Q1 2025 Materialise NV Earnings Call
Operator: Good day and thank you for standing by.
Good day, and thank you for standing by and welcome to the first quarter 'twenty 'twenty five materialize financial results conference call.
Operator: Welcome to the first quarter 2025 Materialize 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.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
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Operator: Please be advised that today's conference is being recorded.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Harriet Fried of Alliance Advisors. Please go ahead.
Harriet Fried: I would now like to hand the conference over to your speaker today, Harriet Fried of Alliance Advisors. Please go ahead.
Harriet Fried: Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Brigitte Vet, 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 first quarter of 2025. 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 issued earlier today can also be found on that page.
Speaker Change: Thank you for joining us today for Materialise. This quarterly conference call with US on the call are party to the death, Chief Executive Officer, and couldn't Bachus Chief Financial Officer.
Speaker Change: Today's call and webcast are being accompanied by a slide presentation that reduce materializes strategic financial and operational performance for the first quarter of 2025.
Speaker Change: To access the slides if you haven't already done. So please go to the Investor Relations section of the company's website at Www Dot materialize dotcom.
Speaker Change: 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 company's plans, expectations, and growth prospects, among other things. These forward-looking statements are subject to known and unknown certainties 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 day. Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes in expectation.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Including competitive dynamics and industry change.
Speaker Change: Any forward looking statements, including those related to the company's future results and activities represent managements estimates as of today and should not be relied upon as representing their estimates as of any subsequent day.
Speaker Change: Management disclaims any duty to update or revise any forward looking statements to reflect future events or changes in expectations.
Harriet Fried: A more detailed description of the risks and uncertainties and other factors that may 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.
Speaker Change: A more detailed description of the risks and uncertainties and other factors that may 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 Fried: 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.
Speaker Change: Finally management will discuss certain non I FRS measures on today's call. A reconciliation table is contained in the earnings release and at the end of the slide presentation.
Harriet Fried: And with that, I'd like to turn the call over to Brigitte Vet. Brigitte, please go ahead.
Boogie: And with that I'd like to turn the call over to Boogie to Tibet <unk>. Please go ahead.
Brigitte Vet: Good morning and good afternoon and thank you everyone for joining us today. You can find the agenda for our call on slide three. First, I will summarize the business highlights for the first quarter of 2025.
Boogie: Good morning, and good afternoon, and thank you everyone for joining us today.
kuehne: You can find the agenda for our call on slide three first I will summarize the business highlights for the first quarter of 2025, I will then pass the floor to kuehne, who will take you through the first quarter financials in more detail and finally I will come back and explain what we expect for the remaining months of 2025.
Brigitte Vet: I will then pass the floor to Koen, who will take you through the first quarter of financials in more detail.
Brigitte Vet: And finally, I will come back and explain what we expect for the remaining months of 2025. When we've completed our prepared remarks, we'll be happy to respond to questions.
Boogie: When we've completed all feedback remarks, we'll be happy to respond to questions.
Brigitte Vet: I'm moving to slide four for the highlights of the first quarter 2025. To start with, we recently published our 2024 Sustainability Report, sharing our goals, actions, and progress on our sustainability strategy. Since the start of Materialise, our key focus has been to make a real difference through additive technology, and sustainability has always been part of this mission. As we shared in the report, we set ourselves the target to cut absolute emissions by 55% by 2029 compared to the 2019 baseline. And in 2024, we reduced our emissions already by 32%, which represents a 3% reduction on the 2023 emissions.
Boogie: Now moving to slide four for the highlights of the first quarter 2020 Fox to start with we recently published our 2020 for sustainability reports Shang hour Gold's actions and progress on all of sustainability strategy.
Boogie: Since the start of materialize all key focus has been to make a real difference through additive technology and sustainability has always been part of this mission.
Boogie: We shared in the report we set ourselves the target to cut absolute emissions, but 55% by 2029 compared to the 2019 baseline and in 2024, we reduced emissions already by 32%, which represents a 3% reduction on the 2023 emissions.
Brigitte Vet: The most significant change from the previous year was a reduction of almost 700 tons of CO2 in raw materials, reflecting improved efficiency and our constant improvement in our operational processes. And this is a perfect example to show that profit and planet go hand in hand. Now our key focus in the recent years has been to scale additive manufacturing, making additives easier, faster, and more reliable, while enabling more applications of additives. In the first quarter, we've made meaningful progress on this journey, and I'm very proud that in the current challenging market environment, we managed to grow our revenue in this period by more than 4%.
Boogie: Most significant change from the previous year with a reduction of almost 700 tons of C. O two in raw materials, reflecting improved efficiency and a constant improvements in our operational processes and this is a perfect example to show that profit and planets go hand in hand.
