Q3 2022 Materialise NV Earnings Call
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As Johan during Q&A, you can dial star one one.
[music].
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Yeah.
Yeah.
Good day and thank you for standing by welcome to the Q3 2020 to materialize financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand is Reyes. Please.
Be advised that today's conference is being recorded I would now like to hand, the conference over to Sherri afraid of Elly Chen. Please go ahead.
Thank you for joining us today for Materialise. This quarterly conference call with US on the call are free Bun Crumb, 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 reviews, Materialises strategic financial and operational performance for the third quarter of 2022 to access the slides if you've not already done. So please go to the Investor Relations section of the company's website. The earnings press release 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 prospects among other things.
These forward looking statements are subject to known and unknown certainties, uncertainties and risks that could cause actual results to differ materially from the expectations expressed including competitive dynamics and industry change.
Any forward looking statements, including those related to the company's future results and activities represent managements estimates as of today and should not be relied upon as representing their estimates 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 results the risks and uncertainties and other factors that may impact the companys 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 conference call. A reconciliation table is contained in the earnings release and at the end of todays slide presentation.
With that I'd like to turn the call over to Peter Leys. Please go ahead Peter.
Sure.
Thank you.
Yes.
And thank you everyone for joining us today.
You can find as always.
Tender for this call on slide number three.
As the first item on our agenda I will set the stage by summarizing the highlights of our financial results for the first quarter.
Then I will pass the floor to <unk>, who will walk you through some of our recent business successes and initiatives.
After that.
Johan will go through our third quarter numbers in more detail and finally I will come back to give you. Some very quick observations about what we currently believe the last few months of the year may bring.
And when we have completed our prepared remarks.
As always we will be happy to take in response.
Yes.
So, let's turn to slide number four which summarizes the highlights of our financial results.
In the third quarter of 2022.
Record at 58 3 million Euro revenues.
Representing a growth of almost 20%, 12% compared to last year's period.
Also.
Deferred revenue from maintenance and license fees further increased $3 2 million euro compared to the end of last year.
Driven by strong sales performances of our medical segment.
Okay.
Our adjusted EBITDA for the quarter amounted to five 1 billion euro compared to $9 7 million Euro last year.
<unk> was impacted by both our continued investments in particular in our Korean software solutions.
But also by inflation related higher expenses.
In particular revenue ratio costs.
Our earnings per share for the quarter worked through sales.
And with this I would like now to pass the floor to <unk>.
Thank you Peter good morning, or good afternoon to all of you listening to this call.
Season.
In the current uncertain economic climate.
<unk> is consistently posting double digit growth.
Investing in a sustainable future.
Materialise manufacturing.
That's a 14% growth in Q3 on a business that is going to exceed 100 million euro.
This result is a combination of the reliable and profitable rapid prototyping activity in the mature markets and in <unk>.
Growth of our certified manufacturing activities in selected vertical segments, such as aerospace.
Alternative drive systems and Wearables.
And those we are building on early proven and long term scalable opportunities for additive manufacturing.
In aerospace we have been consistently growing our customer base beyond our long standing relation with Airbus.
In last year's Q3 call, we talked about a material contribution to the veto of lift aircraft.
Currently.
In regular production.
A recent project that we can communicate about.
As shown on slide five.
It is the production of 60 components firstly.
Our new series of areas supervisor drones for the company ethanol.
At the beginning of 2022.
We indicated we would invest in the future this year and we are doing so consistently.
During our Q2 call, we announced the acquisition of a second plant for Arctic.
This quarter, we launched a complete new materialized puts <unk> suite for Materialise motion.
And this one is illustrated on slide six.
Is this is a result of a major product portfolio upgrade the years after integrating at Essakane and at our sprint into the newly formed materialized motion.
The new foods and software is now CE.
Certified medical device and the fifth Bruce Insoles form a complete new line of medical grade personalized installs.
Based on years of scientific research and collaborations with multiple academic institutes two gated specific technologies.
In place of inflation is raising on the current investments.
The outcome in the longer term looks very promising.
Materialise medical.
<unk> also consistently maintaining a double digit growth rate.
In ever increasing numbers.
This is true both for the three D printed medical device business and for the medical device software.
In the medical device business, we are increasing our number of OEM partnerships in the auto segment.
Drilling booth, our partner sales and direct sales.
In that segment.
Simultaneously we.
Increasing our presence in medical device companies and point of care settings in hospitals.
Our surgical planning platforms are systematically being extended from the workstation based mimics.
Sweet and mimic in light planning environment.
Two cloud based mimics platform planning systems.
Those combined the benefits of our global clinical engineering services.
With the increasing use of artificial intelligence based automation.
