Q1 2024 Materialise NV Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the Materialise NV Financial Results Conference Call for Q1 2024.
Speaker Change: Good day and thank you for standing by welcome to the Q1 'twenty 'twenty four materialize N V financial results Conference call.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, you will hear there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Harriet Fried of LHA. Please go ahead.
At this time all participants are in a listen only mode.
Speaker Change: After the Speakers' presentation, you'll hear.
Speaker Change: 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 raised to withdraw your question. Please press star one again please.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your first speaker today Harriet fried of <unk>. Please go ahead.
Harriet C. Fried: Thank you everyone for joining us today on Materialise's quarterly conference call. With us on the call are Brigitte Vet, Chief Executive Officer, and Koen Berges, Chief Financial Officer.
Harriet C. Fried: Thank you everyone for joining us today for materialize. This quarterly conference call with US on the call are pretty tied to that Chief Executive Officer, and coolant, Belgium, Chief Financial Officer.
Harriet C. Fried: Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's strategic, financial, and operational performance for the first quarter of 2024. 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.materialise.com. The earnings press 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 company's plans, expectations, and growth prospects, among other things.
Harriet C. Fried: Today's call and webcast are being accompanied by a slide presentation that reviews, Materialises strategic financial and operational performance for the first quarter of 2024.
Harriet C. Fried: 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 materialized Dot Com. The earnings press 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 prospects among other things.
Harriet C. Fried: 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 forward-looking statements, including those related to the company's future results and activities, represent management's estimates as of today and should not be relied upon as 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.
Harriet C. Fried: 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 forward looking statements, including those related to the company's future results and activities.
Harriet C. Fried: At present managements estimate as of today and should not be relied upon as representing their estimates as of any subsequent date.
Harriet C. Fried: Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
Harriet C. Fried: A more detailed description of the risks and 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-IFRS measures on today's call. A reconciliation table is contained in the earnings release and at the end of the slide presentation. Now, I would like to turn the call over to Brigitte Vet.
Harriet C. Fried: A more detailed description of the risks and 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.
Harriet C. Fried: Finally management will discuss certain non lifetime Ifr S measures on today's call. A reconciliation table is contained in the earnings release and at the end of the slide presentation.
Speaker Change: And now I would like to turn the call over to eat into that.
Brigitte de Vet: Good morning and good afternoon. Thank you everyone for joining us today. Looking at the agenda for our call on slide three, you will recall that in our last earnings call, I described my observations about the market dynamics and our strong position in this market, built on the foundation of the last 34 years. I also clearly described our priorities for 2024. Today, I will build on that theme and share with you key highlights of our team's performance in the first quarter of 2024, as well as the progress made on our strategic priorities.
Eat: Good morning, and good afternoon.
Speaker Change: Thank you everyone for joining us today.
Eaton: Looking at the agenda on slide three.
Speaker Change: You'll recall that in our last earnings call I described my observations about the market dynamics and our strong position in this market.
Speaker Change: Built on the foundation of the last 34 years.
Speaker Change: Also clearly describes our priorities for 2024.
Speaker Change: Today, I will build on that theme and share with you key highlights of our team's performance in the first quarter 2024 is what is the progress made on our strategic priorities.
Brigitte de Vet: After that, I'll pass the floor to Koen, who will go through our first quarter numbers in mode E. Finally, I will come back and explain what we expect the remaining months of 2024 to be. And we've completed our prepared remarks. We'll be happy to respond to questions.
Speaker Change: After that.
Speaker Change: The floor to corn, we will get go go through our first quarter numbers in more detail.
Corn: Finally, I will come back and explain what we expect the remaining months of 2024 to Britain and we've completed our prepared remarks, we'll be happy to respond to questions.
Brigitte de Vet: Looking at our key results for Q1 2024, summarized on page 4, you can see that we were able to deliver profitable results in line with our expectations. For the comparisons versus the first quarter of last year later on this call, please bear in mind that the first quarter of 2023 was a particularly strong quarter with record high revenues and high EBITDA supported by significant tailwinds, mainly in our medical and manufacturing. Over the first quarter of this year, our total revenue decreased slightly by 3.4% to €63.6 million compared to the record first quarter of 2023 that I just referred to.
Corn: Okay.
Speaker Change: Looking at our key results for Q1 2024 summarized on page four.
Speaker Change: You can see that we were able to deliver profitable results in line with our expectations.
Speaker Change: For comparisons versus the first quarter of last year lead on this call. Please bear in mind.
Speaker Change: That the first quarter of 2023 was a particularly strong quarter with record high revenues and the higher EBITDA supported by significant deal wins, mainly in our medical and manufacturing segments.
Speaker Change: Over the first quarter of this year.
Speaker Change: Our total revenue decreased slightly by three 4% to $63 6 million euro compared to the record first quarter 2000, Twenty's, we did adjust for it.
Brigitte de Vet: When compared to the first quarter of 2022, our consolidated revenue still grew by more than 20%. At the same time, our growth margin increased to 56.5% from 55.9% over the same period last year. Adjusted EBIT amounted to €2.7 million, representing 4.2% of revenue.
Speaker Change: When compared to the first quarter of 2022, our consolidated revenues still grew by more than 20%.
Speaker Change: At the same time, our gross margin increased to 56, 5% from 55, 9% over the same period last year.
Speaker Change: Adjusted EBIT amounted to $2 7 million in Europe, representing four 2% of revenue.
Brigitte de Vet: Net profit amounted to €3.6 million or €0.06 per share, which is stable versus the very strong first quarter of 2023. Our net cash position at the end of Q1 2024 was €69.2 million, an increase of €6 million versus the beginning of the quarter. Koen will elaborate further on these results in his remarks later in this call. Moving now to slide five.
Speaker Change: Net profit amounted to $3 6 million euro or six cents per share, which is stable versus the very strong first quarter of 2003 and 2023.
Speaker Change: Our net cash position at the end of Q1 2024 was $69 2 million, an increase of 6 million Europe versus the beginning of the quarter.
Speaker Change: Gordon will elaborate further on these results in his remarks later in this call.
Gordon: Moving now to <unk> now to slide five.
Brigitte de Vet: I am also very pleased that we have made progress on our strategic priorities and achieved critical milestones, including the introduction of new technologies and the expansion into new markets and segments to capture the growth opportunities in the market for mass personalization and in the market for cereal and used parts and to ensure sustainable, healthy growth in the near, mid, and long term. In medical, we managed to keep the momentum and grew further compared to an exceptional Q1 2023 that was already 33 percent higher than Q1 2022. We continued to drive a doctrine of personalized cases in our existing markets. And this is reflected in two elements.
Gordon: I'm also very pleased that we made progress in our strategic priorities and achieved critical milestones, including the introduction of new technologies and the expansion into new markets and segments to capture the growth opportunities in the market for mass personalization.
Gordon: And in a market for cereal end use parts and to ensure sustainable healthy growth in the near mid and long term.
Gordon: In medical we managed to keep the momentum and grew further compared to an exceptional Q1 2023 that was already 33% higher than Q1 of 2022.
Gordon: We continued to drive adoption of personalized cases in all existing market.
Gordon: And this is reflected in two elements first.