Boogie: Now I'll keep focus in recent years has been to scale additive manufacturing, making active easier faster and more reliable, while enabling more applications of outages in the first quarter. We've made meaningful progress on this journey and I'm very proud that in the current challenging market environment, we managed to grow our revenue into spirits by me.
Boogie: More than 4%.
Brigitte Vet: In our medical business, we continue to see strong uptake of our personalized solutions, driven by adoption in various anatomical areas across orthopedics, CMS, cardiac, and respiratory. The strong growth in the first quarter, which comes on top of an already strong quarter last year, is evident. To boost the adoption of personalized devices even further, we are continuously improving our segmentation, planning, and design software to make it faster and more user-friendly. In our last earnings call, we discussed the launch of our cloud-based MIMIX platform called MIMIX Flow, which makes it easier and faster to segment and plan cases thanks to the access to AI-based algorithms, and which enables effortless collaboration among clinicians and engineers through real-time file sharing, eliminating the need to upload or download files.
Boogie: Our medical business, we continued to see strong uptake of our personalized solutions driven by adoption in various anatomical areas across orthopedics, CMS cardiac and respiratory the strong growth in the first quarter, which comes on top of an already strong quarter last year is evidence of this.
Boogie: To boost the adoption of personalized devices. Even further we are continuously improving our segmentation planning and design software to make it faster and more user friendly.
Boogie: In our last earnings call, we discussed the launch of our cloud based mimics platform called mimics flow, which makes it easier and faster to segment and planned basis. Thanks to the access to AI based algorithms and which enables effortless collaboration among clinicians and engineers through real time file sharing eliminating the need to do.
Boogie: Total download floor tiles in the first quarter, our customers reported significant efficiency gains with this product and confirmed that they value the access to a single integrated platform.
Brigitte Vet: In the first quarter, our customers reported significant efficiency gains with this product and confirmed that they value the access to a single integrated platform. Now, in addition to Mimics Flow, we've previously introduced specialized solutions for segmentation and planning workflows in specific applications, such as CMF or Structural Heart, all under the Mimics and LIGHTS brand. This tool helps surgeons reduce planning time. Autognathic cases, for example, can be completed in under 25 minutes thanks to its intuitive workflow. In the first quarter of this year, Mimics & Light CMF was shortlisted as a finalist for the TCT awards in the healthcare application category, and that is a testament to the value of this product.
Boogie: Now in addition to me slow with previously introduced specialized solutions for segmentation and planning workflows in specific applications, such as CMS or structural heart or another mimics and lights brands.
Boogie: This tool helps surgeons reduced planning time automatic cases for example can be completed in under 25 minutes. Thanks to its intuitive workflows.
Boogie: In the first quarter of this year mimics the lights Tms was shortlisted as a finalist for the TCP Awards into health care application category and that is a testament to the value of this product line.
Brigitte Vet: Now, while we continuously make progress on our software offering, we also continue to expand our portfolio of personalized instrumentation and implants.
Boogie: Now, while we continue to make progress on our software offering. We also continue to expand our portfolio of personalized instrumentation and implants.
Brigitte Vet: In the first quarter, we announced the launch of a clinical trial led by the University of Michigan focused on a 3D printed tracheal splint for infants with tracheobronchomalacia called TBM. TBM is a rare and potentially fatal condition where the airway And while most children outgrow the condition by age three, they often depend on ventilators in the meantime. This bioresorbable splint. allows babies to grow up at home until the disease is resolved and the implant dissolved. The trial will enroll 35 infants across multiple children's hospitals with the goal of making this life-changing, personalized device widely accessible and opening the door to a new market for materials.
Boogie: In the first quarter, we announced the launch of a clinical trial led by the University of Michigan focused on the three D printed tracheal splints for infants with tracheal uncle, Malaysia called G. B M. D. B M is a rare and potentially fatal condition, where the airwave collapses and by most children outgrow to condition by age three.
Boogie: They often depend on ventilators in the meantime.
Boogie: This bar Resorbable splint.
Boogie: Allows babies to grow up at home until the diseases resolved and the implant is sold to <unk>.
Boogie: While the literal 35 infants across multiple children's hospitals with the goal of making this life changing personalize device widely accessible and opening the door to a new market for materialized.
Brigitte Vet: Now in our software division, our goal is to help customers scale additive manufacturing with advanced software solutions. Broader adoption of additive manufacturing depends on overcoming current barriers and reducing the cost of parts.
Boogie: Now we know our software division, although they still help customers scale additive manufacturing with advanced software solutions broader adoption of additive manufacturing depends on overcoming current barriers and reducing the cost of parts.
Brigitte Vet: At a recent RAPID DCT conference in Detroit, we announced two new products that address these challenges. The first was the 2025 release of Magix, our flagship software for data and build preparation. The user will now benefit from performance and functionality enhancements, as well as simplified licensing and automatic updates. As an example, the new release introduces seamless processing of end-top implicit geometry. file formats that can characterize very complex, high-performance geometries at a fraction of traditional file formats. By pairing this capability with Materialise's next-generation build processors, users can design and print parts that were previously too complex for 3D printing.
