Shapeways Holdings, Inc.
Q3 2021 Earnings Call Transcript

Published: 15 Nov 2021

[Company Representatives:]

Greg Kress - Chief Executive Officer Jennifer Walsh - Chief Financial Officer Miko Levy - Chief Revenue Officer

[Operator:]

Greetings, and welcome to Shapeways Third Quarter 2021 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. As a reminder, this conference is being recorded. Joining us on the call are Greg Kress, Chief Executive Officer and Jennifer Walsh, Chief Financial Officer. Before we get started, I'd like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of Federal Securities Laws which are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call are not statements of historical fact, should be deemed to be forward-looking statements. Our forward-looking statements, including without limitation statements regarding our business strategy, future financial and operating performance, projected financial results for calendar year 2021, expected growth and market opportunity are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, please see the company's SEC filings, including the company's periodic report on Form 10-Q for the quarter ended September 30, 2021. Information provided in this conference call speaks only to the broadcast today, November 15, 2021. Shapeways disclaims any 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's a reconciliation schedule showing the GAAP versus non-GAAP results currently available in our press release issued after market closed today, which can be found on our website at www.shapeways.com. On the call today are Greg Kress, Chief Executive Officer; Jennifer Walsh, Chief Financial and also available for Q&A is Miko Levy, Chief Revenue Officer. And now, I'd like to turn the call over to Greg. Greg.

[Greg Kress:]

