Good afternoon, and welcome to this financial results presentation and Q&A with Shape Robotics. With us today, we have the CEO of Shape Robotics, André Fehrn. First, there will be a presentation, and afterwards, a Q&A, where the CEO will answer questions submitted via Stokk.io. There have already been pre-submitted questions on Stokk.io , and the Q&A is still open so that you can submit questions live as well. I will now hand over the mic to Shape Robotics to start the presentation. Your line is now open.
Thank you so much, Anders, and thank you everyone for listening. I have started, you know, today I've chosen to spend less time actually on our 2023 figures, and simply comment on the key figures and the question that I imagine that arise to our figures. Following that, I will dwell a bit more on our strategic plan, which we broadly communicated yesterday. So the rhythm for me, and I hope it's okay, compared to previous presentation, will be a bit different. Usually, I begin by talking about our products, our market, and our history. Instead, I will incorporate this into the strategy presentation that will follow, which will follow after this key figures presentation. I hope that's okay.
So just briefly, Shape Robotics is an EdTech company that promotes technology education, and basic digital skills in the field of science. Through our STEAM solutions, science, engineering, arts, and math, and robotics technology, young students learn introductory programming, mathematics, and physics, preparing them for a future where technology will be a part of their everyday life, regardless of the career path they might choose. On the key figures for 2023. In 2023, we achieved a revenue of DKK 171 million, especially after a fantastic Q4, where revenue alone amounted to DKK 86 million, nearly half of the annual revenue in one quarter, specifically, mainly in November and December. This aligns with our previous statements about the trends in our sales cycle, where the last quarter of the year is always our busiest period.
We announced in early 2023 that we expected an EBITDA in the range of DKK 4 million-DKK 6 million, and just over three weeks ago, we upgraded this to DKK 8 million. A few days ago, again, we adjusted the EBITDA to approximately DKK 15 million. Our full-year report, as you can see, shows an EBITDA of DKK 16 million, slightly exceeding the guidance that we did. However, our earlier guidance of DKK 8 million-DKK 15 million is also based on the fact that our 2023 figures is not finalized and audited yet. They are, in so to speak, finalized, but we still have an audit ongoing, and therefore, we included some risk in our guidance, but still within the same range as you see here.
The changes from the previous guidance and the ones we did a few days ago is mainly due to transition from the Danish Financial Statement Acts, also called Årsregnskabsloven, to the international standards, IFRS, where, for example, leasing costs are treated differently and some expenses must be recognized in assets or directly in the equity instead of operations. It is, of course, from our side, regrettable that we do not hit the mark the first time. We did this exercise weeks ago, but we can guarantee you that we have learned from this process, and, to be frank, it's good that the guidance went up instead of down. This is the first time we do IFRS, and I am sure that we have learned from this, and we will be even better and more on spot going forward.
One could say that it's an accounting technical thing, and it does not create more value than it did before. But on the other hand, it is also important that our financial reporting is benchmarked and done in the same way as others that are following the IFRS standards. As already communicated earlier this week, we expect a minimum revenue of DKK 300 million in 2024. We have changed it from a range of DKK 300 million-DKK 325 million previously communicated. It's not because we expect less, but rather an expression to the market of a minimum goal. We have solid framework agreement in Romania, for instance, where projects are progressing rapidly right now and will almost guarantee what we are guiding right now on the majority of this revenue.
Our expectations are that we will exceed DKK 300 million, but it's also too early to say how much we will exceed it. Therefore, we also stated in the latest announcement that it will be released sometime during the summer, just after. The same applies to our EBITDA guidance, which, in addition to changes from IFRS to IFRS, is a better EBITDA, but here, too, it is an expression of our minimum expectations. Also, I could say the revenue and results from a new major market, Poland, are very cautiously included in this guidance, as project can start over the summer, but it might also be pushed into the autumn and winter. So there is some risk also here to say how much should we include or recognize that there will be revenue from this market. Good.
Well, basically, that's what I wanted to tell you about the 2023 results. We have concluded in several messages and also in the interim reports. I would rather spend some time talking about what's going to happen now in Shape Robotics.... I think it's very important before I jump into the strategy slides, to say that there is a little disclaimer. What has been communicated in the company announcement, including development and financial objectives, are goals and objectives, not guidance. On the other hand, I would say that it's likely that we can achieve them, and we have previously moved mountains to reach our goals. Also important to say that the strategy presented here is outlined. We will conduct webinars in the spring.
