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InicioRoboticsWEBINAR REPLAY: January 2023 Investor Name

WEBINAR REPLAY: January 2023 Investor Name


Tune in for a dialogue in regards to the present tendencies in disruptive tech together with what to make of the This autumn efficiency throughout our innovation indices: ROBO, THNQ & HTEC.

Jeremie Capron:

Good day everybody. Welcome to our January 2023 investor name. My identify is Jeremie Capron, I am the Director of Analysis right here at ROBO International, and I am speaking to you from New York. And with me as we speak, my colleagues, Lisa Chai and Zeno Mercer. And we’re going to discuss robotics, automation, AI, healthcare applied sciences. We’ll share some ideas in regards to the current market developments, after which we’ll take a better take a look at a few of our index portfolios. And the primary one is ROBO, R-O-B-O. That was the primary Robotics Automation Index. It began greater than 9 years in the past, in 2013. The second is THNQ, T-H-N-Q. That is the Synthetic Intelligence Index. The third one is HTEC, H-T-E-C. That is the Healthcare Know-how and Innovation Index. And these portfolios mix analysis with the advantages of index investing. They’re composed of best-in-class corporations from around the globe.

We now have small, mid, giant caps that we analysis, and we rating on numerous metrics. And the best scoring shares make it into the portfolios. After which we’ll be taking your questions, so be at liberty to kind them into the Q&A field on the backside of your display screen. And I believe for all of us in funding business, we’re glad to show the web page on the 12 months 2022, which actually was one for the historical past books by way of the hardships delivered to fairness and bond traders, however particularly to large tech, the place we have seen a few of the most brutal declines after two years of euphoria. And the ROBO International Innovation indices weren’t resistant to that, and so they underperformed world equities for the 12 months 2022, however actually to not the identical extent as a few of the extra concentrated, disruptive know-how indices on the market. Inside this new 12 months, 2023 is a 12 months of alternative, as a result of there’s an enormous distinction between the declines that we noticed within the inventory market, and what automation corporations are telling us and displaying us by way of their document order consumption and their, in lots of instances, document order backlogs.

So within the ultimate quarter of the 12 months, the ROBO International Innovation indices noticed fairly good features, and a few inexperienced shoots which may be setting the stage for progress to come back. So let’s begin with robotics and automation, and the ROBO index portfolio that was up 12% in This autumn. It outperformed world equities by just a little greater than two proportion factors, with some fairly sturdy features in Europe, that was up 25%. And in addition in logistics automation, that was up some 20% or so. And I believe it is value discussing as we speak, logistics automation right here, as a result of that is an more and more vital a part of the robotics business.

And lots of traders in public equities are simply not uncovered to this large progress alternative. The truth is, since we launched the ROBO index in 2013, this has been the most effective performing of the 11 sub-sectors that composed the portfolio. We noticed a complete return of greater than 300%, 340% via the top of 2022. And that is after the substantial decline final 12 months, when the sector was down greater than 40% in 2022. So what is going on on right here is that there’s an arms race to automate provide chains and warehouses around the globe. And that race was began by Amazon, which is now operating one of many largest warehouse robotics operations on the earth. And that is actually enabling more and more brief supply instances from click on to order to supply. And everyone else within the e-commerce business is mainly scrambling to compete with this operational excellence. And it is not solely in regards to the growth in e-commerce, but in addition, conventional retailers which might be constructing omnichannel operations which might be then feeding that vast transport and logistics business, that’s dealing with a major label scarcity situation these days.

So there’s large progress in demand for logistics and warehouse automation, and it is vital to grasp that greater than 90% of the 20,000 or so warehouses within the US as we speak haven’t any automation in any respect in additional than 90% of these warehouses. So, we have recognized the most effective at school corporations which might be on the forefront of this development. And as we speak, now we have 10 ROBO index members which might be centered on that, and so they account for about 14% of the portfolio. So you can find corporations like Daifuku in Japan, that’s the world chief in materials dealing with gear. You have got GXO, that’s utilized by a few of the largest blue chip corporations to outsource their order achievement or logistics operations. You will have corporations like Zebra, that’s the world chief in automated identification and different observe and hint applied sciences for provide chain. And Zebra was really an early investor in Fetch robotics that is made the headlines this 12 months.