Brigitte de Vet: First, the growth in the number of cases delivered to patients, in particular in the U.S. and Europe, in our existing and new settings. We managed to expand into the trauma segment with the first cases delivered into this segment from our U.S. manufacturing plant, which enabled us to deliver at shorter lead times. This is building a solid platform for further growth in 2024 and beyond.
Gordon: The growth in number of cases delivered to patients in particular in the U S and Europe in our existing and new segments.
Gordon: We managed to expand into the trauma segment with the first cases delivered into this segment from our U S manufacturing plant, which enabled us to deliver and shorter lead times.
Gordon: This is building a solid platform for further growth in 2024 and beyond.
Brigitte de Vet: We made progress with our new software solutions, and in particular with Mimics Flow, a case management solution used to manage workflows for 3D labs in hospitals, for which we received the first order in this only limited launch. We also achieved key milestones to break into new markets in the future. We received IDE approval for our tracheal split program, which is part of our respiratory business line. And we got FDA and MDR clearance for our SAVA planner to offer planning services for transcatheter aortic valve replacements in our cardiac disease business.
Gordon: Second.
Gordon: We made progress with our new software solutions and in particular with mimic slow the case management solution used to manage workflows for three labs and hospitals for which we have received the first order in this.
Gordon: Oh, there is only limited launch phase.
Gordon: We also achieved key milestones to break into new markets in the future.
Gordon: We received IDE approval for our <unk> program, which is part of our respiratory business line, and we got FDA and MTR clearance for our South Atlanta.
Gordon: Two of our planning services for Transcatheter aortic valve replacements in our product business line.
Brigitte de Vet: Moving to software, as mentioned in our last call, our focus is to capture the growth opportunities in the market for the manufacturing of end-use products. We launched key new products that add value for users of additive manufacturing in this sector. We launched E-Stage for MetaPlus, a software that optimizes data and build preparation for laser power-to-bed fusion, using physics-based modeling to automate support structure generation that will also help make metal additive manufacturing more economically viable.
Gordon: Moving to software.
Gordon: As mentioned in our last call our focus is to capture the growth opportunities in the market for the manufacturing of end use product.
Gordon: We launched key new products that add value for users of additive manufacturing in this segment.
Gordon: At <unk> we.
Gordon: We launched E stage metals E stage for Metro plus our software that optimizes data and build preparation for laser powder bed fusion.
Gordon: Using physics based modeling to automate support structure generation that will also help make metal additive manufacturing more economically viable.
Brigitte de Vet: Laser Powerbed Fusion is the leading segment for EM, accounting for over 52% of the industry's global revenue in 2022. It is also one of the most complex technologies to use with many potential challenges. By automating support structure generation with EStage for MetalPlus, users can reduce support volume up to 80%. They can simplify support removal, ease powder extraction, and decrease build blade machining after effortless part removal.
Gordon: Laser powder bed fusion is the leading segment for E M accounting for over 52% of the industry's global revenue in 2022.
Gordon: It's also one of the most complex technologies to use with many potential challenges.
Gordon: But what's amazing support structure generation with E stage for metal plus users can reduce support volume up to 80%.
Gordon: They can simplify support removal Eastbourne extraction and decreased build blade machining offers effortless pause removal.
Koen Berges: Automating support structure generation at the sweet spot of printability and required support saves time, material, and post-processing. We also released an additional module on our CoEM, QPC, quality process and control system. Layer Analysis, a module that allows to auto-detect and quantify defects in 2D layer data and map them to 3D models for early scrap detection and root cause analysis, was released at RAPIDS last year. ProcessLab, a tool to trace process parameters in test lab results, was announced at Formnext last year and will be released in the first quarter of this year on the market.
Gordon: Automating support structure generation at the sweet spot of profitability and with White supports C spine material and post processing costs.
Gordon: We also released an additional module on our OEM QBC quality processes and control system.
Gordon: Leah analysis, the module that allows to auto detect and quantified defects in <unk>, our data and match them to three D models for early scrap detection and food cost analysis.
Gordon: Released it rapidly last year.
Gordon: Close to flat.
Gordon: All to trace process power meters and desktop results was announced at four onex last year and released in the first quarter this year to the market.
Koen Berges: This QPC process lab enables customers to transform additive manufacturing process monitoring and quality data into actionable insights using AI and IoT connectivity in a secure, collaborative, and open software system. We have also made progress in shifting our business model to cloud and subscription-based agreements to better suit the market for end-use products. While this shift is negatively impacting our Q1 software revenues, it prepares us for further growth in the market for serial end-use products.
Gordon: This QBC proceeds left enables customers to transform additive manufacturing process monitoring and quality data into actionable insights using AI and Iot connectivity in a secure collaborative and open software system.
Gordon: We also made progress in shifting our business model to cloud and subscription based agreements to better suit the market for end use products.
Gordon: While this shift has negatively impacted impacting our Q1 software revenues.
Gordon: Parents us for further scaling in the market for serious and used truck.
Koen Berges: In manufacturing, we focus on capturing growth in selected segments to drive revenue in 2024, even as market circumstances remain difficult for our 3D printing service business due to very weak prototyping demands. Keeping in mind that the first quarter of 2023 was a very strong quarter with 25% growth in revenue, I am pleased with the performance in the first quarter of this year, and in particular with the strong progress in our certified manufacturing business.
Gordon: In manufacturing.
Gordon: Focus on capturing growth in selected segments to drive revenue in 2024, even if market circumstances remain difficult fall is really printing service business due to very weak prototyping demand.
Gordon: Keeping in mind that the.
Gordon: The first quarter of 2023 was a very strong quarter with 25% growth in revenue I am pleased with the performance in the first quarter of this year and in particular with the strong progress in our certified manufacturing business.
Koen Berges: With our space in mind. Both industries are strictly regulated, and our ability to provide process documentation and historical process performance data enables us to drive growth in both sectors. Koen will now take you through the detailed results by section.
Gordon: Driven by our space and metric.
Gordon: Both industries are strictly regulated and our ability to provide process documentation and historical process performance data enables us to drive growth in both segments.
Gordon: Glenn will now take you through the detailed results by segment.
Koen Berges: Good morning or good afternoon to all of you on this call. I'll begin with a brief review of our consolidated revenue on slide 6. As a reminder, please note that, unless stated otherwise, all comparisons in this call are against our results for the first quarter of 2023, which, as Brigitte already indicated, was an exceptionally strong port. Now, compared to this high baseline, revenue in the first quarter of 2024 decreased 3.4% to 63.6 million euros.
Glenn: Thank you Bridget.
Glenn: Good morning, or good afternoon to all of you on this call.
Glenn: I will begin with a brief review of our consolidated revenue on slide six.
Glenn: As a reminder, please note that unless stated otherwise all comparisons in this call are against our results for the first quarter of 2023, which.
Glenn: Which is pretty good already indicated was an exceptionally strong quarter.
Glenn: Now compare to this high baseline revenue in the first quarter of 2024 decreased three 4% to $63 6 million Euro.
Koen Berges: However, Materialise Medical continued on its growth path and increased its revenue by 8%. On the other hand, revenues at our software segment were impacted by the accelerated transition towards a cloud-based subscription business model, and low prototyping demand had an unfavorable effect on our manufacturing segment, resulting in revenue decreases of 8% and 11%, respectively. As you can see in the graph on the right side of this page, Materialise Medical accounted for 41%, Materialise Software for 16%, and Materialise Manufacturing for 43% of our total revenue in the first quarter of 2024.