This is a variety of solutions allows us to gauge of the need of large medical device companies with proprietary solutions.
Well those are smaller companies that preferred are more out of the box approach.
This combination is the most complete offering in the industry.
It is important for companies to develop new devices or hospitals develop new therapies.
From the initial R&D space over the clinical studies phase II.
The scale and pace with.
With dedicated teams for each of those phases.
It is obvious.
That's in a world with increasing cyber security and privacy threats.
All of the successful.
Certified applications listed above.
Need a secure software platform.
That is why we acquired identified <unk> in September .
Identified treaty has a proven software toolkit that has been field tested by companies and government organizations to allow distributions.
Europe entities manufacturing operations and supply chain.
The tools of identified three D.
Immediately compatible with the Coram platform we lost.
Earlier this year.
Even more important is that we can build on the extensive experience of the identified team to advise our customers and configuring and implementing get onto fewer version of Korea.
Coram is currently operational at multiple customer sites.
The use of Coram will also accelerate our own manufacturing and medical production lines.
And we will be proud to announce a new set of partnerships at four onex, which go in.
Municipal and software suppliers and machine Oems are joining the platform.
We are looking forward to announce dose in two weeks at four onex.
And we hope to see you there as well.
Thank you for your attention and over to Johan.
Thank you Frank.
I'll begin with the brief review of our consolidated revenue on slide seven.
Please note that unless otherwise stated all comparisons in this call other guns the results for the third quarter of 2022.
'twenty one.
Great.
Revenue increased 12% to $58 3 million Euro the increase took place in all three segments.
Growth in our sector.
Growth in our software segment was 4%.
Medical segment grew by 13% and revenue in manufacturing increased 14%.
Importantly, deferred revenues from software license and maintenance fees further increased.
$3 2 million euro compared to the end of last year further underscoring the strong software sales performance within our medical segment.
For the third quarter of 2022, Materialise software accounted for 18% over total revenue Materialise medical for 37, and Materialise manufacturing for 45%.
Those segments revenue from software products represented 31% over total revenue.
Moving to slide eight you will see our consolidated adjusted EBITDA numbers for the third quarter of 2022.
Consolidated adjusted EBITDA was $5 million of 72000 zero compared to 9.739 million for the same period last year.
But adjusted EBITDA reflected the negative effect from the investments in our new businesses linked <unk> identified three D.
Labor cost inflation.
Slide nine summarizes the results of our Materialise software segment.
Software revenue increased three 8% to $10 million 863000 Bureau, supported by 37% of sales from renewed licenses and by usage from deferred revenue.
Revenue from non recurring sales decreased 12% as mentioned in our Q2 earnings call. It will take some time to convert the positive feedback we've received on our crude.
Platform and applications into significant sales growth.
We expect to see this growth only in mid term and the midterm because of the introduction time required and because of the nature of the cloud solutions. We offer in fact at the beginning of the typical cloud pricing model has a temporary negative impact on revenue growth as a result of the recognition of sales.
But then Bruce growth through renewed and growing licenses and services.
In the third quarter EBITDA margin was one 9% with 202000 judo compared to $3 million $700.
Zero.
Accelerated investments in our new COO.
<unk> business, which vessel September also include.
Expenditures of identified three weeks.
On the investment on the segment's EBITDA as we increased our R&D efforts by 103%.
Moving now to slide 10, you will see that materialize medical continued growing at a solid double digit pace of 13%.
<unk> increased from software of 19%.
Medical devices solutions, 10%.
Software sales, even grew 32% partly deferred in terms of revenue recognition.
Adjusted EBITDA amounted to $4 million 765000, Juno compared to $5 million 251000 last year.
Our EBITDA margin decreased to 22, 3% as a result of various effects.
The portion of revenue or sales from complex implants of medical devices increased significantly.
We continued investing in people and in our.
R&D and sales and marketing to sustain our growth and new business lines and third the effects of inflation and the war for talent impacted our results before we could get Jumpstarted annual price increases.
Now, let's turn to slide 11 for an overview of the Q3 performance materialized from the fracturing segments.
Revenue grew 14, 1% to 26 million euro driven by core manufacturing business lines by the automotive market in particular.
So that the order intake ultra looks promising for revenue in the next few months.
Our new growth business lines, either in motion are experiencing fluctuating quarterly growth rates and will require more time to contribute significantly to the total segments revenue.
Meanwhile, our investment programs and these businesses are ongoing.
Together with the effects of inflation labor shortages and temporary higher costs for subcontracting affects the segment's profit.
Adjusted EBITDA for the quarter amounted to 2.530 million Bureau, and an EBITDA margin of nine 7% compared to $3 million 546000 last year.