Fetch robotics makes autonomous cell robots for warehouses and distribution facilities and manufacturing and so forth. You will discover corporations like Manhattan Associates, that could be a chief within the warehouse administration system, so that’s on the software program facet. You will discover a firm like Cardex, that’s based mostly in Switzerland, that makes automated storage and retrieval programs. After which you’ve got Auto Retailer from Norway, which is a warehouse robotic know-how firm that invented the dice storage automation. That may be a very dense resolution for auto achievement, that you could mainly deliver into an present warehouse and automate it in a flip turnkey vogue. And so, Auto Retailer was the most effective performing inventory within the ROBO index in This autumn, it was up greater than 65%. That is coming after a really risky 12 months because it went public on the finish of 2021. They’re doing rather well. You take a look at a gross sales progress that is properly over 50% 12 months over 12 months, and enterprise that is already very worthwhile with EBITDA margins over 50%.

So, that is logistics. However as lots of you understand, the ROBO portfolio is uncovered to many different very sturdy robotics functions, from manufacturing to healthcare and enterprise course of and meals and agriculture. And in reality, the ROBO portfolio could be very diversified. And it is not solely throughout the 11 sectors, but in addition throughout market cap. You have got about 40% in giant caps, however greater than 60% in small and mid-cap corporations. And it is also diversified throughout areas, and that is a very world portfolio. The truth is, you possibly can see round 40, 45% in US shares and about 55 to 60% in one other 12 totally different nations. And the rationale I deliver this up as we speak is as a result of ROBO has nearly excessive publicity to Asia, at round 30%. And that is vital as a result of, first, Asia is the place we’re seeing the strongest progress in demand over the long run. And China already is the most important marketplace for robots as we speak.

And second, it is as a result of we’re seeing China reopening and enjoyable, the overwhelming majority of the COVID associated constraints which were in place and actually holding again investments within the final two years. So with China reopening, we’re fairly optimistic with regards to the Asian piece of ROBO. And that isn’t a lot Chinese language corporations, however actually, exporters into China. So now we have about 20% in Japan. Corporations like Fanook and Yaskawa in manufacturing facility robots, after which you’ve got an excellent variety of the know-how and market leaders in key parts that go into automated programs, like excessive precision gears from Harmonic Drive or Nabtesco. You have got linear movement management from THK, you’ve got pneumatic parts from SMC and so forth. And with the large transfer within the Japanese yen within the final 12 months, the Japanese exporters have gained a major aggressive benefit that we expect they are going to profit from this 12 months.

Now earlier than I cross it on to Lisa, I need to come again to my earlier remark in regards to the discrepancy between inventory costs, and the truth on the bottom within the automation business the place demand stays very sturdy, regardless of all of the discuss of recession. And I am not saying it won’t soften, but it surely’s outstanding how the basics have remained very sturdy. And on the identical time, valuations have dramatically compressed. And so as we speak, the ROBO index is buying and selling round 20 instances earnings. That’s down from a excessive of greater than 35 instances, in 2021 on the excessive. And as we speak, we’re on the low cost to the long-term common valuation. And within the meantime, we see the earnings of these greatest at school robotics corporations. They’ve remained on that actually good trying progress trajectory. The truth is, we’re gross sales progress of 11% in 2022. And the expectations for this 12 months, 2023, are additionally round low double digits. And that’s considerably above what is anticipated from the broader market, the S and P 500 or world equities. So with that, we’ll cross it on to Lisa to debate healthcare know-how

 

Lisa Chai:

Thanks, Jeremy. ROBO International Healthcare Know-how Innovation Index HTEC is a method that we launched in 2019 that captures the expansion of the digital transformation that we’re seeing within the healthcare business as we speak. It has a really sturdy deal with the subsequent era diagnostic options, in addition to the innovation that we’re seeing in medical IOT and data-driven applied sciences. After a number of difficult quarters, HTEC had a strong efficiency within the fourth quarter, rising 6.9%. The efficiency was pushed by robotics, medical devices, and diagnostic sub-sectors, which all gained double digits. Whereas beneath efficiency through the quarter have been in genomics and knowledge analytics sub-sectors. Total, 2022 was a difficult 12 months for HTEC index members versus a worldwide market indices. So we have been actually inspired by the sturdy efficiency through the fourth quarter with six of the 9 sub-sectors posting constructive returns. HTEC index for the 12 months declined roughly 33% in comparison with broader market within the sea of 18% decline.

