Q3 2024 Materialise NV Earnings Call
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Speaker Change: I would now like to hand, the conference over to your first speaker today Harriet fried of Alliance advisors.
Harriet Fried: Thank you for joining us today for Materializes quarterly conference call with US on the call are <unk> to vet, Biogen, Chief Executive Officer, and Coors beverages, Chief Financial Officer.
Harriet Fried: 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 2024.
[music].
Harriet Fried: To access the slides if you have not done so already please go to the Investor Relations section of the company's website at Www Dot materialized dot com there.
Harriet Fried: The earnings press release issued earlier today can also be found on that page.
Harriet Fried: 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 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 <unk>.
Okay.
Operator: Good day, and thank you for standing by.
Harriet Fried: Including competitive dynamics and industry change.
Good day, and thank you for standing by.
Operator: Welcome to the Q3 2024 Materialise financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To install your question, please press star 1-1 again.
Harriet Fried: 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 as of any subsequent date.
I'll come to the Q3, 'twenty 'twenty four materialize financial results conference call at.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Harriet Fried: Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
To ask a question during the session you will need to press star one one on your telephone you will.
Harriet Fried: A more detailed description of the risks and uncertainties and other factors that could 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.
Operator: Please be advised that today's conference ends being reported.
Harriet Fried: I would now like to hand the conference over to your first speaker today, Harriet Fried of Alliance Advisors. Thank you for joining us today for Materialise's quarterly conference call. With this on the call, our Brigitte Vet legend, Chief Executive Officer, and Koen Berges, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's strategic financial and operational performance for the third quarter of 2024. To access the slides, if you have not done so already, please go to the Investor Relations section of the company's website at www.materialise.com. The earnings press release issued earlier today can also be found on that page.
Harriet Fried: Finally management will discuss certain non <unk> measures on today's call.
Harriet Fried: A reconciliation table is contained in the earnings release and at the end of the slide presentation.
Speaker Change: With that I'd like to turn the call over to bridge you to divest vitamins grew with detail go ahead. Please.
Speaker Change: Good morning, and good afternoon, and thank you everyone for joining us today.
Speaker Change: You can find no agenda on.
Speaker Change: Slide three as always I want to first summarize the highlights of our financial results for the third quarter. In 2024, then I will take you through some of the progress we've made in realizing our strategic priorities over the last couple of months and after that I will pass the floor to corn will go into our third quarter numbers in more detail.
Harriet Fried: 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. 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 estimates as up to date and should not be relied upon as representing their estimates as of any subsequent date. Management disclaims, and you do need to update or revise any forward-looking statements to reflect future events for changes in expectations.
Speaker Change: Finally, I will come back and explain how we view the remainder of 2024.
Harriet Fried: When we've completed our prepared remarks, we'll be happy to respond to questions.
Harriet Fried: Now looking at our key results for the third quarter summarized on page four.
Harriet Fried: Very pleased to report that we performed strongly in all of our business segments and one small deliver profitable results this quarter with a strong improvement compared to last year.
[noise] represent management's estimates as of today and should not be relied upon as representing their estimates as of any subsequent date.
Harriet Fried: We realized strong quarterly revenues of $68 7 million Europe growing more than 14% compared to the third quarter last year and demonstrating growth in all segments.
Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
We realized a gross margin of 50 57, 2% in the third quarter, which is up from the 56% for the comparable period of 2023.
Harriet 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.
A more detailed description of the risks and uncertainties and other factors that could 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.
Harriet Fried: This solid performance enabled us to increase our adjusted EBIT to $4 4 million, representing six 4% of our revenue without compromising on our continued investments to drive future growth.
Finally management will discuss certain non <unk> measures on today's call.
A reconciliation table is contained in the earnings release and at the end of the slide presentation.
Harriet Fried: This translates into a net profit of 3 million or five years and for sure.
Harriet Fried: With that, I'd like to turn the call over to Brigitte DeVette Biden. Brigitte, go ahead, please.
Our net cash position at the end of the third quarter was $63 1 million Euro Colin will elaborate further on these results in his remarks later in this call now moving now to slide five I'm very pleased with our progress made on the main strategic priorities.
Speaker Change: With that I'd like to turn the call over to <unk>.
Speaker Change: <unk> go ahead please.
Brigitte Vet: Good morning and good afternoon, and thank you everyone for joining us today. You can find our agenda on the slides at three. As always, I will now first summarize the highlights of our financial results for the third quarter in 2024. Then, I will take you through some of the progress we've made in realizing how strategic priorities are with the last couple of months.
Speaker Change: Good morning, and good afternoon, and thank you everyone for joining us today.
Speaker Change: You can find no agenda on.
Speaker Change: Slide three as always.
Harriet Fried: First in medical we accelerated our growth.
Speaker Change: I will first summarize the highlights of our financial results for the third quarter in 2024.
Harriet Fried: Thanks, mainly to the progress made in our core markets for the second time in our company's history medical was the strongest revenue generator accounting for 44% of revenue this quarter.
Speaker Change: I will take you through some of the progress we've made in realizing our strategic priorities over the last couple of months and after that I will pass the floor to corn will go into our third quarter numbers in more detail finally, I will come back and explain how we view the remainder of 2024.
Brigitte Vet: And after that, I will pass the floor to Corn, who will go into our third quarter numbers in more detail. Finally, I will come back and explain how we view the remainder of 2020. When we've completed our prepared remarks, we'll be happy to respond.
Harriet Fried: Now this is evidence that our mass customization strategy is working and that our investments are paying off now.
Harriet Fried: Now what do I mean by mass personalization, we continuously ask ourselves how we can serve more patients with personalized approaches lovitt and just benefit benefiting a lucky few and in the last few years, we've made strategic investments to broaden the population we are reaching.
Speaker Change: When we've completed our prepared remarks, we'll be happy to respond to questions.
Brigitte Vet: Wond to question.
Brigitte Vet: Now, looking at our key results for the third quarter, summarized on page 4, I am very pleased to report that we performed strongly in all of our business segments, and once more, deliver comfortable results this quarter with a strong improvement compared to last year. We realized strong quarterly revenues of 68.7 million in Europe, growing more than 14% compared to the third quarter last year, and demonstrating growth in all segments. We realized the gross margin of 50.57.2% in the third quarter, which is up from the 56% for the comparable period of 2023. In this solid performance, enabled us to increase our adjusted EBIT to 4.4 million euro, representing 6.4% of our revenue, without compromising on our continued investments to drive future growth.
Speaker Change: Now looking at our key results for the third quarter summarized on page four I am very pleased to report that we performed strongly in all of our business segments and one small deliver profitable results this quarter with a strong improvement compared to last year.
Harriet Fried: Some examples thanks.
Harriet Fried: Thanks to our U S manufacturing plant, we have managed to bring our personalized solutions to trauma patients.
Speaker Change: We realized strong quarterly revenues of $68 7 million Europe growing more than 14% compared to the third quarter last year and demonstrating growth in all segments.
Harriet Fried: Rama patients are patients that need to have a solution in days not in weeks.
Harriet Fried: As a reminder, the U S facility enables us to deliver parts was much shorter and more reliable lead times.
Speaker Change: Realized gross margin of $50 57, 2% in the third quarter, which is up from the 56% for the comparable period of 2023.
Harriet Fried: For this plant and the investment we made there we managed to triple the number of trauma cases, we treated per quarter compared to the number we treated before the opening of the plant and.
Speaker Change: This solid performance enabled us to increase our adjusted EBIT to $4 4 million, representing six 4% of our revenue without compromising on our continued investments to drive future growth.
Harriet Fried: And we are now delivering solutions faster than any other provider in the U S market and we therefore expect our penetration of this market to continue and generate further growth in the future.
Brigitte Vet: This translates into a net profit of 3.0 or 5 years in per share. Our net cash position at the end of the third quarter was 63.1 million in Europe.
Harriet Fried: Now as a second example, I would like to point to the investments we are making in our mimics platform to expand our position in the research and engineering market in this market with traditionally build a strong position with our mimics innovation suites of software suite that is used by researchers and engineers to segment the medical in.
Koen Berges: Koen will elaborate further on these results in its remarks late in this call.
Brigitte Vet: Now, moving out to slide 5, I am very pleased with our progress made on the main strategic priorities. First, in medical, we accelerated our growth, thanks mainly to the progress made in our core markets. For the second time in our company's history, medical was the strongest revenue generator, accounting for 44% of revenue this quarter. Now, this is evidence that our mass personalization strategy is working and that our investments are paying off.
Harriet Fried: <unk> of our patients create a <unk> model and to prepare the treatment plan on this basis or decided to patient specific and blunt instrument for the patient.
Harriet Fried: In order to accelerate the adoption of these patient specific approaches we need to make this workflow a lot easier and faster and integrated with the rest of the healthcare ecosystem and this is what we are achieving with our cloud based mimics platform cosmetics flow.