Boogie: At the recent rapid TCT conference in Detroit, We announced two new products that address these challenges. The first was the 2025 for the use of magics, our flagship software for data and build preparation.
Boogie: The user will now benefit from performance and functionality enhancements as well as simplified licensing an automatic updates.
Boogie: As an example, the new release introduce a seamless processing of ends up implicit geometries file formats that can characterize very complex high performance geometries at a fraction of traditional firewall much but bearing just about capability with materialize. This next generation build processors, you just can design and print box.
Boogie: They were previously too complex for three D. Printing for example, DMT Maury a leader in precision machining used the new integration of matrix and Enzo to process, a high performance geometry fault in seconds compared to days previously.
Brigitte Vet: For example, DMG MORI, a leader in precision machining, used the new integration of MATRIX and NTOP to process a high-performance geometry file in seconds compared to days previously.
Brigitte Vet: In a second announcement, we introduced two next-generation build processors, developed through partnerships with Aplas and OneClickMath. Materialise's next-gen Build Processor is a configurable software that translates 3D design files into 3D printable instructions, optimizing and managing the 3D printing process from start to finish. The combination of Raplas' SLA 3D printing technology with Materialise's Build Processor has already demonstrated remarkable results, including a 30-40% increase in printing speed. At the same time, the build processor integration with OneClick Metal supports the rapid growth of the mid-market 3D printing.
Boogie: In a second announcement, we introduced two next generation build processors develop two partnerships as a plus and one click metal.
Boogie: But to your license Nextgen built which I thought is a configurable software that translates really design falls into three principal instructions optimizing and managing the three D printing process from start to finish so combination of atlas's SLE three D printing technology with materializes build processor, that's already demonstrated remarkable result, including a 32.
Boogie: 40% increase in printing speeds.
Boogie: At the same time, the build processor integration with one click metal support the rapid growth of the mid market three D printing sector.
Brigitte Vet: These new capabilities complement our MAGIX SDK offerings, which we launched at the end of 2024. By giving users access to our algorithm base, which we've built over 35 years, we allow them to create custom workflows for their unique manufacturing requirements. With these solutions in the markets, we help customers overcome the barriers to adoption of EM, and we are confident in the growth that this will bring for Materialise.
Boogie: These new capabilities complement our magics SDK offerings, which we learned that it launched at the end of 2024 are giving users access to all algorithm beef, which was built over 35 years, we allowed them to create custom workflows for their unique manufacturing requirements.
Boogie: But these solutions in the market, we help customers overcome the barriers to adoption of the M. And we are confident in the growth that this will bring for materialized.
Brigitte Vet: In our manufacturing division, macroeconomic circumstances remained difficult in the first quarter. Nevertheless, I'm proud to say that we again made progress in our key segments, and in particular in our aerospace segment, where sales grew by 23% versus the first quarter 2024, and we were able to renew longer-term contracts with key companies.
Boogie: In our manufacturing division macroeconomic circumstances remained difficult in the first quarter.
Boogie: Nevertheless, I am proud to say that would be again made progress in all key segments and in particular in our Iris based segment, where sales grew by 23% versus the first quarter 2024, and we were able to renew longer term contracts with key customers.
Brigitte Vet: In light of the current geopolitical landscape and the breakdown of traditional global alliances, we are also reassessing Materialise's involvement in the defence sector to extend our offering into this sector. We anticipate that a broader engagement in the defense sector will strengthen our position in the aerospace segment and create new opportunities in the future.
Boogie: In light of the current geopolitical landscape and the breakdown of traditional global alliances. We're also reassessing materializes involvement in the defense sector to extend our offering into this segment.
Boogie: We anticipate that a broader engagement in the defense sector will strengthen our position in the aerospace segment and create new opportunities in the future.
Brigitte Vet: I will now turn over to Koen, who will present the financial results. Thank you, Brigitte.
Paul: I will now turn it over to Paul who will present the financial results.
Paul: Thank you Bridget.
Koen Berges: Good morning or good afternoon to all of you on this call. I'll begin with a brief overview of our key financial results, as shown on slide 5. Amidst the current macroeconomic and geopolitical turbulence in the first quarter of this year, we managed to increase total revenue year-over-year by more than 4%. 66.4 million euro, while EBIT for the first quarter of 2025 amounted to 0.6 million euro. The net result for the quarter amounted to a loss of minus €0.5 million or €0.01 per share, reflecting also the impact of significant unfavorable effects from exchange rate fluctuations. Driven by positive free cash flow, we reinforced our net cash position at the end of Q1 to 67.7 million euro, an increase of almost 7 million euro versus the beginning of the quarter.
Paul: Good morning, or good afternoon to all of you on this call.
