Q2 2022 Materialise NV Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
The.
[music].
Okay.
Good day, and thank you for standing by.
Welcome to the Q2, 2022 materialized Nv's financial results conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
And to ask a question during the session you will need to process star one on your telephone.
Please be advised that this conference is being recorded.
I would now like to hand, the conference over to your speaker today Hyatt freed from early Shane. Please go ahead.
Thank you for joining us today for Materialise. This quarterly conference call with us on the call are free and founder.
<unk> founder and Chief Executive Officer of Materialise.
<unk> executive Chairman and Johan Albrecht Chief Financial Officer.
Today's call and webcast are being accompanied by a slide presentation that reviews, Materialises strategic financial and operational performance for the second quarter 'twenty two.
To access the slides if you haven't already done so.
If you go to the Investor Relations section of the company's website at Www Dot serialize Dot com.
The earnings release that was issued earlier today can also be found on that page.
Before we get started I'd like to remind you that management may make forward looking statements regarding the companys plans expectations and growth.
Among other things.
These forward looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed.
Including competitive dynamics and industry change any.
Any forward looking statements, including those related to the company's future results and activities represent management's estimates.
It should not be relied upon representing their estimates as of any subsequent date.
Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
A more detailed description of the risks uncertainties and other factors that could impact the company's future business or financial results can be found in the company's most recent annual report on form 20-F filed with the SEC.
Finally management will discuss certain non <unk> measures on today's call. A reconciliation table is contained in the earnings release and also at the end of the slide presentation.
With that introduction I'd like to turn the call over to Peter Lee Go ahead. Please Peter.
Thank you Herriot.
And thank you everyone for joining us today.
As always you can find the agenda for our call.
<unk> III.
As the first item on our agenda I will summarize the highlights of our financial results for the second quarter of 2022 then.
I will pass the floor to fleets, who will give you more insights into our active business line to.
To which we are pursuing a new vertical opportunity for our manufacturing business.
After that Johan will walk you through our second quarter numbers in more detail.
And finally I will come back to give you some observations about what we currently believe the rest of the year may bring.
When we've completed our prepared remarks, we will be as always happy to respond to any questions that you may have.
Sure.
Let's turn to slide four which summarizes the highlights of our financial results.
In the second quarter of 2022, we recorded $58 1 billion euros and revenues.
Representing a growth of almost 15% compared to last year's periods.
Also and importantly.
Deferred revenue from maintenance and license fees further decreased $3 8 million euro compared to the end of last year.
Mainly driven by the strong sales performance in our medical segment.
Yeah.
Our adjusted EBITDA for the quarter amounted to $4 2 million euro compared to $6 nine last year.
And was impacted both by our continued investments in our <unk> solutions.
And by inflation related to higher expenses in particular revenue actually grows.
Our earnings for the quarter or <unk> <unk> per share.
And with that I would like to pass the floor to fleet, who will explain the investments we plan to make an hour.
<unk> Tec business line and the market opportunities.
Brazil, Keith Thank you Peter.
Good morning, and good afternoon, everyone.
The launch of OEM, which we discussed at length during our Q1 call.
East of water.
Could show in Detroit in May.
We are in discussions with multiple parties that want to use our drawing new OEM platform.
As you know those strategic interactions.
Take time to develop.
In today's call, we wanted to discuss a major opportunity to catch sight.
Our asset team in Germany.
Let me give you some background for this decision and an explanation of its potential benefits.
Not only on our financial results, but also can offset the global warming.
You'll see some images.
Our efforts for this business on slide five on slide six.
Oh manufacturing activities.
Not only recovered to pre COVID-19 levels, but even reached a new high in Q2 2022.
They exceed the Q2.
2019 levels by more than 10%.
Importantly.
Our manufacturing business did not simply bounced back to pre COVID-19 levels.
<unk> also significantly changed its focus.
What we believe are the most promising segments and verticals for TD printing.
In executing this strategy, we have significantly reduced the loan of the automotive sector in our plastics manufacturing activities.
Compared to last year.
Our contract manufacturing business.
Industrial goods and medical device projects grew 25%.
While automotive projects remained stable at a low level of 2021.
Although the market was rising in 2022, we have refused to grow low margin automotive prototyping project in plastics.
Instead in the legacy automotive subcontracting, we have been focusing our efforts, where we have a large competitive edge for instance on large stereolithography parts printed with printers.
As part of the same strategy.
We encouraged acetate.
Is also focusing on the automotive sector, but exclusively on the metal side to bring its metal parts turnover.
As possible.
The pre COVID-19 levels.
Importantly.
In this process.
Our team at access has strategically positioned product mix.
Multiple opportunities for the future.
This repositioning of the.
Product offering is seamlessly aligned with at least two major trends within the automotive industry.