We will include with Stokk.io and other webinar possibilities, where we will go more in depth and where the respective leaders of the departments will have the opportunity to present their fields. So that meaning other members of the management team, Mark, our sales director, will present expansion plans, and Moises, our CTO and founder, will talk about development. We will set up these calls and webinars as soon as possible, and we expect it to be end of the spring. Good. So this is what I brought to you. I will start by talking about where are Shape Robotics today, and then we have, like, a vision statement, what is it that we are aiming towards, and what is our star here?
The three strategic pillars that we're aiming towards, and how we founded our strategy. So that's growth and expansion, technology, and strategic partnerships. Then, of course, the success criteria to actually get to these targets, and then again, what is our financial goals? Good. Just a second. I think I jumped somewhere. There you go. So very quickly about where Shape Robotics is today. I think it's very important to say where is it we are today, and where is it that we want to move to. In 2017, the company was founded, and this was also the first year where the robots were sold. In 2020, we were listed on the Nasdaq First North.
In 2021, we acquired a company in Romania specializing in designing technology rooms, which is actually where it all began, where we offered integrated solutions, complete technology rooms, where our robot solution become a component of the overall solution. In 2022, we partnered up with Samsung for product development. Also, in 2022, we acquired another Romanian company to increase our distribution possibilities. In 2023, we acquired Skriware, a Polish pendant to Shape Robotics to open up that market. And in 2023, also we got listed on the main market in Copenhagen, so quite a fast journey we've had. We have sold today more than 25,000 robots.
We have delivered over 300 of smart classrooms, and we are approximately present right now in something like 10 markets, with Romania in particular contributing with majority of the revenue. Our main markets currently are the EU countries, especially Central and Eastern Europe. To ensure more ICT specialist, engineers, and general increase in the digitalization, the EU Commission has launched a digital education plan, significantly increasing investment at least until 2027, as we know for now. Additionally, until 2027, or in this, up until 2027, EUR 47 billion is allocated solely for education, with almost EUR 14 billion or around something like DKK 100 billion, is allocated solely to digital education.
These funds are naturally allocated to the least digitalized countries, which in the EU currently are countries like, Bulgaria, Poland, Romania, Italy, and Greece. And a big part of these allocations are for building technology rooms in their schools. As an example, over DKK 1 billion is allocated in Romania to building technology rooms, something like DKK 2 billion in Poland. But the same trend applies outside EU, so that's why we will, I will present later in the strategy, we also want to start moving outside EU. We launched this new strategy under the name or mantra that we are preparing today's, today's youth for the future, and we do this by offering intelligent classrooms, robots for educational use, and software that supports this learning content.
In the future, you will see that we use these four categories below, or in this slide, to define which products or solution we're referring to, and thus also being able to point out where the growth or the growth potential comes from in these four pillars. We have one, the Thinkin, our mobile STEAM lab that we developed with Lenovo. We have the Smart Classrooms, formerly referred to as Smart Labs or STEAM Labs, but now we will consistently use the name Smart Classrooms to define that concept. These are comprehensive technology rooms with robots, virtual reality, interactive boards, 3D printers, et cetera. Then we have Fable. This is our cornerstone and our DNA, our modular robot that started the whole journey that we're on right now.
The Academy, which also a part of what we acquired from Skriware in Poland, this will be immersive learning experience and intelligent lessons for all ages. Here we aim to create a subscription-based learning platform where all software and learning content are included, and that's also including the AI project, with which I will talk more about later. We build our strategy in these three pillars: growth and expansion plans, technology, and partnerships. On the next couple of slides, I will still on a high level, but I will explain more about the different strategies. Growth, one of the first pillars. In the next few years, we need to continue growing in our key markets and sort of say that all the seeding we do, we need to harvest it now.
Additionally, in 2024 and 2025, we will accelerate our expansion in Europe and prepare to grow in new markets. This means that the goal is also on the map on the right, presented in 2026, 2027. We are market leaders in Denmark, Poland, Moldova, Bulgaria, and Spain, and we have growth momentum in India, Saudi Arabia, UAE, China, and USA. Our distribution model will mostly still be organic growth and driven by distributors, but we will not exclude the possibility of acquisitions in the future, although I would say there's nothing in the pipeline right now.
