Good day, ladies and gentlemen, and welcome to the Q2, 2018 Materialise Financial Results Conference call. [Operator Instructions] I would now like to introduce your host for today's conference Ms. Harriet Fried of LHA. You may proceed.

Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Fried Vancraen, Founder and Chief Executive Officer of Materialise; Peter Leys, Executive Chairman; and Johan Albrecht, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's performance for the second quarter of 2018 and other recent activities. To access the slide that you've not done so already, please go to the Investor Relations section of the company's website at www.materialise.com. The press release that will be issued this morning can also be found on our page. Before we get started, I would 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's estimates as of today and should not be relied upon as representing their estimates as of any subsequent date. Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes and expectations. 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 20-F for fiscal year ended December 31, 2017, filed with the SEC on April 30, 2018. 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. With that, I'd now like to turn the call over to Peter Leys. Go ahead please, Peter.

Thank you, Harriet. A very warm welcome to everyone on the call today. And actually the term warm welcome is particularly appropriate here as temperatures are expected to reach an all-time high in Belgium today. We'd especially like to welcome those of you who are joining our call for the first time following the completion of last month's public offering. As always, you will find an agenda for our call on slide 3. I'll begin with a brief recap of our results for the quarter and then I'll touch briefly on the capital increase we've realized through our two recent offerings, as well as our plans for using that capital. After that, Fried will come on to discuss our strategic alliance with BASF, and the potential that the alliance holds for both the additive manufacturing industry in general and for Materialise in particular. After that, Johan will go through our second quarter numbers in more detail, and then I will come back on with a few concluding remarks. When we've completed our prepared remarks we will be happy to respond to any questions that you may have. Turning to Slide 4. You see the highlights of our second quarter results. Again reaping the benefits of our diversified business model, Materialise delivered another set of good results with total revenue increasing by 34%. Our Materialise Medical segment and the ACTech business that we added to our Materialise Manufacturing segment in the fall of 2017, both performed especially well. Including the impact ACTech which contributed revenue of €11 million and EBITDA of €2 million in the quarter, our adjusted EBITDA rose 91%, and our net results swung from a loss of almost €1 million to a profit of roughly €350,000. For the period, all three of our segments delivered EBITDA margins at…

Good morning and good afternoon to everyone. Thank you for joining us today. Last year, Materialise took a strategic step for our industrial 3D printing activities in metals. With the acquisition of ACTech, a step that substantially contributed to the results we announced today. More recently, we also took steps to substantially strengthen our strategic position in the 3D printing of plastics. With the strategic alliance partnership agreement we entered into with BASF, a world leading chemicals company. As summarized on slide 6, BASF and Materialise share a common vision on the development of the additive manufacturing industry. First of all, we believe that the industrial use of additive manufacturing will grow substantially as long as meaningful applications can be further developed. Only through applications where substantial added value can be made, the 3D printing industry is going to achieve sustainable growth. Such applications require development efforts not only on the technical side, but also in market development as they rarely fit the same economic models as traditional manufacturing technologies. This approach is not new to BASF which has been at the forefront of many new plastics applications for decades. Second, BASF and Materialise believe that the larger industrial organizations will require an open ecosystem with freedom of choice to combine multiple material options with hardware and software from different vendors. An open environment is instrumental to getting the cost of additive manufacturing down while ensuring continuity of supply and a possibility to develop proprietary solutions for markets being served. At a more practical level, our strategic alliance with BASF has short and long-term ambitions. In the coming quarters, Materialise will act as an additive manufacturing pilot plant for several of the new materials that BASF is bringing to the market. Together, we will organize co-creation session with the help…