For the 12 months, precision medication was the most effective performing sub-sector, down nearly 10%, whereas the genomics and knowledge analytics have been the worst performing sub-sectors. So with genomics declining over 60% 2022, we need to share our ideas on the sub-sector and spotlight a couple of of our index members that drove the efficiency. We strongly consider that we’re nonetheless on the early innings multi-year cycle of genomic know-how, taking a middle stage in drug discovery, and likewise enabling that life-saving analysis for uncommon illnesses in most cancers. The index members within the house are really remodeling healthcare. The most important motive for the selloff was that many of those corporations have been buying and selling at very excessive valuations as a result of sturdy progress prospects, and traders have been ready for the corporate to simply develop into the analysis. Total, we consider the basics haven’t modified. The truth is, we’re seeing breakthroughs and acceleration investments from giant pharma to medical machine makers within the genomic house.

Whereas we noticed steep selloff and perhaps a few of the valuation resets have been essential, we’re already beginning to see the genomic corporations recovering from a few of the deep losses that we noticed previously 12 months. Corporations in genomics and precision medication sub-sectors, for instance, like VeriCite, Backyard Well being, and Exec Sciences, are beginning to present signal of restoration. For instance, index member VeriCite beat and raised the forecast throughout fourth quarter, pushed by larger than anticipated gross sales at their most cancers diagnostic check. VeriCite makes use of AI enabled genomic know-how to hurry up medical analysis so docs can present early therapy for these at excessive danger for thyroid and prostate most cancers. In the meantime, Backyard Well being declined over 70% final 12 months, as the expansion slowed to simply lower than 20% prime line progress from 30% progress from the prior 12 months. They’re rising to be an vital participant within the liquid biopsy market within the areas of colorectal most cancers.

And the shared costs could proceed to be risky, however they do have one of the attention-grabbing portfolios in most cancers monitoring, profiling, and diagnostics. They’re within the early phases constructing this platform and demonstrating the facility of genomics and epigenomics, which is an space that you’ll hear extra about within the coming quarters. Shares of backyard are already getting an excellent steadiness for the 12 months. We expect many of those transformers of healthcare are really oversold as traders de-risk their portfolios within the final 12 months. Actual Sciences, one other index member, which makes a speciality of most cancers diagnostics, have shared worth acquire of fifty% through the fourth quarter. And [inaudible 00:14:50] however one other 20% was an excellent indication that these corporations have been in an oversold scenario. So whereas the businesses in our genomic sub-sector did expertise large volatility previously 12 months, the extreme a number of compressions have additionally supplied vital upside alternative for 2023.

Lengthy-term drivers and demand for genomic applied sciences have solely strengthened, and we consider that our index members are very properly positioned for remainder of the 12 months. In the meantime, we’re additionally very excited in regards to the medical instrument sub-sector, which holds the largest ready for HTEC at about 25%. It skilled sturdy features through the quarter, pushed by hospital procedural restoration, and a really giant M and A deal for certainly one of our index members. In November of final 12 months, we noticed one of many largest ever acquisition within the med tech business, with Johnson and Johnson buying a biomed, our HTEC index member that now we have held because the creation of the technique. The biomed was acquired for 16.6 billion by J and G through the quarter, a 50% upside from the closing worth. The corporate developed the world’s smallest coronary heart pump, and had over 18 years of revenue progress, and was properly on its approach in disrupting the 77 billion greenback cardiovascular business when it was acquired.