Brigitte Vet: Now, what do I mean by mass personalization? We continuously ask ourselves how we can serve more patients with personalized approaches rather than just benefiting a lucky few. And in the last few years, we've made strategic investments to broaden the population we are reaching. Some examples. Thanks to our US manufacturing plans, we have managed to bring our personal solutions to trauma patients. Trauma patients are patients that need to have a facility enables us to deliver parts with much shorter and more reliable lead types. Thanks to this plan, and the investment we made there, we managed to triple the number of trauma cases which we treated because of the competitive number which we treated before the opening of the plan.
Harriet Fried: Earlier this year, we believe the case management capabilities on mimics floor.
Harriet Fried: Lisa to medical device companies earlier. This year also released through the hospitals end of last year.
Harriet Fried: Other benefits this solution enables customers to manage their workflows and to and in force quality management and in battery stability and reports and create visibility for all stakeholders on case status and enable easier collaborations with stakeholders across the ecosystem for example to get approvals.
Harriet Fried: This solution is a valuable extension of our offering for customers to process, a large number of personalised cases per year and need to find ways to efficiently manage these larger volumes. It is seamlessly integrated with mimics our market, leading desktop based segmentation and planning software.
Brigitte Vet: And we are now delivering solutions faster than any other provider in the US market. And we therefore expect our penetration of the market to continue and generate further growth in the future.
Harriet Fried: Since the launch of the solution, we have already managed contracts and customers and expect the uptick to continue into fourth quarter and throughout 2025 in the coming years, we will continue to bring out additional cloud based functionality that will make it easier and faster for customers to treat personal use cases.
Brigitte Vet: Now, as a second example, I would like to point to the investments we are making in our MIMICS platform to expand our positions in the research in engineering markets. In this market, we have traditionally built a strong position with our MIMICS innovation suite, a software suite that is used by researchers and engineers to segment the medical images of a patient, create a 3D model, and prepare a treatment plan on this basis or design the patient's specific implant or instrument for the patient at hand. In order to accelerate the adoption of these patients' specific approaches, we need to make this workflow a lot easier and faster and integrated with the rest of the Action.
Speaker Change: Yeah.
Speaker Change: Now is the second example, I would like to point to the investments we are making in our mimics platform to expand our position in the research and engineering market in this market with traditionally build a strong position with our mimics innovation suites of software suite that is used by researchers and engineers to segment the medical images of our patients.
Harriet Fried: Now turning to software.
Harriet Fried: We made significant progress on multiple fronts.
Harriet Fried: We made progress on previously announced partnerships delivering first results that are truly encouraging as an example in the second quarter, we announced the collaboration with <unk> in order to enable the processing of complex and large design and STL files.
Speaker Change: The <unk> model and to prepare the treatment plan on this basis or decided to patient specific and blunt instrument for the patient and it hasn't.
Speaker Change: In order to accelerate the adoption of these patient specific approaches we need to make this workflow a lot easier and faster and integrated with the rest of the healthcare ecosystem and this is what we are achieving with our cloud based mimics platform cosmetics flow earlier.
Harriet Fried: We announced an early access program at rapid in June we have now selected 12 companies for this program from 57 net applied setting us up for demonstrating the value of an additional use cases in the future.
Harriet Fried: Another example in the first quarter. This year, we signed an agreement with <unk>, a cloud based soft quoting and E Commerce solutions for advanced manufacturing companies.
Speaker Change: Earlier this year, we believe the case management capabilities on mimics flow released it to medical device companies earlier this year after a release to the hospitals end of last year.
Harriet Fried: In the third quarter, we signed our first OEM sale, including the digital digit factor solution in the consideration.
Speaker Change: Other benefits this solution enables customers to manage their workflows and to and in force quality management and in battery stability and reports and create visibility for all stakeholders on case status and enable easier collaborations with stakeholders across the ecosystem for example to get approvals. This.
Harriet Fried: Second we also announced new partnerships for example, with walnuts and strengths and strategies.
Harriet Fried: But most importantly, we made significant progress in Materialise magics, leveraging our new products to further strengthen our position in key strategic accounts and sectors like aerospace and on demand manufacturing as an example, we see increased adoption of our metal support workflows with more companies migrating to our advanced automated support.
<unk> is a valuable extension of our offering for customers to process, a large number of personalised cases per year and need to find ways to efficiently manage these larger volumes. It is seamlessly integrated with mimics our market, leading desktop based segmentation and planning software.
Harriet Fried: <unk> solution E stage metric metal for E stage for metal class.
Speaker Change: Since the launch of the solution, we have already managed contracts and customers and expect the uptick to continue in the fourth quarter and throughout 2025 in the coming years, we will continue to bring out additional cloud based functionality that will make it easier and faster for customers to treat personalized cases.
Harriet Fried: These states from a process reduces the time spend on support designed by up to 90%, while minimizing human error on Bill's question.
Harriet Fried: I'm also pleased to share that the usage and adoption of our latest version of metrics Magics 28 is accelerating at a much faster rate compared to previous releases.
Speaker Change: Now turning to software we.
Harriet Fried: After the raise in June almost 50% of our active customer base is already using the latest metrics release, while it is still in its early lifestyles lifecycle fees compared to other supported version of.
Speaker Change: We made significant progress on multiple fronts.
Harriet Fried: This version is quickly replacing legacy versions in the market a clear indicator of how customers are recognizing the improved features such as the new lexis model or the new <unk> modules.
Harriet Fried: This is helping us drive a broader transition ensuring that our customers stay up to date with the latest advances it's really printing technology.
Harriet Fried: And last but certainly not least I am very pleased with the progress on our next generation metrics Bp's, We released the desktop deployment of our next generation bps in the first quarter. This year and have already contracted more than 20 partners.
Harriet Fried: The advanced algorithms of the next generation BP significantly improve build time and quality things too for example, its advancement strategies for mobile users and enable a variety of collaboration model, including the possibility for customers to build their own bps. Thanks to the availability of our SDK.
Harriet Fried: Turning now to manufacturing.
Harriet Fried: We celebrated the opening of our second plant at uptick and will ship the first parts of the fourth quarter.
Harriet Fried: This second plant, we are expanding our capacity and enhancing our ability to handle huge and heavy parts. In addition to the extension of our capacity in the new equipment is a critical step to address the market for more complex metal parts in the market for small series now.
Harriet Fried: Now why is this important.
Harriet Fried: First this strengthens our position in the market that we are traditionally strong in the automotive market, where the development of electric electric cars brings the need for more complex casted components for electrical Drivetrains and chassis.
Second it opens market opportunities in new segments, such as agriculture mining construction and marine vehicles, where parts are typically larger and heavier and therefore more difficult to handle.
Harriet Fried: The complexity of pods in these segments is increasing for example to achieve better thermodynamic cycles in the engines with maximum fuel efficiency.
Harriet Fried: The combination of high precision printing casting and complex post treatment that we can offer effect is ideal for these and we are therefore very well positioned to serve these needs.
Speaker Change: <unk> technology.
Speaker Change: And last but certainly not least I am very pleased with the progress on our next generation metrics P. Pes, we released the desktop deployment of our next generation bps in the first quarter. This year and have already contracted more than 20 partners. The advanced algorithms of the next generation be significantly improve build time and quality things to four.
Harriet Fried: It is interesting to note that customers in all of these segments are turning to Arctic for two reasons.
Harriet Fried: First they are looking for fast and reliable prototyping solutions and.
Harriet Fried: But second what is very exciting is that with the new plan. We are also able to deliver small series.
Apple its advancement strategies familiar multi lasers and enable a variety of collaboration models, including the possibility for customers to build their own bps. Thanks to the availability of our SDK.
Harriet Fried: Now the additional capacity in the new equipment strengthen our position for both types of offerings.
Harriet Fried: We are gradually reorganizing our operational flow in the fourth quarter and will then wrap up our capacity throughout 2025 and 2026, we expect the temporary impact of the operational startup in the fourth quarter.
Speaker Change: Turning now to manufacturing.
Speaker Change: We celebrated the opening of our second planned adaptec and will ship the first parts of the fourth quarter.
Speaker Change: With this second plant, we are expanding our capacity and enhancing our ability to handle huge and heavy parts. In addition to the extension of our capacity in the new equipment is a critical step to address the market for more complex metal parts in the market for small series now.
Speaker Change: Now Kun will take you through the detailed financial results by segment.
Kun: Thank you Bridget.
Speaker Change: Good morning, or good afternoon to all of you on this call.
Kun: Again with a brief review of our consolidated revenue on slide six.
Speaker Change: Now why is this important.
Kun: As a reminder, please note that unless stated otherwise all comparisons in this call are against our results for the third quarter of 2023.
Speaker Change: First this strengthens our position in the market that we are traditionally strong in the automotive market, where the development of electric electric cars brings a need for more complex casted components for electrical Drivetrains and chassis.
Kun: In this year's third quarter total revenue increased 14% to $68 7 million Euro.
