1 is already performing very well in the market. This system collectively expand our reach into health care and utilization of 3D printing in the medical and dental communities accelerate. Mass optimization is a key benefit of 3D printing. So it is ideal for providing personalized health care. Given the range of products we are bringing to the market, we view health care as a key growth component of our portfolio going forward. This quarter also saw us make great strides enhancing our ESG initiatives. 3D printing has some inherent sustainability benefits over traditional manufacturing. And during the quarter, we created an ESG leadership team to guide our strategy. We recently became a founding Board member of the Additive Manufacturer Green Trade Association, the leading organization focused on our industry. And in a few weeks, we look forward to announcing more details related to our ESG plans. In software, we expanded our partner program to 6 companies in the first 6 months of 2021, with the addition of Teton Simulation, which uses our new GrabCAD designed for additive manufacturing or DFAM Software Development Kit to help customers improve the reliability of additive manufacturing build. This is another example of how we are using our leadership position in 3D printing to build ecosystems of partners across software, materials and post-processing to provide superior solutions for customers. Our software business has seen great progress over the first half of 2021, and we have started monetizing our offering into paid subscriptions. The first example is GrabCAD Shop, which provides customers with an all-in-one tool that helps teams communicate 3D printing needs, fulfill internal 3D printing work orders and monitor 3D printing job progress. GrabCAD Shop improves over-the-air with regular updates to meet customers' new and growing needs. To-date, GrabCAD Shop is being used by several large customers from around the world, including Schneider Electric, McLaren, Virginia Tech and many more. We will grow our monetization strategy through the sale of annual onetime license subscriptions, which enable customers to connect their Stratasys printer to our third-party partners, such as Siemens, Link3D, Identify3D and others. In May, we launched our Customer Hub, a new digital ordering platform for partners and customers to help make us not only the best, but also the easiest 3D printing company with whom to do business. Over $25 million in orders were placed globally in Q2 with all regions well represented, and we already have over 2,000 new account activations. In addition to giving them a complete dashboard view of their portfolio of Stratasys 3D printers, users find it to be a fast and convenient way to order from us, particularly for FDM and PolyJet materials. With a powerful combination of our next phase of product launches moving ahead and our multiple competitive advantages, we will further advance our position as the leading provider of polymer 3D printing solution for our world-class customer base. I'd like to remind you of those competitive advantages. We have the broadest, most advanced polymer technologies that span the full product life cycle from concept to end-use part. Our customer-centric, dynamic software strategy continue to evolve from the close working relationship we have with many OEMs across the industry. This approach provides a unified, comprehensive platform across our technologies that is built to interface with the top standard enterprise system. Supporting our products, we have the leading global channel with over 200 partners that can market, sell and maintain systems for our customers. We have the largest team of engineers and customer support in our industry, and we have a proven and resilient business model designed to scale across a range of macroeconomic conditions. These key advantages, combined with the new technologies that we launched primarily in the fourth quarter and beyond, positions Stratasys to continue delivering on our growth strategy. Our improved results in the past few quarters demonstrate the renewed strength of the company and that our strategy is on the right track. This is only the beginning of what we believe will be an accelerated pattern of growth in the coming years. I will now turn the call over to Lilach, who will share the financial results of the quarter. Lilach?