If we go to technology, one of the things I'm most excited to see the result is our EdAI, which is an educational AI system addressing fundamental changes for teachers and students by delivering tailored lesson plans based on subject, technical setup, and students' levels. One of the most common challenges for teachers all around the world is that it takes time to create lessons, lesson plans involving technology. EdAI will be an engine that creates lesson plans in seconds or minutes, and the teacher can specify the grade level, the country's curriculum, the subject, the available technology they have, and the degree of accreditation required from the sources used, so the books, the auditors.
It is expecte d to run on Google's Gemini engine, but if we have later seminars, I would rather have Moises, our founder, digging in deep into this subject. Additionally, in technology, we focus on renewing, upgrading our current portfolio products, and future-proofing them with IoT, Internet of Things, faster processors, and creating new modules for the Fable robot. Also, we will have a very high focus on OEM products, including the new 3D printer, the Skrinter, which we also acquired through Skriware. In the long run, we can supplement or replace products in our offering with products we control ourselves, resulting in better margins.
Partnerships, as I said, is the third pillar. It is still essential for us to maintain and find, what you could say, good playmates who knows the playground and have a bit more muscles than we do.
Lenovo is here a good example, and the latest one we did partnership with, where we recently developed Thinkin and this Mobile STEAM Lab together. We would like to explore more similar collaborations, and it could be Microsoft, Google, or other tech giants, where there's a win-win situation for both parties. Another critical factor as to how do we succeed in this? We need to attract and retain the best talents and continue to maintain an entrepreneurial culture in our company. Our recruitment, although, will primarily take place outside Denmark, so that will be mostly in Moldova, in Poland, in Romania, in Bulgaria. Second, we need to be even better in our governance and professionalism. There must be even better. We need to have even better internal, external communication, not only to shareholders, but also internal.
We're growing so fast, integrating new companies, new employees. We need to be better at this also. And in general, I would say we have to be even more professional than we already are. We are a professional company, but if we want to move to the next level, there's also a task here. We need to ensure that we choose the right partners. We are still a small company, and if we steer in the wrong direction for months, choosing a partner, towards a product or an opportunity that turns out not to be attractive or the return on investment is not good, we have. We might have lost an opportunity somewhere else. So that is also very important.
Second, not second, last we need to be able to access working capital to finance growth and investment in development. This does not necessarily mean that there will be more issues of shares, but however, I will not rule out the possibility that there will be a need for injecting capital at a later time. But it could also be improved credit facilities, so these are also very key to getting the success for our growth. And last, and maybe most important, this is where we're aiming towards. So as I said, DKK 300 million we're aiming towards in 2024, with a minimum EBITDA, minimum 300, minimum EBITDA of 25. And our financial objective right now is to hit DKK 1 billion in 2027, the latest, and have an EBITDA in the range of 12%-15%.
Of course, implicit, we are profitable in between. Anders, that's all what I had. I did it quite fast, it seemed.
That's, perfect, André. Let's, go to the Q&A then.... So if we, take the first question here around the, financials, can you provide any kind of insights into how much of your revenue in 2023 or expected for 2024 is coming from existing clients or projects you have sold to before, but is now reordering new solutions, upgrades, or anything like that? And some follow-up here, I'm trying to assess if Shape Robotics need to find new projects all the time, or there's an ongoing potential in existing clients and installed projects.
Yeah. Good question. A lot of questions in one question, but most of the order pipeline that we're communicating or the guidance that we're communicating for 2024 is already secured, or so to speak, secured by framework agreements, commitments to what the partners want to buy in 2024. That is not a legal obligation, you know, it's not a, an actual purchase order, but it always came out in the history of the purchase orders. So that means we have framework agreements indicating that we will have this minimum revenue. And what I'm saying is that most of the guidance of the revenue in 2024 is secured by these framework agreement. In regards to projects ongoing, it's not one project.
Let's say an example, Romania or Poland. It is several projects running in several years. So that means it could be a municipality that say that we have 30 or 50 smart classrooms we need to equip, and then you can go into that tender and win it. But there might be 500 municipalities or 100 municipalities, with all having 50 classrooms to equip. So that ongoing process will take years, and there are. It might be that we don't win them all, but there are so many of these projects, and that's just one pillar. Then there are equipping the kids with educational technology they can use from home, or there are educational technology that they need to use in kindergarten, and there are so many of these projects.