Paul: I'll begin with a brief overview of our key financial results as shown on slide five.
Paul: Amidst the current macroeconomic and geopolitical turbulence in the first quarter of this year, we managed to increase total revenue year over year by more than 4% to $66 4 million, while EBIT for the first quarter of 2025 amounted to <unk> 6 million Euro.
Paul: The net results for the quarter amounted to a loss of minus <unk> 5 million euro or one euro cent per share.
Paul: Reflecting also the impact of significant unfavorable effects from exchange rate fluctuations.
Paul: Driven by positive free cash flow, we reinforced our net cash position at the end of Q1 to $67 7 million an increase of almost 7 million Euro first at the beginning of the quarter.
Koen Berges: In the following slides, I will further elaborate on these results.
Paul: The following slides I will further elaborate on these results.
Koen Berges: As a reminder, please note that unless stated otherwise, all comparisons are against the results for the first quarter of 2024.
Paul: As a reminder, please note that unless stated otherwise all comparisons are against our results for the first quarter of 2024.
Koen Berges: Turning now to slide six, you'll see an overview of our consolidated revenue. Materialise Medical continued nicely on its double-digit growth, but increasing its revenue by almost 19%. On the other hand, revenues at our software and manufacturing segments were impacted by the uncertain market conditions, resulting in reported revenue decreases of around 6% each. At the same time, however, we managed to grow the deferred revenue related to software maintenance and license fees coming both from our medical and software segments by 1.9 million euro in this year's first quarter, bringing the total amount carried in our balance sheet to almost 49 million euro.
Paul: Turning now to slide six you'll see an overview of our consolidated revenues.
Paul: Materialise medical continued nicely on its double digit growth, but increasing its revenue by almost 19%.
Paul: On the other hand revenues at our software and manufacturing segments were impacted by the uncertain market conditions, resulting reported revenue decreases of around 6% each.
Paul: At the same time, however, we managed to grow the deferred revenue related to software maintenance license fees coming both from our medical and software segments by $1 9 million Euro in this year's first quarter.
Paul: Bringing the total amount carried on our balance sheet to almost 49 million euro.
Koen Berges: As you can see in the graph on the right side of the page, Materialise Medical accounted for 47 percent, Materialise Software for 15, and Materialise Manufacturing for 39 percent for total revenue over the first quarter of 2025.
Paul: As you can see in the graph on the right side of the page materialized medical accounted for 47% Materialise software for 15, and Materialise manufacturing for 39% for total revenue over the first quarter of 2025.
Koen Berges: On slide 7, you will see our consolidated adjusted EBIT and EBITDA figures for the first quarter of this year. Consolidated Adjusted EBIT totaled €0.6 million compared to €2.7 million for the same period of last year, representing an Adjusted EBIT margin of 1%. Consolidated Adjusted EBITDA for the first quarter amounted to 6.1 million euro, decreasing from 8.1 million euro in 2024, representing an Adjusted EBITDA margin of 9.3%.
Paul: On slide seven you'll see our consolidated adjusted EBIT and EBITDA figures for the first quarter of this year.
Paul: Consolidated adjusted EBIT totaled <unk> 6 million compared to $2 7 million Euro for the same period of last year.
Paul: Presenting an adjusted EBIT margin of 1%.
Paul: Consolidated adjusted EBITDA for the first quarter amounted to $6 1 million euro representing pet sorry, decreasing from $8 1 million Euro in 2024, representing an adjusted EBITDA margin of nine 3%.
Koen Berges: In today's turbulent and rapidly changing market environment, it's also relevant though to compare our operational performance against the prior quarter, being the last quarter of 2024. We are happy to report that both the adjusted EBIT and EBITDA in the first quarter of this year improved significantly compared to Q4 of 2024. increases of respectively 154 and 43 percent reflect the impact of the measures we are taking to safeguard operational profitability in these challenging times.
Paul: In today's turbulent and rapidly changing market environment. It's also relevant to compare our operational performance against the prior quarter.
Paul: Being the last quarter of 2024.
Paul: We are happy to report that both the adjusted EBIT and EBITDA in the first quarter of this year improved significantly compared to Q4 of 2024.
Paul: The increases of respectively, 154, and 43% reflect the impact of the measures we are taking to safeguard to operational profitability in these challenging times.
Koen Berges: Moving now to slide 8, you will notice that the quarter's total revenue in our materialised medical segment increased, as said, almost 19% compared to an already strong first quarter of 2024. solid growth was generated by both medical software and by revenue from medical devices sales, which grew respectively by 14% and 21%.
Paul: Moving now to slide eight you will notice that the quarter's total revenue in our Materialise medical segment increased asset almost 19% compared to an already strong first quarter of 2024.
Paul: This solid growth was generated by both medical software and by revenue from medical devices sales, which grew respectively by 14% and 21%.