Glenn: However, materialized medical continued on its growth path and increased its revenue by 8%.
Glenn: On the other hand revenues at our software segments were impacted by the accelerated transition towards the cloud based subscription business model at.
Glenn: At low prototyping demands had an unfavorable effect on our manufacturing segments.
Glenn: <unk> revenue decreases of 8% and 11% respectively.
Glenn: As you can see in the graph on the right side of the page Materialise medical accounted for 41%.
Glenn: Materialise software for 16% and Materialise manufacturing for 43% of our total revenue over the first quarter of 2024.
Koen Berges: Deferred revenues related to software maintenance and license fees grew further in the first quarter of this year by 0.5 million euros, bringing the total amount carried on our balance sheet to 45.4 million euros. On slide 7, you will see our consolidated adjusted EBIT and EBITDA numbers for the first quarter of this year. Consolidated adjusted EBIT ended at 2.7 million euros compared to 5 million euros for the same period of last year, representing a decrease of 47%.
Glenn: Deferred revenues related to software maintenance and license fees grew further in the first quarter of this year by <unk> 5 million, bringing the total amount carried on our balance sheet to $45 4 million Euro.
Glenn: On slide seven you will see our consolidated adjusted EBIT and EBITDA numbers for the first quarter of this year.
Glenn: Consolidated adjusted EBIT ended at $2 7 million euro compared to $5 million Euro for the same period of last year, representing a decrease of 47%.
Koen Berges: Our adjusted EBIT margin was 4.2% compared to 7.6% last year. Consolidated Adjusted EBITDA for the first quarter amounted to €8.1 million, decreasing from €10.3 million last year. Our Adjusted EBITDA margin reached 12.7% compared to 15.6% the prior year. This decrease reflects partly the impact of continued investments in innovation to secure long-term profitability. We fully executed our planned R&D investments despite being confronted with less favourable market conditions.
Glenn: Our adjusted EBIT margin was four 2% compared to seven 6% last year.
Glenn: Consolidated adjusted EBITDA for the first quarter amounted to $8 1 million euro decreasing from $10 3 million Euro last year, our adjusted EBITDA margin reached 12, 7% compared to 15, 6% the prior year.
Glenn: This decrease reflects partly the impact from continued investments in innovation to secure long term profitability, we fully executed our planned R&D investments, despite being confronted with less favorable market conditions in.
Koen Berges: In Q1 of 2024, R&D spend corresponded to more than 16% of our total revenue. The decrease in adjusted EBIT and EBITDA is also partly due to the high reference point in the comparisons shown, being the exceptionally strong first quarter of 2023, which was impacted, as said, by one of the tailwinds in all business segments. Moving now to slide 8, you will notice that the quarter's total revenue in our Materialise medical segment increased by almost 8%, building further on an already strong revenue growth in 2023.
Glenn: In Q1 of 2024, R&D spent corresponded to more than 16% of our total revenue.
Glenn: The decrease in adjusted EBIT and EBITDA is also partly due to the high reference point in the comparisons shown being the exceptionally strong first quarter of 2023, which was impacted by one off tail winds in all business segments.
Glenn: Moving now to slide eight you will notice that the quarter's total revenue in our Materialise medical segment increased by almost 8% Bill.
Glenn: Building further on an already strong revenue growth in 2023.
Koen Berges: Solid growth was generated by both medical software and revenue coming from medical device sales, which grew respectively by 6% and 9%. And just that EBITDA grew further to 7.9 million euros with an adjusted EBITDA margin that remained stable at 30.3%. Slide 9, summarizing the results of our materialized software segment.
Glenn: This solid growth was generated by both medical software and by revenue coming from medical devices sales, which grew respectively by 6% and 9%.
Glenn: Adjusted EBITDA grew further to 7.9 million euro with an adjusted EBITDA margin remained stable at 33%.
Glenn: Slide nine summarizes the results of our Materialise software segment.
Koen Berges: In the first quarter, software revenue decreased by 8% to 10.4 million euros. However, recurring revenue from software maintenance and license sales, including CoAM, increased by 4%. On the other hand, non-recurrent revenue further decreased by 31%, driven by the accelerated transition from perpetual license sales to cloud and subscription-based agreements, but also by the more difficult market conditions. Accordingly, Adjusted EBITDA decreased to 1.1 million euros, representing an Adjusted EBITDA margin of 10.4%. Now, let's turn to slide 10 for an overview of the performance of our Materialise manufacturing segment.
Glenn: In the first quarter software revenue decreased by 8% to $10 4 million Euro how.
Glenn: However, recurring revenue from software maintenance and license sales, including <unk> increased by 4%.
Glenn: On the other hand, non recurrent revenue further decreased by 31% driven by the accelerated transition from perpetual license sales to cloud and subscription based agreements, but also by the more difficult market conditions.
Glenn: Accordingly, adjusted EBITDA decreased to $1 1 million euro representing an adjusted EBITDA margin of 10, 4%.
Glenn: Now, let's turn to slide 10 for an overview of the performance of our Materialise manufacturing segment.
Koen Berges: In the first quarter, manufacturing continued to operate in a difficult market environment. Compared to a strong Q1 2023 and as a result of low prototyping demand, revenue decreased by 11% to 27 million euros. On the other hand, we noticed promising further growth of our certified manufacturing business, in particular in the METEC and aerospace market segments.
Glenn: And first quarter manufacturing continued to operate in a difficult market environments.
Glenn: Bear to a strong Q1 2023 and as a result of low prototyping demand revenue decreased by 11% to 27 million Euro.
Glenn: On the other hand, we noticed promising further growth of our certified manufacturing business in particular and metric and Iris based market segments.
Koen Berges: Adjusted EBITDA dropped to 1.5 million euros and an adjusted EBITDA margin of 5.7%. Slide 11 provides the highlights of our Consolidated Income Statement for the first quarter of this year. As you will notice, we increased our gross profit margin by 60 basis points to 56.5% compared to 55.9% in Q1 of 2023, which compensated part of the lower revenue. Our operating expenses in the quarter increased by 1.8 million euros or 5.5% in aggregate, with the biggest increase coming from a higher R&D spend.
Glenn: Adjusted EBITDA dropped to $1 5 million euro or an adjusted EBITDA margin of five 7%.
Glenn: Slide 11 provides the highlights of our consolidated income statement for the first quarter of this year.
Glenn: As you will notice we increased our gross profit margin by 60 basis points to 56, 5% compared to 55, 9% in Q1 of 2023, which compensated part of the lower revenue.
Glenn: Our operating expenses in the quarter increased by $1 8 million euro or five 5% in aggregate with the biggest increase coming from the higher R&D spend.
Koen Berges: Net operating income in the quarter was positive, with 0.8 million euros compared to 0.5 million euros last year. As a result of these elements, the group's operating result in the quarter was €2.6 million, compared to €5 million in last year's period. In Q1, net financial income amounted to 1.5 million euros, including a positive currency exchange result of 0.7 million euros, interest income of 1.2 million euros from our cash reserves, and interest and interest expense on our financial debts of 0.4 million euros. Income tax increased in the quarter amount to 0.5 million euros compared to 0.7 million euros last year.