First.
The biggest legacy business of architect what situated around the development of new internal combustion engines for passengers.
Pretty decent gate and pre Covid.
The combination of both the diesel gate and the Covid crisis.
Our asset turnover by 50% early 2020.
Since then.
Marketing has shifted its focus from small cylinder blocks and turbo Chargers.
Two complex cost components for electric car Drivetrains and Chelsea.
As the entire automotive sector is under immense time pressure to launch new electric passenger cars.
The timing shift of focus of our active sales teams to electrification has allowed.
To gradually return its revenues to nominal business levels.
Sustainable margins.
Second.
The size of the components that are active factory can handle to send your printing has increased in size and weight.
Opening new market opportunities in agricultural mining construction and marine vehicles.
For this sector.
The market expect a long term business opportunity for a while.
<unk> of small cities or so called <unk> in heavy parts for the large engines.
Winter diverse a diverse portfolio of energy sources.
For instance, hydrogen and other dialysis or view biofuels.
Alternative fuels.
Is it expected that these alternative to electric engines will be needed in batteries will be shorted supply and too heavy for the intended use.
Our sales team.
Rapidly increasing activity in this market.
Important to note that while the number of developers.
An alternative systems is even larger than in the passenger car market.
The global.
Army is putting.
Acute time pressures on the companies in those markets.
And they were used to long development cycles.
Therefore, they are now turning to architect for fast and reliable prototyping solutions.
There are more than prototypes opportunities here.
The complexity of dose parks, you think leasing to get better thermodynamic cycles in the engine.
Maximum fuel efficiency.
This turns the combination of high precision printing and costing into a production technology for the small cities.
It also implies that the new generation of engines for which the core components are manufactured access as a major impact on carbon dioxide reduction.
So the older generation of engines.
The transition from peak production prototypes to small series is already happening today.
We believe we are uniquely positioned to help scale it.
Especially.
Because we have a unique combination of all of our technologies and skills that are required to address this niche market.
Sand printing molds assembly metal casting and all of the needed.
Flex post processing steps, including <unk> million.
The analogy.
I mean, the opportunity that presents itself in this huge and has a subsection of the automotive market and.
And the opportunity that we emphasized in other medical and paramedical practices is obvious.
Three D printing is a key part of the solution.
And the only way to capture all the value is by being able to integrate the three D printed parts into a broader solution.
The offering of the flu.
Oh in solution is significantly more valuable for the customer.
And that's higher margin potential.
And the offering of <unk>.
Subcontractor.
<unk>.
If I could have just decided to invest in an exit plan of 9000 square meter.
Our existing asset Texas.
The new plant will be dedicated to CNC milling and quality control operations.
This will create space to increase <unk> printing mobile assembly and casting operations in the Orca.
In order to expand our production capacity, we are planning a total investment of 23 million euro in the coming years.
Which will double.
Tax capacity.
Doing so well.
We'll develop the alphatec activities as a vertical specialized in high value high impact vehicle components that are a meaningful three D printing application.
This investment project fully supports our drive to create choices for sustainability through additive manufacturing and <unk>.
Let me now pass the call to Johan.
Thank you <unk>.
It begins with a brief review of our consolidated revenue on slide seven.
As a reminder, when we.
We refer to sales in our presentation, we mean revenues plus change in deferred revenues.
Also please note that unless otherwise stated.
In this role up against our results for the second quarter of 2021.
Revenue increased 15% to $58 1 billion euros.
The increase took place in all three segments.
The growth in our software segment, plus 6% political signals grew by 19% of revenue <unk>.
Increased 14%.
Importantly, deferred revenues from software license and maintenance fees further increased and were up $3 8 million euro compared to the end of last year further underscoring the strong software sales performance was in our medical segment.
For the second quarter of 2022, let's utilize software adult towards 18% of our total revenue with <unk> medical for two to six and materials for the future.
446%.
Cost segments revenue from software products represented 13% over total revenue.
Moving to slide eight you will see our consolidated adjusted EBITDA numbers for the second quarter of 2022.
Consolidated adjusted EBITDA was $4 million 240000, euro compared to $6 million 925000 for the same period last year.
But adjusted EBITDA reflected the negative effect of our investments in new business labor resources inflation.
Slide nine summarizes the results of our Materialise software segment.
Software revenue increased 6% to 100% to $10 million 642000 judo.
Risen by a 12, 7% sales drop that renewed licenses.
By usage from deferred revenue.
Revenue from recurring sales decreased nine 5%.
We look forward to converting the positive feedback we've received.
<unk> or <unk> platform and applications into significant sales growth.
We expect to see these effects only in the midterm because with the introduction time of it.
Because of the nature of the cloud solutions, we offer.