Thank you, Fried. I'll begin with a brief review of our consolidated revenue on Slide 7. As we can start it, I would like to remind you that when we refer to sales in our presentation, we mean revenues plus deferred revenues. Also please note that unless otherwise stated, all comparisons in this call are against our results for the same period in 2017. Finally, we have consolidated results of ACTech for the second quarter of 2018 in our manufacturing business that do not affect for financial reporting purposes the results of our software and medical segments. When we provide certain numbers on a cross-segment basis, we present the ACTech numbers separately. As Peter mentioned in his opening remarks, in this year's second quarter, including ACTech's €11 million, we generated a 34% increase in revenue. Organically, our revenue grew to €34.1 million, or 1.5% compared to last year's period. Both our medical and our software segments have solid sales increases particularly when you take into account our deferred revenue from annual software sales and maintenance which rose by €2.4 million from the end of 2017 to €21.4 million. As a result of the ACTech acquisition, our revenue is distributed differently also this quarter than in last year's period. Including ACTech's 24% share, Materialise Manufacturing grew to 52% of our revenue this quarter, while Materialise Software accounted for 20% and Materialise Medical for 28%. The cross segment distribution of our revenues also looks different, in great part due to the ACTech acquisition. The total revenue from software products increased in absolute numbers by €624,000, it decreased relatively as compared to the other cross segment product groups by 8 percentage points to 29%. Moving to Slide 8, you will see our consolidated adjusted EBITDA number for the second quarter. As Peter mentioned…

Thank you, Johan. So to sum up, the last several months have been a very busy and exciting period for Materialise. With a solid quarter behind us, our strategic alliance BASF signed; our private placement closed and our follow on offering successfully completed. We now very much look forward to returning to the excitement of our daily business in the next few months. Our focus will be on continuing to enhance and streamline our operations, and to advance the plans that we already have put in place. Based on our performance in the first half of 2018 and our outlook for the rest of the year, we believe we are well on track to meet the full year guidance we provided in March of this year. Operator, this concludes our prepared remarks. We are now ready to open the call to questions.

[Operator Instructions] And our first question comes from the line of Troy Jensen from Piper Jaffray. Your line is now open.

Hey, congrats on the good results, gentlemen. Hey, so I guess, first I want to hit medical. You guys had record revenues this quarter. I would just love to know kind of what's really kind of driving the strength there? It seems like the entire vertical is strong, but has CMF been a driver yet? And will that be material and if you could just talk to the sustainability of the growth here in the medical business that would be great.

Well, indeed you are right, Troy. CMF is currently one of the major growth engines of our medical activities. Now to take that a little bit broader, within CMF is the first area where we also take our metal implants to the US market, and yes implants are having overall a bigger added value than the guide. So to the extent we will be able to bring more implants to the market in the future, this will drive sustainable growth in our medical segment.

So, for you if you think of all three segments, do you feel like medical will be the fastest-growing for the next couple of years?

Well, we believe in equilibrated growth, definitely medical will keep growing steadily, but at the same time we have similar expectations for our two other segments as well.

Okay, all right, that's fair. So guys if I just poke on one thing in the quarter the organic manufacturing business was down 14% organically. I do understand it had a hard comp versus last year, but it was the third -- I think the third consecutive quarter of year-over-year decline. So can you just talk about what's going on in that piece of the business?

Sure, Troy. So in manufacturing, I mean you definitely pointed out that, yes, we have an exceptional quarter in Q2 of 2017, which definitely should be taken into account when assessing the overall results of our manufacturing business in this quarter this year. What's happened is I'd say a number of things. First, as you know, we have invested over the last couple of quarters and years in setting up some additive manufacturing production lines for end parts for a number of particular customers. And what's happened now and this is all part of the business model is to some extent we have been but rather brutally a victim of our own success, because in a certain instance it turned out that this production line that we had set up that the product was so successful that the customer actually decided to take it back, and actually switch back to injection molding for larger volume production. In other instances, you have customers who are perfectly satisfied with the production line that we have set up internally, and then decide to either take it in-house or move the production to their own contract manufacturers, which overall is good news for our software business because our software will be used by those contract manufacturers or OEMs. But on short term, it means a loss of business for our manufacturing unit. So that is what happened and what impacted the results of manufacturing in this quarter as compared to the same quarter last year. And second of course, as we've explained I think also during the previous call, we are experiencing rather a softness in the European automotive business. In particular, we've seen less new models are being brought to the market, which of course also impacts some of our organic business that we have built and that to some extent does depend on the cyclical automotive business. So the combination of those two actually explain the softness of our manufacturing segment currently. I should add --

Okay. Go ahead.

I was about to add, Troy, giving you an outlook that we do see “light at the end of the tunnel.” Maybe not for the third quarter, but in general the automotive industry seems to be picking up, that is what we see in the number of quotes. So we do expect that over time manufacturing will show better results as the one that is currently being reported.