Koen Berges: Within our medical devices and services activity, we saw continued growth, both in our direct and in our partner sales. In line with top-line growth, adjusted EBITDA grew further to over €9 million, at a stable adjusted EBITDA margin of 29%.
Paul: We did in our medical devices and services activity. We saw continued growth both in our direct and our partner sales.
Paul: In line with top line growth adjusted EBITDA grew further to over 9 million Euro at the stable adjusted EBITDA margin of 29%.
Koen Berges: Important R&D investments in our future growth and in the further integration of VEOPS continued as planned for the first three months of this year.
Paul: Important R&D investments in our future growth and in the further integration of pay ups continued as planned for in the first three months of this year.
Koen Berges: Slide 9 summarises the results of our materialised software segment. Although sales in our software segment increased by more than 2%, reported revenue declined by 6% to €9.8 million as a result of more revenue deferrals. This quarter, we generated a net buildup of 0.7 million euro of deferred revenue in our software segment.
Paul: Slide nine summarizes the results of our Materialise software segment.
Paul: Although sales in our software segment increased by more than 2% reported revenue declined by 6% to $9 8 million as a result of more revenue deferral.
Paul: This quarter, we generated a net buildup of <unk> 7 million of deferred revenue in our software segment, whereas in last years corresponding period, we depleted the deferred revenue reserve on our balance sheets.
Koen Berges: Whereas in last year's corresponding period, we depleted the deferred revenue reserve on our balance sheet. This also reflects the continued transition to a cloud and subscription-based business model. In Q1 of this year, and for the first time, more than 80% of our software revenue was of a recurring nature. As a result of the lower top line, adjusted EBITDA in our software segment decreased to 0.6 million euro, representing an adjusted EBITDA margin of 6.1%.
Paul: This also reflects the continued transition to cloud and subscription based business model.
Paul: In Q1 of this year and for the first time more than 80% of our software revenue was recurring in nature.
Paul: As a result of the lower top line adjusted EBITDA in our software segment decreased to <unk> 6 million.
Paul: Representing an adjusted EBITDA margin of six 1%.
Koen Berges: Now let's turn to slide 10 for an overview of the performance of our materialised manufacturing segments. In the first quarter of 2025, as expected, manufacturing continued to operate in a very challenging market environment where macroeconomic uncertainty further impacted the investment climate in our core market. As a result, revenues decreased by 5.5% in the first months of this year compared to the corresponding period of 2024.
Now, let's turn to slide 10 for an overview of the performance of our Materialise manufacturing segment.
Paul: In the first quarter of 2025 as expected manufacturing continued to operate in a very challenging market environment.
Paul: Macro economic uncertainty further impacted to the investment climate in our core markets.
Paul: As a result revenues decreased by five 5% in the first months of this year compared to the corresponding period of 2024.
Koen Berges: When making the comparison against the fourth quarter of 2024, however, revenue increased again by 12%. Also in the opening months of this year, we realized further growth in our strategic focus areas of aerospace and medtech, while the industrial and automotive segments continue to face serious headwinds. Adjusted EBITDA for the segment ended negatively at minus 0.4 million but was significantly up from the adjusted EBITDA of minus 3 million euro reported in the fourth quarter of 2024. Reflecting the impact of operational optimizations, we continue to implement in this business segment.
Paul: When making the comparison against the fourth quarter of 2024, However revenue increased again by 12%.
Paul: Also in the opening months of this year, we realized 30 growth in our strategic focus areas of aerospace and message, while the industrial and automotive segments continue to face serious headwinds.
Paul: Adjusted EBITDA for the segment and it negatively at minus <unk> 4 million, but it was significantly up from the adjusted EBITDA of minus 3 million Euro reported in the fourth quarter of 2024.
Paul: Collecting the impact of operational optimizations, we continue to implement in this business segment.
Paul: Okay.
Koen Berges: Slide 11 provides the highlights of our Consolidated Income Statement for the first quarter of this year. Over the first months, our gross profit margin decreased to 55.3% compared to 56.5% in Q1 of 2024, while remaining roughly stable compared to the prior quarter. Our operating expenses in the quarter increased by 2.4 million euro or 6.9% in aggregates, with the biggest increase coming from higher R&D spend, which grew by almost 12% compared to prior year. In the first quarter of this year, we spent more than 11 million euro on R&D, the majority of which in our medical segment.
Paul: Slide 11 provides the highlights of our consolidated income statement for the first quarter of this year.
Paul: Over the first months, our gross profit margin decreased to 55, 3% compared to 56, 5% in Q1 of 2024, while remaining roughly stable compared to the prior quarters.
Paul: Our operating expenses in the quarter increased by $2 4 million euro or six 9% in aggregates with the biggest increase coming from higher R&D spend which grew by almost 12% compared to prior year.