Good afternoon, everyone. Thank you for joining us for our first earnings call as a Publicly Traded Company since completing our business combination with Galileo Acquisition Corp. on September 29. With the closing of that business combination, we have strengthened our balance sheet and our liquidity position. We have also set the stage for accelerated growth in the years to come as we expand our additive manufacturing capabilities, further broaden our go-to-market strategy beyond our self-service capabilities today, increase our customer share of wallet by offering traditional manufacturing capabilities and offer our software as a service. Since many of you might be new to Shapeways, before we turn to discussing our recent highlights, financial results and outlook, I'd like to spend some time discussing the Shapeways platform, our business model and growth strategy. Jennifer our CFO will then discuss the third quarter results and outlook for the remainder of the year. Shapeways was built from the ground up in order to fully digitize the end-to-end manufacturing process, giving up the ability to deliver high quality, low volume manufacturing at compelling economic. The digital transformation of the manufacturing industry is still in its infancy and Shapeways is well positioned to both participate in and contribute to its growth. We believe that the additive manufacturing industry is approaching an inflection point as it moves from prototyping parts and tooling to production at scale, which we expect will unlock broad adoption and drive growth over the next decade. According to industry reports, the digital manufacturing market is expected to grow from approximately $39 billion to over $120 billion over the next 10 years, representing a 12% compounded growth, annual growth rate. Shapeways is helping to overcome many of the challenges that have hindered digital manufacturing adoption rates to-date, such a high capital costs and investments needed to launch new manufacturing technologies and material, the ability to efficiently manufacture highly complex low volume production at scale, and overall digitization of the end-to-end manufacturing process. We are doing this through our proprietary software platform that we have developed over the last 10 years. The platform is our true differentiator. It will allow Shapeways to achieve higher gross margins than we would typically produce in this space. We can do that because we fully digitized the end-to-end manufacturing process. This approach is what creates a lot of efficiency to manufacture low volume, highly complex production at scale. Shapeways makes industrial grade additive manufacturing accessible. We provide a broad range of manufacturing solutions to our customers utilizing 11 additive technologies and more than 90 materials and finishes, with the ability to scale new innovation. While Shapeways does not make any physical printers on raw materials, we partner with the hardware OEMs and the material companies to enable adoption of those capabilities to the market. Our manufacturing platform is agnostic to the hardware technologies and materials, which allows us to quickly adapt to market shifts and customer needs. We support our customers through both internal manufacturing capabilities and external network and supply team capabilities, all managed by our proprietary software platform. We have two manufacturing facilities, one in the U.S. and the other in the Netherlands, and we’re further supported by over a – our 50 strategic supply chain partners, who focus on overflow capacity and helps us meet peak demands and supports us in efficiently launching new materials and technologies. Our long term strategic growth plan is focused on four key areas. First, is expanding our hardware and material capabilities that we offer through our manufacturing services. Our customers use our platform to seamlessly order and configure their items. Shapeways software then manages the complex workflow through every step of the manufacturing process, providing efficiency and maximizing profitability. Adding manufacturing scale and capabilities including though potential acquisitions is an important part of our growth strategy. Second, is new market expansion. Shapeways has historically been a self-service business, and we have a large and loyal customer base. However, we see a tremendous opportunity for us to build out our go-to-market strategy. We will accomplish this through an alignment of our sales strategy with hardware printer OEMs and material OEMs, and broadening our business development efforts to the middle-market and enterprise customers. Third, we see the opportunity to expand our manufacturing capabilities beyond additive, to more traditional manufacturing processes such as CMC, injection molding and sheet metal. Additive manufacturing is a small component of the overall digital manufacturing market. By expanding our manufacturing capability to include more traditional manufacturing processes, we can leverage our software and our supply chain capabilities to capture more share of wallet from our customers and increase our market penetration. Importantly, we will not make those manufacturing investments internally, but we will leverage the supply chain to execute on that. The fourth element of our growth strategy is software as a service. As I said, the platform that we built is our differentiating factor. We are beginning to offer that software to manufacturers to reap the same types of benefits that we enjoy, including efficiency and better economic. Over the last 12 months we've launched this software to specific design partners to gain feedback on the product market fit, pricing and optimal use cases. We recently launched the first phase of our software, more broadly to the public market under the brand Otto. The target customer for this initial launch are small and midsized traditional manufacturing businesses, that who are never going to be able to make the investment to fully digitize their platform, and can leverage Shapeways software offering as an off-the-shelf solution. Now, turning the reason highlights. As noted in our earnings press release, the timing of the completion of our merger impacted our ability to invest in these growth initiatives, which in turn have delayed the start of our revenue ramp we expected in the third quarter and full year 2021. Additionally, COVID continues to cause shortages in labor, materials and equipment, both in the U.S. and abroad, all of which combined impacted our financial results. Even with these challenges year-to-date, we generated 10% increase in revenues to $25.4 million as our existing customer base remains strong. As we evolve our go-to-market strategy, our third quarter revenues declined 5%, but we saw a benefit is our gross margin as we go 180 basis points for the same period in 2020. As a result in the shift of expected timing of our revenue ramp associated with the deferred growth investment, we are updating our outlook for 2021 and expect there to be additional shift next year as these investments will take time to ramp. I want to highlight that while the tightening of expectations have shifted, our conviction is not. We have exciting opportunities ahead of us as we add the manufacturing capacity, capture more share of wallet with additional hardware and material offering and grow our proprietary software platform, and we believe we have now set the stage for a multi-year period growth. I’m pleased that since the closing, that we have already taken a number of tangible steps to pursue that strategy. In mid-October we publicly released the first phase of our software offerings under the new brand Otto. We believe that this will contribute to the transformation of manufacturing for current and new customers by making it incredibly easy and fast to adopt a digital end-to-end process without requiring major capital expenditures or different software tools to navigate the transition to digital manufacturing. Otto’s intuitive front end simplifies initial digital file upload, product configuration, file analysis and optimization with instant auto correction for efficient manufacturing ability. Traditional manufacturers also can leverage the strength of Otto by deploying it as a white label solution to expand current production capabilities with the addition of on-demand 3D printing fulfilled by Shapeways. This is our first step in a broader software strategy and we’ll look forward to providing updates over time. Last week we announced our landmark partnership with Desktop Metal to offer manufacturing and engineering team’s unprecedented flexibility and seamless access to industry leading 3D printing services. Consistent with the strategic partnership that we had entered into in early 2021, we are expanding our Desktop Metal system capacity and capabilities by providing customers access to these solutions at our ISO-9001 manufacturing facilities in both Long Island City, New York and Eindhoven in the Netherlands. In addition, Desktop Metal plans to leverage Shapeways manufacturing capabilities and purposable software platform Otto to provide its customers with instant access to fully digitized end-to-end 3D printing workflows. On the business development side, we continue to focus on our middle market and enterprise opportunities. In September we brought on a new sales leader and started to build out our business development and sales team. While we understand it will take, we are already building our pipeline. In particular, we have an opportunity to utilize our technology to accelerate the adoption in key markets, including the industrial, medical, automotive and aerospace segments. The closing time set for these orders are longer than our typical inbound sales and we expect to begin seeing results from these efforts as we move through 2022. In terms of our core cohort of customers, we have continued to see a fairly consistent contribution. Approximately 88% of our revenue comes from repeat customers, many which meaningfully increase their orders over time, which demonstrate both he loyalty of our customers and the growth opportunity. From a governance perspective we strengthened our board with the appointment of a new Independent Director, Leslie Campbell, who has more than 30 years of multi-disciplinary experience in technology, finance, software and information service industries. We look forward to her insights and contribution. As we look forward, we believe there are multiple growth opportunities for Shapeways platform. We are positioned to scale across material, markets, technologies and through our offering of software as a service. We believe Shapeways is well positioned as customers turn to digital manufacturing for quick turn, part production and to mitigate increasingly common supply chain disruptions. We know how to add and optimize new manufacturing technologies as we have demonstrated in the past. Furthermore, with the closing of our transaction, we have a balance sheet and liquidity position to invest and execute on the team and technology to scale and fuel our growth. We will most likely utilize tick-in complementary strategic acquisitions that will not only add capacity and manufacturing capabilities, but will increase our customer base with the already installed base. We believe this approach will allow us to accelerate growth over time. Over the years, we have developed many relationships and as appropriate we will work to execute on those new acquisition. We have a road map that we believe will help us accelerate our pipeline, develop new initiatives and deliver the innovative and high quality solutions our customers have come to expect over the last 10 years. Finally, I want to offer my gratitude to the enter Shapeways team, our investors and all of our stakeholders. This is an exciting time in Shapeways evolution and we will not be here today, where it not be for the unwavering dedication and hard work of everyone involved. Jennifer will now discuss our financial results in more detail.