Whereas medical instrument sub-sector gained about 12% through the quarter, it did negatively impression the attribution for the 12 months, attributable to heavy weighting of the index and ongoing provide chain disruptions that hit lots of the machine corporations. Long run, we’re very bullish within the medical instrument sub-sector, as many of those index members not offering simply the important merchandise for the medical procedures, however we’re seeing large innovation accelerating and environments appears to point out indicators of enchancment as individuals are getting extra checkups, and ebook their appointments for his or her surgical procedures that they’ve held off through the pandemic. As we glance out into the 12 months, we would really feel actually strongly that our index numbers with subsequent NextGen Healthcare Options will proceed to be in sturdy demand because the world goes again to the pre-pandemic ranges. And our HTEC could be very properly positioned to profit from a lot of the secular progress drivers on the market. Thanks. And now I’ll flip to Zeno, who will focus on THNQ.

 

Zeno Mercer:

Thanks, Lisa. Now I will discuss in regards to the ROBO International Synthetic Intelligence Index THNQ, which offers publicity to corporations around the globe main the AI revolution throughout infrastructure in each broad and vertical functions which might be increasing GDP, creating new markets, and bettering human situation. We launched the index in 2018, and the house has seen unimaginable progress and progress since that point. It might be remiss to not speak about generative AI and chat GPT, however first, we are going to cowl some This autumn highlights and efficiency. The index row is 4.4%, with a continued fall in valuation all the way down to round 4.7 EV gross sales on the 12 months finish, with efficiency down 45% because the November 2021 peak, the place it was buying and selling at 9.2 ahead EV gross sales. So reported Q3 earnings noticed gross sales progress of 18.5%, which is under the long-term common of 23%. And on the flip facet, we noticed EBITDA progress speed up to 32% progress.

So, breaking down the efficiency, we noticed eight out of the 11 sub-sectors within the constructive territory, with semiconductor, client, enterprise course of, manufacturing facility automation and e-commerce up. Whereas we noticed what had been a multi-year lengthy sub-sector darling, community and safety down 8.1%, with corporations like CrowdStrike down 36% on conservative steering cuts for 2023. Massive knowledge and analytics was down 4.7%, and I would like to spotlight that Ford EV gross sales have dropped from a relative excessive of 13X all the way down to 4.2X. An organization I need to speak about rapidly in that sub-sector, and large knowledge analytics. Alteryx, which is transitioning from a pure play observability platform right into a extra deployable, automation platform for the enterprise, was down 9%, even with a 12% prime line beat and steering raised 14% for income and a 30% EPS elevate. We additionally noticed Mongo DB and Splunk decline, and these are all now at or under all their pandemic features.

We have been optimistic going into 2023 that that is the 12 months of AI primetime for adoption and deployment. From a monetary perspective, out of our 68 holdings, 90% are projected to have constructive EPS this 12 months, with as many as 5% anticipated to cross that threshold within the profitability. So how we deploy and take a look at our index and allocation, now we have 54% into infrastructure presently. And breaking that down, we have got large knowledge analytics, semiconductor, community and safety, cognitive computing, and cloud suppliers. So I need to briefly spotlight SEMI, which represents the most important ready right here.

For those who have been right here for our final name, you may keep in mind me speaking about SEMI being useless, long-live semi. And at that time limit, SEMI had been the worst performing index of the 12 months, everybody was very nervous in regards to the house, seeing declines and stock construct up. And what’s occurred since then is, A, we had the CHIPS Act handed, which was really within the third quarter, however SEMI was our greatest performing sub sector, and we noticed a number of corporations, particularly these tied to AI, which is all of our corporations, cloud and automotive, outperforming the overall, outdoors of THNQ, corporations which have larger publicity to client markets, PC and Cellular, which is seeing a slowdown attributable to over-saturation, inflation, et cetera.

So we noticed some corporations with some nice efficiency, and a few of that is only a rebound, however they’re nonetheless buying and selling properly off at any form of excessive. So we had corporations like Infineon up 38%, Amberella up 46%, ASML up 32%, and Nvidia up 20%. Piggybacking off that, we have seen over 200 million {dollars} in investments introduced in US semiconductor manufacturing capabilities anticipated of the subsequent decade, benefiting from the CHIPS Act passage. A pair different highlights embrace Amberella asserting a partnership with Continental for superior driverless programs and good dashboards. ASML introduced plans to spice up CapEx to supply their flagship excessive ultraviolet machines.