Speaker Change: Second it opens market opportunities in new segments, such as agriculture mining construction and marine vehicles, where parts are typically larger and heavier and therefore more difficult to handle.
Kun: We reported growth in all three of our business segments with the strongest increase coming from our medical segment, which grew by more than 24% and posted record high quarterly revenue figures.
Kun: Despite of the vertical version of our software business model to recurring revenue streams continued challenging market conditions that are manufacturing segment faces. Although both of these segments grew in the third quarter more specifically by three and 9% respectively.
Speaker Change: The complexity of pods in these segments is increasing for example to achieve better thermodynamic cycles in the engines with maximum fuel efficiency.
Speaker Change: The combination of high precision printing casting and complex post treatment that we can offer it affect is ideal for this and we are therefore very well positioned to serve these needs.
Kun: As you can see in the graph on the right side of the page Materialise medical now accounted for 44% Materialise manufacturing for 40% and materialized.
Speaker Change: It's interesting to note that customers in all of these segments are turning to Arctic for two reasons.
Speaker Change: First they are looking for fast and reliable prototyping solutions.
Kun: Software for 16% of total revenue.
Speaker Change: But second what is very exciting is that with the new plan. We are also able to deliver small series.
Kun: In the third quarter, our medical segment took over the role of largest revenue generators for manufacturing.
Kun: To date, we've now generated over $201 million Euro of revenue, which is five 4% above the same periods in 2023.
Kun: The amount of deferred revenues on our balance sheet related to software license and maintenance fees amounted to $41 1 million Euro at the end of September.
Kun: Total deferred revenues on our balance sheet were $47 4 million also at the same moment at the end of the quarter.
Kun: Now on slide seven you will see that our consolidated adjusted EBIT and <unk>.
EBITDA numbers for the third quarter of 2024.
Kun: Consolidated adjusted EBIT increased to $4 4 million compared to $2 3 million euro for the corresponding periods of 2023.
Kun: Top line growth in combination with continued focus on leveraging scaling effects and cost control led us to an 89% increase in operational performance, while we continued investing in our future growth businesses.
Kun: The adjusted EBIT margin for the quarter was six 4%.
Kun: Compared to three 9% last year.
Kun: Consolidated adjusted EBITDA for the third quarter amounted to $9 9 million euro increasing from $7 9 million last year.
Kun: Our adjusted EBITDA margin reached 44% compared to 13, 1% the prior year.
Kun: Year to date, we have now generated $10 9 million euro or adjusted EBIT of $27 2 million of adjusted EBITDA.
Kun: Okay.
Kun: Moving now onto slide eight you will notice that the quarter's total revenue in our Materialise medical segment increased by almost 25%.
Kun: This strong growth was generated by higher revenue coming from medical devices and services sales and by higher revenue from our medical software, which grew respectively by 28 of 16%.
Kun: Within our medical devices and services activity, we drove both direct and partner sales.
Kun: As a result of topline growth and cost discipline to adjusted EBITDA for the medical segment grew to $9 9 million with an adjusted EBITDA margin decreased to 32, 8%.
Kun: These numbers and will also include the impact from sales the acquisition that we completed in July and which at its current development phases contributing negatively to our EBIT.
Kun: Year to date, our medical segments realized $84 5 million of revenue by.
By 15% from last year with an adjusted EBITDA of 26 million euro representing almost 31% of adjusted EBITDA margin.
Speaker Change: Effects and cost control led us to an 89% increase in operational performance.
Speaker Change: While we continued investing in our future growth businesses.
Kun: Slide nine summarizes the results of our Materialise software segment in the.
Speaker Change: The adjusted EBIT margin for the quarter was six 4% compared to three 9% last year.
Kun: Third quarter software revenue grew by almost 3%.
Kun: Negative revenue impact of our further transition to a cloud and subscription based business model was more than offset by strong direct sales preprint segments.
Speaker Change: Consolidated adjusted EBITDA for the third quarter amounted to $9 9 million euro increasing from $7 9 million Euro last year.
Speaker Change: Our adjusted EBITDA margin reached 44% compared to 13, 1% in the prior year.
Kun: Recurring revenue from software maintenance and licenses sales, including Korea increased by 9% on the other hand, non recurrent revenue decreased by 12%.
Speaker Change: To date, we have now generated $10 9 million euro or adjusted EBIT and $27 2 million euro of adjusted EBITDA.
Kun: Adjusted EBITDA in our software segment, increasing the third quarter of this year to almost $2 million.
Speaker Change: Okay.
Speaker Change: Moving now on to slide eight you'll notice that the quarter's total revenue in our Materialise medical segment increased by almost 25%.
Kun: Representing an adjusted EBITDA margin of 17, 8%, while we continue the R&D development efforts Oems in particular.
Speaker Change: This strong growth was generated by higher revenue coming from medical devices and services sales and by higher revenue from our medical software, which grew respectively by 28 and 16%.
Kun: Generally on the factory management capabilities.
Kun: Year to date, our software segments realized $32 8 million euro of revenue and an adjusted EBITDA of $4 4 million Europe.
Speaker Change: Within our medical devices and services activity, we do both direct and partner sales.
Kun: Presenting 35 13, 5% of adjusted EBITDA margin.
Speaker Change: As a result of topline growth and cost discipline. The adjusted EBITDA for the medical segment grew to $9 9 million with an adjusted EBITDA margin decreased to 32, 8%.
Kun: Now, let's turn to slide 10 for an overview of the performance of our Materialise manufacturing segment.
Kun: As in prior quarters also in Q3, our manufacturing segment faced a challenging market environment, which was mainly reflected in continued weak prototyping demand nonetheless.
Speaker Change: These numbers and I'll also included the impact from fails the acquisition that we completed in July and which at its current development phases contributing negatively to our EBIT.
Kun: Nonetheless, we managed to grow revenue by 9% compared to the third quarter of last year.
You have to date, our medical segments realized $84 5 million euro of revenue by.
Kun: Fueled by growth in <unk> and.
Kun: <unk> certified manufacturing.
Speaker Change: By 15% from last year with an adjusted EBITDA of 26 million euro representing almost 31% of adjusted EBITDA margin.
Kun: Here again, we posted the strongest growth in our strategic aerospace and mythic focus areas.
Kun: In spite of the topline growth and further realization of operational efficiencies cost pressure and less consulting income led to a lower adjusted EBITDA $4 7 million, representing an adjusted EBITDA margin of two 6%.
Brigitte Vet: It's like nine summarized results of our materialized software segments. In the third quarter, software revenue grew by almost three percent. Negative revenue impact of our further transition to a cloud and subscription-based business model was more than offset by strong narrative sales now pre-print segments. Recurring revenue from software maintenance and licenses sales, including co-AM, increased by nine percent. On the other hand, non-recurrent revenue decreased by 12 percent. The adjusted EB-Dine are software segments increased in the third quarter of this year to almost two million euro, representing an adjusted EB-Dine margin of 17.8 percent while we continued the R&D development efforts in co-AM and particularly on the factory management capabilities.
Speaker Change: Slide nine summarizes the results of farming Materialise software segment in the.
Speaker Change: Third quarter software revenue grew by almost 3%.
Kun: Year to date, our manufacturing segments realized revenue of 83 point.
Kun: 8 million with an adjusted EBITDA of $4 6 million Euro.
Kun: Representing five 5% of adjusted EBITDA margin.
Kun: Slide 11 provides the highlights of our consolidated income statement for the third quarter of this year.
Kun: Our gross profit increased to $39 3 million euro representing a gross profit margin of 57, 2% in.
Kun: An increase of 120 basis points compared to the gross profit margin realized in Q3 of last year.
Brigitte Vet: Here today are software segments realized 32.8 million euro of revenue and an adjusted EB-Dine for 4.4 million euro, representing 35.13.5 percent of adjusted EB-Dine margin.
Kun: Direct cost increases were offset by efficiency gains and mix effects.
Kun: Our operating expenses in the quarter increased by three 8 million or 11, 8% in aggregates with the largest increase coming again from the higher R&D spend which grew by 16% compared to last year.
Brigitte Vet: Now let's turn to slide 10 for an overview of the performance of our materialized manufacturing segments. As in prior quarters, also in due to three manufacturing segments faced a challenging market environment, which was mainly reflected in continued with prototyping demands. Nonetheless, we managed to grow revenue by 9 percent compared to the third quarter of last year. Fueled by growth in access and in certified manufacturing. Here again, we posted the strongest growth in our strategic aerospace and metric focus areas.
Kun: R&D investments remained mainly focused in our medical segment on the mimics platform developments in our medical devices business and in our software segment of OEM developments.
Kun: Net operating income in the quarter was positive at $4 1 million compared.
Kun: Compared to $1 7 million last year.
Kun: As a result of these elements the group's operating results in the quarter was positive at $4 3 million euro compared to $2 3 million in last year's periods.