Okay, and then maybe last question for me. Today, when you guys talked about the BASF partnership here, it seems like you focused a lot maybe more than I had caught the first time about plastics here. So is this resins and filament that they're working on and is this --do they also have intentions to do more powder based metals with BASF or is this just kind of the first step to focus on?

Indeed BASF currently has mostly some filaments on the market, but they have a pipeline with quite a lot also in photopolymers and in, yes, powders for MJF and selective laser sintering and it's especially the photo polymers and the powders that are of course primary topics for Materialise while we will also do a bit of work on filaments, but the majority of the work will be related to powders and resins.

If you did -- both you guys have partnership with HP I mean was that one of the basis of becoming kind of stronger partners? If you are focusing on powders and multi jet fusion here or is that maybe just reading too much here?

Well like I indicated. one of the powders that we are planning to further develop with the BASF for applications will also be with HP. So we definitely keep working on that Troy.

And our next question comes from the line of Weston Twigg from KeyBanc. Your line is now open.

Hi, thanks. First I was just wondering we just talked about the manufacturing piece but I wanted to gauge your confidence in the manufacturing rebound. You reiterated full-year guidance for revenue. How much of that is dependent on a manufacturing rebound?

Yes. We are quite confident in manufacturing rebound. We see it not only in the quote but also in some orders coming in of which especially those in a rapid fit business for instance, where we have seen yes good ordered intake but where the projects are taking longer than in the let's say past prototyping business. We can -yes, we can anticipate normally a very good fourth quarter although the third quarter will still be mixed given the length of the startup of those projects.

Okay. So it sounds like there should be quite a --there should be rebound in Q4. Okay. The other questions I had one on the BASF deal. Can you help us understand when you might see revenue opportunities emerge from that partnership?

Well I although we will definitely --yes make serious efforts to launch till this year some initiatives. Revenue wise, the even next year --the real revenue will be relatively limited, but for 2020 and dissipate some larger production series order based on the BASF materials. And the real benefits are expected in a five year time frame,

Okay, that's helpful. And then actually I had two more quick ones if you don't mind. The next one was just recently you reiterated your long-term targets of annual revenue growth of over 20% and EBITDA margins of over 20%. Organic revenue is growing slower than that so just wondering what needs to happen to hit those goals and how soon do you think you could get to that 20% level annual growth?

Troy, this is Peter speaking. West, I'm sorry. If you look at our organic growth of 1.5% you really have to break it down. Software is showing solid sales growth of 15%. Our medical segment is showing now a number of consecutive second quarters of very solid growth nearing the 20%. And if we can just get our regular manufacturing business simply back on track with even a single-digit growth, but add on top of that some of the growth initiatives within manufacturing such as the eyewear initiative or the work for aviation that we expect to grow faster through the collaboration with BASF, or some of the verticals in automotive such as rapid fit. If those initiatives that all sits within manufacturing, if they accelerate on top of a more moderate growth of the overall business of manufacturing; if you add all that then our target over 20% growth rates which would actually simply be the repetition of our revenue gagger over the last three to four years is definitely feasible. So, in short, if we can get some of the growth accelerators in manufacturing to work and get the regular business as a regular growth rate then we are very comfortable that we should be able to continue to post compound annual growth rates in the neighborhood of the 20% just like we've done the last three to four years.

Okay, that's helpful. And then just finally for me, this is more housekeeping but what do you expect your diluted share count average share count to be for Q3 for modeling purposes?

While Johan is looking up some numbers, basically I don't know whether this will answer your question, West. We roughly added I mean 3 million-- we issue 3,450,000 additional shares and added close to 2 million new shares in the private placement at BASF. So that means you basically add 5.3 million new shares which would then be bring you to new total -- it's simply adding but Johan is there now. Johan can give you a more precise number.

This is about 10%.

Yes. But what is the absolute number?

Okay. I didn't know if there are any other activities it would change that but simple enough, thanks guys.

8 million.

Thank you. And at this time, I'm showing no further questions. I'd like to turn the call back over to Peter Leys for any closing remarks.

Okay. Well, thanks again for joining us today. We look forward to continuing our dialogue with you at Investor Conference and on the roadshow or at our next quarterly call. For your information Johan will be attending the Keybanc Investor Conference in Vail, Colorado next week. Thanks again and goodbye for now.

Ladies and gentlemen, thank you for participation in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.