Paul: In the first quarter of this year, we spent more than 11 million euro on R&D, the majority of which in our medical segments.
Koen Berges: Net operating income in the quarter was €0.4 million, compared to €0.8 million last year. And as a result of these elements, the group's operating result in the quarter was €0.6 million, compared to €2.6 million in last year. Now in Q1 net financial results amounted to a loss of 0.9 million euro, which includes interest income of 0.7 million euro from our cash reserves, an interest expense on our financial debt of 0.2 million euro and a significant negative impact from foreign exchange fluctuations of minus 1.3 million euro. last year's corresponding period, the net financial result was positive by 1.5 million euro as we benefited from favorable exchange rates effects at that time.
Paul: Net operating income in the quarter was <unk> 4 million compared.
Paul: Compared to <unk> 8 million last year and.
Paul: And as a result of these elements. The group's operating result in the quarter was $4 6 million euro compared to $2 6 million.
Paul: And last year.
Paul: Now in Q1 net financial results amounted to a loss of $4 9 million Europe, which includes interest income of $4 7 million from our cash reserves and interest expense on our financial depth of $4 2 million Euro and a significant negative impact from foreign exchange fluctuations.
Paul: One 3 million Euro.
Paul: Last year's corresponding periods. The net financial result was positive by 1.5 million Euro as we benefited from favorable exchange rates effects at that time.
Koen Berges: Income tax expense in the quarter amounted to 0.2 million euro compared to 0.5 million euro last year.
Paul: Income tax expense in the quarter amounted to <unk> 2 million compared to $1 5 million Euro last year.
Koen Berges: And as a result, the net loss of the first quarter was 0.5 million euro, representing one euro cent per share, compared to the net profit of 3.6 million euro for the corresponding 2024 period.
Paul: And as a result, the net loss for the first quarter was $4 5 million euro representing one <unk> per share compared to net profit of $3 6 million euro for the corresponding 2024 periods.
Koen Berges: Now please turn to slide 12 for a recap of balance sheet and cash flow highlights.
Paul: Now please turn to slide 12 for a recap of balance sheet and cash flow highlights.
Koen Berges: In the first quarter of 2025, we further reinforced our balance sheets. Our cash reserve increased to €104 million by the end of the quarter. Loan and lease repayments further reduced our gross debt to €36 million. The resulting net cash position at the end of the year, as said, was €67.7 million, up by almost €7 million compared to the position at the beginning of the year. trade receivables, inventory, and trade payable positions all increased, reducing our networking capital. The total deferred income position increased to €61 million, out of which €49 million was related to deferred revenue from software licences and maintenance contracts, as I mentioned earlier.
Paul: In the first quarter of 2025, we further reinforced our balance sheet, our cash reserve increased to $104 million euro by the end of the quarter.
Paul: Loan and lease repayments further reduced our gross debt to 36 million euro the resulting net cash position at the end of the year are set was $67 7 million euro.
Paul: By almost 7 million euro compared to the position at the beginning of the year.
Paul: Trade receivables inventory and trade payable positions increased reducing our net working capital.
Paul: Total deferred income position increased to 61 million euro out of which 49 million is related to deferred revenue from software licenses and maintenance contracts as I mentioned earlier.
Koen Berges: As you can see from the graphs on the right of the page, cash flow from operating activities for the first quarter was strong and amounted to almost 10 million euros. Capital expenditures for the quarter amount to 1.8 million euro, reflecting a more normalised level with the bulk of the investments in our new ag-tech plants behind us now. As a result of these, we generated once more a positive free cash flow, which amounted to 8 million euro over the quarter.
Paul: As you can see from the graphs on the right page cash flow from operating activities for the first quarter was strong and amounted to almost 10 million Euro <unk>.
Paul: Capital expenditures for the quarter amounted to 1.8 million, reflecting a more normalized level with a bulk of the activity investments in our new <unk> plants behind us now.
Paul: As a result of this we generated once more a positive free cash flow, which amounted to $8 million euro over the quarter.
Brigitte Vet: And with that, I'd like to hand the call back to Brigitte. Thank you, Koen. Let's turn to page 13.
Paul: And with that I'd like to hand, the call back to breakeven. Thank.
Colin: Thank you Colin.
Colin: Let's turn to page 13, I'll conclude my remarks, with a discussion of our full year 2025 guidance.
Brigitte Vet: I'll conclude my remarks with a discussion of our full year 2025 guidance. The fundamentals of our business segments are strong, and while we expect the current uncertain macroeconomic and geopolitical conditions to weigh on our 2025 results, in particular in the second quarter, we anticipate a stabilization in the second half of the year and therefore expect to be able to deliver on our earlier guidance. As such, we continue to expect to report consolidated revenue for the full year 2025 within the 270 to 285 million euro range we communicated in our prior year earnings call. We are also maintaining our adjusted EBIT guidance of 6 to 10 million euros for the fiscal year.