Brigitte Vet: In spite of the top-lying growth in the further realization of operational efficiencies, cost pressure and less consulting income, let you will lower adjusted EB-Dine of 0.7 million euro, representing an adjusted EB-Dine margin of 2.6 percent. Here today are manufacturing segments realized revenue of 83.8 million euro within adjusted EB-Dine of 4.6 million euro, representing 5.5 percent of adjusted EB-Dine margin.
Kun: Now in Q3, the net financial results amounted to a negative minus $1 1 million euro mainly impacted by unfavorable currency exchange results of minus $1 8 million Euro.
Kun: Interest income from our cash reserves more than offset the decline in interest expense on our gradually decreasing financial depths.
Income tax expenses in the quarter amounts to minus $4 1 million Euro.
Kun: All of this resulted once more in net profit for the quarter equaling 3 million Euro.
Brigitte Vet: Slide 11 provided a highlight of our consolidated income statement for the third quarter of this year. Our growth profit increased to 39.3 million euro, representing a growth profit margin of 57.2 percent, an increase of 120 base points compared to the growth profit margin realized in due to EF last year. Direct cost increases were offset by efficiency gains and makes effects.
Kun: <unk> per share compared to a 4 million euro or seven euro cents per share for the same period of last year.
Now please turn to slide 12 for a recap of the key balance sheet and cash flow highlights.
Kun: Also in the third quarter of 2024, our balance sheet remains strong.
Kun: Our cash reserve at the end of the quarter amounted to 160 million Euro.
Brigitte Vet: A operating expenses in the quarter increased by 3.8 million euro or 11.8 percent in aggregates, with the largest increase coming again from the higher R&D spent, which grew by 16 percent compared to last year. R&D investments remained mainly focused in our medical segments on the MIMIC platform developments in our medical devices business and in our software segments on co-AM developments. Net operating income in the quarter was positive at 0.1 million euro, compared to 0.7 million euro last year. As a result of these elements, the group's operating results in the quarter was positive at 4.3 million euro, compared to 2.3 million euro in last year's period.
Loan and lease repayments totaling almost $5 million year over the quarter reduced our gross debt to 53 million Euro.
Kun: Since the beginning of this year, which further reduced our gross debt position by <unk> 11 5 million Euro.
Kun: The resulting net cash position at the end of the third quarter was $63 1 million euro remaining stable compared to the position at the beginning of this year, although down by $4 4 million from the position at the end of the second quarter.
Kun: This decrease in the third quarter is mainly the result of increased capex investments and of the <unk> acquisition that we funded from our own means.
Speaker Change: The group's operating results in the quarter was positive at $4 3 million Europe compared to $2 3 million in last year's periods.
Kun: Compared to the end of last year, we reduced our net working capital by $2 6 million Euro mainly as a result of reduced receivables.
Brigitte Vet: Now, in Q3, the net financial results amount to a negative minus 1.1 million euro, mainly impacted by unfavorable currency exchange results of minus 1.8 million euro. The interesting come from our cash reserves more than I've said to decline in the interest expense on our gradually decreasing financial debts. In contact expenses in the quarter amount to minus 0.1 million euro, and all of this results at once more in net profit for the quarter, equaling 3 million euro, representing 5 euro cents per share compared to a 4 million euro or 7 euro cents per share for the same period of last year.
Speaker Change: Now in Q3, the net financial result amounted to a negative minus 1.1 million euro mainly impacted by unfavorable currency exchange results of minus 1.8 million Europe.
Kun: The total deferred income position amounted to 40 47 million euro of which $41 million was related to deferred revenue from software license and maintenance contracts as mentioned earlier in the call.
Speaker Change: Interest income from our cash reserves more than offset the decline in interest expense and a gradually decreasing financial depth.
Kun: As you can see from the graph on the right side of the page cash flow from operating activities for the third quarter amounted to $6 9 million euro slightly below the operational cash flow generated in the third quarter of last year and as a result of working capital movements.
Speaker Change: Income tax expenses in the quarter amounted to minus 1.1 million Euro.
Speaker Change: And all of this resolved with once more in net profit for the quarter equaling 3 million euro representing five euro cents per share compared to a 4 million euro or seven euro cents per share for the same period of last year.
Kun: Capital expenditures for the quarter on the other hand amounted to a high $7 3 million higher than the average mainly as a result of intensified investments in the new <unk> plants and the acquisition of sales.
Brigitte Vet: Now, please turn just right 12 for recap of the key balance sheets and cash flow highlights.
Speaker Change: Now please turn to slide 12 for a recap of the key balance sheet and cash flow highlights.
Brigitte Vet: Also, in the third quarter of 2024, a balance sheet remains strong. A cash reserve at the end of the quarter amounted to 116 million euro; loan and lease repayments totaling almost 5 million euro over the quarter reduced our gross debt to 53 million euro. Since the beginning of this year, we further reduced our gross debt position by 11.5 million euro.
Speaker Change: Also in the third quarter of 2024, our balance sheet remains strong.
Kun: As a result of these are free cash flow over the third quarter of 2024 to negative by minus $3 1 million Euro.
Speaker Change: Cash reserve at the end of the quarter amounted to 116 million Euro.
Kun: The operational cash flow amounts to 25 million euro after nine months into 2024.
Speaker Change: <unk> reached with payments totaling almost $5 million year over the quarter reduced our gross debt to 53 million Euro.
Kun: Which is up by 26% compared to the same period of last year, while also to year to date free cash flow was positive by $4 2 million in spite of a higher investment volume.
Speaker Change: Since the beginning of this year, which further reduced our gross debt position by 11 5 million Euro.
Brigitte Vet: The resulting net cash position at the same stable compared to the position at the beginning of this year, although down by 4.4 million euro, from the position at the end of the second quarter. This decrease in the third quarter is mainly the result of increased gap exchange investments and of the failed acquisition that we found it from our own means. Compared to the end of last year, we reduced our net working capital by 2.6 million euro; many other results of reduced rate receivables. The total deferred decomposition amounted to 47 million euro, of which 41 million was related to the 4 to revenue from software license and maintenance contracts, as mentioned earlier in the call.
Speaker Change: The resulting net cash position at the end of the third quarter was $63 1 million Euro.
Kun: As mentioned in our earlier calls the Capex investments in our new facility.
Speaker Change: Gaining stable compared to the position at the beginning of this year, although down by $4 4 million Euro from the position at the end of the second quarter. This.
Kun: The facility will continue for some time as we add additional machinery and gradually ramp up throughput.
Speaker Change: And with that I'd like to hand, the call back to breakeven. Thank you.
Speaker Change: This decrease in the third quarter is mainly the result of increased Capex investments and of the failed acquisition that we funded from our own means.
Speaker Change: Let's now turn to page 13.
Speaker Change: Conclude my remarks, with a discussion of our full year 2020 for guidance.
Speaker Change: Compared to the end of last year, we reduced our net working capital by $2 6 million Euro mainly as a result of reduced tape receivables.
Speaker Change: The consistently strong operational performance of our business segments throughout the first nine months of the year strengthens our confidence that we will land our full year revenue within the earlier communicated range of 20% to 65% to 275 million Euro.
Speaker Change: We're also maintaining our adjusted EBIT guidance of $11 million to $14 million for 2024.
Brigitte Vet: As you can see from the graph on the right side of the page, cash flow from operating activities for the third quarter amounted to 6.9 million euro, slightly below the operational cash flow generated in the third quarter of last year and as a result of working capital movements. Capital expenditure for the quarter, on the other hand, amounted to a high 7.3 million euro, higher than average, many as a result of intensified investments in the new active plants and the acquisition of fails.
Speaker Change: We're taking a conservative stance for the last quarter of 2024, given the weaker prototyping demand that we've seen in recent months.
Speaker Change: In addition, this guidance reflects the integration cost and further product portfolio investments of our recent <unk> acquisition as well as the startup of the new Arctic plant.
Speaker Change: This concludes our prepared remarks, operator, we're now ready to open the call to questions.
Brigitte Vet: As a result of this, our free cash flow over the third quarter of 2024 to a negative by minus 3.1 million euro.
Speaker Change: Thank you 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 one on your telephone and wait for your name to be announced.
Brigitte Vet: The operational cash flow amounts to 25 million euro after 9 months into 2024, which is up by 26% compared to the same period of last year, while also the year-to-date free cash flows positive by 4.2 million euro, in spite of a higher investment volume.
Speaker Change: To withdraw your question. Please press star one one again.
Speaker Change: Please standby.
Speaker Change: Our first question comes from Troy Jensen from Cantor Fitzgerald. Your line is now open.
Brigitte Vet: As mentioned in our earlier calls, the garbage investments in our new active facility will continue for some time, as we add additional machinery in the gradually ramp up two puts. And with that, I'd like to hand the call back to the leaders. Thank you, Koon.
Troy Jensen: Hey, good morning, good afternoon, thanks for taking my questions.