Glenn: Net operating income in the quarter was positive with <unk> 8 million euro compared to <unk> 5 million last year.
Glenn: As a result of these elements. The group's operating result in the quarter was $2 6 million euro compared to 5 million Euro in last year's periods.
Glenn: In Q1, net financial income amounted to $1 5 million euro, including a positive currency exchange result of <unk> 7 million Euro interest income of $1 2 million Euro from our cash reserves and interest and interest expense on our financial debt of $1 4 million Europe.
Glenn: Income tax expense in the quarter amounted to <unk> 5 million compared to <unk> 7 million last year.
Koen Berges: As a result, net profit for the first quarter was positive at 3.6 million euros, representing 6 euro cents per share, coming very close to the net profit of 3.7 million euros, also 6 euro cents per share, for the corresponding 2023 period. Now, please turn to slide 12 for a recap of balance sheet and cash flow highlights. In the first quarter of this year, our balance sheet remained strong, and our cash reserve increased to €129 million by the end of the quarter.
Glenn: As a result net profit for the first quarter was positive $3 6 million euro representing six euro cents per share coming very close to the net profit of $3 7 million in Europe are also six years since per share for the corresponding 2023 periods.
Glenn: Now please turn to slide 12 for a recap of balance sheet and cash flow highlights.
Glenn: In the first quarter of this year, our balance sheet remains strong.
Glenn: Cash reserve increased to 129 million euros by the end of the quarter.
Koen Berges: Loan and lease repayments reduced our gross debt to below 60 million euros, and the resulting net cash position at the end of the quarter was 69 million euros. An improvement by 6 million euros compared to the position at the beginning of this year. Are trade receivables and trade payables positions both decreased while inventories remain stable? The total deferred income position increased further to €52 million, out of which €45 million was related to deferred revenue from software licenses and maintenance contracts.
Glenn: These repayments reduced our gross debt to below 60 million euro.
Glenn: Our resulting net cash position at the end of the quarter was 69 million euro and improving by 6 million euro compared to the position at the beginning of this year.
Glenn: Our trade receivables and trade payables positions both decreased while inventories remained stable.
Glenn: The total deferred income position increased further to 52 million euro out of which 45 million Euro was related to deferred revenue from software licenses and maintenance contracts.
Koen Berges: As you can see from the graphs on the right of the page, cashflow from operating activities for the first quarter was high and amounted to 10 million euros, while capital expenditures for the quarter amounted to 2.8 million euros, all of which were internally financed.
Glenn: Already mentioned.
Glenn: As you can see from the graphs on the right of the page cash flow from operating activities for the first quarter was high and amounted to 10 million Euro while capital expenditures for the quarter amounted to $2 8 million Europe, all of which are internally financed.
Koen Berges: And with that, I'd like to hand the call over to Brigitte again. Thank you, Koen.
Speaker Change: And with that I'd like to hand, the call over to mitigate again. Thank you.
Brigitte de Vet: Let's turn to page 13. I'll conclude my remarks with a discussion of our full year 2024 guidance. The fundamentals of our three business segments are strong, and we therefore remain confident that we are well positioned to deliver on our goals and objectives. We continue to expect to report consolidated revenue for the full year 2024 within the €265 million to €275 million range we communicated in our prior earnings call. We are also maintaining our adjusted EBIT guidance of 11 to 14 million euros for the fiscal year. This concludes our prepared remarks, Operator. We're now ready to open the call to questions. Thank you.
Mitigate: Let's turn to page 13.
Mitigate: Conclude my remarks, with a discussion of our full year 2020 for guidance.
Mitigate: The fundamentals of our three business segments are strong and we therefore remain confident that we are well positioned to deliver on our growth objectives.
Mitigate: We continue to expect to report consolidated revenue for the full year 2024 within the 265 to 275 million range, we communicated in our prior earnings call.
Mitigate: We are also maintaining our adjusted EBIT guidance of 11 to 14 million for the fiscal year.
Speaker Change: This concludes our prepared remarks, operator, we're now ready to open the call to questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Alexander Craeymeersch of Kepler Chevreux. Your line is now open
Speaker Change: Thank you.
Speaker Change: At this time, we will conduct a question and answer session.
Speaker Change: 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.
Speaker Change: Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Mitigate: Yeah.
Mitigate: Our first question comes from the line of Alexander <unk> of Kepler Chevron. Your line is now open.
Alexander Craeymeersch: Hey, good afternoon, Brigitte and Koen. Thank you for that presentation. A couple of questions from Kepperchevreuf's side. I'm a bit surprised at how many times you stressed that Q1 2023 was exceptional, especially in manufacturing. So that was definitely not as stressed as last year.
Alexander: Hey, good afternoon, Richard Thank goodness and thank you for the presentation a couple of questions from a couple of shared risk side.
Alexander: I'm a bit surprised at how many times you stressed with Q1 2023 was exceptional.
Mitigate: Especially in manufacturing.
Speaker Change: So that was definitely not a stressed.
Alexander: As last year. So so so could you maybe elaborate on what was so exceptional and then are you also indicating to us the markets. That's the these are also not realistic numbers in the next two years in manufacturing and then the second question would be.
Brigitte de Vet: So could you maybe elaborate on what was so exceptional? And then are you also indicating to us, the market, that these are also not realistic numbers in the next years in manufacturing? And then the second question would be: you also stressed that the medical segment was exceptionally strong in Q1 2023, yet you were able to book better results than last year. So why was one exceptional different from the other exceptional?
Alexander: You also stressed that the medical segment was exceptionally strong in Q1, two and three yet you were able to book better results than last year. So why was one exceptional different than the other exceptional.
Brigitte de Vet: And then the third question would be, at the low CAPEX levels, you're building the AC Tech plant that's coming online in H2 2024. Why was there not a lot of CAPEX coming into the cash flow statement? I was just wondering why that is, exactly whether those projects are either being delayed or... And then maybe on the AC Tech, following up on that specific topic. I was just wondering, with the ACETEC plant coming up, whether you're not fearing any overcapacity considering that the volumes of manufacturing are trending lower?
Speaker Change: And then the third question would be on the low Capex levels, you you're building the AC deck plant, that's coming up life in <unk> 'twenty 'twenty four and why was there not a lot of capex.
Speaker Change: Coming into the cash flow statement I was just wondering.
Speaker Change: Why did was exactly whether those projects are either being delayed or and then maybe on the aesthetic I'm following up on that specific topic.
Speaker Change: I was just wondering.
Speaker Change: Sure.
Speaker Change: The east plant coming up whether you're not feeling any overcapacity considering that the volumes of manufacturing are trending lower I'll I'll keep it there which for my colleagues then and then maybe ask some questions afterwards.
Brigitte de Vet: I'll keep it there, wait for my colleagues then, and then maybe ask some questions again afterwards. Thanks, Alexander, for the questions and for joining the call. So I'll maybe start answering, and then I'll let Koen pitch in with the KPEC questions.
Speaker Change: Thanks, Alex and reward our questions and for joining the call. So I'll, maybe start answering and then ill, let the qunar pitching for the Capex question.
