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 World, and I am speaking to you from New York. And with me at present, my colleagues, Lisa Chai and Zeno Mercer. And we’re going to speak robotics, automation, AI, healthcare applied sciences. We will share some ideas concerning 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 world wide.

We’ve got small, mid, giant caps that we analysis, and we rating on varied metrics. And the very 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. And I feel for all of us in funding trade, we’re glad to show the web page on the yr 2022, which definitely was one for the historical past books when it comes to the hardships delivered to fairness and bond buyers, however particularly to huge tech, the place we have seen among the most brutal declines after two years of euphoria. And the ROBO World Innovation indices weren’t proof against that, they usually underperformed international equities for the yr 2022, however definitely to not the identical extent as among the extra concentrated, disruptive know-how indices on the market. Inside this new yr, 2023 is a yr 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 exhibiting us when it comes to their report order consumption and their, in lots of circumstances, report order backlogs.

So within the remaining quarter of the yr, the ROBO World Innovation indices noticed fairly good features, and a few inexperienced shoots that could 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 international equities by a bit greater than two proportion factors, with some fairly sturdy features in Europe, that was up 25%. And likewise in logistics automation, that was up some 20% or so. And I feel it is price discussing at present, logistics automation right here, as a result of that is an more and more necessary a part of the robotics trade.

And plenty of buyers in public equities are simply not uncovered to this huge progress alternative. In truth, since we launched the ROBO index in 2013, this has been one of the best performing of the 11 sub-sectors that composed the portfolio. We noticed a complete return of greater than 300%, 340% by way of the top of 2022. And that is after the substantial decline final yr, 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 world wide. 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 quick supply occasions from click on to order to supply. And everyone else within the e-commerce trade is mainly scrambling to compete with this operational excellence. And it is not solely concerning the growth in e-commerce, but additionally, conventional retailers which can be constructing omnichannel operations which can be then feeding that massive transport and logistics trade, that’s going through a big label scarcity challenge these days.

So there’s great progress in demand for logistics and warehouse automation, and it is necessary to know that greater than 90% of the 20,000 or so warehouses within the US at present haven’t any automation in any respect in additional than 90% of these warehouses. So, we have recognized one of the best in school corporations which can be on the forefront of this development. And at present, now we have 10 ROBO index members which can be centered on that, they usually account for about 14% of the portfolio. So you’ll discover corporations like Daifuku in Japan, that’s the international chief in materials dealing with gear. You’ve got GXO, that’s utilized by among the largest blue chip corporations to outsource their order success or logistics operations. You may have corporations like Zebra, that’s the international chief in computerized 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 yr.

Fetch robotics makes autonomous cell robots for warehouses and distribution facilities and manufacturing and so forth. You may discover corporations like Manhattan Associates, that could be a chief within the warehouse administration system, so that’s on the software program facet. You may discover a firm like Cardex, that’s primarily based in Switzerland, that makes automated storage and retrieval techniques. 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 answer for auto success, you could mainly convey into an present warehouse and automate it in a flip turnkey vogue. And so, Auto Retailer was one of the best performing inventory within the ROBO index in This autumn, it was up greater than 65%. That is coming after a really unstable yr 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% yr over yr, and enterprise that is already very worthwhile with EBITDA margins over 50%.

So, that is logistics. However as lots of you already know, 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 may be very diversified. And it is not solely throughout the 11 sectors, but additionally throughout market cap. You’ve 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 international portfolio. In truth, you’ll be able to see round 40, 45% in US shares and about 55 to 60% in one other 12 completely different international locations. And the rationale I convey this up at present is as a result of ROBO has nearly excessive publicity to Asia, at round 30%. And that is necessary 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 biggest marketplace for robots at present.

And second, it is as a result of we’re seeing China reopening and stress-free, the overwhelming majority of the COVID associated constraints which have been in place and actually holding again investments within the final two years. So with China reopening, we’re fairly optimistic on the subject of the Asian piece of ROBO. And that’s not a lot Chinese language corporations, however actually, exporters into China. So now we have about 20% in Japan. Firms like Fanook and Yaskawa in manufacturing facility robots, after which you’ve got a great variety of the know-how and market leaders in key elements that go into automated techniques, like excessive precision gears from Harmonic Drive or Nabtesco. You’ve got linear movement management from THK, you’ve got pneumatic elements from SMC and so forth. And with the massive transfer within the Japanese yen within the final 12 months, the Japanese exporters have gained a big aggressive benefit that we expect they may profit from this yr.