First all right.
Speaker Change: Hello together.
Speaker Change: But congrats I was really impressed shows.
Brigitte Vet: That's all; turn to page 13.
Brigitte Vet: I'll conclude my re-app remarks with the discussion of our full year 2020 for all guys. of the United Nations. To consistently strong operational performance of our business segments throughout the first nine months of the year, strengthens our confidence that we will land our full-year revenue within the earlier communicated range of 265 to 175 million euro. We are also maintaining our adjusted EBIT guidance of 11 to 14 million euro for 2024. We are taking a conservative stance for the last quarter of 2024, given the weaker prototyping demands that we have seen in recent months. In addition, this guidance reflects the integration cost and further portfolio investments of our recent fee-of-the-acquisition, as well as the startup of the new Arctic plant.
I thought the revenue upside gross margins and Opex P&L above plan.
Speaker Change: We're pretty impressive so keep up the good work but.
Speaker Change: To dive into the questions a little bit a little bit on medical.
Speaker Change: Just thoughts on the sustainability of the growth here.
Speaker Change: And profitability like what is flow through margins looked like what could EBITDA margins look like.
Speaker Change: The medical business if it continues to grow at this type of pace.
Speaker Change: So let me answer this question.
Speaker Change: Qualitatively.
Speaker Change: Giving a long term quantitative guidance typically but.
Speaker Change: To reflect on the medical business going forward.
Speaker Change: So that's it.
Speaker Change: So a lot of potential in the medical sector to adopt personalized solutions and.
Speaker Change: And the example, I've given earlier on the trauma population, we're now with the U S manufacturing plants, we are addressing part of the population honestly, we're still scratching the surface of that population. That's just one example, where I do think we can still drive up the adoption of personalized solutions in many.
Brigitte Vet: Now, this concludes our PBRT marks.
Operator: Operators, we are now ready to open the goals of questions. Thank you.
Operator: 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 11 again. Please stand by.
Speaker Change: The different markets in which we are playing.
Speaker Change: So in terms of the sustainability of the growth I think there's still a lot of potential in that segment.
Speaker Change: There's no reason why I would see that come.
Speaker Change: At a different.
Troy Jensen: Our first question comes from Troy Jensen from Canter Fitzgerald. Your line is now open.
Speaker Change: Profitability level.
Speaker Change: If anything with larger volumes typically you know it gets a little easier too.
Troy Jensen: Hey, good morning. Good afternoon. Thanks for taking my questions.
Speaker Change: To manage.
Speaker Change: Our margins, but there is no reason to believe why the profile will be different going forward.
Troy Jensen: First thing I thought, Hello, Brigetta. But congrats. I was really impressed. I thought the revenue of upside, gross margins, and op-x, being all above plan. We are pretty impressive, so keep up the good work.
Speaker Change: Right right well to that point kun could you confirm that.
Speaker Change: Flow through margins look like.
Speaker Change: For us for a medical business.
Speaker Change: And when you say fluids will not what executive.
Troy Jensen: But to dive into the questions a little bit, a little bit on medical, just thoughts on the sustainability of the growth here and profitability. What if flow through margins looked like? What could even our margins look like in the medical business if they continue to figure out this type of pace?
Speaker Change: An incremental million dollars, how much is going to go to the bottom right.
Speaker Change: You typically.
Speaker Change: $1 million more accretive in the first million dollars and accordingly, so as opposed to it looks like.
Speaker Change: Good luck.
Speaker Change: I understand your question correctly the choice, but the margins are currently around 30% in the 30% range of the EBITDA margins.
Brigitte Vet: Let me answer this question more qualitatively.
Speaker Change: That is what you were referring to and that is I think what we see we see flowing through to two or.
Brigitte Vet: I guess you know we are not giving a long-term quantitative guide, and typically, but we trust on the medical business going forward. So there's still a lot of potential in the medical sector to adopt personalized solutions. And the example I've given earlier on the trauma population. We're now with the U.S. manufacturing plants. We are addressing part of that population. Honestly, we're still scratching the surface of that population. And just one example where I do think we can still drive up the adoption of personalized solutions in many of the different markets in which we are playing.
Speaker Change: Bottom line EBITDA bottom line and medical segments.
Speaker Change: Okay understood I'm, just trying to get like what our forecast could be on EBITDA margins, but I'll move on so now comparing this you've got two businesses at a roughly the same size.
Speaker Change: In the medical is extremely profitable, but who has got 3%.
Speaker Change: EBITDA margins on the manufacturing business. So just thoughts on what you can do the rigor to improve profitability is scale is going to be the answer.
Speaker Change: Thoughts on that would be great. So there's probably a couple of aspects.
Speaker Change: Yes.
Speaker Change: We need to mention here until to answer your question.
Brigitte Vet: So there's, in terms of the sustainability of the growth. I think there's still a lot of potential in that segment. There's no reason why I would see that come at a different profitability level. If anything with larger volumes, typically it gets a little easier to manage our margins. But there's no reason to believe why the profile would be different going forward. What's at that point?
<unk>, obviously skill that help.
<unk>.
Speaker Change: I was just in all of our business lines.
Speaker Change: Scale is is a driver.
Speaker Change: That helps us get to better margins.
Speaker Change: The second.
Speaker Change: Part of the answer I want to give.
It shifts.
Speaker Change: We are making and we need to continue to make away from prototyping more towards end use parts.
Speaker Change: To profile will be different going forward.
Speaker Change: In the segments, where we see that our proposition.
Troy Jensen: Could you confirm what the flow through margins would like for medical business? And when you say flow to Mars, what exactly do you believe in? An incremental million dollars, how much is going to go to the bottom, right? There's typically the additional million dollars, you know, more creative than the first million dollars in a quarter, right?
Speaker Change: Right right well to that point couldn't coone can you confirm or what the flow through margins with Blake.
Speaker Change: <unk> has added value we've talked about certified manufacturing in the past, we've talked about aerospace domestic segment et cetera being segments, where the.
Speaker Change: For medical business.
Speaker Change: And when you say fluids, what exactly do you have any new York and.
Speaker Change: An incremental million dollars, how much is going to go to the bottom right.
Speaker Change: The complexity and the requirements are such that our high level Knowhow.
Speaker Change: You typically the additional million dollars more accretive in the first $1 million and accordingly, so what does it flow through look like.
Brigitte Vet: So what is the flow to look like? I don't know if I understand your question correctly, the Troy, but the margins are currently around 30% in the 30% range, and the EBDA margins, if that is what you were referring to, and that is, I think, what we see, we see flowing through to our bottom line, ABDA, bottom line in the medical segments. Okay.
Speaker Change: And the fact that based on the long experience that we have we can handle these more complex and high quality requirements.
Speaker Change:
I understand your question correctly, Detroit, but the margins are currently around 30% to 30% range and the EBITDA margins.
Speaker Change: I think the position as well and those are the segments, where we need to.
Speaker Change: That is what you were referring to and that is I think what we see we see flowing through to two or.
Speaker Change: Continue the journey that we're on and continue to increase to get to a healthier position in terms of margin.
Speaker Change: Bottom line, EBITDA, Bottomline and medical segments.
Troy Jensen: I was just trying to get like what a forecast could be on EBDA margins, but I'll move on. So now, comparing this, you get two businesses that are roughly the same size. Medical is extremely profitable, but here we've got, you know, 3% EBDA margins on the manufacturing business.
Speaker Change: Okay understood I'm, just trying to get like what our forecast could be at an EBIT margin split up but I'll move on so now comparing this you've got two businesses that are roughly the same size.
Alright understood.
Speaker Change: Last question, then I'll cede the floor, but just on Opex going forward.
Speaker Change: You guys did a nice job here it looks like it was down sequentially.
Speaker Change: In the medical is extremely profitable, but here, we've got you know 3% each.
Speaker Change: I guess I always assume opex is going to grow modestly on a sequential basis on an absolute basis.
Speaker Change: EBITDA margins on the manufacturing business. So just thoughts on what you can do there to get it to improve profitability is scale is going to be the answer.
Brigitte Vet: So just thoughts on what you can do there, forget it, to improve profitability. Is scale going to be the answer or just some thoughts on that. So there's probably a couple of aspects that we need to mention here to answer your question. I mean, scale obviously. Scale will help. That is just, you know, in all of the business lines, you know, scale is a driver that helps us, you know, get to better margins.
Speaker Change: But just thoughts on kind of where opex is going to trend for the next few quarters.
Speaker Change: As you indicate Detroit.
Speaker Change: Just some thoughts on that would be great.
Speaker Change: Probably a couple of aspects.
Speaker Change: Part of our Opex is related to staff costs and personnel costs. So there is continuous pressure on that where we see.
That debt.
Speaker Change: We need to mention here until to answer your.
Speaker Change: Question, I mean scale, obviously skills that help.
Speaker Change: Salaries gradually going up so.
Speaker Change: So indeed.