Brigitte de Vet: So your first question on the exceptional manufacturing results last year, well, essentially your question was, are these structural or not, and what can we expect for the future? If we look at what happened in the first quarter last year in manufacturing, I see a structural part and a non-structural part. And let me explain what I mean.
Speaker Change: And so your first question on the exceptional manufacturing results for last year, but essentially your question being are these structural or not and what can we expect for the future. If we look at what happened in the first quarter of last year in manufacturing I see a structural heart in a non structure.
Brigitte de Vet: So the results last year were driven, the exceptional results last year were driven by two main factors. One was that our ag-tech business had very strong revenues at that point in time. Over the last couple of quarters, we have noticed that we have capacity constraints at ag-tech, which leads to revenues being lower than what we think or what we strongly believe is possible in the market. And with the capacity extension that we are now planning, we believe that that gives us a road towards further increase and growth of those revenues going forward.
Speaker Change: Let me explain what I mean, so the results last year were driven exceptional results last year were driven by two main factors. One is that our Arctic business had very strong revenues at that point in time.
Speaker Change: And over the last couple of quarters, we have noticed that we have capacity constrained at <unk>.
Speaker Change: Which leads to the revenues being lower than what we think what we strongly believe is possible in the market and with the capacity extension that we in our planning we believe that that gives us.
Speaker Change: Erodes towards further increase and growth of those revenues going forward. So I think that's a structural element.
Brigitte de Vet: So I think there's a structural element in ag-tech that gives us a path towards future growth in the manufacturing sector. The second driver of that exceptional result last year is not so structural, I would say, and which is why we call it exceptional. What was this?
Speaker Change: That gives us a path towards future growth.
Speaker Change: The manufacturing segment, the second driver over that exceptional results last year is non <unk>.
Speaker Change: Not so structural I would say and which is why we quality exceptional and well was this you might notice as part of our services within the manufacturing unit, we did have a consulting services.
Brigitte de Vet: You know, as part of our services within the manufacturing unit, we deliver consulting services to customers, and consulting services as such have the beauty of, you know, when we have these contracts, that they come at a very healthy profitability for us. But the nature of those consulting services is that you don't necessarily have a recurring element because once the consulting project is over, you start from scratch. And we had a very strong revenue component in our first quarter last year on that business line specifically. And that's, you know, honestly, in all transparency, I'm not confident that, you know, we will be able to repeat that every single quarter, you know, going forward.
Speaker Change: Customers.
Speaker Change: And consulting services as such.
Speaker Change: The beauty of you know when we have these contracts if they come either way.
Speaker Change: <unk> seen a profitability for us.
Speaker Change: The nature of those consulting services is that you don't necessarily have a recurring element because once this consulting project is over.
Speaker Change: Start from scratch and we had very strong revenue component in our first quarter last year on that business line specifically.
Speaker Change: And that's.
Speaker Change: Honestly and in all transparency and our confidence that we.
Speaker Change: We will be able to repeat that every single quarter going forward. So the answer on manufacturing is a bit mixed but yes. There is a structural element that it gives us a path towards future growth as soon as we have results they're capacity constrained at AMETEK.
Brigitte de Vet: So the answer on manufacturing is a bit mixed, but yes, there is a structural element there that gives us a path towards future growth as soon as we have resolved the capacity constraints at hand. Switching to medical, which was your second question.
Speaker Change: Switching into medical which was your second.
Brigitte de Vet: So yes, we had an exceptional quarter last year, essentially because we were able to take, for a specific period of time, we were able to take on business from another party in the market that wasn't able to deliver for a certain time, and we benefited from that in the last, in the first quarter last year. Now, despite that exceptional growth number of 33%, we delivered, you know, even stronger growth on top of that this year, and that is, I refer to it in, you know, in my remarks. We have been able to break into this trauma segment, which is an additional market segment for us, which has great potential, and we have proven this year in the first quarter that we can actually access that potential with the short lead times that we can offer.
Speaker Change: A question. So yes, we had an exceptional quarter last year.
Speaker Change: Essentially because we've been able to take off for a specific period of time, we received we were able to take on business.
Speaker Change: Other parts in the market it wasn't able to deliver.
Speaker Change: Hi.
Speaker Change: And we benefit from that in the last in the first quarter last year and now despite that exceptional gross number of 33% we delivered.
Speaker Change: Stronger growth on top of that.
Speaker Change: This year and that is I referred to it in my remarks, and we have been able to break into this trauma segment, which is an additional market segment for us.
Speaker Change: <unk>, which has lots of potential and we've proven this year in the first quarter that'd be can actually access that potential with the short lead times that we can offer.
Brigitte de Vet: And again, that gives us a path to continued further growth on that baseline that we have seen. And that's, you know, one of the drivers of that, you know, additional growth despite a very strong first quarter line. And then I'll hand it over to Koen for the topics question regarding access. Yeah, so.
Speaker Change: Again that gives us a path to continued further growth on that baseline that we have seen and that's one of the drivers of that additional growth. Despite a very strong.
Speaker Change: First quarter last year.
Speaker Change: And then I'll I'll I'll hand, it over to Colin for the Capex question regarding uptick so I figured I can't confirm Alexander depth.
Koen Berges: Yeah, so I think I can confirm, Alexander, that the investment program is in full execution and is still fully on track to have a startup of the plant later this year, as we've indicated before. Now, the reason why the investment is limited in the cash flow statement of the first quarter is that we include, of course, only the cash component of CAPEX investments in our cash flow statement, and you will see that there is a ramp-up of investments that are being made, but where the cash-out has not been made to the suppliers and will typically come, or mainly come, in the second quarter and the third quarter of this year.
Colin: The investment program is in full execution and this is still fully on track to have the startup of the plant later on in this year as we've indicated before now the reason why.
Colin: Investment is limited in the cash flow statement of the first quarter is because we include of course, only the cash components of Capex investments and our cash flow statement and you will see that there is a ramp up of investments that are being made but we had a cash out.
Colin: <unk> not been made to the suppliers and will typically come or mainly come in the second quarter in the third quarter of this year and that is because at that point also the machinery will be installed in the factory and will be started up and the way. We have negotiated most of the contracts with T cell suppliers is that the bulk of the payment.
Koen Berges: That is because, at that point, the machinery will also be installed in the factory and will be started up, and the way we have negotiated most of the contracts with these suppliers is that the bulk of the payment is the delivery of the machinery, which is going to take place, is taking place in the coming weeks, and, of course, then there is also a payment term to be applied. So, you will see a different picture, for sure, in the second quarter and, partly, also in the third quarter, with the delayed payments related to ACTEC investments.
Colin: Yes.
Colin: A delivery of the machinery.
Colin: Which is going to take place taking place in the coming weeks and of course, then there is also a payment term to be applied. So you will see a different picture for sure in the in the second quarter and.
Colin: Partly also the third quarter AOI at the lease.
Colin: Payments.
Colin: Related to our investments.
Koen Berges: Could you maybe indicate there how much we need to foresee in terms of CAPEX, maybe just for the full year, but then maybe for Q2 and Q3. I think we've always indicated the total order of magnitude.
Colin: Investments.
Speaker Change: Could you maybe indicate their how much were.
Speaker Change: We need to foresee in terms of Capex, maybe if just for the full year with some maybe for Q2 and Q3 specific.