In fact, the typical cloud pricing model will have a temporary negative impact on revenue growth in the beginning as a result of recognition of sales.
Boost growth through renewed and growing licenses and services.
EBITDA margin was seven 7% or 821 sells and bureau, compared to $3 1 million last year.
The investments in our new <unk> business reached all the segments EBITDA as we increased our R&D efforts by 73% of our sales and marketing expenditures by 31%.
Moving now to slide 10, you will see that materialize medicals continued growing at a solid double digit pace of 19%.
Both from software and medical devices solutions.
Software sales, even grew by 52% of which 2 million, mostly hurts is the revenue recognition.
Adjusted EBITDA amounted to $4 5 million euro at the same level of last year.
Our EBITDA margin decreased to 21, 5% as a result of various effects first the portion of revenue in our Salesforce complex implantable medical devices increased significantly.
We continued investing in people and in R&D and sales and marketing to sustain our growth and new business lines.
<unk>.
<unk> of inflation and the war for talent impacts us our results earlier to the depths.
So our annual price increases.
Now, let's turn to slide 11 put an overview of the Q2 performance of our Materialise manufacturing segment.
Revenue grew 14, 2% to 26 6 million euro driven by our core manufacturing business lines.
Solid order intake also looks promising for revenue in the next few months.
New group business lines, either emotion are experiencing fluctuating quarterly growth rates that will require more time to contribute significantly to the total segment revenue.
Meanwhile, our investment programs and these businesses are ongoing.
Together with the effects of inflation labor shortages and temporary higher coastal subcontracting.
<unk> affects the segment's profit.
Adjusted EBITDA for the quarter was $1 million 581 sells in Euro 269000 euro with over last year's period.
Slide 12 provides the highlights of our income statements for the second quarter.
Gross profit margin was 55, 2% compared to 56, 1% in Q2 last year.
Our operating expenses increased 25, 1% to $33 6 million Euro.
Significantly invested in our accrual businesses, including Korea.
Expenditures in R&D increased 31% sales and marketing of those 25, so SG&A.
1% is.
As explained in the previous sections inflation and the work and tell them to also with all of our costs.
As a result of these factors to group's operating result was negative $1 million of 84000 judo compared to $2 million 471000.
Financial income for Q2 was $2 6 billion Euro and included unrealized currency exchange gains of $3 million, mainly reflecting the strong U S dollar euro position on intercompany position.
The profit for the quarter was 896000 Bureau, or <unk> <unk> per share compared to where the profits of $2.4 million.
So please turn to slide 13 for a recap of balance sheets and cash flow highlights.
At the end of the second quarter of stretch to cheat.
Sheet remains strong.
<unk> amounted to $168 1 billion.
Borrowing position further decreased to $95 million.
Cash flow from operating activities for the second quarter of 2022 was $8 6 million euros compared to $8 nine.
Capital expenditures for the quarter amounted to $6 5 million euro over.
Appointments pizza.
Thank you Johan.
Before opening the floor for questions, we want to try and give some insights into what we currently believe the remainder of 2022 will bring.
Our business performed well.
The consecutive revenue growth posted by each of our segments in the first and second quarter of this year.
Strengthens our confidence that our full year 2022 revenues.
At least 10% higher.
In the previous year.
At the beginning of the year, we announced that we intended to accelerate our investments in particular in our core platform.
And that this would result in a lower EBITDA than last year.
Since then.
Global installation and the effects of the war for talent.
Have become higher and more consistent than initially expected.
Despite this worsening macroeconomic circumstances.
Currently intends to continue to execute on our growth plans.
If these efforts will weigh more on our bottom line this year than we had initially anticipated.
As a result.
We currently expect that our consolidated EBITDA for the full year 2022 will be in the range.
20 to 25 million euros.
With this I would like to conclude our prepared remarks.
Operator, you can now open the call to questions.
Alright. Thank you so as a reminder to ask a question you will need to press star one on your telephone.
Once again that would be star then the number one on your telephone.
Please stand by while we compile the Q&A roster.
Okay.
Yeah.
Our first question comes from the line of Jason <unk> from Keybanc. Please go ahead.
That's great. Thanks for taking my question.
Nice to see.
The new growth opportunities, but then a C tech.
The new plant.
To capitalize on that.
Should we think about the timing of the.
$23 million investment what you talked about.
Hello.
First portion is going to <unk> acquisition of the of the building.
And that's in the order of magnitude of.
Six to 7 million Euro as it will include also some renovation works on this.
On this building.
And as of next year, we will be able to start installing the equipment.
Yes.
Gordon.
Our investments will be in order of magnitude.
$10 million in 2023.
The remainder of <unk>.
$7 million in 2020.
Okay perfect.
And then I don't know.
But he does turn over of that is related to this investment.