Now earlier than I move it on to Lisa, I need to come again to my earlier remark concerning the discrepancy between inventory costs, and the truth on the bottom within the automation trade the place demand stays very sturdy, regardless of all of the speak of recession. And I am not saying it is not going to soften, but it surely’s exceptional how the basics have remained very sturdy. And on the identical time, valuations have dramatically compressed. And so at present, the ROBO index is buying and selling round 20 occasions earnings. That’s down from a excessive of greater than 35 occasions, in 2021 on the excessive. And at present, we’re on the low cost to the long-term common valuation. And within the meantime, we see the earnings of these greatest in school robotics corporations. They’ve remained on that actually good trying progress trajectory. In truth, we’re taking a look at gross sales progress of 11% in 2022. And the expectations for this yr, 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 international equities. So with that, we’ll move it on to Lisa to debate healthcare know-how

Thanks, Jeremy. ROBO World Healthcare Know-how Innovation Index HTEC is a technique that we launched in 2019 that captures the expansion of the digital transformation that we’re seeing within the healthcare trade at present. It has a really sturdy give attention to 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 stable efficiency within the fourth quarter, growing 6.9%. The efficiency was pushed by robotics, medical devices, and diagnostic sub-sectors, which all gained double digits. Whereas beneath efficiency in the course of the quarter had been in genomics and knowledge analytics sub-sectors. General, 2022 was a difficult yr for HTEC index members versus a world market indices. So we had been actually inspired by the sturdy efficiency in the course of the fourth quarter with six of the 9 sub-sectors posting optimistic returns. HTEC index for the yr declined roughly 33% in comparison with broader market within the sea of 18% decline.

For the yr, precision drugs was one of the best performing sub-sector, down nearly 10%, whereas the genomics and knowledge analytics had 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 number 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 in addition enabling that life-saving analysis for uncommon ailments in most cancers. The index members within the house are actually reworking healthcare. The most important purpose for the selloff was that many of those corporations had been buying and selling at very excessive valuations because of the sturdy progress prospects, and buyers had been ready for the corporate to simply develop into the analysis. General, we consider the basics haven’t modified. In truth, we’re seeing breakthroughs and acceleration investments from giant pharma to medical machine makers within the genomic house.

Whereas we noticed steep selloff and possibly among the valuation resets had been obligatory, we’re already beginning to see the genomic corporations recovering from among the deep losses that we noticed up to now yr. Firms in genomics and precision drugs 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 increased than anticipated gross sales at their most cancers diagnostic take a look at. VeriCite makes use of AI enabled genomic know-how to hurry up medical analysis so docs can present early therapy for these at excessive threat for thyroid and prostate most cancers. In the meantime, Backyard Well being declined over 70% final yr, as the expansion slowed to simply lower than 20% prime line progress from 30% progress from the prior yr. They’re rising to be an necessary participant within the liquid biopsy market within the areas of colorectal most cancers.

And the shared costs could proceed to be unstable, however they do have probably the most attention-grabbing portfolios in most cancers monitoring, profiling, and diagnostics. They’re within the early levels constructing this platform and demonstrating the facility of genomics and epigenomics, which is an space that you will hear extra about within the coming quarters. Shares of backyard are already getting a great stability for the yr. We expect many of those transformers of healthcare are actually oversold as buyers de-risk their portfolios within the final yr. Precise Sciences, one other index member, which makes a speciality of most cancers diagnostics, have shared worth acquire of fifty% in the course of the fourth quarter. And [inaudible 00:14:50] however one other 20% was a great indication that these corporations had been in an oversold state of affairs. So whereas the businesses in our genomic sub-sector did expertise great volatility up to now yr, the extreme a number of compressions have additionally supplied important 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 yr. In the meantime, we’re additionally very excited concerning the medical instrument sub-sector, which holds the most important ready for HTEC at about 25%. It skilled sturdy features in the course of the quarter, pushed by hospital procedural restoration, and a really giant M and A deal for one in all our index members. In November of final yr, we noticed one of many greatest ever acquisition within the med tech trade, 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 in the course of 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 trade when it was acquired.