[Jennifer Walsh:]

Thanks, Greg. I'll start with a recap of the quarter and year-to-date performance, provide an update on our balance sheet position and give an update to our guidance for the year. Year-to-date we have delivered a 10% increase in revenue to $25.4 million as we saw strong contributions from our existing customers. In the third quarter we experienced a 5% revenue decline from the prior year to $7.7 million, primarily due to an ongoing strategy to evolve our go-to-market approach, and an increased focus on our more profitable enterprise customers. Direct sales where Shapeways provides additive manufacturing services directly to the customer who selects the model specification accounted for approximately 78% of revenue or $6 million in the third quarter, and was in-line with last year's results. Offsetting this was revenue from market place sales, where we provide a platform for shop owners to sell their products to their customers, utilizing the Shapeways e-commerce website. That accounted for 22% of revenues or $1.7 million down from $2.1 million in the prior year. Since revenue includes a more historic customer base with lower economics, our target customer base and new customer acquisition was not able to fully offset this decline. However, the benefit of this shift is evident in our gross profit margin, which expanded by 180 basis points year-over-year to 47.5%, resulting gross profit dollars in line with last year's third quarter at $3.7 million. Our third quarter adjusted EBITDA was a loss of $2.4 million compared to a loss of $0.3 million last year. This year's results include additional marking spend to drive growth, higher personnel and corporate expenses to drive growth and an increase in audit and other spending related to becoming a publicly traded company. SG&A expenses for the quarter were $4.4 million compared to $2.5 million in the prior year. Turning now to our balance sheet, as of September 30, our cash and cash equivalents totaled $90.3 million, reflecting the proceeds from the closing of our business combination. The strength of our balance sheet positions us to fund increased investments toward our strategic growth initiatives over the remainder of 2021 and in the years ahead. As we wrap up the final quarter of the year, we are focused on executing on the strategic growth initiatives that Greg discussed earlier on this call. Taking into account the results achieved to-date, along with our revised outlook for the fourth quarter, we anticipate full year 2021 revenue to be in the range of $32.5 million to $33.5 million. We remain confident that our results will improve over the longer term as we realize the results of our planned investments in additional additive manufacturing capabilities, additional business development resources, supporting our customers with traditional manufacturing technologies and rolling out additional phases of our Otto software product. This completes our prepared remarks. We will now open the call for questions. Operator.