Thank you, Yoav, and good morning, everyone. We are pleased to have exceeded our stated targets in the second quarter. The 25% total revenue growth compared to the corresponding quarter of 2020, especially the 35.8% growth in our product sales, along with our positive cash generation support our growing optimism around continuing economic recovery from COVID-19 and our unique position to lead the market. For the quarter, total revenue was $147 million, up 25% versus the prior year quarter and in excess of our previous outlook of mid-teens growth. This was primarily due to stronger-than-expected performance in Europe, a substantive increase in our consumables sales to almost pre-COVID level, our customer support revenues exceeding 2019, and the successful launch of the RPS resin-based systems. Customer reception to RPS has been solid, demonstrates our ability to leverage our go-to-market access to customer that helps to accelerate sales. On a constant currency basis, total revenue grew 22.4% versus the second quarter of 2020. Product revenue grew almost 36% in the second quarter to $100.3 million compared to the same period last year or 32.6% on a constant currency basis. Within product revenue, system revenue grew 32% to $45.6 million compared to the same period last year, and increased 29.2% on a constant currency basis. This growth was bolstered by the introduction of the new system we discussed earlier, including RPS and the new healthcare printer. The rate of growth clearly demonstrates that the end market recovery is well underway compared to the corresponding quarter of 2020, which were fully impacted by the pandemic. The quarter also saw improved consumable utilization, showing strength after the COVID slowdown. Consumable revenue rose 39.1% to $54.7 million compared to the same period last year and was up 35.5% on a constant currency basis. Relatively to the 2019 quarter, consumable improved to the point of being off only 3.4%, showing a nearly complete reversal of the impact of the pandemic as our customers increased utilization of our systems. You may recall that earlier this year, we announced the launch of our carbon fiber material for the F123 series. We believe it is the best of its kind in the market, providing the benefits of both strength and more geometric freedom while staying lightweight. The materials continues to perform well and importantly, it has also been a meaningful catalyst for sales of our F370 system. Service revenue was $46.7 million, up 6.8% compared to the same period last year. On a constant currency basis, service revenue grew 5.3%. Within service revenue, customer support revenue increased 10% to $28.3 million, an increase of 8.2% on a constant currency basis and up 1.4% compared to Q2 of 2019, which was pre-COVID, another good indication of market recovery and increased system utilization. Turning to margin. GAAP gross margin was 43% for the quarter compared to 37.2% for the same period last year. Non-GAAP gross margin was 47.5% for the quarter compared to 45.4% for the same period last year. Given the increase in hardware and consumable growth, overall sales margin benefited from the change of mix. This was partially offset by an increased global cost pressures that included logistics and raw materials inflation, which were both more costly this quarter than Q1 and ramp up production costs for new product introductions. At this point, it looks like these issues will continue to be a negative impact for the back half of this year. Due to the ongoing uncertainty of these macro issues, along with the introduction in the second half of new systems and anticipated associate upfront margin pressure, we expect gross margin for the balance of the year to remain similar to what we saw in Q2. GAAP operating expenses were $86 million, an increase of $13 million or 17.8% compared to the same period last year. Non-GAAP operating expenses were $72.5 million, an increase of $11 million or 18% for the quarter as compared to the same period last year. Non-GAAP operating expenses were 49.3% of revenue for the quarter compared to 52.2% for the same period last year. Operating expenses were up primarily due to the return to a 5 days' work week, post-COVID expenses as the market started opening up and commission due to more revenue. We also incurred additional operating costs associated with the inclusion of our new acquisition. These costs were funded by the resizing plan implemented in May 2020, which allowed us to allocate resources to area where we believe we will generate stronger growth. From an earning perspective, GAAP operating loss for the quarter was $22.7 million compared to a loss of $29.3 million for the same period last year. Non-GAAP operating loss for the quarter was $2.6 million compared to a loss of $8.1 million for the same period last year. GAAP net loss for the quarter was $20.2 million or $0.31 per diluted share compared to net loss of $28 million or $0.51 per diluted share for the same period last year. Non-GAAP net loss for the quarter was $1.6 million or $0.02 per diluted share compared to net loss of $7.4 million or $0.13 per diluted shares in the same period last year. We produced cash of $5.6 million from operations during the second quarter as compared to using $9.7 million of cash in the same quarter last year. This total $52.1 million generated in the last 3 quarter, an excellent achievement despite the impact of the pandemic. We are pleased to have generated this level of cash flow given our second half plan to continue investing to accelerate the growth of our business. We ended the quarter with $522.7 million in cash and cash equivalent and short term deposits compared to $530.4 million at the end of the first quarter of 2021. Beyond the strategic investments, we have recently made to help expand our product portfolio, we continue to evaluate additional opportunity that will further strengthen our leadership position as we execute on our strategic initiatives. Now turning to our outlook for the balance of the year. As we previously stated, the revenue growth will be sequentially linear. We expect Q3 to be approximately 17% to 18% higher than Q3 of last year and Q4 will be sequentially higher. We continue to expect our OpEx for all of 2021 to be approximately $30 million higher than 2020 due primarily to return to a 5 days' work week and operating cost as the markets are gradually opening post-COVID. We continue to expect our capital expenditure for all of 2021 to range between $24 million to $30 million. We have a strong balance sheet that will support our ongoing growth, both internally through strategic investments in high-growth area of our business that focus on manufacturing, and externally, when additional growth opportunities emerge. In the coming year, as the 3D printing industry expands and shift to mass production from prototyping, we are committed to not only maintain our leadership position, but to grow it. With that, let me turn the call back over to Yoav for closing remarks. Yoav?