Whereas medical instrument sub-sector gained about 12% in the course of the quarter, it did negatively affect the attribution for the yr, as a consequence of heavy weighting of the index and ongoing provide chain disruptions that hit most 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 great innovation accelerating and environments appears to point out indicators of enchancment as individuals are getting extra checkups, and guide their appointments for his or her surgical procedures that they’ve held off in the course of the pandemic. As we glance out into the yr, 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 may be very properly positioned to learn from a lot of the secular progress drivers on the market. Thanks. And now I’ll flip to Zeno, who will focus on THNQ.

Thanks, Lisa. Now I’ll speak concerning the ROBO World Synthetic Intelligence Index THNQ, which supplies publicity to corporations world wide main the AI revolution throughout infrastructure in each broad and vertical functions which can be increasing GDP, creating new markets, and enhancing human situation. We launched the index in 2018, and the house has seen unbelievable progress and progress since that point. It will be remiss to not speak about generative AI and chat GPT, however first, we’ll cowl some This autumn highlights and efficiency. The index row is 4.4%, with a continued fall in valuation right down to round 4.7 EV gross sales on the yr 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 beneath 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 optimistic territory, with semiconductor, shopper, 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. Large knowledge and analytics was down 4.7%, and I might like to spotlight that Ford EV gross sales have dropped from a relative excessive of 13X right down to 4.2X. An organization I need to speak about shortly in that sub-sector, and massive 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 beneath all their pandemic features.

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

When you had been right here for our final name, you would possibly bear in mind me speaking about SEMI being useless, long-live semi. And at that cut-off date, SEMI had been the worst performing index of the yr, everybody was very nervous concerning 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 final, outdoors of THNQ, corporations which have increased publicity to shopper markets, PC and Cell, which is seeing a slowdown as a consequence of 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 saying a partnership with Continental for superior driverless techniques and sensible dashboards. ASML introduced plans to spice up CapEx to provide their flagship excessive ultraviolet machines.

And this anticipated increase is anticipated to generate extra six to 10 billion {dollars} in income from their steering by 2025. So, that is a reasonably huge enhance of their anticipated demand from their clients. Their clients being corporations like Taiwan Semiconductor, Intel and Samsung and different huge 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, shopper, we noticed shopper and e-commerce as leaders right here with shopper up 13% and e-commerce up 6%. The flip facet of this additionally, we had seen these two sub-sectors additionally, the opposite greatest laggers alongside semiconductor up till Q3. So we’re seeing an indication of resurgence and reversal of oversold situations, with sturdy efficiency from Shopify, Netflix, reserving.com and jd.com. Now, I might like to change again over to what I previewed earlier, which was generative AI.

In the course of the fourth quarter, we noticed the introduction of the publicly accessible Chat GPT, which is from Open AI, which is partnered with and runs on index member, Microsoft’s Azure AI platform. So I feel everybody’s pondering proper now, what finish markets, enterprises, human conduct modifications may very well be affected? And the way does that change the circulation of worth throughout society in organizations and governments? We anticipate 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 going through tech equivalent to Chat GPT, which is what is accessible for us to play with proper now. And so we anticipate 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 will be affected right here. As a reminder, Microsoft acquired Nuance, which supplies conversational AI and instruments for healthcare equivalent to transcribing.

And we’re excited to see how that might assist scale back administrative burden within the healthcare house. And general, we’re excited to see what will be constructed to enhance optimistic 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 elements 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 principle. So you have received different index members equivalent to Pure Storage, Arista networks. After which many different involvement software program improvement and developer operations which can be within the index, that present ongoing software program help and instruments to maintain this uptime. To verify it is operating securely. So we anticipate 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 almost 50% of organizations that they surveyed have no less than one enterprise unit using AI, with the very 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 when it comes to adoption and spend within the house. And we anticipate, for instance, generative AI to be probably 100 billion plus trade over the subsequent decade because it turns into extra built-in into completely different merchandise and components of our lives. And I might like to spotlight that whereas we’re seeing report layoffs, AI spend is anticipated to speed up this yr. 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 might wish to move it again to Jeremie, and yeah.

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. And I need to remind everyone that on the finish of final yr, we revealed our 2023 developments report by which most of the extra thrilling progress tales round robotics, healthcare know-how and AI are defined intimately. So please check with that, report’s accessible on our web site at globalglobal.com.