Yes.
To some extent.
Already stocking up yet.
But we try to handle some of it through subcontracting.
Well yeah.
Only be handled internally as of the second half of next year.
Yeah.
Okay perfect. Thank you that makes sense.
Staying on the manufacturing segment.
Very solid performance.
Talked about good order intake for the rest of the year.
But.
Did you see any pull in into the second quarter or is it just.
Broad based strength.
Excuse me I didn't fully understand the question did we see any cooling what did you see.
I mentioned, Poland any order.
Bill in the second quarter that may have come from prior quarters.
Upcoming.
The coming quarter.
Well I.
I can tell you that that order intake and invoicing work like an equilibrium.
No.
Order intake is still very solid at this moment.
Okay excellent I'll pass it onto the next bigger.
Okay.
Thank you Jason.
Yes.
Alright, one moment, while we opened up to next question.
Your next question comes from the well.
Noelle Dilts from Stifel. Please go ahead.
Hi, guys good morning.
Good morning.
Hey, good morning, So first I was just hoping when you when you sort of look at the increments.
Incremental headwinds to the profitability this year from inflation in the war for talent could you, maybe just kind of parse out which is more impactful and I guess the reason I'm asking that question is just to think about you know it could be that could be the almonds worse than in the back half of the year.
Or do you feel like you've got a pretty good handle on on how things are sort of the forward trajectory at this point any thoughts around that would be great. Thank you.
Yeah.
Well, if you look at our cost base.
OTC is remuneration for the knowledge company that we are.
So the hit that's our.
Okay EBITA.
Taking is definitely.
To a large extent associated with it.
Increased remediation costs that on the one hand.
Flow from the fact that we definitely want to keep as much talent as we currently have on board.
And on the other hands.
As we want to continue to grow and we want to continue to further invest.
Key new talent onboard.
Also requires.
Yes, more in investments than we had initially.
Initially anticipated.
Increased remuneration costs because of that war for talent definitely.
It's a very significant parts.
The increased total expenses that we are that we are experiencing.
And second of course and that also weighs as you have seen somewhat on our gross margin.
And I think you should take costs supplies of materials also of course, there has increased.
Which also weighed on our.
On our results as Johan has already indicated.
During his initial remarks.
We have not been able to just because of a timing effect not been able to pass on these increased expenses.
Onto our customers.
For some reason just simple timing effects in other instances in particular in medical because we have contractual arrangements with our customers, which allow us to adjust prices for inflation and related increased cost at particular instances in the year.
And these events just not coincides perfectly we will only be able to adjust some of the pricing in particular in long term contracts with our medical partners in the course of the second half of the year.
Right, Okay, great and that actually ties into my second question, basically where I was going with that which as you know.
There have been it's.
It's been fairly recent developments or changes in the business, whether that's launching coapt data lake or now really expanding AC tack any changes and how you're sort of thinking about the longer term or.
Multiyear margin potential for the business. If you could just touch on how youre thinking about that that would be great. Thank you.
Again.
<unk>.
As you already indicated we are.
And we are very optimistic about our OEM platform and also about the.
The potential for margin generation that.
That that platform and the business model behind the platform.
Generate but then a strict indicated we are in discussion with a number of parties.
These discussions are disruptive for the parties because once they choose for a platform they really make a multiyear.
Engagements. So these onboarding discussions that are currently going on.
Time, and then subsequently obviously our business with these players will increase as the adoption of the pension increases.
So the.
The very solid margin.
We expect from OEM and that gives us confidence.
Our software business will go back to the 30% and 35% plus margins that it shows.
Only recently, our confidence is very high.
But that is not going to happen in the first quarter should we think it's more likely going to happen towards the end of next year.
Okay.
Great. Thank you very much.
The little jumps relates to their.
Their business on the longer term, we also expect continuation of the group that received in the medical segment.
Yes.
Yes.
Section mentions.
The promising growth of AC deck.
We will double capacity that capacity will not be doubled in revenue immediate it will take some time.
So look promising but we also will have much higher margins than traditional three D printing manufacturing business lines and then finally, we also mentioned that we continue investing in other new business lines like <unk> and motion and also that takes time, but we would not invest in that if you don't.
Outlook.
Higher revenue over the next years, which also.
Nice margins to realize.
I appreciate the color. Thank you.
[laughter].
Okay.
Alright, once again, if you'd like to ask a question you May press star one on your telephone.
There are no further questions at the moment I would now like to turn the conference back to Peter Leys for any closing remarks.
Thank you operator, and thank you all for joining us today on the call.
As always we look forward to continuing our dialogue with you through investor conferences or in one on one virtual meetings or calls. So please reach out if you have any further questions.