And this anticipated increase is anticipated to generate further six to 10 billion {dollars} in income from their steering by 2025. So, that is a reasonably large enhance of their anticipated demand from their clients. Their clients being corporations like Taiwan Semiconductor, Intel and Samsung and different large foundries. Regardless of this information, ASML continues to be buying and selling 25% off earlier highs. Now switching over to the functions, which incorporates sub-sectors, consulting providers, enterprise course of, e-commerce, healthcare, manufacturing facility automation, client, we noticed client and e-commerce as leaders right here with client up 13% and e-commerce up 6%. The flip facet of this additionally, we had seen these two sub-sectors additionally, the opposite largest laggers alongside semiconductor up till Q3. So we’re seeing an indication of resurgence and reversal of oversold circumstances, with sturdy efficiency from Shopify, Netflix, reserving.com and jd.com. Now, I would like to modify again over to what I previewed earlier, which was generative AI.

Throughout the fourth quarter, we noticed the introduction of the publicly out there Chat GPT, which is from Open AI, which is partnered with and runs on index member, Microsoft’s Azure AI platform. So I believe everybody’s considering proper now, what finish markets, enterprises, human habits modifications could possibly be affected? And the way does that change the stream of worth throughout society in organizations and governments? We count on Microsoft, for instance, to combine this tech throughout all merchandise, as they’ve unique entry to license the backend know-how versus the general public dealing with tech reminiscent of Chat GPT, which is what is out there for us to play with proper now. And so we count on this commercialization and subsequent downstream utilization to additional profit and speed up the house and adoption of AI. Core enterprise merchandise, web page and picture era, communication, and even healthcare may be affected right here. As a reminder, Microsoft acquired Nuance, which offers conversational AI and instruments for healthcare reminiscent of transcribing.

And we’re excited to see how that would assist cut back administrative burden within the healthcare house. And total, we’re excited to see what may be constructed to enhance constructive human experiences right here. So shifting again to that Azure AI platform, which is what that is operating on, do not forget that, that itself makes use of many parts that comprise the AI stack, which many individuals do not understand or take into consideration. You see this on the floor, after which beneath is, consider an iceberg concept. So you have obtained different index members reminiscent of Pure Storage, Arista networks. After which many different involvement software program growth and developer operations which might be within the index, that present ongoing software program assist and instruments to maintain this uptime. To ensure it is operating securely. So we count on enhance of AI community and cybersecurity spend to come back from elevated utilization right here. A current McKinsey report that got here out on the state of AI on this final This autumn, highlighted that virtually 50% of organizations that they surveyed have at the least one enterprise unit using AI, with the best proportion being robotic course of automation.

And so they’re seeing very clear advantages on value discount and income enhance. So there is a distinction between adoption and exploring, experimenting, after which driving enterprise. And proper now, we’re in between that exploring and experimenting stage. So we’re actually within the early innings right here by way of adoption and spend within the house. And we count on, for instance, generative AI to be probably 100 billion plus business over the subsequent decade because it turns into extra built-in into totally different merchandise and components of our lives. And I would like to spotlight that whereas we’re seeing document layoffs, AI spend is anticipated to speed up this 12 months. So we even consider that, in a harsh surroundings, this development will persist as the necessity for reliability, uptime, product modes, value discount will drive aggressive financial demand. With that, I would prefer to cross it again to Jeremie, and yeah.

 

Jeremie Capron:

Okay, thanks Zeno and Lisa, and now we’re going to take your questions. So be at liberty to kind them into the Q and A field on the backside of your display screen. And I need to remind everyone that on the finish of final 12 months, we revealed our 2023 tendencies report during which lots of the extra thrilling progress tales round robotics, healthcare know-how and AI are defined intimately. So please seek advice from that, report’s out there on our web site at globalglobal.com.

 



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