[Operator:]

. Our first question today comes from Jim Ricchiuti with Needham.

[Jim Ricchiuti:]

Hi! Good afternoon. A couple questions just with respect to the implied guidance for Q4. If we look at the low end of the range, you're showing a sequential decline from Q3. It looks like maybe in the high teens, and I'm wondering is there some seasonality at work in Q4? Are there other factors including what you were just alluding to, the de-emphasis of some of these lower margin marketplace business, and I have a couple of others.

[Greg Kress:]

Hey Jim! Thanks for the question. So one, typically Shapeways does have seasonality in its fourth quarter and we typically do see a bump from some of those more historic customers that we see, that have shops on our marketplace. Now with that being said, one of the things that we’ve seen over Q3 is that customers or some of those more historic customers inside Shapeways have actually been struggling with, even the increased ramp of COVID that we saw over the summer and so what we're doing is we're looking at the assumptions that are in our cohort model and using those assumptions around purchase frequency, retention and AOV to go and predict basically what Q4 could look like, and that's where you start to see some of that lower range that we're providing to you, that Jennifer had spoken to.

[Jim Ricchiuti:]

And then if we think of that gross margins, if we're down or around the lower end or even the mid-point, talk to us a little bit about how we should think about gross margins, because it also seems like this mix shift is helping you to maintain your gross margins, even at these lower levels of revenues.

[Greg Kress:]

Yes, that's correct. I think the one thing to keep in mind is since the closing of the transaction, we have been starting to kick off the CapEx investments for a lot of our ads and manufacturing expansion. And so you know obviously the transaction was delayed and so we weren’t able to make those CapEx purchases until the beginning of the fourth quarter, but we've already gone off to the races. We started to deploy some of those assets already in our Long Island City facility and our Eindhoven facility and those will come with lower volume at first, and we have lower gross margins associated with that, those machines as well. And so that’s a, we’ll see gross margin improvement over time. But typically when we launch new technologies you'll see a little bit of pressure on gross margin at first and then you'll see it built. So I would – one thing that we're looking at and what we are modeling is you know continued pressure on top line and then also applying some pressure on gross margin as well, so that we can take into consideration some of the investments that we're making a new CapEx.

[Jim Ricchiuti:]

Got it. Last question for me and I'll jump back in the queue. The SG&A line probably doesn't fully factor the expense you're incurring now as a public company, including the professional expenses associated with that. So I’m wondering how we might think of that, the potential uptick in some of that G&A expense as we layer in these costs?

[Greg Kress:]

Yeah, that's a great question. Jennifer, do you want to speak to that?

[Jennifer Walsh:]

Sure. So thanks for the question. When we met with you many months ago, we said that our financial did not include the cost of being public and we're starting to see those come through in Q4 and forecast those in ’22, so we're still getting a more precise number on that and you'll see that in the coming months as we roll out ’22. But we're expecting you know like any public publicly traded company several million dollars of costs related to being publicly traded.

[Jim Ricchiuti:]

Got it. Thanks a lot.

[Operator:]

Our next question comes from Troy Jensen with Lake Street Capital Markets.

[Troy Jensen:]

Hey! Thanks for taking my question. Congrats on the first quarter out of the box here. Maybe starting with you Greg, I mean for the most part a lot of the additive service bureaus had pretty strong fourth quarters and I understand they are kind of you know getting out of some non, you know less sexy businesses. Can you just talk about like vertical exposure? I mean, was it the strength really more industrials? You guys were less so in industrials, your more consumer? Just help us out with the exposure and maybe why you guys were a little bit different than others in this space?