Slide 12 provides the highlights of our income statements for the first quarter.
Gross profit margin was 55% compared to $59 five in Q3 last year.
Operating expenses increased $6 6 million euro or 24, 5% to $33 5 million Euro.
We invested significantly in our group businesses, including linked to the ounces in September also identified three D. R.
Our expenditures in R&D increased 41% sales and marketing those 'twenty, two and G&A grew was up 14%.
As explained in the previous sections inflation on the war for talent also rates on our costs.
As a result of these factors. The group's operating result was negative 282000 judo compared to $4 million 529000 Euro.
Net financial income for Q3 was $2 million 173 cells in Juneau and included currency exchange gains of $2 7 million, mainly reflecting the strong U S dollar euro position on intercompany positions.
Net profit for the quarter was 1.413 million Euro two euro cents per share compared to a net profit of 8.657 million Euro.
Now please turn to slide 13 for a recap of balance sheet and cash flow highlights.
Until the third quarter of 2022, our balance sheet remains strong cash amounted to $150 6 million Euro borrowings position further decreased to $83 9 million cash.
Cash flow from operating activities for the third quarter of 2022 was $3 8 million euro compared to $4 4 million.
Capital expenditures for the quarter amounted to $9 4 million Euro and included the purchase of a building to support the expansion of electric issued Dec business lines in Germany.
Also this quarter capital expenditures were more trainers.
After the close of the third quarter.
<unk> into our credit facility agreement with KBC Bank.
Provides for drawing a total of 50 million euro during the next three and a half years at fixed interest rates and with full capital reimbursements between 2030 and 2033.
This agreement to further strengthen our cash position in the future.
P J.
Thank you Johan.
Before opening the floor for questions.
Glad to confirm that the consolidation of identified.
In our numbers as of September 30 of 2022.
We will not impact the financial guidance that we have provided earlier for the entire year.
In other words, we expect our revenues to increase by at least 10% compared to last year and we expect to post a full year adjusted EBITDA This year.
In 2020 $5 million.
This concludes our prepared remarks, operator, we're now ready to open the call for questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.
Okay.
Our first question comes from Jacob <unk> from Lake Street Capital. Please go ahead.
Yeah, Hey, Thanks for taking my question Congrats on the great results.
Maybe looking at the medical software side.
<unk>.
Was that primarily from a single customer or.
Is that just broad strength across the healthcare industry.
Wanted to say, it's absolutely a growth a growth industry.
Covering multiple.
Medical segment like.
Yes.
<unk> candela vascular neurology and currently a maxillofacial segments.
Okay and.
Have you started to see any early indications that sales cycles on software are like.
Lengthening just given the environment that we're entering.
As our numbers show not on the medical side.
We do see yes.
Yes.
<unk>.
The investments happening on the industrial side.
Okay.
And maybe just on the.
Inflationary cost have you been able to pass any of these sub contractor.
Increased wages, our materials prices onto your customers at all.
And what kind of what have you guys been doing around that.
Well, we absolutely are.
Doing so.
Well for.
Some of our thoughts.
Activities for instance, rapid prototyping.
Can adjust our price levels I would say on a daily basis.
But.
That's not really happening at all to that on a regular basis monthly goes to <unk>.
However for all the bigger contracts.
We normally include indexation clauses that happened only once a year.
And for instance, the very basic medical contracts.
They are.
Typically once a year adjusted in function of price indexes.
Okay.
Paul.
I'll take the rest of my questions offline. Thanks.
Thank you.
Thank you.
Our next question comes from Noelle Dilts with Stifel.
Hi.
Thanks for taking my questions and congrats on the good results.
First I was just hoping you could comment on just how you're thinking about some of the risks that are out there.
Obviously, a lot of concern around what might happen with energy in Europe .
Can you just.
Give us some thoughts on how youre thinking about them, maybe even if you're looking out into 'twenty three how youre thinking about some of those risks and.
Where do you think your business will be more resilient and lesser itself.
Potentially in a weaker economy.
Yes.
I would like to say that.
We believe we will show.
Resilience.
Because in a more difficult supply chain economics.
We are seeing good evening evidence that yes.
People turn more and more to additive manufacturing so while.
There may be a recession.
We still believe that the additive manufacturing or the <unk> printing industry is going to grow also in the coming year or years, that's the first fundamental.
We have to wait.
We will be able to benefit from.
Secondly.
Materialized has been attaching.
<unk>.
Yes.
The sustainability and as a consequence, we have in the previous years already shifted to.
Renewable electricity contracts.
Which will also help us in the future to moderate the <unk>.
Impact of increasing energy prices.
Be it that it was not totally offset the overall market dynamics.