The second quarter was an exciting one for Stratasys as we saw growth across all platforms accelerate. We expect that our existing market-leading offerings and our new platforms that we'll begin to ship in the fourth quarter will provide incremental growth that should contribute to revenues, cash flow and earnings in the coming years. The order pipeline for this new system is solid, and we look forward to updating you further after the launch. We are executing on our strategy to enhance our leadership position in polymer 3D printing. And with our strengthened balance sheet, we are in the position to create long term value for all of our stakeholders. With that, let's open it up for questions. Operator?

[Operator Instructions] Our first question today is coming from Shannon Cross from Cross Research.

I wanted to dig a little bit more into what appears to be somewhat of an inflection point and in, clearly, your revenue growth or revenue trajectory. But also, I'm curious, from an industry perspective, if you could talk a bit more about what you're hearing from your customers about why they're buying the products, what they're looking at using the product for? And essentially, I'm trying to understand how much of the growth is sustainable past the rebound following COVID. So anything you can provide to us would be helpful.

Great question, because we are definitely at an inflection point for the entire industry. And we benefit from this inflection point, because we are the leader in polymer 3D printing, but we also work very hard to make sure that we are supporting it and delivering the expectations of our customers. So in a nutshell, no better recent year to be honest, a lot of hard work to deliver constant growth by addressing the customers' needs, it sounds like cliche, but it is what it is. And it's all about delivering the best parts, good economics, reliability, all within a package of material and software and service that support the work flow in manufacturing and can really be something that the customer can lean on in terms of adopting 3D printing. And this is what we are doing day after day and it's a journey, but I'm happy to say that we see the start of getting there. And those manufacturers, our customers, this huge installed base that we have, the leading companies in the world, they are updating their factories plan. They are updating their -- I would say, the vision that they have. Each one of them has a specific team that looks at the plant of the future and 3D printing is part of it. 3D printing is definitely part of it in the long term, and we are there, and we'll keep supporting them.

And I guess, how has the conversations changed maybe in the last 3 to 6 months as you've been talking to customers, because again it seems as if, like you said, this is sort of an inflection point for the industry. Or do you think this is something that's been building for quite a long period of time, and it's just starting to happen now?

I would say that there are 2 underlying forces here. One is that the COVID, as we said in many earnings calls over the last year, opened the eyes of leading manufacturer to the benefit of 3D printing supply chain. So instead of having a distributed supply chain, let's have digital inventories, let's shift from long lines of manufacturing and production into a file and a machine, which is supported by a whole system, what we are providing. That's very strong force that we are -- it's a different level of engagement. And the second force is what we are doing here within Stratasys, so we are working on addressing those needs. So we have this benefit of having the direct interaction with our customers. And we are tailoring what we are doing. So we have a great example with GM and TE Connectivity, and we are leveraging our relationship to tailor our solution that has to be a manufacturing grade. So we have material. We have software. Software is critical in manufacturing. We have service. And as I said in the beginning, no bells and whistles here, a lot of hard work to make sure that we are coming with manufacturing grade solutions.

[Operator Instructions] Our next question is coming from Wamsi Mohan from Bank of America.

In your press release, you say longer term, the company continues to expect significant leverage, benefits from its investments as revenue growth should start to accelerate in 2022 and beyond. And I was curious, what is your baseline of -- for which you're saying acceleration? Clearly, 2021 has got -- you're showing very strong growth in this past quarter, you're projecting quite strong growth even for the next quarter, but it's coming off of a very tough year. So when you're speaking about acceleration in '22, how should investors think about the magnitude of revenue growth or what is the relative base over which you're expecting to accelerate? And I have a follow-up.