And for the moment I would like to thank you again say goodbye to all of you and for those of you who have a holiday ahead of you still happy holidays Goodbye for now.
Got it.
Right.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Yes.
[music].
[music].
Okay.
[music].
[music].
Good day, and thank you for standing by.
Welcome to the Q2 'twenty, it's wanted to materialize and we financial results conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
And to ask a question during the session you will need to process star one on your telephone.
Please be advised that this conference is being recorded.
I would now like to hand, the conference over to your speaker today Hyatt freed from <unk>. Please go ahead.
Thank you for joining us today for Materialise. This quarterly conference call with US on the call are free fund client founder and Chief Executive Officer of Materialise, Peter Leys, Executive Chairman and Johan Albrecht Chief Financial Officer.
Today's call and webcast are being accompanied by a slide presentation that we've used materialises strategic financial and operational performance for the second quarter of 2022.
To access the slides if you haven't already done. So please go to the Investor Relations section of the company's website at Www Dot dot.
Dot com.
Our earnings release that was issued earlier today can also be found on that page.
Before we get started I'd like to remind you that management may make forward looking statements regarding the companys plans expectations and growth.
Among other things.
These forward looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed <unk>.
Including competitive dynamics and industry change.
Any forward looking statements, including those related to the company's future results and activities represent management's estimates.
It should not be relied upon representing their estimates as of any subsequent date.
Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
A more detailed description of the risks uncertainties and other factors that could impact the company's future business or financial results can be found in the company's most recent annual report on form 20-F filed with the SEC.
Finally management will discuss certain non <unk> measures on today's call. A reconciliation table is contained in the earnings release and also at the end of this presentation.
With that introduction I'd like to turn the call over to Peter Lee Go ahead. Please Peter.
Yeah.
Thank you.
And thank you everyone for joining us today.
As always you can find the agenda for our call on slide three.
As the first item on our agenda I will summarize the highlights of our financial results for the second quarter of 2022 then.
I will pass the floor to fleets, who will give you more insights into our activation business line.
Through which we are pursuing a new vertical opportunity for our manufacturing business.
After that Johan will walk you through our second quarter numbers in more detail.
And finally I will come back to give you some observations about what we currently believe the rest of the year may bring.
When we've completed our prepared remarks, we will be as always happy to respond to any questions that you may have.
So.
Let's turn to slide four which summarizes the highlights of our financial results.
In the second quarter of 2022, we recorded $58 1 million euros in revenues.
Representing a growth of almost 15% compared to last year's periods.
Also and importantly differed revenue from maintenance and license fees further decreased $3 8 million euro compared to the end of last year.
Mainly driven by the strong sales performance in our medical segment.
Okay.
Our adjusted EBITDA for the quarter amounted to $4 2 million euro compared to $6 nine last year.
And was impacted both by our continued investments in our OEM solutions.
And by inflation related to higher expenses in particular revenue actually grows.
Our earnings for the quarter or <unk> <unk> per share.
And with that I would like to pass the floor to fleet, who will explain the investments we plan to make in our debt.
As you take a business line and the market opportunities that it presents.
Thanks.
Good morning, and put up.
One.
The launch of OEM, which we discussed at length during our Q1 call.
At least a warm welcome as a rapid show in Detroit in May.
We are in discussions with multiple parties that want to use our drug to new OEM platforms.
As you know those strategic interactions.
Take time to develop.
In today's call, we wanted to discuss a major opportunity that we have to fight.
Together with our asset team in Germany.
Let me give you some background for this decision and an explanation of its potential benefits.
Not only on our financial results, but also.
<unk> can offset the global warming.
You'll see some images illustrate our efforts for this business on slide five on slide six.
Oh manufacturing activities.
Not only recovered to pre COVID-19 levels, but even reached a new high in Q2 2022.
They exceed the Q2.
2019 levels by more than 10%.
Importantly.
Our manufacturing business did not simply bounced back to pre COVID-19 levels.
Also significantly changed its focus to what we believe are the most promising segments and verticals for three D printing.
In executing this strategy.
Have significantly reduced the loan of the automotive sector in our plastics manufacturing activities.
Compared to last year in our contract manufacturing business.
Industrial goods and medical device projects grew 25%.
While automotive projects remained stable at a low level of 2021.
Although the model to thrive in 2022, we have refused to grow low margin automotive prototyping project in plastics.
Instead in the legacy automotive subcontracting, we have been focusing our efforts, where we have a large competitive edge for instance on large stereolithography parts printed on our <unk> printers.
As part of the same strategy.
We encourage acetate, which.
Which is also focusing on the automotive sector, but exclusively on the metal side to bring its metal parts turnover as quickly as possible.
To the pre COVID-19 levels.
Importantly.
In this process.
Our team at <unk> has strategically positioned product mix.