Okay, Great. That's very helpful. And then could you just expand upon on the on the labor front with the talent, Brian how are you.
What are you seeing in terms of finding the people that you need and retaining folks could you just comment on that thanks.
Yes.
What we can what we have been doing in the in the past there and something that is something that we're really really benefiting from now is we have talent sensors and competent centers across the globe.
We source our talent.
In Western Europe , but also in eastern Europe , including kiosks, and actually we continue to hire.
But we also have very important talent sensors as you know and then in the east and in the U S. Both in North America, but also in South America in Colombia in the East we have an increasing talent pool in Kuala Lumpur.
And here in Europe , not only stores our people at HQ that we're also actively looking for talent in finding talent in important countries like Germany and also the step we're moving to the south countries like Spain, and the likes so by now.
Now by having this growth through global pool of places, where we could actually source talent and where we already have the people that are present on the markets and can actively talk to new recruits.
We think that we can.
The issue of the war for talent.
Be it that even with this broad reach for talent that we have.
It remains it remains a difficult market and pressure on remuneration, obviously as we've explained earlier.
There and it's probably going to be still there and that in the coming quarters.
Okay. Thanks, very much I appreciate it.
Sure.
Thank you as a reminder to ask a question. Please press star one on your telephone.
Our next question comes from Alexander <unk> of Kepler.
Please go ahead.
Yes, Hello, sorry, I got it from cover I was just wondering if you could just give us some more granularity on what exactly was the impact of the enrollment from wage inflation and then also the higher investment costs from the linked <unk> identified treaty.
I was just wondering that because especially in the software segment is difficult to split out the effect and then and then a second question on the on the medical contracts, where you say that you are just once a year I was just wondering what the timing exactly what's the bulk of the contract timing and that and does it also adjust.
The wage inflation next year, because if I remember correctly.
If a large.
Which grew in Belgium, So I guess that there it will be indexed to inflation just wondering.
I will start.
Okay.
I think let me answer the second question.
First and then ill come back to the first one I just note also make sure that we fully understood.
The indication for losses on the large.
Medical contracts.
Dave will take place they typically take place and at the end of the year.
So that is something that will be coming coming soon in other words and this year, we have not been able to fully recover.
Our increase in freight costs in these large contracts with our larger medical device partners.
The contracts have been dropped.
A very standard and very straightforward way of referring to the Belgium index and so that will allow us.
You'll recall recover quite a bit of insight. It also inflated remuneration, including as a results of the automatic indication of red ratios in Belgium, which is a unique feature that I am sure you are very much.
Ralph.
With respect to your first question.
Alexander I, we may I may not have taken note of all of the parts of your question, but you were asking to what extent.
Linda <unk> and identified three D R.
Impact on increased costs is that correct.
Yeah. So basically you have your R&D don't split it up between 2 million approximately and then you also have like the marketing expenses went up $3 million I was just wondering how much is that related to wage inflation, how much is related to our <unk> to increase.
Higher investments due to link <unk> et cetera.
Would be a split.
Yes, I know the wages of course around 10%.
Or 7%.
I'm just wondering how much of it exactly.
So it's hard to give you.
An exact number but if you look at the variance compared to last year's quarter you.
You see the difference in EBITDA off of that.
<unk> is due to the higher investments in awful for the divestiture because of the cost increase of the inflation that could not immediately be.
Calculated to certain customers.
Okay and could you maybe give us a then on linked to again identify Judy specifically a bit of a large team.
But that's effectively what I'm, saying so the difference between the EBITDA of Q3 'twenty one 'twenty.
Too often the difference is due to the investments in the <unk>.
<unk> identified three D.
Right.
Okay.
Yeah.
Alright, that's perfect and then just one final question. So I remember a couple of calls ago. You mentioned that you were that you would go back in the software segment to the EBITDA margin of 30% 35%.
By the end of next year are you still confident you will you will reach that level or do we have to think that.
A bit on.
The weakness that we have seen recently.
Yeah, just a question if thats still maintainable and this high inflationary environment.
Alexander just referred to my previous response, we should have said that we are investing a lot in the new business was off limits and I didn't quite get it.
Part of this whole fish segments. So as I mentioned also in the prepared remarks.
It will not come immediately on short term all the large profits from this new business will take a little bit more time.
Okay.
Alright.
Thank you for that.
That's all for me.
Thanks, a lot.
No.
Thank you I am seeing no further questions I'd now like to turn it back to management for closing remarks.
Thank you operator.
Again, thank you all for joining us on the call today.
We obviously look forward to seeing some of you at <unk>.
And to continuing our dialogue with all of you throw at investor conferences or through one on one virtual meetings or calls so.
If you have any questions. Please feel free to reach out.