[Greg Kress:]

Yeah, that's a great question Troy. As everyone knows, Shapeways is more of a self-service business today, right. We're expanding our go-to-market, which allow us to go and tackle some of those more specific verticals over time. But Shapeways has a very diverse suite of customers that make up our base today, and I think one of the reasons why we pointed out the marketplace sale specifically and how that performed versus what we would consider more of the rest of our business, is that there's a subsection of that market place that still has some of our historic customer base that has lower economics associated with it. And so we see those businesses as being – they were impacted by COVID over the summer and we expect them to – we’re expecting fourth quarter to continue some of those assumptions as they continue to kind of work through it at their own business level. These are smaller companies. They don't have access to some of the benefits that some of the larger companies have, and so that's what you do see in our base. But I would say today we are starting to kick off a lot of the business development activities inside Shapeways. We’ve started our hiring and what we're seeing so far is that we’ve started already building a pretty strong pipeline across all the major verticals that we've spoken to so far. So industrial, aerospace, automotive and I think as we start to think about those moving forward, you'll start to see that balance out some of the market place that's kind of in our base.

[Troy Jensen:]

Okay, and then maybe you know Greg or Jennifer on this one. I mean if I think back in the spec into what’s eating our interest in 2022 and you talked about some of this delays in deploying the capital are going to roll into next year. I know a lot of that growth is going through metals. Part of that now is specifically and you need to add some machines now in your labs and just your thoughts on that technology. Is this going to be as big of a driver as you think? I mean we’ve got a really big step when you're going to 2022. So just maybe thoughts on maybe what next year looks like?

[A - Greg Kress:]

Yeah, so we kicked off launching our metals products at the very late summer and with just one machine and one set up and we used that to just kind of like test the waters to get the machine up and running, to kind of understand the process. We’ve now scaled that considerably. We kicked off an additional order right after we closed the transaction. We now have two set ups; one, in our Long Island City facility, another in our Eindhoven facility and we are working with key customers inside of our base and a few outside business development opportunities today. I think there's a lot of potential there, but I think it's something we need to validate a lot of assumptions around and so the next two quarters will be very focused around bringing those products to market and kind of building out the volume associated with it. But I think we’re going to learn more over the next two quarters as we really validate those assumptions that we've put into our plan. But so far you know we're excited about the opportunity to go and launch it and we've seen some really low interesting use cases in the market and we expect those to continue.

[Troy Jensen:]

And is there any help you can give us on another $20 million you have to spend on desktop products. The timing of that is X over multiple years; is it you know shortened planned times, just any color will be helpful.

[A - Greg Kress:]

Yeah, right now we are focused on launching the equipment so that we have a full service offering as quickly as possible, and right now we're looking at not only just the desktop metal equipment, but also in Vision Tech, they are wood products, larger sand castings, and so we have a pretty comprehensive portfolio of what we're looking at, but we haven't made those final decision yet. We are looking at how do we bring those to market as fast as we can, where does the best product market fit for Shapeways, where we can see strong business development opportunities. And so you know I think we'll be making those decisions over the next couple of months and walking in basically is what that plan looks like, but right now it's not firm.

[Troy Jensen:]

Okay, understood. Good luck going forward.

[Operator:]

Our next question comes from Noelle Dilts with Stifel.

[Noelle Dilts:]

Hi guys! And congrats on closing the transaction. First, this kind of builds on Troy’s question, but you know I was hoping you could talk a little bit about the timing of some of the other growth initiatives, you know around software and how we should think about kind of the next phases of that rolling out, and then also expanding more into traditional manufacturing. I think the bigger question here is how does – given you talked about again the timing of these investments impacting ’22, so it's – the question is really you know, is this going to impact ‘22 by 10% relative to your initial expectations of 20%. So kind of if you could tie those ideas together, that would be helpful. Thanks.