That is something we we certainly focus on to keep that under control soon with third party spend.
Speaker Change: I guess just in all of our business lines.
Speaker Change: Scale is a is a driver.
Speaker Change: The larger we get the more negotiation power we have of course.
Speaker Change: That helps us get to better margins.
Brigitte Vet: Now the second part of the answer I want to give is the shifts that we are making and we need to continue to make away from prototyping more towards the end-use parts. In the segments where we see that, you know, our position, you know, has added value. We spoke about certified manufacturing in the past. We talked about, you know, aerospace, the MACC segment, et cetera, being segments where the complexity and the requirements are such that our high level of know-how and the fact that based on the long experience that we have, we can, you know, handle these more complex and high quality requirements.
Speaker Change: These kind of expenses.
Speaker Change: The second.
Speaker Change: Part of the answer I wanted to give.
Speaker Change: But indeed, there is that the cost pressure that we try to mitigate by by closely following up the costs that we are that we are making.
It shifts.
Speaker Change: We are making and we need to continue to make away from prototyping more towards the end use parts.
Speaker Change: In the segments, where we see that our composition.
Speaker Change: So to be more specific with respect to on an absolute basis for Q4 do you expect total expenses would be up flat or down sequentially.
Speaker Change: In absolute numbers.
Speaker Change: Absolutely and absolute basis.
Speaker Change: I mean, you're not going through any cost, but it seems like a lot of people in the industry now going through cost cutting.
Speaker Change: Alright, so the Opex is shrinking on a quarterly basis, but I don't think you guys are so much.
I don't see a particular reason why they would go down.
Troy Jensen: I think they position as well, and those are the segments where we need to continue to journey. They will continue to increase to get to a healthier position in terms of margins. All right. I understand.
Speaker Change: So.
Speaker Change: In terms of absolute.
Speaker Change: And number.
Speaker Change: Now, there's one element that when it comes to Opex and I'm talking more relative to the more percentage wise I mean, you referred to scale earlier.
Troy Jensen: Last question, then I'll see the forward, but just on optics, going forward, gets it a nice job here. It looks like it was down sequentially. I guess I always assume optics is going to grow modestly on a sequential basis on an absolute basis.
Speaker Change: Our percentage wise, our Opex, our revenue number is going to drive the opex percentage to a large extent scaling will help and not specifically for the fourth quarter, you've heard us being relatively conservative on the fourth quarter.
Brigitte Vet: But just by the time that we're optics is going to train to the next few quarters. As you indicate, Troy, a large part of our optics is related to staff costs and personnel costs. So there is continuous pressure on that where we see salaries gradually going up. So indeed, that is something we certainly focus on to keep that under control, saying we thought of party spends, where the larger we get, the more negotiation power we have, of course, on these kind of expenses. But indeed, there is that the cost pressure that we try to mitigate by closely following up the costs that we are making.
Speaker Change: So that is mainly on the revenue side and therefore, the opex percentage in the fourth quarter, we will take a slightly different profile than we have this quarter.
Speaker Change: That's helpful.
Speaker Change: Some specific helps will follow up too.
Speaker Change: But congrats and keep up the good work.
Speaker Change: Thank you.
Speaker Change: Thank you so much.
Speaker Change: Our next question comes from Alexander <unk> from Kepler Chaparral. Your line is now open.
Speaker Change: Hey, Hello, Alexander from departure from here.
Alexander: Congrats on the nice set of results also from our side.
Troy Jensen: So, to be more specific, just like on an absolute basis for Q4, do you expect total expenses to be up, flat, or down significantly? In absolute, an absolute basis yet, I mean, you're not going through any costs. It seems like a lot of people in the industry now are going through cost cutting, right? So, the optics is shrinking on a quarterly basis, but I don't think you guys are so much. I don't see a particular reason why they could go down.
Alexander: Just so.
So I have three questions on the AC Tech plans first one would be.
Speaker Change: You mentioned that the ramp up wait and we will still weigh on the manufacturing segment in terms of Opex, but maybe could you specify the number.
Speaker Change: Second question would be.
Couldnt you mentioned that you expect some capex for this problem going forward as you are planning some additional machinery et cetera, maybe you could could you clarify how much comp excuse to budget and what's the timing of this so we can.
Brigitte Vet: So, in terms of absolute number, now, there's one element that, you know, when it comes to OPEX, and I'm talking more relative, so more percentage wise, I mean, you referred to scale earlier. Our percentage wise, our OPEX, our revenue number is going to drive the, you know, OPEX percentage to a large extent, so scaling will help in our specifically for the fourth quarter. You referred as being relatively conservative on the fourth quarter. So, that is mainly on the revenue side, and therefore, you know, the OPEX percentage in the fourth quarter will take us like a different profile than we have this quarter.
Speaker Change: Also get a bit of a grasp on.
Speaker Change: Expansion Capex going forward.
Speaker Change: And then how do we need to see it in terms of additional revenues next year. So that's the three questions on the AC.
Speaker Change: Plant specifically.
Speaker Change: Then I do have some other questions, maybe one would be to actually coming back to a question of choice before I think it was more asking about the gross margins just to get the sense of the operational leverage in the medical segment. If you could maybe give us some granularity in that respect in the.
Speaker Change: As I assume that the cost of goods sold was relatively stable in this segment.
Speaker Change: And then maybe the last question.
Brigitte Vet: Maybe that helps.
Speaker Change: Yes, I think the new partnerships and software.
Troy Jensen: We'll follow up to you in a little bit, but, um, which, uh, can grads and keep up the alert. Thank you.
Speaker Change: Do you see that evolving into in terms of the top line next year. Thank you.
Speaker Change: Well, let me.
Troy Jensen: Thank you so much.
Speaker Change: Sure.
Speaker Change: Try to answer some of your questions I Hope I can remember all of the money Center.
Alexander Kremirsch: Our next question comes from Alexander Kremirsch from Kepler Chevro.
Speaker Change: Yeah.
Speaker Change: I'll start with the <unk> plant.
Alexander Kremirsch: Your line is now open. Hey, hello, Alexander from Kepler Chevro. Um, congrats on the nice set of results; also from our side.
Speaker Change: And the bit of revenues.
Speaker Change: Yeah, absolutely and maybe just as a general comment so at this point in time, we're not giving guidance on next.
Alexander Kremirsch: Uh, just, um, I have three questions on the ATTEC plans. First one would be, uh, you mentioned that the ramp-up weight and will still weigh on the manufacturing segment in terms of OPEX, but maybe could you specify that number? Um, second question would be, uh, could you mention that you expect some topics for this plan going forward, as you are planning some additional machinery, et cetera. Maybe you could, could you clarify, um, how much carpets you still budget? And, uh, and what's the timing of this so we can, uh, also get a bit of a grasp on, um, on the, on the expansion carpets going forward?
Speaker Change: Next year yet.
Speaker Change: So I'll stay away from.
Speaker Change: And the second is we are not giving guidance.
Speaker Change: Specific for the specific business lines.
Speaker Change: No.
Speaker Change: It's a bit more difficult.
Speaker Change: Now, let me maybe give you a bit more color.
Speaker Change: By what we expect in the fourth quarter on the <unk> plant up and why.
Speaker Change: So we expect an impact on.
Speaker Change: On the fourth quarter, maybe that is a revenue impact and by the fact that we.
Alexander Kremirsch: Um, and then, yeah, how do we need to see this in terms of additional revenues next year?
Alexander Kremirsch: So that's the three questions on the ATTEC plan, specifically.
Speaker Change: <unk>.
Speaker Change:
Alexander Kremirsch: Um, then I do have some other questions. It may be one would be to actually coming back to a question of Troy before. I think he was more asking about the gross margins just to get a bit the sense of the operational leverage in that medical segment. If you could maybe give us some granularity in that respect and, uh, um, as I assume that the cost of goods sold is relatively stable in this, uh, in this segment.
Speaker Change: Get the second plant ready, which also involves.
Speaker Change: Transferring some of the equipment and the machines from one plant to the add on which <unk>.
Limits, our capacity for a while and that's why we do expect that impact now I know you asked for quantifying that impact.
Speaker Change: <unk>.
Speaker Change: I can do that but he needs an impact.
Speaker Change: And that leads us to be conservative with our guidance.
Alexander Kremirsch: Um, and then maybe the last question. Um, yeah, I think the new partnerships in software, um, how do you see that evolving into in terms of the top line next year?
Speaker Change: So you can you can draw a conclusion a lower from there.
Speaker Change: I can point you in that direction now I'll, let kuhn.
Speaker Change: So the question the Capex, yes.
Brigitte Vet: Thank you. So let me, um, um, try to answer some of your questions. I hope I can remember all of them.
Speaker Change: Going back to the Capex of the hidden dimensions that we have started up the <unk>.
Speaker Change: Pumps and.
Speaker Change: In the third quarter, which basically means that the investments on the building itself to a large extent have been completed what remains and what will continue over some time is additional investments in machinery and we have.