Colin: Andamento somehow or business segments are strong and while we expect the current uncertain macroeconomic and geopolitical conditions to weigh on our 2025 results in particular in the second quarter, we anticipate a stabilization in the second half of the year and therefore expect to be able to deliver on our earlier guidance.
Colin: We continue to expect to report consolidated revenue for the full year 2025 within the 270 to 285 million Euro range, we communicated in our prior earnings call.
Colin: We are also maintaining our adjusted EBIT guidance of six to nine six to 10 million euro for the fiscal year.
Brigitte Vet: This concludes our prepared remarks.
Operator: Operator, we're now ready to open the poll for questions. Thank you. As a reminder, to ask a question, please 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 while we compile the Q&A roster.
Colin: This concludes our prepared remarks, operator, we're now ready to open the call for questions. Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Troy Jensen: And our first question comes from Troy Jensen of Cantorfish Gerald. Your line is open. Hey, good morning. Good afternoon. Congrats on the better-than-expected Q1 results here. Yeah, good morning, Troy. Thank you. Yes, indeed.
Troy Jensen: And our first question comes from Troy Jensen of Cantor Fitzgerald. Your line is open.
Troy Jensen: Hey, good morning, good afternoon, congrats on the better than expected Q1 results here.
Speaker Change: Good morning, Troy. Thank you, yes indeed.
Brigitte Vet: So, Brigitte, for you first, just tariff impact. To me, it's probably not much. When I think about your European business, you print parts out of there and ship them into Europe. And probably for the U.S. healthcare business, you print locally and ship from the U.S. But can you touch on kind of tariff impacts for Materialise?
Speaker Change: So we get it for you first just tariff impact to me its probably not much when I think about your European business, you've printed parts out of there and ship them into Europe.
Probably for the U S healthcare business of your print locally and shipped from the U S. But can you touch on that tariff impacts for our pro materialize yeah, absolutely. So what you just said you're absolutely right. So in all of them. So that's the three.
Brigitte Vet: Yeah, absolutely. So, with what you just said, you're absolutely right.
Brigitte Vet: So, there's three things that I would set on the positive side. So, we have our healthcare business with a U.S. manufacturing plant, which helps, obviously, in this situation. Our manufacturing business is focused on Europe, as you said. And then the third one is that software, as such, at this point in time is not impacted. Now, where we do see the impact potentially is on our raw materials, because even in our U.S. facility, we will have raw materials that potentially are impacted. That's one. But the biggest impact is probably the impact of tariffs on our customers.
Speaker Change: Things that I would say.
Speaker Change: On the positive side, so we have a health care business with a U S manufacturing plants.
Speaker Change: Which helps us in this situation our manufacturing business focused on Europe. As you said and then the third one is it software.
Speaker Change: As such at this point in time is not impacted.
Speaker Change: Now, we do see the impact potentially is on our raw materials, because even in our U S.
Speaker Change: Facility, we will have raw materials that potentially impacted them.
Speaker Change: That's one but the biggest impact is probably the impact of tariffs on our customers and that is at this point in time very hard.
Brigitte Vet: And that is, at this point in time, very hard to say what the impact will be and how customers will react to the climate and to their increased costs. But from our side, you're absolutely right with the focused operations of manufacturing in Europe and our healthcare business in the U.S.
Speaker Change: And to see what the impact will be and how customers will react to the assignment into their increased costs.
Speaker Change: So but from our side, you're absolutely right with the.
Speaker Change: Focus the operations of manufacturing.
Speaker Change: Europe in our health care business in the U S and I would add there.
Brigitte Vet: And I would add software as the one that is excluded from tariffs at this point. Alright, makes sense.
Speaker Change: As the insulin is excluded foodservice at this point in time.
Speaker Change: Alright makes sense.
Brigitte Vet: You talked about Q2 being disruptive here and then kind of stabilizing or back to normal in the second half, so to speak. Can you just touch base on month-to-date? I mean, how does Q2 look? Are we going to be down sequentially? Flat-ish? I mean, any insight on what you think Q2 could look like? Yeah, so I mean, I obviously can only take the information that we have at this point in time. So the way we look at Q2 at this point in time is that it's going to be a bit more of a difficult quarter.
Speaker Change: You talked about Q2 being disruptive here and then kind of <unk>.
Speaker Change: Stabilizing or back to normal in the second half so to speak.
Speaker Change: Can you just touch base on a month to date I mean, how does Q2 look are we going to be down sequentially flattish I mean any insight on what you think Q2 could look like yeah. So I mean, I, obviously can only.
Speaker Change: Take the information that we have at this point in time.
Speaker Change: So the way we look at Q2 at this point in time is that it's going to be a bit more of a difficult quarter.