[A - Greg Kress:]

Yeah, thanks Noelle. So yeah, obviously we're kicking up a lot of added manufacturing capabilities inside. So additional capacity certifications, technologies and we're doing that, and those are – that’s a slow build of additional capabilities that we’ll be rolling out over time. The other growth initiatives that you hinted at as we were chatting is one, expansion of our go-to-market strategy and this is moving us beyond just being a self-service company and building up a business development, and we've already made a lot of really, really good tangible steps towards this. We've hired our sales lead to go and run this process and several business development reps to go and support that. These are people with deep experience in the manufacturing space and we're building a pipeline today. We're excited about the opportunity. We still have a lot of conviction around that this expansion is the right thing for us to go do and we're going to be spending the next quarters looking at that pipeline and how fast and what probability of conversion we're going to see. And once that’s done, we’ll have a much better understanding of like what we can expect moving forward. The second thing is we’re focused on traditional manufacturing, expanding our offering. We've done this in a very low, light weight way today. We're focused on really helping support a few very – some of our best customers and we're kind of testing out what it requires us to do that very well. I think this will be a bigger theme for us as we look into next year. And then the last piece of software, and software, we rolled out our first phase of the Otto platform just last month, and what we're focusing on with this first roll out is a very limited ordering front-end that we can provide to smaller manufacturers to get access to industrial grade additive manufacturing. So that’s basically fulfilled by Shapeways. Phase 2 is expansion of that ordering platform and then a lot of the back end services that Shapeways leverages to go run and automate and digitize our own business, and that's where you'll see a lot of the licensing fees and ongoing charges associated with – or take rate associated with what actually flows through the platform. And you know so again, everything we're doing right now is really focused on getting as many of these growth initiatives started now that we’re funded and that transaction is behind us, and using the next quarter or two to really validate a lot of the things that we put in the plan. And you know obviously we're building off of assumptions that we made from our historic business experience, but we're also learning a ton as we go right. And so we're using the insights and the data that's coming in from this, going to perfect that and I think we’ll be able to provide a much clearer path of like what the long term revenue potential for these growth initiatives are once we get through that process.

[Noelle Dilts:]

Okay, and then you know obviously you have a lot to do in terms of internal investments. But could you just touch on M&A, how you're thinking about that right now and any company – you know what the pipeline might look like in terms of engagements?

[A - Greg Kress:]

Yeah, great question. You know we operate in a very fragmented market, so we see a lot of opportunities that could be great partners to Shapeways. This is a way for us to accelerate the additive manufacturing expansion that we're doing, some of the go-to-market efforts that we're doing, also some of the traditional manufacturing capabilities that we're doing and so there's a lot of opportunities out there and we're looking at it from a build or buy perspective. And so we're looking at it where this could be advantageous for our investors and it could be a great value add for Shapeways and accelerate what we're doing by acquiring those companies and we see a lot of targets. And I would say, now that the process is actually done, we have more opportunity going to shift some of our focus towards those, and so I think you'll see more and more of those tuck-in type of strategic targets being identified once we gain a little bit more traction. But this is something we really haven't been able – we weren't able to really start until we closed the transaction, and so now that that's closed and behind us, it's something that we can kind of refocus our time on.

[Noelle Dilts:]

Okay, great. Thank you.

[Operator:]

Our next question comes from Greg Palm with Craig Hallum Capital Group.

[Greg Palm:]

Yeah, thanks. I’ll add my congratulations on this transaction close in becoming a publicly traded company here. I mean I guess just sticking on that theme, you know curious what you're seeing from a – you know whether it's a brand or awareness standpoint since becoming public. Anything to note?

[A - Greg Kress:]

Yeah, I think that going through this process has giving us a tremendous amount of visibility. I think it'll help us greatly on the business development side. It really speaks to a lot of the industrial grade capabilities that we have internally and I think this has given us a great platform to really showcase that, and I think that'll be very helpful for those business development resources that I referenced earlier as they go in, and go-to-market, it allows for us to get our food in the door with a lot of companies that we may not have been on the top of their radar in the past. And so we'll see more as we validate those assumptions, but I think it's been positive so far.

[Greg Palm:]

Yeah, okay good. And you know I’m getting the sense that some of the supply chain bottlenecks that you know virtually every company is dealing with is creating some increased awareness for additive in general and some of the capabilities of the technology. What are your thoughts? I mean could this be, I don’t know call it an event that maybe provides a boost for industry demand going forward?