People opportunities for the future.
This positioning of the product offering is seamlessly aligned with at least two major trends within the automotive industry.
First.
The biggest legacy business of Arctic was situated around the development of new internal combustion engines for passengers.
Three diesel gate and pre Covid.
The combination of both the DCP and the Covid crisis.
Our <unk> turnover by 50% early 2020.
Since then.
Academic has shifted its focus from small cylinder blocks and turbo Chargers.
Two complex cost components for electric car Drivetrains and Chelsea.
As the entire automotive sector is under immense time pressure to launch new electric passenger cars.
The timing shift of focus of our active sales teams to electrification has allowed <unk> to gradually return its revenues phenomenal business levels at.
Sustainable margins.
Second.
The size of the components that Arctic factory can handle to send to the printing has increased in size and weight.
Opening new market opportunities in agricultural mining construction and marine vehicles.
For the sector the.
The market expect a long term business opportunity for the <unk>.
A variety of small series of so called merchant heavy parts for large engines.
Winter diverse a diverse portfolio of energy sources.
For instance, hydrogen and other dialysis or view biofuels.
And also the alternative fuels.
It is expected that this alternative to electric engines will be needed in batteries will be shorted supply and too heavy for the intended use.
Our sales team is rapidly increasing activity in this market.
Important to note is that while the number of developers.
An alternative systems is even larger than in the passenger car market.
The global <unk>.
Putting acute time pressures on the companies in those markets.
And they were used to long development cycles.
Therefore, they are now turning to architect for fast and reliable prototyping solutions.
There are more than prototypes opportunities here.
The complexity of dose part is increasing too.
Get better thermodynamic cycles in the engine.
Maximum fuel efficiency.
This turns the combination of high precision printing and costing into a production technology for the small series.
It also implies that the new generation of engines for which the core components are manufactured at <unk> as a major impact on carbon dioxide reduction.
Virtually all of the generation of engines.
The transition from peak production prototypes to small series is already happening today.
We believe we are uniquely positioned to help scale it.
Especially because.
We have a unique combination of all of our technologies and skills that are required to address this niche market.
Sand printing multi assembly metal casting and all of the immediate complex post processing steps, including <unk> million.
The analogy between.
The opportunity that presents itself in this huge and has a subsection of the automotive market.
And the opportunity that we emphasized in other medical and paramedical practices is obvious.
Three D printing is a key part of the solution.
The only way to calculate what the value is by being able to integrate it disciplined part into a broader solution.
The offering of the flu.
All in solution is significantly more valuable for the customer.
And the higher margin potential.
And the offering of <unk>.
Printed subcontracted park.
That is five years.
To invest in an X.
Plan of 9000 square meter.
Our existing asset Texas.
The new plant will be dedicated to CNC milling and quality control operations.
This will create space to increase <unk> printing mobile assembly and casting operations in the Orca.
In order to expand our production capacity we have.
Learning a total investment of 23 million euro in the coming years.
Which will double taxed.
Tax capacity.
Doing so well.
Develop the alphatec activities as a vertical specialized in high value high impact vehicle components.
There are a meaningful three D printing application.
This investment project fully supports our drive to create choices with sustainability through additive manufacturing.
And let me know obstacle to Johan.
Thank you Pete.
With a brief review of our consolidated revenue on slide seven.
The reminder.
Sales in our presentation revenues plus change in deferred revenues.
Also please note that unless otherwise stated all purposes of this call up against our results for the second quarter of 2021.
Revenue increased 15% to $58 1 million Euro.
The increase took place in all three segments to grow.
Growth in our software segment was 6%.
<unk> signals grew by 19% of revenue <unk> increased 14%.
Importantly, deferred revenues from software license and maintenance fees further increased and were up $3 8 million euro compared to the end of last year further underscoring the strong software sales performance within our medical segment.
For the second quarter of 2022, let's utilize software adult towards 18% of our total revenue with <unk> medical for 36 and materials for the future.
446%.
Cost segments revenue from software products represented 13% over total revenue.
Moving to slide eight you will see our consolidated adjusted EBITDA numbers for the second quarter of 2022.
Consolidated adjusted EBITDA was $4 million 240000, euro compared to $6 million 925000 for the same period last year.
But adjusted EBITDA reflected the negative effects of our investments in new business Labor resources.
<unk>.
Slide nine summarizes the results of our Materialise software segment.
Software revenue increased six 1% to $10 million 642000, euro driven by a 12, 7% sales drop renewed licenses.
By usage from deferred revenue.
Revenue from non recurring sales decreased nine 5%.
We look forward to converting the positive feedback we've received on a global platform and applications into significant sales growth.
Although we expect to see these effects in the midterm because of the introduction time and because of the nature of the cloud solutions we offer.