Brigitte Vet: Oh, maybe I'll start with just on the ATTEC plan and a bit of revenue. Yes, absolutely. And maybe just, you know, as a general comment.
Speaker Change: Post processing machinery already in place and we will be gradually adding additional machinery as time goes by.
Brigitte Vet: So I just want to say we're not giving guidance on the next year yet. So I'll stay away from that. In the second, we're not giving guidance as a specific for the specific business lines. But you don't want to give it up now. So that's a bit more difficult.
Speaker Change: <unk> into account that the delivery times on these machines are quite long.
Speaker Change: That will mean that also.
Speaker Change: Capex.
Speaker Change: All of this of this project will take US I would say at least a year a year and a half to up to two years before the full investment program has been completed.
Brigitte Vet: Now, let me maybe give you a bit more color by what we expect in the fourth quarter on the exact plan and why. So we expect an impact on the fourth quarter. Mainly that is a revenue impact by the fact that we operationally get the second plant ready, which also involves transferring some of the equipment and the machines from one plant to the other, which, you know, obviously limits our capacity for a while. And that's why we do expect that impact. Now, I know you asked for quantifying that impact. But, you know, I can't do that.
Speaker Change: Where we are today to give you. An example that we have always indicated the total investment volume to be north of that between 30, and 40 million Euro and we have.
Speaker Change: At this stage invested about.
Speaker Change: 65% up to 70% of the total investment volume.
Speaker Change: But the rest will come in you see the peak now and it will still continue a bit in the fourth quarter. As there is also payment terms on the invoices from the suppliers.
Speaker Change: <unk> provides.
Speaker Change: The key to those investments, but the biggest equal then gradually come down in the in the coming quarters.
Koen Berges: But it is an impact that leads us to be more conservative with our guidance. So you can control a conclusion a little from there, if I can point you in the direction.
Speaker Change: Hope that answers your question.
Speaker Change: Thank you.
Speaker Change: And then maybe if you could think of your question on the gross margin saw.
Speaker Change: On medical I think.
Speaker Change: You do see our gross margins.
Koen Berges: Now, I'll let Koen answer the question.
Speaker Change: Total.
Speaker Change: Okay until yeah. So so.
Koen Berges: Yeah, to come back to the topic, I'll be here to mention that we have started up the plants in the third quarter, which basically means that investments on the building itself, to a large extent, have been completed. What remains and what will continue over some time is additional investments in machinery. We have post processing machinery already in place, and we will be gradually adding additional machinery as time goes by. Taking into account that the delivery times on these machines are quite long.
Speaker Change: Quantifying comment on the gross margins our gross margins on the.
Speaker Change: On medical.
Speaker Change: But relatively comparable to what typically what you would expect in the medical device business.
Speaker Change: Now.
The scaling effect drive further efficiencies there most on the longer term then on a shorter term. So the profile is going to stay relatively similar on the shorter term.
Speaker Change: Certainly when we talk about the next quarter.
Speaker Change: <unk> on these machines are quite long.
Speaker Change: Okay.
Koen Berges: That will mean that also the topics tail off of this project will take us, I would say, at least a year, a year and a half to up to two years before the full investment program has been completed. Where we are today to give you an idea that we have always indicated the total investment volume to the north of the between 30 and 40 million euro. And we have at this stage invested about 65% up to 70% of the total investment volume. But the rest will come. We see the peak now that will still continue a bit in the fourth quarter as there is also payment terms on the invoices from the suppliers.
Speaker Change: Thanks.
Speaker Change: That will mean that also the cap.
Speaker Change: And the last question was just too small at on the software segment.
Speaker Change: Opex.
Speaker Change: All of this of this project will take US I would say at least a year a year and a half to up to two years before the full investment program has been completed.
Speaker Change: Yeah. So you asked around.
Speaker Change: The new partnerships now.
Speaker Change: And what was your specific question on the new partnerships, well I mean, you've not announced.
Speaker Change: Where we are today to give you. An example that we have always indicated the total investment volume to be north of that between 30 and $40 million Euro and we have.
Speaker Change: New partnerships and deals.
Speaker Change: Secondly, I was just wondering because I mean, the segment has been a bit under pressure lately.
At this stage invested about <unk>.
Speaker Change: Of course, you have growth, but and.
Speaker Change: 65% up to 70% of the total.
Speaker Change: In terms of profitability et cetera, So I'm just.
Speaker Change: And the volumes.
Speaker Change: But the rest of our company, we see the peak now and it will still continue a bit into fourth quarter. As there is also payment terms on the invoices from from the suppliers.
Speaker Change: Asking.
Speaker Change: More specifically towards the growth of next year of course, you don't give guidance, but at least we get a bit of a sense of what is what.
Koen Berges: That provides the goods that include as investments.
Speaker Change: What the deals look like yes, and maybe I'll give you.
Speaker Change: <unk> provides.
Koen Berges: But the biggest people then gradually come down in the coming quarters. Hope that answers your questions.
Speaker Change: We grew those investments, but the biggest equal then gradually come down in the in the coming quarters.
Speaker Change: But the view of a view on what these partnerships do for us.
Speaker Change: One is.
Speaker Change: Hope that answers to your questions.
Brigitte Vet: Thank you. And then maybe, if you think of your question on the gross margins on medical, I think you do see our gross margins on the total. Okay, on total. Yeah, so just qualifying comments on the gross margins on the medical relatively comparable to what typically you would expect in the medical device business. Now the scaling effect drives further efficiencies there most on the longer terms and on the shorter terms. So the profile is going to stay relatively similar on the shorter term. And certainly, when we talk about the next quarter.
Speaker Change: So we have indeed announced some new partnerships.
Speaker Change: Thank you.
Speaker Change: And then maybe a question on the gross margin saw.
Speaker Change: Now I've also reflected back on some of the partnerships that we closed earlier this year.
Speaker Change: On medical.
Speaker Change: I think you do see our gross margins.
Speaker Change: And I thought that was important to do because at the end of the day, we can all announced partnerships, but if they don't need to need to resolve them.
Speaker Change: Total.
Speaker Change: Okay until yeah. So so just quantifying comment on the gross margins our gross margins on on on.
Speaker Change: And then what are they really doing.
Speaker Change: So so I think what is important.
Speaker Change: On medical.
Speaker Change: But relatively comparable to what typically what you would expect in the medical device business.
One thing to note ended the third quarter, we actually had real results. On these are partnerships that were previously announced and I've. Given the example of the enterprise partnership into did you popped up the partnership up to illustrate that that we see good traction there now second comment I want to make is that why it's so important slots.
Speaker Change: Now.
Speaker Change: The.
Speaker Change: Scaling effect drive further efficiencies there most under longer term then on a shorter term. So the profile is going to stay relatively similar on the shorter term and certainly when we talk about the next quarter.
Speaker Change: And why do.
Speaker Change: Do I see these partnerships as an important element.
Speaker Change: Okay. Thank you thanks.
Alexander Kremirsch: The last question was just a small add-on on the software segment. So you asked around the new partnerships? What was your specific question on the new partnerships? Well, I mean, you've announced a lot of new partnerships and deals in the software segment. I was just wondering because the segment has been a bit under pressure lately. Of course, you have growth, but in terms of profitability, etc. So I'm just asking more specifically towards the growth of next year. Of course, you don't give guidance, but at least we get a bit of a sense of what these deals look like.
Speaker Change: And why is that.
Speaker Change: And the last question was just a small add on software segment.
Speaker Change: Good foundation for future growth next year and the softer.
Speaker Change: So at the end of the our customers need an end to end solution.
Speaker Change: Yeah. So you asked around.
The new partnerships.
Speaker Change: And rather than building it and sort of an end to end solutions with all the capabilities ourselves.
Speaker Change: Yeah.
Speaker Change: And what was your specific question on our new partnerships.
Speaker Change: I mean, you've not announced.
Speaker Change: I believe in a model of collaborations we've talked about that a number of times in the previous calls as well I believe in collaborations and partnerships illustrates that we can collaborate with others to bring that end to end solution a complete solution without.
A lot of new partnerships and deals in the software segment I was just wondering because I mean, the segment has been a bit under pressure lately.
Speaker Change: Of course, you have growth, but and in terms of profitability et cetera. So I'm just.
Speaker Change: Asking more specifically towards the growth of next year of course, you don't give guidance, but at least we get a bit of a sense of what is.
Speaker Change: Doing the R&D investments ourselves.
Speaker Change: And having that end to end solution is I believe an important element for our customers and will drive further adoption and <unk>.
Speaker Change: What these deals look like yes, and maybe I can give you.
Brigitte Vet: Yeah, and maybe I give you a bit of view of a view on what these partnerships do for us. And so two comments. One is, so we have indeed announced some new partnerships. Now, I've also reflected back on some of the partnerships that we closed earlier this year. And I thought that was important to do because, at the end of the day, we can all announce partnerships, but if they don't need to resolve, then what are they really doing? So I think what is important to know that is the third quarter, we actually had real results on these partnerships that were previously announced.
