Sherin CEO Bets on AI Amidst Growing Losses and Falling Revenue
Sherin CEO Tzafrir Engellard sees artificial intelligence as a key to accelerating product development and offering diamond manufacturers more efficient operations. However, the company is struggling to translate its technological advancements into improved financial results, with revenues declining, losses widening, and the stock price dropping nearly 30% year-to-date. Engellard stated that AI is making the company more productive and significantly enhancing its ability to innovate and experiment with new product ideas and solutions at a faster pace. These remarks were made at a CIBJO conference in Italy.
Sherin Technologies, founded in 1988 and based in Hod Hasharon, develops systems for planning, mapping, measuring, and grading diamonds. The company supplies technology to manufacturers and other industry players, making it vulnerable to reduced diamond processing or delayed investments by its clients. The increasing competition from laboratory-grown diamonds also adds pressure to the natural diamond industry and its suppliers.
The company's MVP system aims to automate rough diamond planning for maximum value extraction. Engellard highlighted that AI is crucial for accelerating the development behind these capabilities, which can offer increasing value to clients amidst volatile rough diamond supplies. While the MVP system's revenues more than doubled in the first half of the year from a small base, and its GCAL diamond grading service grew over 50%, these gains have not offset overall company performance.
In the first half of the year, Sherin's revenues decreased by approximately 6% to $14.4 million. The operating loss was $2.2 million, and the net loss deepened to about $3.5 million, compared to $0.2 million in the same period last year. Although the gross profit margin improved slightly to 59%, operating expenses rose by about 25%. Factors such as a strengthening shekel, tax expenses, and Sherin's share in polarization losses contributed to the increased net loss.
Sherin projects continued adoption of MVP in the latter half of 2026 and service growth in 2027, but these are operational expectations without a guaranteed return to profitability. A significant increase in overall revenue, estimated at around 26% above current levels to cover the operating loss, would be needed to reach operational breakeven, assuming current gross margins and operating expenses remain stable. As of late June, Sherin held approximately $19.7 million in cash and deposits, providing runway for continued development and sales, but not guaranteeing investment returns. The company's stock was trading at 40.9 agorot on September 10th, with a market cap of about 139 million shekels, reflecting a decline of nearly 29.5% since the start of the year.