Speaker Change: I think we've always indicated.
Koen Berges: I think we've always indicated the total order of magnitude of the investment is around 30 million euros and upwards, and it will come in several stages. But that has been spread over a number of years. So I think I don't have the exact number. It will also depend on the exact timing of what will be delivered when. But I think you can expect that our free cash flow, as I've indicated in the last call, might be negative in the second quarter, driven by this non-recurring capital.
Colin: Total order of magnitude of the of the investment is around 30 million Euro.
Colin: Upwards and it will depend it will come in several stages, but that has been spread over a number of years.
Colin: I think I don't have the exact number it will also depend on the exact timing of what will be delivered when but I think you can expect that our free cash flow as indicated also in last call might be negative in the second quarter driven by this nonrecurring nonrecurring capex.
Colin: Okay.
Speaker Change: Okay. Thank you for that.
Speaker Change: Okay.
Operator: One moment for our next question. Thank you. Our next question comes from the line of Jacob Stephan of Lake Street. Your line is now open.
Speaker Change: Thank you Eric.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Jacob Stephen of Lake Street. Your line is now open.
Jacob Michael Stephan: Yeah, hey, thanks for taking my questions. Maybe could you just kind of give us an indication in the manufacturing segment, you know, how project volumes have been trending? And I know you said prototyping has been weak, but maybe just kind of overall project size. You can give us a sense for that.
Jacob Michael Stephan: Yeah, Hey, thanks for taking my questions.
Jacob Michael Stephan: Maybe could you just kind of give us an indication.
Jacob Michael Stephan: In the manufacturing segment Hollywood project volume has been trending and I know you said prototyping its been weak, but maybe just kind of overall project size.
Brigitte de Vet: Hi Jacob. Thanks for the question. And when you say project size, you refer to an indication of what our, you know, average type of project is in terms of revenue driven. Oh, yeah.
Jacob Michael Stephan: If you can give us a sense for that.
Speaker Change: Hi, Jacob.
Jacob Michael Stephan: Thanks for the question and when you say project size.
Speaker Change: You referred to an indication of what our.
Speaker Change: And which type of project project in terms of the revenue driven by.
Brigitte de Vet: And it's a hard one to say because the manufacturing segment as such is composed of so many different components. I think, in general, when we look at our core manufacturing segments, so the core 3D printing services that we offer, what we have indicated is that we want to make, and we see the shift from prototyping to certified manufacturing. And, in general, the certified manufacturing projects are slightly larger than our prototyping projects.
Speaker Change: Yes.
Jacob: Yeah, and it's a hard one to say because the manufacturing segment as such is composed of so many different.
Jacob: Components.
Jacob: I think in general.
Jacob: When we look at the hour.
Jacob: Core manufacturing segments. So the core three D printing services.
Jacob: We offer what we have indicated is that we wanted to make and we see the shift from prototyping to certified manufacturing and in general.
Jacob: The certified manufacturing projects.
Jacob: Slightly larger than our prototyping.
Brigitte de Vet: Now I can't give you an exact number, but that is certainly a shift that we see and that we will continue to see, you know, going forward. Now, if you then put in the mixed architecture and the other business lines that we have, it's a very different structure in terms of the order, sizes, etc. So I can't give you an exact number on your question, honestly.
Jacob: And now I can give you an exact number but that is certainly a shift.
Jacob: We see and then we will continue to see going forward.
Jacob: If you then put in the mix.
Jacob:
Jacob: Arctic and the other business lines that we have.
Speaker Change: It does.
Jacob: Very different structure in terms of the order sizes et cetera. So I can't give you an exact pneumonia question honestly.
Brigitte de Vet: Okay, you said that you shipped the first products in key one here from the Michigan facility. Is that correct?
Jacob: Okay.
Jacob: You said that you shipped the first products in Q1 here from the Michigan facility is that correct.
Brigitte de Vet: In the medical field, well, so, no, so we shipped the first product from our Michigan facility last year in August. And we started ramping up that facility, so we were up and running in 2023.
Jacob: And the medical so.
Jacob: No. So we shipped the first products in our Michigan facility last year in August and.
Jacob: We started ramping up that facility and so we were up and running in 2023, where we now have done in the first quarter is accessed the trauma market that I was talking about and those are products that require very short lead times.
Brigitte de Vet: What we now have done in the first quarter is access the trauma market that I was talking about. And those are products that require very short lead times. And we have done that out of our U.S. manufacturing facility now, which has enabled us to get into the U.S. trauma market. That's essentially a type of new product line in that facility, which gives access to that large market segment.
Jacob: And we have done that out of our U S manufacturing facility now, which has enabled us to get into the U S trauma market.
Jacob: And that's essentially a some type of a new product line in that facility, which gives access to that large market segment.
Brigitte de Vet: Okay, and maybe you could just kind of give us a sense of how things are trending as we are, you know, a month into kind of Q2 here, but maybe just help us kind of think about where you're seeing the most opportunity in that trauma space.
Speaker Change: Okay, and maybe you could just kind of give us a sense on.
Jacob: How things are trending as we are.
Jacob: A month into Q2 here, but maybe just help us kind of think about.
Jacob: Where youre seeing the most opportunity in the trauma space.
Brigitte de Vet: Yes, so I think the trauma opportunity remains a large one for the rest of the year in the medical business. The way you should look at that is probably to say that, you know, in the first quarter, we were cautious because we first wanted to make sure that, you know, we were able to deliver on those short timelines.
Speaker Change: Yeah. So I think the trauma opportunity remains a large one for the rest of the year in our in the medical business.
Speaker Change: Yes.
Speaker Change: The way you should look at this.
Jacob: With me to say that the first quarter, we were cautious because we first wanted to make sure that.
Jacob: We were able to deliver in the.
Jacob: Short timeline.
Brigitte de Vet: We have seen confirmation, you know, that we are able to bring that offering successfully to the market. So that definitely will stay a growth driver for the remainder of the year and beyond. That is for, you know, that particular trauma segment. I think the other one that I referred to in my remarks as a growth driver is an important one too, and that's on the more software side.
Jacob: And we are seeing confirmation that we are able to bring that offering successfully to the market. So that definitely will see E.
Jacob: Gross driver for the remainder of the year and beyond.
Jacob: And that is for the <unk>.
Jacob: Nicola trauma segments.
Jacob: I think the other one that I referred to in my remarks.
Jacob: The growth driver is an important one to one and one on the software side.
Brigitte de Vet: With more and more personalization being done in the market, the parties bringing personalized cases to the market will face more volume, and with that, they need a system that helps them stay organized and do that in an efficient and effective way. And that's what our Mimic Flow product does. So despite the fact that we're still in a limited launch, we've seen traction there in the first quarter, and I would expect that as well in 2024 and beyond to stay, you know, a nice opportunity. Okay, great. Thank you for the medical segment.
Jacob: More personalization being done in the market.
Jacob: The parties, bringing personalized cases to the market, we will see more volume and with that needs.
Jacob: A system that helps them stay organized and do that in an efficient and effective way and that's what I'll, Let me make slow product does.
Jacob: Despite the fact that we're still in a limited launch we've seen traction there in the first quarter and I would expect that as well in 2024 and beyond to see a nice opportunity for us.