With a view of a view on what these partnerships do fast and.
Over the software solutions in the future because that makes sense.
Speaker Change: So two comments one is.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: So we have indeed announced some new partnerships.
Speaker Change: Thank you so much.
Speaker Change: Now I've also reflected back on some of the partnerships that we closed earlier this year.
Speaker Change: Okay.
Our next question comes from Jacob Saffian from Lake Street Capital markets. Your line is open.
Speaker Change: And I thought that was important to do because at the end of the day, we can all announced partnerships, but if they don't need to need to resolve them.
Jacob Saffian: Hey, Thanks for taking my question I'll add my congratulations to the results here.
Speaker Change: And what are they really doing.
Speaker Change: Thank you Jake.
Jacob Saffian: Just.
Jacob Saffian: Yeah, absolutely I was just kind of wondering on the on the medical segment.
Brigitte Vet: And I've given the example of the end of partnership and the digital partnership to illustrate that we see good traction there. Now, the second comment I want to make is that why is this so important for us? And do I see these partnerships as an important element? And why is that a good foundation for future growth next year in the disaster? So at the end of the day, our customers need an end-to-end solution. And rather than building an end-to-end solution with all the capabilities ourselves, I believe in a model of collaboration. We've talked about that a number of times in the previous calls as well.
Jacob Saffian: Segment, obviously like Troy had mentioned to EBITA margins have continued to impress.
Jacob Saffian: I guess can you help us kind of get a sense for.
Jacob Saffian: The new Michigan facility.
Jacob Saffian: I know trauma.
Jacob Saffian: Personalized solutions are.
Jacob Saffian: Kind of.
Jacob Saffian: Maine.
Speaker Change: Things produce there, but maybe help us get a sense on your overall capacity at the new facility itself.
Speaker Change: And so first clarification, maybe for our U S manufacturing plant is indeed fully dedicated to the medical business.
Speaker Change: So.
Speaker Change: All we ship out of there up personalized.
Brigitte Vet: I believe in collaboration, and these partnerships illustrate that we can collaborate with others to bring that end-to-end solution: a complete solution. Without doing the RLE investments ourselves. And having that end-to-end solution is, I believe, an important element for our customers and will drive further adoption over the software solutions in the future.
Speaker Change: Personalized devices.
Speaker Change: Instrumentation or implants.
Speaker Change: The capacity is driven by two things.
Speaker Change: So one is the number of machines.
Speaker Change: And resources, we have there now.
Speaker Change: Second is the space. So at this point in time, we're not at the capacity limit.
Speaker Change: Put it that way I won't give you a kind of give you a specific number on what percentage of the capacity via App.
Brigitte Vet: Does that make sense?
Alexander Kremirsch: Okay. Yeah.
Alexander Kremirsch: Thank you.
Speaker Change: But there is that there is room for adding capacity and extending that into future.
Jacob Stefan: Thank you so much.
Speaker Change: Okay, and you made a comment.
Jacob Stefan: Our next question comes from Jacob Stefan from Lake Street Capital Market. Your line is open.
Speaker Change: Essentially you're treated three times, the number of trauma patients compared to kind of.
Speaker Change: Before the plant was.
Jacob Stefan: Hey, thanks for taking my question. I'll add my congratulations to the results here. Thank you.
Speaker Change: Up and running but maybe help us understand is there room to 10 X 20 X that.
Jacob Stefan: I'm just, yeah, absolutely. I was just kind of wondering, you know, on the medical segment, obviously, like Troy had mentioned to, even the margins have continued to impress.
Speaker Change: Any color there would be helpful.
Speaker Change: Yeah, So I without mentioning a specific number I also made a comment previously.
Jacob Stefan: But I guess, can you help us kind of get a sense for, you know, at the new Michigan facility. I know trauma and personalized solutions are the kind of main, you know. things produce there, but maybe help us get a sense on the overall capacity at the new facility itself.
Speaker Change: And earlier in this call that I said, we are only scratching the surface. So that's more kind of the the relations that are.
Speaker Change: We need to look at so its not only we have potential to further double or triple.
Speaker Change: Potentially it is effectively launch here.
Speaker Change: Okay.
Speaker Change: And last one for me just on kind of the software segment.
Speaker Change: Did I hear that correctly, you signed your first customer.
Brigitte Vet: So first clarification, maybe so our U.S. manufacturing plant is indeed fully dedicated to the medical business. So you know, all we ship out of there are personalized devices, intimidation, or implants. The capacity is driven by two things. So one is the, obviously, the number of machines and resources we have there, and the second is the space. So, at this point in time, we're not at the capacity limit. Let me put it that way.
Speaker Change: So.
Speaker Change: Maybe I wasn't super clear yet so we have signed in a whole range of Casa OEM customers I don't have the exact number but.
Speaker Change: But you know there's a lot of OEM customers already since we launched our solutions a couple of years that the first we now have signed the first.
Speaker Change: Customer that also has a faster solution and so my point was more to illustrate that the partnership that we announced earlier this year and we now have actual sales coming out of this.
Brigitte Vet: I won't give you a specific number on, you know, what percentage of the capacity we are at. But there is room for adding capacity and extending that in the future.
Speaker Change: And again as I said earlier, it's nice to announce a partnership.
Speaker Change: But what it really matters.
Speaker Change: What kind of drove that.
Speaker Change: Drive for us.
Brigitte Vet: Okay, and you made a comment that, you know, essentially you treated three times the number of trauma patients compared to kind of before the plant was up and running. But maybe help us understand that, you know, is there room to the, you know, 10X that 20X that any color there would be helpful. Yeah, so I, you know, without mentioning a specific number, I also made a comment a previous, you know, in earlier in this call that I said we only stretching the surface. So that's more kind of the, the relations that that we need to look at.
Speaker Change: With that partner.
Speaker Change: Got it.
Speaker Change: Just to kind of to follow up on that.
Speaker Change: Any kind of sense on.
Speaker Change: One we can see the last kind of perpetual customers roll off.
Speaker Change: It should be a 100% SaaS.
Speaker Change: So that's going to take a very long time.
Speaker Change: [laughter] ambitious.
Speaker Change:
Speaker Change: Very last one.
Speaker Change: I'm not saying that.
Speaker Change: A significant amount of our business will stay perpetual because we really are.
Speaker Change: Pushing hard and making very good progress in that switchover, and but I do expect that there will be some customer segments market segments.
Brigitte Vet: So it's not only we have potential to further double our triple. So the potential is effectively large here.
Speaker Change: That remain on.
Actual for quite a while.
Jacob Stefan: Okay.
Jacob Stefan: And last one for me, just on kind of the software segment.
Speaker Change: Okay got it I appreciate the color. Thanks.
Brigitte Vet: Did I hear that correctly? You signed your first KAM customer?
Speaker Change: Thank you so much.
Speaker Change: I'm showing no further questions at this time I would now like to turn it back to Bermuda for closing remarks.
Brigitte Vet: No, so I am; maybe I wasn't super clear here. So we have, you know, signed, you know, a range of customers. I don't have any exact number, but there is a lot of KAM customers already since we launched the solutions a couple of years back.
Speaker Change: Well. Thank you again for joining us today, and we look forward to continuing our dialogue with you obviously through our investor conferences or one on one meetings or calls.
Speaker Change: And we obviously hope to see many of you during the upcoming fall next in November please reach out to US. If you have any further questions. So for now thank you and goodbye.
Brigitte Vet: The first, we now assigned the first customer that also has a digit popster solution. And so my point was me more to illustrate the partnership that we announced earlier this year. We now have actual sales coming out of this. And again, you know, as I said earlier, it's nice to announce the partnership, but what really matters is, you know, what kind of growth that will drive for us with that partner.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Brigitte Vet: Got it. And I guess just kind of to follow up on that. Any kind of sense on, you know, when we can see the last kind of perpetual customers roll off and, you know, essentially be 100% fast. Yeah.
Brigitte Vet: So that's going to take a very long time. Because, you know, the very last one. So I'm saying that, you know, the significant amount of our business will stay perpetual because we are really pushing out and making very good progress in that switch over. But I do expect that there will be, you know, some customer segments, market segments that remain on perpetual for quite a while.
Jacob Stefan: Thank you so much.
Operator: I'm showing no further questions at this time.
Brigitte Vet: I would now like to turn it back to Brigitte for closing remarks. Well, thank you again for joining us today, and we look forward to continuing our dialogue with you, obviously, through our investor conferences or one-on-one meetings or calls. We obviously hope to see many of you during the upcoming fall, next in November. Please reach out to us if you have any further questions.
Operator: So, for now, thank you and goodbye.
Thank you for your participation in today's conference. This just concludes the program. You may now disconnect. Thank you very much.
Speaker Change: [music].