The typical cloud pricing mobile will have a temporary negative impact on revenue growth in the beginning as a result of recognition of sales.
Boost growth through renewed and growing licenses and services.
EBITDA margin was seven 7% or 821 sells and bureau, compared to $3 1 million last year.
The investments in our new <unk> business with all the segments EBITDA as we increased our R&D efforts by 73% of our sales and marketing expenditures by 31%.
Moving now to slide 10, you will see that materialize medical's continued growing.
Solid double digit pace of 19%.
Both from software and medical devices solutions.
Software sales, even grew by 52% of which $2 million was deferred revenue recognition.
Adjusted EBITDA amounted to $4 5 million euro at the same level of last year.
EBITDA margin decreased to 21, 5% as a result of various effects.
The portion of revenue are still complex implants of medical devices increased significantly.
Second we continued investing in people and in R&D and sales and marketing to sustain our growth and new business lines.
Third the effect of inflation and the war for talent impacts us our results overview.
The depths of our annual price increases.
Now, let's turn to slide 11 for an overview of the Q2 performance of Orbitz utilized from the fracturing segment.
Revenue grew 14, 2% to 26 6 million Euro driven by our core manufacturing business lines solid order intake also looks promising for revenue in the next few months.
New group business lines, either emotion or experiencing fluctuating quarterly growth rates. It would require more time to contribute significantly to the total segment revenue.
Meanwhile, our investment programs and these businesses are outgoing together with the effects of inflation labor shortages and temporary higher coastal subcontracting.
All effects the segment's profit.
Adjusted EBITDA for the quarter was $1 million 581 sells in Euro 269 zero with over last year's period.
Slide 12 provides the highlights of our income statements for the second quarter.
Gross profit margin was 55, 2% compared to 56, 1% in Q2 last year.
Our operating expenses increased 25% to 33 6 million Euro.
We significantly invested in our accrual businesses, including Korea.
Our expenditures in R&D increased 31% sales and marketing rose 25% SG&A.
21% is.
As explained in the previous sections inflation and the work with <unk> also with all of our costs.
As a result of these factors to group's operating result was negative $1 million of 84000 judo compared to $2 million 421000.
Net financial income for Q2 was $2 6 billion Euro and included unrealized currency exchange gains of $3 million, mainly reflecting the strong U S dollar euro position on intercompany position.
The profit for the quarter was 896000 Bureau, or <unk> <unk> per share.
Compared to the profits of the $4 million.
So please turn to slide 13 for a recap of balance sheet and cash flow highlights.
At the end of the second quarter of two.
<unk> remained strong.
<unk> amounted to $168 1 billion euros.
Following positioned further decreased to $95 million.
Cash flow from operating activities for the second quarter of 2022 was $8 6 million compared to $8 2 million.
Capital.
Capital expenditures for the quarter amounted to $6 5 million Euro.
Financed Peter.
Thank you Johan.
Before opening the floor for questions, we want to try and give some insights into what we currently believe the remainder of 2022 will bring.
Our business performed well.
The consecutive revenue growth posted by each of our segments in the first and second quarter of this year.
<unk> strengthens our confidence that our full year 2022 revenues will be at least 10% higher than the previous year.
At the beginning of the year, we announced that we intended to accelerate our investments in particular in our Korean platform.
And that this would result in a lower EBITDA than last year.
Since then global installation and the effects of the war for talent.
Have become higher and more persistent than initially expected.
Despite this worsening macroeconomic circumstances.
Currently intend to continue to execute on our growth plans.
Even if these efforts will weigh more on our bottom line. This year than we had initially anticipated.
As a result, we can.
Currently expect that our consolidated EBITDA for the full year 2022.
We'll be in the range.
Of $20 million to $25 million Euro.
With this I would like to conclude our prepared remarks. So operator, you can now open the call to questions.
Alright. Thank you so as a reminder to ask a question you will need to process star one on your telephone.
Once again that would be star then the number one on your telephone.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Jason <unk> from Keybanc. Please go ahead.
Great. Thanks for taking my question.
Nice to see.
The new growth opportunities, but then AC tech.
The new plant.
To capitalize on that how should we think about the timing of that.
$23 million investment that you talked about.
Hello.
First portion is going to this year's acquisition of the of the building.
And that's in the order of magnitude of six.
Six to 7 million Euro as it will include also some renovation works on this.
On this building.
And as of next year, we will be able to start installing the equipment.
Yes.
Further.
Investments will be in order of magnitude.
$10 million in 2023.
The remaining $7 million in 2020.
Okay perfect.
And then I don't know.
Turnover of that is related to this investment.
Yes.
To some extent.
Already stocking has been yet.
But we try to handle some of it through subcontracting.
Well, yes.