Thank you again and goodbye for now.
Goodbye Bye.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Good day and thank you for standing by welcome to the Q3 2020 to materialize financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will.
Then here an automated message advising your hand is Reyes. Please be advised that today's conference is being recorded I would now like to hand, the conference over to Harriet fried of <unk>. Please go ahead.
Thank you for joining us today for Materialise. This quarterly conference call with US on the call are free Hong Kong, 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 reviews, Materialises strategic financial and operational performance for the third quarter of 2022 to access the slides if you've not already done. So please go to the Investor Relations section of the company's website. The earnings press release 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 prospects among other things.
These forward looking statements are subject to known and unknown uncertainties, uncertainties and risks that could cause actual results to differ materially from the expectations expressed including competitive dynamics and industry change any forward.
Looking statements, including those related to the company's future results and activities represent managements estimates as of today and should not be relied upon as representing their estimates at any subsequent day.
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 result, the risks and uncertainties and other factors that may impact the companys 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 conference call.
Conciliation tables contained in the earnings release and at the end of todays slide presentation.
With that I'd like to turn the call over to Peter Leys. Please go ahead Peter.
Yes.
And thank you everyone for joining us today.
You can find as always the agenda for this call on slide number three.
As the first item on our agenda I will set the stage by covering the highlights of our financial results for the first quarter.
Then I will pass the floor to fleet.
Who will walk you through some of our recent business successes and initiatives.
After that Johan.
We will go through our third quarter numbers in more detail and finally I will come back to give you. Some very quick observations about what we currently believe the last few months of the year may bring.
And when we have completed our prepared remarks.
As always we'll be happy to take in response your questions.
Sure.
Let's turn to slide number four.
Summarizes the highlights of our financial results.
In the third quarter of 2022.
Recorded $58 3 million Euro revenues.
Representing a growth of almost 20%, 12% compared to last year's period.
So.
Deferred revenue from maintenance and license fees further increased $3 2 million euro compared to the end of last year, which was driven by strong sales performances of our medical segment.
Okay.
Our adjusted EBITDA for the quarter amounted to $5 1 billion euro compared to $9 7 million Euro last year.
<unk> was impacted by both our continued investments in particular in our Korean software solutions.
But also by inflation related higher expenses.
In particular renovation costs.
Our earnings per share for the quarter worked through status.
And with this I would like now to pass the floor to Eric.
Thank you Peter good morning, or good afternoon to all of you listening to this call.
Ethan.
In the garden some.
Uncertain economic climate.
The address is consistently posting double digit code.
Investing in a sustainable future.
Materialise manufacturing posted a 14% growth in Q3 on a business that is going to exceed 100 million euros.
This result is a combination of the reliable and profitable rapid prototyping activity in the mature markets.
And in growth of our certified manufacturing activities.
Elected vertical segments, such as aerospace netting alternative drive systems and Wearables.
And those we are building on early proven and long term scalable opportunities.
Additive manufacturing.
Okay.
In aerospace we have been consistently growing our customer base.
Beyond our longstanding relations with Airbus.
In last year's.
Goal, we talked about a material contribution to the easy.
Of lift aircraft.
Currently.
In regular production.
A recent project.
We can communicate about it.
As shown on slide five.
It is the production of 60 components firstly in a new series of aerial surveillance drones for the company ethanol.
At the beginning of 2022.
We indicated we would invest in the future this year and we are doing so consistently.
During our Q2 call, we announced the acquisition of a second plant for equity.
This quarter, we launched a complete new materialized throughput scan suite for Materialise motion.
And this one.
David on slide six.
Is this the result of a major product portfolio upgrades a year after integrating at Essakane and edits print into the newly formed materialized motion.
The new foods and software is now CE.
Certified medical device and the fifth insoles form a complete new line of medical grade personalized insoles.
Based on years of scientific research and collaborations with multiple academic institutes two gated specific feet technologies.
In place of inflation is waiting on the current investments.
The outcome in the longer term looks very promising.
Materialise medical.
<unk> also consistently maintaining a double digit growth rate an ever increasing numbers.
This is true both for the three D printed medical device business and towards the medical device software business.
In the medical device business, we are increasing our number of OEM partnerships in the auto segment and grilling Booth, our partner sales and direct sales in the CMS segment.
Simultaneously, we are increasing our presence in medical device companies and point of care settings in hospitals.
Our surgical planning platforms are.
Systematically being extended from the workstation based.
Sweet.
Sweet and mimics and light planning environment.
Two cloud based mimics platform planning systems.
Those combined the benefits of our global clinical engineering services with.
The increasing use of artificial intelligence based automation.
This is a variety of solutions allows us to gain to the need of large medical device companies with proprietary solutions.