Speaker Change: Okay, great if a medical segment.
Brigitte de Vet: Yeah, no, I appreciate the color. I will turn it over. Thank you.
Speaker Change: Okay.
Speaker Change: Yes, no I appreciate the color I will turn it over thank you.
Brigitte de Vet: All right. Thank you, Jacob. Thank you.
Speaker Change: Alright, Thank you Jacob.
Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. One moment for our next question. Thank you. Our next question comes from the line of Kieran McCabe of Cantor Fitzgerald. Your line is now open.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.
Speaker Change: One moment for our next question.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Kieran Mccabe of Cantor Fitzgerald. Your line is now open.
Kieran Mccabe: Thank you for taking my call. I called for Troy Jensen. My first question was, maybe R&D should be about 16% of revenue, and we should continue to make investments for sustainable growth. I was wondering if you could shed some details or color on sort of the strategy or plan for continued investments in R&D and sort of the timeline for payoff of those investments. Where do we kind of see R&D going for the year and into next year and sort of the benefits from those investments, the timing of that?
Kieran Mccabe: Great. Thank you for taking my call going for Troy Jensen.
Kieran Mccabe: My first question was.
Kieran Mccabe: Maybe it's.
Kieran Mccabe: R&D was about 16% of revenue and continue to make investments for sustainable growth I was wondering maybe you could set some details or color on sort of on the.
Kieran Mccabe: Yeah.
Kieran Mccabe: Strategies, you're planning for continued investments in R&D and sort of the timeline of pay off.
Kieran Mccabe: Its investments.
Kieran Mccabe: Where do we kind of see R&D going for the for the year and into next year, and that's sort of the benefits from those investments the timing of that.
Brigitte de Vet: Yeah, so let me maybe give you a little bit of color on our high 16% R&D spending. So the R&D efforts that we're doing at this point in time are really going into a number of our strategic priorities that I also refer to in my remarks. The first one is that in the medical segment, we still have significant untapped market opportunities where, you know, we have taken the first steps.
Speaker Change: Yes, So let me maybe give you a little bit of color on you know them.
Speaker Change: Oh hi.
Speaker Change: 16%, our R&D spending.
Kieran Mccabe: So the R&D efforts that we're doing at this point in time.
Kieran Mccabe: Really going into a number of our strategic priorities that I also referred to in my my remarks.
Kieran Mccabe: The first one is that on the on the medical in the medical segment, we still have significant untapped market opportunities.
Kieran Mccabe: Where we have taken the first steps, but we do believe that there is a significant market potential and I'm talking about markets like the respiratory field.
Brigitte de Vet: But we do believe that there is significant market potential. I'm talking about markets like the respiratory field, the cardiovascular, or structural heart field. Those are markets that are still relatively new for us and where there is untapped potential, and there are R&D efforts going into those markets. The second main strategic priority is on the software side of our software unit.
Kieran Mccabe: The cardiovascular structural heart field.
Kieran Mccabe: As our markets.
Kieran Mccabe: It's still relatively new for us.
Kieran Mccabe: There is untapped potential and if the R&D effort.
Kieran Mccabe: Going into those markets.
Kieran Mccabe: The second main strategic priority is on the software side of our software unit, specifically I talked to the.
Brigitte de Vet: Specifically, I talk about the priority that we have to tap into the growth that is in the market for the manufacturing of end-use products. And that is where, you know, in terms of our product portfolio, we still make significant investments to bring appropriate offerings into the market to tap into that growth. I think that gives you a bit of color as to what type of R&D investments are driving, to a large extent, the 16% that we talk about.
Kieran Mccabe: The priority that we have to tap into the growth that is.
Kieran Mccabe: As in the market.
Kieran Mccabe: In the area of manufacturing of end use products.
Kieran Mccabe: And that is where.
Kieran Mccabe: In terms of our product portfolio, we still make significant investments.
Kieran Mccabe: To bring appropriate offerings into the market to tap into that growth potential.
Speaker Change: I think that gives you a bit of color.
Kieran Mccabe: What are the.
Kieran Mccabe: What type of.
Kieran Mccabe: The investments are driving.
Kieran Mccabe: To a large extent.
Kieran Mccabe: The 60% that we talk about.
Brigitte de Vet: Now to your question, what is our view on those investments going forward? The new markets that we want to tap into; we will certainly not be at the end of our efforts there in the next couple of quarters. I think there are still significant R&D investments going forward that we are planning to do. We see those untapped markets and market expansions. As a market leader, we want to take advantage of being one of the first in those market segments and take the lead there. Therefore, I would expect our R&D spending to remain at least in the area of what we are spending today. Right, thank you.
Speaker Change: Now to your question Oh, you know what is our.
Kieran Mccabe: View on those investments going forward.
Kieran Mccabe: The new markets that we all want to tap into.
Kieran Mccabe: We will certainly not be.
Kieran Mccabe: And of our efforts there in the next couple of quarters I think there is still significant R&D investments going forward.
Kieran Mccabe: Plenty to do.
Kieran Mccabe: We see those untapped markets.
Kieran Mccabe: And market expansions.
Kieran Mccabe: And as a market leader.
Kieran Mccabe: We wanted to take the advantage of being one of the first in those market segments.
Kieran Mccabe: And take the lead there in there.
Kieran Mccabe: I would expect our R&D.
Kieran Mccabe: Spending to remain.
Kieran Mccabe: At least in the area of where we are.
Kieran Mccabe: Lending today.
Brigitte de Vet: And my other question was, I think you recently quoted in an article talking about replicating some of the success that the medical segment has had, trying to replicate that in the other segments. I was wondering if you could provide any kind of details on the strategy or practices that you're looking to apply to the other segments to really kind of replicate that success that you've seen in the medical segment. Yeah, so I think there's a couple of strategies or reflections that we've seen have led to success in the medical market that we'll seek to apply in the other markets as well.
Speaker Change: Alright, Thank you and my other question was I think you.
Speaker Change: Recently quoted in an article talking about replicating some of the success.
Speaker Change: The medical segment, that's had tried to replicate that in the other segments. I was wondering if you could provide any kind of details on the strategy or practices that youre looking to apply to the other segments to really kind of replicate that success that you've seen in the medical.
Speaker Change: So I think.
Speaker Change: And there's a couple of wells.
Speaker Change: Our strategy is a reflection that we've seen has led to success in the medical market.
Speaker Change: We will seek to apply in the in the.
Brigitte de Vet: I mean, additive manufacturing is a growth segment still, and selecting carefully where we play and how we play with a deliberate market strategy, you know, and continuously setting the right priorities, focusing our efforts there where we see we have the highest chances of a return on our investment. That's what we've done in the medical market, making clear choices about what are the markets we want to serve and how do we want to serve them and focus. I think that is certainly, you know, an effort or a reflection that we want to apply to other markets as well. Great.
Speaker Change: Other markets as well.
Speaker Change: I mean additive manufacturing is a growth segment still.
Speaker Change: And selecting carefully where we play and how we play with the deliberate market strategy.
Speaker Change: And studying continuously setting the right priorities focusing our efforts there.
Speaker Change: They are where we see we have the pies chances of a return on our investment and that's what we've done in the medical market, making choices about what are the markets. We want to serve and how do we want to serve them and focus I think that is certainly an effort.