We are right now, we're not targeting even 50% of these subsidies that are happening in Europe. So it's not like we have put all our egg in one basket for one project. There are more like 500 projects, and we're aiming to get at least some of it, 30% or 40% of it. I hope that answered.
Yeah. Perfect. With Shape Robotics' increased position within the market for educational robots, you begin to have strong connections with more and more buyers. Do you see Shape Robotics into the market for educational software and app development, not connected to robotics, but more connected to the software build?
Yes, and I think that was. Yeah, I guess the question was asked before I presented the strategy. That's pillar number 4, is that we go more in-depth into software now. So that's the AI that is our new AI motor that will be developed. That is subscription-based learning content on the academy. So right now, you can imagine maybe we have 25,000 teachers in the end using our product to some extent, and we need. And there will be even more once this year is ended, and we need to find a way to find something good, premium content, that they are willing to pay for to actually help them teach or get their learning better.
That is the fourth pillar that we are developing right now, is that we want to do the subscription-based software, where we do educational technology, but not necessarily hardware. So, yes.
Yeah, perfect. Then there's also a question here that was posted beforehand, but I think the essence is still important. So of your expected minimum DKK 300 million revenue in 2024, can you provide more information on the geographical split here? How much of that revenue is expected to come from Romania, how much from Italy, Poland, and your other markets, to understand your foothold and potential in each country?
Yes. 2024, as I said, is the guidance is highly already secured by framework agreement in Romania. So that means that we are most likely to succeed on our guidance alone with Romania and some other things we put on top. So that means that if we kick off more in Poland or Italy or Spain, that will only increase the revenue that we can do this year or the projects. Of course, we need, again, to access the capital needed in order to deliver on these projects. But, you know, what we think is that it will be the picture in the 2023 was that 87%-88% came from Romania. That will be lowered a bit in 2024.
So now, now I'm guesstimating here, so it's more like 75%-80% will come from Romania, and then we will see Poland and the growth markets kicking in now.
That maybe leads to the next question here around the capital. You're planning to raise capital to go on with the expected demand and growth. When is it planned for, and how will it take place? Will it be a direct emission to specific investors, or will it be through current shareholders?
It will... we already communicated a couple of weeks ago that we are now only pursuing a direct issue, so no rights issue anymore. The reason why it's delayed, so to speak, is because we did not have the mandate. We, the board of directors, did not have the mandate to actually issue shares because there were no mandate from the general assembly to actually do this. So therefore, we had to wait for the call for an extraordinary general meeting, which will take place tomorrow, to get the mandate or the power of attorney again to the board of directors to issue capital in a direct issue... where and when, not where, when it will take place, I don't know, and I can't say. Even if I knew, I couldn't say because that would be inside information.
I can say that we have communicated earlier. They want to close it in Q1, so that leaves one month out.
Perfect. Looking at your financial statement, it does not seem like you are allocating a lot to R&D. How can that be? In the income statement, you are only spending DKK 279,000 in 2023. And if that is true, how will you make sure to stay ahead of competitors also in the future, and how much will you allocate in the future looking at the new strategy?
I think also I actually heard that remark or comment before, and I think maybe we need to be better in showing what we use in R&D because that figure does not encounter all R&D. That is only consultants or hardware or prototypes that are not either salaries or activated. So that means that line only says the cost incurring in 2023, that relates to 2023 and are not development and are not salaries capitalized. So what I'm saying is that there are also salaries that are relating to R&D, and that they are not in that line. And in that line that says R&D DKK 300,297, some of it is also capitalized. So in reality, that number is much higher.
Can you put any figure on that, just in percentage or something like that, how much you allocate to R&D?
No, that would be a very bad guesstimate right now, because I would say that... Let's say that, we have today, in 2023, we had 50 employees, 45 of which R&D are 10-ish. So if you look at our staff cost, then, 1/5 is R&D, and it might be even more because some of it is capitalized. But allocation in the future, the R&D will be much higher than it has been before, because we recognize that the development we did and the acquisition we did with the software and the products that came took us this far and will take us a couple of years more, but now we need to develop what's going to take us the next five years.