[A - Greg Kress:]

Yeah, I believe it does. But the one thing I would caution is this takes time, right. You know going through the process of onboarding a new supplier, getting something ready for additive manufacturing and preparing that part in a way that can actually go and support the supply chain takes time, and I think we’ve seen an uptick in conversations and we’ve seen an uptick in opportunities, but again these are typically longer buying cycles that we’re competing up against and so they are also taking their time as they look at it, but I do see opportunity in front of us as I look at the market.

[Greg Palm:]

Okay, and I'll ask one more. It’s sort of a follow up on a previous question. But as we sit here and think about the potential ramp in revenue over the coming quarters, you know I guess how has that changed more specifically versus the original projections that you gave during this back process, and I guess just more specifically thinking, when do you think that ramp sort of occurs and do you think that the magnitude of the growth ramp still looks the same as you thought before and it's just delayed a couple of quarters or what are your thoughts there?

[A - Greg Kress:]

Yeah, the biggest thing for us right now is we're focused on getting each one of these started as fast as we can. I think we’ve made some really good tangible steps toward launching each one of our core growth initiatives and so that we can start to validate those assumptions. You know what we're going to look at is, over the next few quarters is how do those assumptions continue to play out? How do we validate them and provide more insight and data associated with those growth initiative, so that we provide more clear guidance. But I think you'll hear a lot more from us over the next two quarters as we firm that up.

[Greg Palm:]

Yep, fair enough. Okay, I’ll hop back in the queue, thanks.

[Operator:]

Our next question is a follow-up from Jim Ricchiuti with Needham.

[Jim Ricchiuti:]

Yeah, I just wanted to ask about some of the other pressures that companies have been talking about through earnings season, a lot of cost pressures, and I'm wondering you know that's what extent that's impacting you, including you're staffing up and obviously we're hearing a lot about, call it a higher wage costs and what not. So to what extent, apart from supply chain issues are the ongoing cost pressures that we've been hearing about impacting your cost structure, above perhaps what you were thinking earlier in the summer.

[A - Greg Kress:]

Well, you know I think Shapeways has a lot of tech resources associated with it to go and support our software build out, and so those are typically more expensive resources and we plan for a lot of those types of resources inside of the company. We are seeing – you did mention some supply chain pressures. We are seeing some supply chain pressures, but I think we've been able to you know manage that very well to-date. We've been able to manage around raw material costs and shipping costs and even the labor costs inside of our factory, so I feel like we're doing a good job there. And then from an overall labor perspective, as we do a lot of our hiring, I think we've done a – we expected to hire some pretty significant resources, so a lot of that’s in our plan and so we have flexibility within the plan to kind of work within those means, and so that's what Jennifer and I would do.

[Jim Ricchiuti:]

Got it. And on the M&A pipeline side, obviously you had an active pipeline, but you know with the resources that you have, are absolutely more limited than you were anticipating. So I’m wondering how you're thinking about M&A over the next six to 12 months? Are you going to be more focused? Are there specific areas that you feel these are the areas we really want to pursue to drive the growth? I mean, if you could just give any color – obviously you can't be specific about M&A, but just wondering how your thoughts about M&A have changed.

[A - Greg Kress:]

Yeah, I would think we're still very targeted from our strategy perspective. We know that we don't want to go after just any target. We want to go after very specific targets that fit into our growth strategy very well. Now the good news is, there's a lot of those targets. With that being said, we also don't want to go and overwhelm our business by bringing on too many targets at once, and so we will be very, very thoughtful in our approach. We have looked at this from a very diligent perspective where we're going to go after a very focused target, one at a time and we'll work our way through it. And then as we start to see success, we can go and adjust that strategy if we want to move faster or not. But we will be very, very focused at first and go after our very specific targets that needs for our business right now.

[Jim Ricchiuti:]

Okay, thank you.

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[Operator:]

This concludes our question-and-answer session. I'd like to turn the call back over to Greg Kress for some closing remarks.

[Greg Kress:]

Thank you so much. Well, thanks everyone for joining. It has been a tremendous amount of work to get to this place and I'm very excited for what’s next for Shapeways. I feel like we're off to the races and we’re just getting started, so more than willing to set up follow-up conversations with anyone that was here. But thank you for taking the time, thanks for the questions, and I look forward to providing you guys with updates as we move forward.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.