Only be handled internally as of the second half of next year.
Yeah.
Okay perfect. Thank you that makes sense.
Staying on the manufacturing segment.
Very solid performance.
Talked about good order intake for the rest of the year.
But.
Did you see any pull in into the second quarter or.
Broad based strength.
Excuse me I didn't fully understand the question did we see any cooling or what did you see.
I mentioned Poland.
The order.
In the second quarter that may have come from prior quarters.
Yes.
Upcoming quarter.
Well.
I can tell you that that order intake and invoicing, we're quite an equilibrium.
So.
The order intake is still very solid at this moment.
Okay excellent I'll pass it onto the next bigger.
Okay.
Thank you Jason.
Yes.
Alright, one mainland while we open up to next question.
Your next question comes from the well.
Now from Stifel. Please go ahead.
Hi, guys good morning.
Hello, Good morning.
Hey, good morning, So first I was just hoping when you when you sort of look at the Inc.
Incremental headwinds to profitability this year from inflation in the war for talent could you, maybe just kind of parse out which is more impactful and I guess the reason I'm asking that question is just to think about it could be that could be the elements worse than in the back half of the year.
Or do you feel like you've got a pretty good handle on on how things are sort of the forward trajectory at this point any thoughts around that would be great. Thank you.
Well, if you look at our cost base.
Obviously his remuneration for the knowledge company that we are.
So the hit that's our.
EBITA is taking is definitely.
To a large extent associated with it.
Increased remediation costs that on the one hand.
So from the fact that we definitely want to keep as much talent as we currently have on board.
And on the other hands.
As we want to continue to grow and we want to continue to further invest.
Taking new talent onboard also requires.
Yes, more in investments than we had initially.
Initially anticipated so Dennis.
Increased registration costs because of that war for talent definitely.
It's a very significant parts.
<unk>.
Increased total expenses that we are that we are experiencing.
And second of course and that also weighs as you have seen somewhat on our gross margin.
Specific cost supplies of materials also of course, there has increased.
Which also weighed on our <unk>.
And our results as.
Johan has already indicated during his initial remarks.
We have not been able to just because of a timing effect not been able to pass on these increased expenses.
To our customers.
For some reason just simple timing effects in other instances in particular in medical because we have contractual arrangements with our customers, which allow us to adjust prices for inflation and related increased costs at particular instances in the year.
And <unk>.
Vince just not coincides perfectly.
We will only be able to adjust some of the pricing in particular in long term contracts with our medical partners in the course of the second half of the year.
Right, Okay, great and that actually ties into my second question, basically where I was going with that which as you know there have been it's been fairly recent developments or changes in the business, whether that's launching coapt data lake or now really expanding AC attack any changes and how you're sort of thinking about the longer term or.
Multi year margin potential for the business. If you could just touch on how youre thinking about that that would be great. Thank you.
Again.
As.
As John indicated we are.
And we're very optimistic about our OEM platform and also about the.
The potential for margin generation that.
That platform and the business model behind the platform.
We'll generate but then a strict indicated.
We are in discussion with a number of parties.
These discussions are disruptive for the parties because once they choose for a platform they really make a multiyear.
Engagement. So these onboarding discussions that are currently going on.
Time, and then subsequently obviously our business with these players will increase as their adoption of the pension increases.
So the.
They're very solid margin.
We expect from OEM and that gives us confidence that.
Our software business will go back to the 30% and 35% plus margins that it shows.
Only recently, our confidence is very high.
But that is not going to happen in the first quarter should we think it's more likely going to happen towards the end of next year.
Yeah Okay.
Great. Thank you very much.
The little jumps relates to their.
Their business on the longer term, we also expect continuation of the group that received in the medical segment.
Okay.
And as.
Section mentions.
The promising growth of AC deck.
We will double capacity that capacity will not be doubled in revenue immediately it will take some time.
So looks promising but we also will have much higher margins than traditional three D printing manufacturing business lines and then finally, we also mentioned that we continue investing in other new business lines like <unk> and motion and also that takes time, but we would not invest in that if you don't.
Outlook.
Higher revenue over the next years with also.
Nice margins to realize.
I appreciate the color. Thank you.
Yes.
Okay.
Alright, once again, if you'd like to ask a question you May press star one on your telephone.
There are no further questions at the moment I would now like to turn the conference back to Peter Leys for any closing remarks.
Thank you operator, and thank you all for joining us today on the call.
As always we look forward to continuing our dialogue with you through investor conferences or in one on one virtual meetings or calls. So please reach out if you have any further questions.
And for the moment I would like to thank you again.
Goodbye to all of you and for those of you who have a holiday ahead of you still happy holidays Goodbye for now.
Got it.
Right.
This concludes today's conference call. Thank you for participating you may now disconnect.