So, you will see in the future that the R&D has a bigger role in our profit and loss.
Perfect.
Yeah. So, just to the conclusion, the number does not tell the true story about R&D.
Yeah.
That, that is the real thing.
Of the DKK 1 billion you are aiming for in 2027, how much of this will be coming from robots and classroom projects, and how much are you expecting to come from new products such as software and recurring revenue products?
Well, again, maybe we're a bit conservative, so we did not recognize more than a couple of percentages in recurring revenue or subscription, because we do believe that it takes something like a year to get a full product that we can actually roll out. It doesn't mean that we won't have something in six months before we're ready to push it in the market. It could take a year, and then you have to push in the market, and then you start getting customers. So it'll take another year before we're actually at the level where we want to be. So therefore, it's a very little percentage we put in as a subscription-based. The robots will still be something like 20%-25% of our revenue.
what we will see in the future is that OEM products will be more and third-party products will be less. That's also why we are aiming towards getting a better gross margin and then hence getting a better EBITDA percentage.
I think you have addressed it a little bit in your presentation, but I will just read the question, and then you can put some more notes around it. You state in the strategy that you will look into OEM products and aim to produce your own that can supplement or substitute some of the products you buy today. What kind of OEM products are you looking at, and will it still be tech products such as robots, that has a competitive advantage in it, or are you looking at producing more mainstream hardware products?
It will be OEM products. It's not because I don't know, I do know, but also recognize that there might be someone listening to this video that are delivering to us today third-party products. So therefore, I cannot say what especially we are looking at OEM products right now. But it is something in our offering that are third-party products that we're looking to make OEM products instead. So it's not necessarily additional products. It could also be additional products, but it will be something that we already have in the portfolio where we can replace it with an OEM. In regards to whether we wanna be an OEM hardware producer and sell specifically, let's say, computers, then no.
But in the case that it makes sense for our classroom, that they have a Shape Robotics computer that has our software pre-installed, so they don't have to use time doing that, then maybe yes. I hope that answered the question. But that said, there are some - f or instance, the 3D printer, Sprinter, has the Sprinter, which we acquired in Skriware. That will, of course, be the one that we promote now instead of third-party products, but there are also other opportunities in our offering right now.
Perfect. When do you expect to reach the point where you can finance your own growth and need to raise, and do not need to raise capital for cash flow purposes?
I think the question is more reversed because if we look at the company Shape Robotics one- and- a- half years ago and said that we do not want to grow in the pace we're doing right now, then we would be sufficient with the equity to finance ourselves. So it's a matter of how fast this growth is taking us. Right now, the last couple of years, we've doubled our revenue every year. Of course, there's a ketchup bottle effect that eventually we cannot grow 100% every year, and then, you know, the cash starts coming in from all the projects.
They are coming in, but what I'm trying to say is that if you grow faster than you sold last year and you have to acquire the products, let's say three or four months before you need them in a growth that was double this year compared to last year, and if you can continue that, you will always need money. So the question is also sort of reversed to how fast do investors, board of directors in Shape Robotics wants to grow? Eventually, when this growth sort of steams off or takes a more, how do you call it? It's not like exponential, but it's more like flat, not flat down, but flat up, then we will be self-financed for sure.
We could, we could stop everything right now, and we could be self-financed for years, but that's not what I think we, the board of directors or the investors want from this company.
Perfect. Then the final question here is a live question around something you presented. So it says, "There are 4 million schools in the world. How many schools in the countries that you are focusing on, and how many have you served today?
Well, I actually don't know how many schools right now there are in the countries that we are aiming towards. I know something about the pools that are in the country. Don't ask me exactly about the numbers, but we do have analysis on the pools that are in the countries we're attacking or expanding to. But right now we have something like 2,500 schools, 3,000 maybe, that we're in or have our product to some extent. So that means there's a lot. You know, the market is huge. There's a lot of way to go from 2,500 schools so far, and there are 4 million schools in the world.
Perfect. And that was, actually, all the questions here, André. So that finalizes the Q&A. So before we end the webcast, I will just give you the word for any kind of final remarks here.
As always, I just say thank you for listening. I know that people are busy, and if they take their time on an afternoon to listen to me updating about Shape Robotics, I thank you for listening in.
Perfect. And also from here, thank you for listening in to everybody. See you next time. Bye.