Speaker Change: Reflection there'll be a went up fly to other markets as well.
Brigitte de Vet: Great. Thank you so much for taking my questions. Thank you, Kieran.
Speaker Change: Great. Thank you so much for taking my questions.
Speaker Change: Thank you Kieran.
Operator: One moment for our next question. Thank you. Our next question comes from the line of Alexander Craeymeersch of Kepler Chevreux. Your line is now open.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Thank you our next.
Speaker Change: <unk> comes from the line of Alexander <unk> of Kepler Chevron. Your line is now open.
Alexander Craeymeersch: Hey, hello, it's just maybe one more question on the Koen platform, so that was back in a time a significant investment also on the back of an acquisition, so could you maybe just give us an indication where that stands today, how that the demand is moving, were you able to increase the prices, because if I look at the Q1 where it was not exceptional as far as I understood it in 2023, so I just see 8% decrease in sales, so yeah I see there that the subscription fees rose by 4%, does that then imply that basically the volumes are down or how do I need to see this?
Alexander: Hey, just maybe one more question on the <unk> platform.
Alexander: So that was back in a time of significant investments else who are on the back of an acquisition.
Alexander: So could you maybe just give us an indication of where that stands today and how that the demand is moving where you're able to increase the prices because if I look at the Q1, it where it's where it was not exceptionally for as far as I understood. It.
Alexander: In 2023, so I was just see them eight.
Alexander: <unk>, 8% decrease in sales.
Alexander: So yeah I see the subscription fees rose by 4% does that then imply that the.
Brigitte de Vet: No, I don't think you can conclude that from the numbers, so let me talk to Koen about the strategic importance of that. And you're absolutely right, we have invested a lot in CoEM in the past. And it is an absolutely critical driver of our growth going forward. Why?
Alexander: Basically the volumes are down or how do I need to see this.
Speaker Change: No I don't think you can can conclude that from the numbers. So let me talk to.
Alexander: OEM and and the.
Alexander: The strategic importance of that and you're absolutely right. We have been was faster.
Alexander: <unk> in the past and it is an absolutely critical driver of our growth going forward why because.
Brigitte de Vet: Because, you know, I talk a lot about that shift in the market from prototyping to end-use products, and that's the shift that we want to tap into with our software unit. And CoEM plays a major role in that because CoEM is one of the vehicles that we can use to cater to the needs of those customers that are additively manufacturing end-use products. And that needs to scale. They need offerings and systems that help them to do this efficiently and effectively.
Alexander: I talked a lot about that shift in the market from prototyping to end use products.
Alexander: And that's the shift that we wanted to tap into with our software unit and at Corium plays a major role in that because <unk> is one of the vehicles that we could use to cater the needs of those customers that are additive manufacturing end use products and that needs to scale they need.
Alexander: Offerings and systems that help them to do this efficiently and effectively in Korea is.
Brigitte de Vet: And CoEM is, you know, the vehicle to do that. In my remarks, I mentioned one of the functionalities that we brought out now in the first quarter that is based on CoEM. And that is the QPC modules for the quality and process control functionality, which does exactly that.
Alexander: The vehicle to do that.
Alexander: My remarks I mentioned.
Alexander: One of the functionalities that we brought out now in the first quarter that is based on corium.
Alexander: And that is the UPC modules to the policy and process control.
Alexander: Now, let's see.
Koen Berges: It helps customers that, you know, really want to scale in the production of end-use products. And then they need to have better tools to monitor quality, monitor their process, and capture that data to scale efficiently and provide their products at an appropriate market, I don't know, appropriate cost to their markets. So CoEM remains an absolutely critical element in our strategy to tap into that market where we see growth, and it is the perfect vehicle.
Alexander: That's exactly that it helps customers.
Alexander: We didn't want to scale.
Alexander: In the production of end use products and then they need to have to have better tools.
Alexander: Wanted her to quality monitor that process and capture that data to scale efficiently.
Alexander: And and provides the air products.
Alexander: And appropriate market I don't know what the appropriate cost to the end markets absorb Oems is an absolutely critical element in our strategy to tap into that market, where we see.
Alexander: Growth.
Alexander: And it is the perfect vehicle now we did an acquisition tool.
Koen Berges: Now, we did an acquisition to at least get the basis of this vehicle in-house, but obviously, we continue to develop it further on that vehicle. And on that basis, which is again what is reflected in our 16% R&D. Does that answer your question? Yeah, but why are the sales down, why are clients less interested in your software? Yeah, but it's not less. At least that's the impression that the numbers get; they're probably wrong. No, maybe what I should do.
Alexander: At least get to the basis of this.
Alexander: Eagle in house.
Alexander: But obviously, we continue to develop.
Alexander: Further on that.
Alexander: And on that basis.
Alexander: Which again is what is reflected in our 16% R&D spend.
Speaker Change: Does that answer your question.
Speaker Change: But.
Speaker Change: But why the sales down where clients less interested in yourself too yeah, but if you got.
Speaker Change: At least that's the impression that the numbers.
Speaker Change: Oh I'm wrong no.
Brigitte de Vet: Alexander, if you look at the number, the 4% increase that we've mentioned for recurring revenue, that includes far more than just our CoEM platform, there is growth mainly on two components within recurring revenue, that is, first on CoEM, and secondly also on the switch to annual licenses. On the other hand, we see a decline, of course, if we do the switch from perpetual to annual licenses with regard to maintenance contracts. Maintenance contracts go down, and historically there has been a large bulk, so when we do the transition from perpetual to annual, that component goes down.
Speaker Change: Maybe what I can add to it is Alexander is if you look at the number at a 4% increase that we've mentioned for recurring revenue that includes far more than just only our Korea plus gamma.
Speaker Change: There is there is growth mainly on two components within recurring revenue that is for some Korean secondly, also on the switch to annual licenses on the other hand, we see a decline of course, if we do the switch from perpetual to annualized consist with regards to maintenance contracts and maintenance contracts go down and historically that has been up.
Speaker Change: A large bulk so when when when we do the transition from perpetual to annual that component goes down. So if you take the bulk of the tree.
Brigitte de Vet: So if you take the bulk of the tree, then overall, there is still an increase of about 4%, but there are various components within that. And also, in the first quarter, we can confirm that CoEM continued to grow, even if the product had more functionalities being added.
Speaker Change: Then overall there is still an increase of about 4%, but there is various components what index and also in the first quarter. We can confirm that <unk> continued to grow even if the process as more functionality is being edits towards.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Brigitte de Vet: I'm showing no further questions at this time. I would now like to turn it back to Brigitte Vet, CEO, for closing remarks.
Speaker Change: I'm showing no further questions at this time I would now like to turn it back to preventative that E O for closing remarks.
Brigitte de Vet: Well, thanks again for joining us today. We look forward to continuing our dialogue with all of you through investor conferences or in one-on-one virtual meetings or calls. And, as you know, you can always reach out to us if you have any questions or you need further clarification. Thank you, and goodbye for now.
E O: Well, thanks again for joining US today, we look forward to continuing our dialogue with all of you through investor conferences or in one on one virtual meetings of coal.
Preventative: And as you know you can always reach out to us if you have any questions or you need further clarification.
Speaker Change: Thank you and goodbye for now.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].