Brigitte Vet: The start of the month was okay-ish. So overall, you know, I would expect us to be, you know, somewhere more or less flat-ish on the top line. But there's a lot of uncertainty in the market, which makes it very hard to predict, you know, what the rest will be. There will be pressure on our bottom line in the second quarter. Now, again, as I said earlier, you know, we'll expect that to stabilize in the second half of the year, and us getting, you know, out of this. But again, at this point in time, hard to predict.
Speaker Change: Out of the months.
Speaker Change: Was that was the case.
Speaker Change: So all of them.
Speaker Change: I would expect us to be somewhere more or less flattish on the top line.
Speaker Change: But there's a lot of uncertainty in the market, which makes it very hard to predict.
Speaker Change: The rest will be there will be pressure on our bottom line in the second quarter now again as I said earlier.
Speaker Change: Fact that to stabilize in the second half of the year and and end up getting out of this but again at this point in time hard to predict.
Troy Jensen: And then maybe for Koen, I mean, I know we hit this a lot, you know, frequently on these quarterly calls, but software was below $10 million. It's the first time we've seen it at that level since kind of the beginning of COVID. Just thoughts on kind of growing that business. I do get, you know, deferred rouser growing. And then could you also confirm, did you say 80% of revenues in software are from recurring sales? Sorry, a couple of questions together there. Yes.
Speaker Change: Okay understood and then maybe for cone I mean, I know you hit this a lot frequently on his corridors quarterly calls, but the software. It was below 10 million. That's first time, we've seen that at that level since kind of the beginning of Covid.
Speaker Change: And kind of growing that business I do get deferred revs are growing and then could you also confirm did you say 80% of revenues in software are from recurring sales sorry for all the questions together.
Koen Berges: No, thank you, Troy. Indeed, for the first time, we passed the 80% threshold or milestone of our total software revenues within the software segment that were of a recurring nature. Last quarter, I indicated we were just north of 75%. So we made quite a big step up in the first quarter of the conversion to recurring revenue. And that is also translating into our reported revenue number. So compared to other quarters, we have deferred more of the sales, so of the revenue coming in on the balance sheet. And that impacts also the top line. And that is also one of the reasons why we see a lower reported revenue in the first quarter.
Speaker Change: No.
Speaker Change: Thank you Troy Indeed for the first time, we passed the 80% threshold or milestone.
Speaker Change: Of our total.
Speaker Change: Software revenues within the software segments that were of a recurring nature last quarter. I indicated we were just north of 75%. So we made quite a big step up in the first quarter of the conversion to recurring revenue and that is also translating into our reported revenue number so compared to other quarters.
Speaker Change: Have deferred more.
Of the of the sales of the revenue coming in on the balance sheet and that impacts also the topline and that's also one of the reasons why you see.
Speaker Change: A lower.
Speaker Change: Reported revenue in the first quarter and as <unk> said, just below 10 million.
Koen Berges: And indeed, as you said, just below the 10 million euro. Now maybe just to add one more point on here, Troy, I mean the fact that we are above the 80% now with our recurring also gives us an indication that we're getting closer to the endpoint of this transition.
Speaker Change: Zero.
Speaker Change: No maybe just.
Speaker Change: One more point on here.
Speaker Change: Hi, I mean effectively.
Speaker Change: Above the 80% now with all recurring.
Speaker Change: And also gives us an indication.
Speaker Change: Getting closer to the endpoint of this transition and now I'm by no way, saying at the endpoint of this condition is in this year and it takes a couple of years to go through this.
Koen Berges: Now I'm by no way saying that the endpoint of this transition is in this year, we know that it takes a couple of years to go through this, but with the recurring revenue above 80% at least, you know, the end of this is in sight.
Speaker Change: But with the recurring revenue above 80% at least the end of this is in sight.
Speaker Change: <unk>.
Troy Jensen: Hunter Shedd. All right, well, keep up the good work. Good luck. Thank you, Troy. Thank you.
Speaker Change: Understood Alright, well keep up the good work good luck this year.
Speaker Change: Troy.
Speaker Change: Yes.
Operator: And as a reminder, if you have a question, please press star 11. I'm showing no further questions at this time.
Speaker Change: Thank you and as a reminder, if you have a question. Please press star one one.
Speaker Change: Okay.
Speaker Change: I'm showing no further questions at this time I would like to turn it back to <unk> for closing remarks, well. Thanks again for joining US today, we look forward to continuing our dialogue with them through investor conferences or in one on one virtual meetings all calls and please do reach out if you have any questions.
Brigitte Vet: I'd like to turn it back to Brigitte Vet for closing remarks. Well, thanks again for joining us today. We look forward to continuing our dialogue as always through investor conferences or in one-on-ones, virtual meetings or calls, and please do reach out if you have any questions.
Brigitte Vet: With that, I want to thank you and say goodbye for now.
Speaker Change: With that I want to thank you and say goodbye for now.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
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