Well those are smaller companies that preferred are more out of the box abilities.
This combination is the most complete offering in the industry.
It's important companies to develop new devices or hospital.
<unk> therapies.
From the initial R&D phase over the clinical study phase II.
The scale and pace.
With dedicated teams for each of those phases.
It is obvious.
Net in a world with increasing cyber security and privacy threats.
All of the successful.
Certified applications listed above.
Need a secure software platform.
That is why we acquired identified three day in September .
Identified three D has a proven software toolkit that has been field tested by companies and government organizations to allow distributions.
And it is manufacturing operations and supply chain.
Yeah.
The tools of identified treaty.
Immediately compatible with the Coram platform, we launched earlier.
Earlier this year.
Even more important is that we can build on the extensive experience of the identified <unk> to advise our customers in configuring and implementing get onto fewer version of Korea.
Yeah.
Coram is currently operation at multiple customer sites.
The use of <unk> will also accelerate our own manufacturing and medical production lines.
And we will be proud to announce a new set of partnerships at four onex, which go in.
Municipal and software suppliers and machine Oems are joining the platform.
We are looking forward to announce dose in two weeks at four onex and we hope to see you there as well.
Thank you for your attention and overdue Johan.
Thank you for it.
I'll begin with the brief review of our consolidated revenue on slide seven.
Please note that unless otherwise stated all comparisons in this call other demonstrate results for the third quarter of 2022.
31 apologize.
Revenue increased 12% to $58 3 million Euro the increase took place in all three segments.
The growth in our sector.
The growth in our software segment was 4%.
Our medical segment grew by 13% and revenue in manufacturing increased 14%.
Fortunately the first revenues from software license and maintenance fees further increased.
$3 2 million euro compared to the end of last year further underscoring the strong software sales performance within our medical segment.
For the third quarter of 2022, Materialise software accounted for 18% over total revenue Materialise medical for 37.
To your large manufacturing 445%.
Gross segments revenue from software products represented 31% over total revenue.
Moving to slide eight you will see our consolidated adjusted EBITDA numbers for the third quarter of 2022.
Consolidated adjusted EBITDA was $5 million of 72000 zero compared to $9 million 739000 for the same period last year.
And adjusted EBITDA reflected the negative effect from the investments in our new businesses linked treaty and identified three D.
Labor cost and inflation.
Slide nine summarizes the results of our Materialise software segment.
Software revenue increased three 8% to $10 million 863000 Bureau, supported by 37% of sales from renewed licenses and by usage from deferred revenue.
Revenue from non recurring sales decreased 12% as mentioned in our Q2 earnings call. It will take some time to convert the positive feedback we've received on our <unk>.
Platform and applications into significant sales growth.
We expect to see this growth only in mid term and the midterm because of the introduction time required and because of the nature of the cloud solutions, we offer an effect at the beginning of the typical cloud pricing model has a temporary negative impact on revenue growth as a result of the recognition of sales.
But then Bruce <unk>.
Through renewed and growing licenses and services.
In the third quarter EBITDA margin was one 9% with 202000 judo compared to 3 million 700 T cells into <unk>.
The accelerated investments in our new business, which as of September also include.
Expenditures of identified three D wheat.
On the investment in the segment's EBITDA as we increased our R&D efforts by 103%.
Moving now to slide 10, you will see that materialize medical continued growing at a solid double digit pace of 13%.
<unk> increased from software of 19%.
Medical devices solutions of 10%.
Software sales, even grew 32% partly deferred in terms of revenue recognition.
Adjusted EBITDA amounted to $4 million 765000, Juno compared to $5 million 251000 last year.
Our EBITDA margin decreased to 22, 3% as a result of various effects.
The portion of revenue in our sales from complex implants of medical devices increased significantly.
We continued investing in people and in our.
R&D and sales and marketing to sustain our growth and new business lines and third the effects of inflation and the war for talent impacted our results before we could adjust annual price increases.
Now, let's turn to slide 11 for an overview of the Q3 performance materialized manufacturing segments.
Revenue grew 14, 1% to 26 million driven by our core manufacturing business lines by the automotive market in particular.
Solid order intake also looks promising for revenue in the next few months.
Our new growth business lines, either in motion are experiencing fluctuating quarterly growth rates and will require more time to contribute significantly to the total segments revenue.
Meanwhile, our investment programs in these businesses.
Ongoing and together with the effects of inflation labor shortages and temporary higher costs for subcontracting affects the segment's profit.
Adjusted EBITDA for the quarter amounted to 2.530 million.
Euro and an EBITDA margin of nine 7% compared to $2 million 546000 last year.
Slide 12 provides the highlights of our income statements for the first quarter close.