Thank you, Wamsi. I would say, technically -- and I'll let Lilach add some comments after it. Technically, we are looking at 2 time horizons. So we need to be better than last year. Let's not forget, COVID is still here, okay? But we are doing well on this front. And we need to make sure that we are improving against 2019. And that's also what you see in our script. So it's very clear what's the baseline, where we need to improve. But this is technical. What is more important and more meaningful is what are those catalysts that will take us forward that we can say that we feel comfortable with continuously showing growth and accelerate it going forward. And in one word, it's manufacturing. We have very clear strategy. We stick to the strategy. We added 3 new technologies this year. Stratasys is no more a company of 2 technologies. We are a company of 5 technologies. And we make sure that in each one of those technologies, we have -- I don't want to be -- to here too arrogant, but we have the best solutions. In terms of the print quality, it's manufacturing, we need to deliver the path that delivers the expectation of the manufacturer. We add 3 new technologies. We'll start introducing them in Q4. And then 2022 will be the first year where we have really full coverage of every problem that any manufacturer of polymers can have. So we are not coming with one or 2. We are coming to solve the problems of our customers. And that makes us feel very comfortable in terms of the top line next year, because we are coming and leveraging -- coming with 3 new technologies and leverage what we have. We have the infrastructure, we have the network, we have the software system, we have the material, and now we just push 3 more technologies into the market.

Wamsi, do you want me to -- so from -- also from a timing perspective, I would like to remind you that we are actually come in with 3 new technologies and 2 of them actually in the second part of the year, most of the Q4 this year. So we are expecting to see a meaningful growth and the full impact of this -- adding this new technology during 2022. And this is the main accelerator factor for us.

And if I could follow-up, I think you were very clear on, sort of, gross margin impact and cost pressures continuing to persist, and Yoav, you just said that COVID is still here. Is there a revenue headwind that you're factoring in as well in your guidance here in next quarter and beyond that -- that could be coming because of component issues or supply chain issues outside of cost, but more from a demand or a revenue standpoint?

So, we are always managing the day-to-day. And the day-to-day is also delivering products every day and developing products every day. We have a solid pipeline as we wrote. We have a very solid pipeline for the new technologies. We manage the supply chain on a daily basis. We restructured our S&OP process to make sure that we are on top of the issues. We gave our operations high degrees of freedom to increase inventories. Every company in our sector and in high-tech are facing the same issues. Currently, it seems that we are on top of the challenges, but definitely, there is uncertainty. And I let -- and yes, it looks good. I cannot say that it doesn't exist out there. It's a daily struggle.

Our next question is coming from Brian Drab from William Blair.

So obviously, the revenue growth is improving and things are recovering. My question is, how expensive is this growth going to be longer term? You mentioned in the prepared remarks, leverage on costs going forward. But if you look historically over the last many years, OpEx has averaged about 50% of sales. It looks like it will be about that this year. What sort of targets do you have in mind, even just roughly for where do you -- where you think OpEx can be as a percentage of sales, because I think you -- a lot of capital equipment type company, similar companies would be in the 25% range, and it's been elevated for a long time here.

So at this stage, we are not providing specific long term guidance. But as we discussed previously, regarding our scale, we do anticipate to leverage significantly our scale position. We have the broadest infrastructure from a go-to-market perspective and corporate to address 3 new technology on top of the 2 ones that we have. So practically, we'll have 5 technologies on the same infrastructure. It's true that in 2021, you don't see that leverage that much. I would like to remind you that we are still in a COVID related year, right? And we increased cost coming back in the organization to 5 days' work week and we had 2 acquisitions. But definitely, when we look at the horizon in the future, we have anticipated significantly accelerated growth in revenue and be able to leverage the infrastructure without adding meaningful -- additional cost to our cost base. At that point, I cannot specifically share the specific percentage, but definitely, this is the direction.

Maybe I'll just add. In general, we resized the company last year to make sure that we are releasing resources to invest in our growth. And that's exactly what we are doing. We are in an investment mode. Long term, we are leveraging our scale. We are -- our intent is not to deliver only on the top line growth, but also gradually to improve profitability. It's very clear. We know exactly what we are doing, and we are leveraging what we have. And we have a great company and great people here.