Gross profit margin was 55% compared to $59 five in Q3 last year.
Our operating expenses increased $6 6 million euro or 24, 5% to $33 5 million Euro.
Invested significantly in our group businesses, including linked since September also identified treaty.
Our expenditures in R&D increased 41% sales and marketing those 'twenty, two and G&A grew was up 14%.
As explained in the previous sections inflation in the war for talent also rates on our costs.
As a result of these factors the group's operating result was negative $282 and euro compared to $4 million 529000.
Zero.
Net financial income for Q3 was $2 million 173 sales of Bureau, and included currency exchange gains of $2 7 million, mainly reflecting the strong U S dollar euro position on intercompany positions.
The profit for the quarter was 1.413 million Euro two euro cents per share compared to a net profit of $8 million 657000 Euro.
Now please turn to slide 13 for a recap of balance sheet and cash flow highlights.
Examples of third quarter of 2022, our balance sheet remains strong.
<unk> amounted to $150 6 million Euro borrowings position further decreased to $83 9 million.
Cash flow from operating activities for the third quarter of 2022 was $3 8 million euro compared to $4 4 million.
Capital expenditures for the quarter amounted to $9 4 million Euro and included the purchase of a building to support the expansion of electric issued Dec business line in Germany.
Also this quarter capital expenditures were more trials.
After the close of the third quarter.
<unk> into our credit facility agreement with KBC Bank that provides for drawing a total of 50 million Euro during the next three and a half years at fixed interest rates and with full capital reimbursements between 2030 and 2033.
This agreement to further strengthen our cash position in the future.
P J.
Thank you Johan.
Before opening the floor for questions.
I'd like to confirm that the consolidation of identified <unk>.
In our numbers as of September <unk> of 2022.
We will not impact the financial guidance that we have provided earlier for the entire year.
In other words, we expect our revenues to increase by at least 10% compared to last year and we expect to post a full year adjusted EBITDA This year.
Between 2020 $5 million.
This concludes our prepared remarks, operator, we're now ready to open the call for questions.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please standby, while we compile the Q&A roster.
Yeah.
Our first question comes from Jacob <unk> from Lake Street Capital. Please go ahead.
Yeah, Hey, Thanks for taking my question Congrats on the great results.
Maybe looking at the medical software.
Was that primarily from a single customer or.
Is that just broad strength across the healthcare industry.
Wanted to say, it's absolutely a growth a growth industry.
Covering multiple.
Medical segment like.
Yes.
This can be a vesta for neurology and currently a maxillofacial settlements.
Okay and.
Have you started to see any early indications that sales cycles on software or.
Lengthening just given the environment that we're entering.
As our numbers show not on the medical side.
But we do see.
Yes.
We could.
Investment happening on the industrial side.
Okay.
Maybe just on the.
Inflationary cost have you been able to pass any of these sub contractor.
Increased wages are.
<unk> prices onto your customers at all.
And what kind of what have you guys been doing around that.
Well, we absolutely are doing so.
Well.
Some of our short.
Activities for instance in the rapid prototyping.
Can adjust our price levels I would say on a daily basis.
But.
That's not really happening at all of that on a regular basis monthly goes to <unk>.
However for all the bigger contracts.
We normally include indexation clauses that happened only once a year.
And for instance, the very basic medical contracts they are.
Typically once a year adjusted in function.
Price indexes.
Okay.
Paul.
I'll take the rest of my questions offline. Thanks.
Thank you.
Thank you. Our next question comes from Noelle Dilts with Stifel.
Hi.
Thanks for taking my questions and congrats on the good results.
First I was just hoping you could comment on just how you're thinking about some of the risks that are out there.
Obviously, a lot of concern around what might happen with energy in Europe can.
Can you just.
Give us some thoughts on how youre thinking about them, maybe even if you're looking out into 'twenty three how youre thinking about some of those risks and.
Where do you think your business will be more resilient and lesser itself again.
Potentially in a weaker economy.
Yes.
I would like to say that.
We believe we will show.
Resilience because in a more difficult supply chain economics.
We are seeing good evening evidence that.
People turn more and more to undertake manufacturing so while.
There may be a recession.
We still believe that the additive manufacturing or the three D printing industry is going to grow also in the coming year or years, that's the first fundamental.
We have to.
We will be able to benefit from.
Secondly.
Materialise has been attaching.
<unk>.
Yes.
The sustainability and as a consequence, we have in the previous years already shifted to <unk>.
Numerable electricity contracts.
Rich.
Also help us in the future to moderate.
<unk>.
The.
Impact of increasing energy prices.
Be it that it was not totally offset the overall market dynamics.
Okay, Great. That's very helpful. And then could you just expand upon on the on the.
Labour front the talent, Brian how are you.
What are you seeing in terms of finding the people that you need and retaining cup could you just comment on that thanks.
Yes.
What we can what we have been doing in the in the past there and something that is something that we're really benefiting from now is we have talent sensors and competent centers across the globe.
We source our talent in Western Europe , but also in eastern Europe , including key it's actually we continue to hire.
Yes.
We also have very important talon sensors as you know and then in the east and in the U S. Both in North America, but also in South America, and Columbia and <unk>.
The east we have an increasing talent pool in Kuala Lumpur.
And here in Europe , not only stores our people at HQ that we're also actively looking for talent and finding talent and important countries like Germany and also the step we're moving to the south countries like Spain, and the likes so by now.
Now by having this growth through global pool of places, where we can actually source talent and where we already have the people that are present on the markets and can actively talk to new recruits.
We think that we can.
The issue of the war for talent.
Be it that even with this broad reach for talent that we have.
It remains it remains a difficult market and pressure on remuneration, obviously as we've explained earlier is there and it's probably going to be still there and that in the coming quarters.
Okay. Thanks, very much I appreciate it.
Sure.
Thank you as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Alexandra <unk> of Kepler. Please.
Please go ahead.
Yes.
From Kepler.
I was just wondering if you could just give us some more granularity on what exactly was the impact of the enrollment from wage inflation and then also the higher investment costs from the linked <unk> identified treaty.
I was just wondering that because especially in the software segment is difficult to split out the effect and then and then a second question on the on the medical contracts, where you say that you are just once a year I was just wondering what the timing exactly of what is the bulk of the contract timing and there and does it also adjust for the wage.
Inflation in the next year, because if I remember correctly.
We have a large.
Which grew in Belgium, So I guess that it will be indexed to inflation. Just wondering next I will talk about.
I think let me answer to that.
Second question.
First and then ill come back to the first one I would just note also make sure that we fully understood.
The indication for losses on the large.
Medical contracts.
Dave will take place they typically take place.
At the end of the year. So that is something that will be coming coming soon in other words and this year, we have not been able to fully recover.
Increased inflated costs in these large contracts with our larger medical device partners.
The contract has been dropped in a very standard and very straightforward way of referring to the Belgian index and so that will allow us.
To request recover quite a bit of the insulate. It also inflated remuneration costs, including as a results of the automatic indication of revenue ratios in Belgium, which is a unique feature that im sure youre very much.
Well.
With respect.
Back to your first question.
Alexander I, we may or May not have taken note of all of the parts of your question, but you were asking to what extent.
Linda <unk> and identified three D are having impact on increased cost is that correct.
Yes. So basically you have your R&D don't split it up between 2 million approximately.
And then you also have like the marketing expenses went up $3 million I was just wondering how much is that related to wage inflation, how much is that related to the increase.
Higher investments due to link <unk> et cetera.
It would be a split.
Yes, I know the wages of course around 10%.
Or 7%.
I'm just wondering how much of it exactly.
So it's hard to give you.
Exact number but if you look at the variance compared to last year's quarter.
You see the difference in EBITDA.
That's.
Due to the higher investments in awful for the divestiture of because of the cost increase of the inflation that could not immediately be.
Calculated to certain customers.
Okay and could you maybe give us a then on linked to again identify Judy specifically.
A bit of a granularity.
So thats effectively what I'm, saying, so the difference between the EBITDA of Q3 'twenty one.
'twenty two.
Half of the difference is due to the investments in the <unk>.
Liquidity and identified three D.
Alright.
Okay.
Alright, Thats perfect and then just one final question. So I remember a couple of calls ago. You mentioned that you were that you would go back in the software segment to the.
EBITDA margin of 30% to 35%.
By the end of next year are you still confident you will you will reach that level or do we have to take that.
A bit on.
I mean on the weakness that we have seen recently.
Yeah, just a question if thats still maintainable and this high inflationary environment.
Aleksandra just referred to my previous response.
As I said that we are investing a lot in the new business was off limits.
It is a part of the software segment. So she is and as I mentioned also in the prepared remarks.
It will not come immediately on short term all the large profits from this new business will take a little bit more time.
Okay.
Alright.
Thank you for that.
That's all for me.
Thanks, a lot.
No.
Thank you I am seeing no further questions I'd now like to turn it back to management for closing remarks.
Thank you operator.
Again, thank you all for joining us on the call today.
We obviously look forward to seeing some of you at <unk>.
And to continuing our dialogue with all of you throw at investor conferences or through one on one virtual meetings or calls so.
If you have any questions. Please feel free to reach out.
Thank you again and goodbye for now.
Bye Bye bye.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.