And I just need to follow-up on Wamsi's question, because every analyst, buy-side and sell-side is going to be looking for clues to what's happening in 2022. And you gave guidance for this year that for sequential growth that is going to lead us to model somewhere in the range of 12% to 14% year-over-year growth in 2021. And then in your -- in the opening of your press release, you say that you'll accelerate revenue growth in 2022. And just by definition, I mean, the faster growth rate. But what you answered Wamsi with was -- led me to believe that you're not necessarily saying that 2022 revenue growth will be greater than 2021. Is that -- are you not forecasting faster growth in 2022 than '21?

Brian, we're actually not providing guidance for 2022, right now, but the growth will come. We know what are the drivers for the growth. As I mentioned to Wamsi, we are introducing 2 new technology in the second part of the Q4. So we are planning to see meaningful growth coming for these 2 technology in 2022. We believe the growth will come and in the right time we will also going to share the specific expectations for the growth rate.

Our next question today is coming from Noelle Dilts from Stifel.

I was hoping you could just, kind of, give us an update, one, on how you view the -- so far, how things are progressing with the recent acquisitions -- Origin and RPS. And generally, who that's compared to your initial expectations? And then also, if you could just comment on how you're thinking about M&A moving forward and what you're seeing in terms of opportunities in the market and valuation. If there's been any change relative to last quarter?

It's going well. It's going well. We have acquired really good companies with leading technologies -- I would say, disruptive technologies in terms of their specific areas. So you look at Origin and their DLP solution, it's a completely different DLP solution than any other in the market -- completely different. Origin is on track. RPS is better than originally we thought for Q2, so we are doing better than we expected. And M&A, as I said in many other calls before, it's all about accelerating our strategy. We are becoming more attractive for startups and for some established company because we have the infrastructure. This becoming the -- to many of the leading and most innovative and disruptive companies out there in our industry, the one thing that they are missing is this infrastructure, and we can provide this infrastructure. And that's why we had a win-win situation with Origin, and they joined us. And today, they are a part of Stratasys. It's an integral part of Stratasys. We are on track, and we would introduce a completely new upgraded better machine in Q4.

And then a couple of somewhat related questions here. So first, just given the number of technology upgrades and new product introductions you've had this year, we didn't have RAPID or Formnext last year, how important are these events moving back to live events going to be for you in terms of getting folks comfortable with these products? And second, you've obviously, again, had a lot of introductions this year. How should we think about, kind of, the pace of technological and new product rollouts as we move into next year?

So we are engaging with our customers. By the way, I'm very excited -- really, it's exciting to engage again live with our customers currently in the U.S. for a long time, and I started meeting customers face-to-face, which is really exciting. I wouldn't say back to normality, but it's exciting, and we are going to participate in RAPID and in Formnext to introduce our whole package, as I call it, because we have 5 technologies supported by ecosystem of software and material, and we are going to introduce it. Having said that, we didn't stop interacting and engaging with our customers. All the time, we found different alternative solutions. So we have a track that is going all over the U.S. We were the first one to do it. And we have -- in some cases, in one location, we have more than 100 leads of specific engineers, because they are coming to the parking lots to see our truck and our new solutions and it works, and it works well. Another alternative that we doubled down on it was the whole digital interaction and engaging with webinar. It works really well. So I can say -- we are not sharing those numbers, but we have better pipeline. And so we found the alternatives. We found the alternatives. And I want just to be clear, we're talking about the new technologies that we are doing well with the current technologies as well. So the current technologies are growing. We are innovating with what we have, because no one has better FDM or better PolyJet material jetting than us. We have new systems in PolyJet. I just mentioned it, the MediJet and the DentaJet, which targeted very lucrative market. We have a fantastic, unique new machines below 100K in the FDM space, the F770, and all of them are doing better than expectations. Yes, we put all our effort on the new technologies to make sure we have solutions instead of just technologies, but also all existing technologies, we keep innovating, and we're doing well on them.

Our next question today is coming from Paul Chung from JPMorgan.

So for the Origin, just a follow-up on the Origin. You mentioned, kind of, incremental $200 million over 5 years for this product when you acquired it. I know it's ramping in Q4, and it's early. But kind of based on initial customer feedback, have your views changed at all since you acquired the asset either in magnitude or, kind of, time line of how that ramps? And what are your expectations for margins on the product and for the system and consumables there? And I have a follow-up.