Good morning, ladies and gentlemen, and welcome to the Materialise Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Ms. Harriet Fried of LHA.

Thank you for joining us today for Materialise’s quarterly earnings 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 accompanied by a slide presentation that reviews Materialise’s strategic, financial and operational performance for the third quarter of 2019. To access the slides if you’ve not already done so, please go to the Investor Relations section of the Company’s website at www.materialise.com. The earnings release issued today can also be found on that page. Before we begin, 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’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 forward-looking statements to reflect future events or changes in expectations. 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 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. With that introduction, I’d like to turn the call over to Peter Leys. Go ahead, please, Peter.

Thank you, Harriet, and thank you, everyone, for joining us today for our call. As always, you will find the agenda for today on Slide 3. On the right, you will see the picture of three gentlemen who have not changed over the last four years since we started using the slides. And on the left, you will find the agenda, which frankly hasn’t changed much either. As always, we’ll begin with a brief recap of our results for the quarter, then Fried as always will come on, and this time Fried will discuss some of the strategic and technological drivers for the continued success of Materialise Software. After Fried, you will hear Johan who will go through our third quarter numbers in more detail and then I’ll come back on to review our financial guidance for the rest of the year. And when we’ve completed our prepared remarks, we will be happy to respond as always to any questions that you may have. So turning to Slide 4, you will see the highlights of our third quarter results. Now despite macroeconomic environment that remains challenging, Materialise continues to grow. Our total revenue as you saw rose 8%. You realized a quarterly adjusted EBITDA record of more than €8 million this quarter and we generated €1 million of net profits. Importantly, Materialise Software enhance its performance in Q3 significantly as we forecasted in our Q2 call. With a revenue growth of 10% and an EBITDA margin that came back to normal of 35%. Also Materialise Medical performed very well. We believe with revenues growing 21% quarter-over-quarter and with an EBITDA margin of 18%, including the August, September results of Engimplan. And finally Materialise Manufacturing also grew its EBITDA margin to a solid 16% and this on the back of stable revenues that grew modestly by roughly 0.5%. Against that background, I would like to turn the call now over to Fried, who will among other things, expands on our software strategy. Fried, go ahead.

Thank you, Peter. Good morning, and good afternoon, to everyone. Thank you for joining us today. While we are heading fast to the big [indiscernible] of the 3D printing industry at Formnext in Frankfurt starting November 19. I would like to use the opportunity of this quarterly call to give an update on the Materialise Software strategy. Our strong Q3 software results demonstrated Materialise Software tools remain the productivity drivers for the majority of the professional 3D printer users. At Formnext, we will introduce several new upgrades of our products that increase productivity further. These tools have been built along two major access. Firstly, our development teams have come up with solutions that dramatically increase the speed at which our tools can process data. For 3D nesting a crucial to make selective laser sintering and Multi-Jet Fusion technology is more cost effective. Our development teams managed to increase the processing speed by whopping factor of 30. Importantly, customers can translate it amazing increase in data processing speed directly into productivity gains. As you know, as printed parts become more and more complex, build platforms become larger and larger, and packing becomes more and more dense. As a result, the associated data files increased significantly in size, which impacted the time that is required to process the data that must be important into the machines. In certain environments, the ability to process data significantly faster and just keep the data preparation time as short as possible becomes a major driver to increase the productivity of 3D printing facility. That is exactly what our newest generation of nesting tools do. In addition to saving time, our highly efficient nesting also saves power, which decreases both the production cost and the environmental impact of the 3D printing process. Secondly, the new generation of…

Thank you, Fried. I’ll begin with a brief review of our consolidated revenue on Slide 6. As a reminder, 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 third quarter of 2018. As Peter mentioned in his opening remarks, in this year’s third quarter, we generated an 8% increase in revenue driven by our Medical segment and an acceleration of sales performance in our Software segment, which returned to double-digit growth. Deferred revenue from annual software sales and maintenance contracts increased €1.4 million compared to year end 2018. For the quarter, Materialise Software accounted for 21% of our total revenue, Materialise Medical for 31% and Materialise Manufacturing for 48%. Cross-segment revenue from software products accounted for 31% of our total revenue. Moving to Slide 7, you will see our consolidated adjusted EBITDA numbers for the third quarter. Consolidated adjusted EBITDA increased almost €1 million, from €7 million to €8 million. Our EBITDA margin increased from 15.1% to 15.9%. Unlike the previous period, the third quarter 2019 EBITDA included a positive effect of €632,000, resulting from the new IFRS 16 Accounting Standard that requires us to capitalize certain lease expenses as of 2019. This new accounting standard has little impact on our operating profit, as depreciation expenses increased by the same amount. Improved gross margin and moderate increase of operating expenses resulted in 25% increase our operating profit. Slide 9 summarizes the results of our Materialise Software segment. Here, revenue grew by 10% or almost €1 million. The rebound from the softer first half of the year was reflected in Q3 sales growth of 16.4%. Recurring revenue was up 5.3%. Non-recurring revenue was up 14.4%, boosted by OEM…

Thank you, Johan. I wanted to conclude our prepared remarks this morning by touching briefly on our financial guidance for the rest of the year. As you may remember, last quarter we confirmed our targets for the full year albeit at the lower end of the range with respect to EBITDA. As we explained last time, this was based on our view that our Medical and Manufacturing segments would continue to do well and that our software segment would do significantly better than the first half of 2019. Our sales teams lived up to these high expectations in Q3 and you would like to congratulate them for that. As we’ve just discussed, overall revenues grew by 8% and including because of the strong performance of our software sales Materialise turned in a record quarterly EBITDA of more than €8 million. Still, to reach our full year targets, we will need to exceed the already excellent results of Q3 in the current quarter Q4. Our strong showing in the third quarter and our pipeline for the remainder of the fourth quarter, which is traditionally our strongest period, show that this is indeed possible even in the soft macroeconomic environment that we live in today. Provided however, that we fully include the EBITDA contribution by Engimplan in the fourth quarter that our Manufacturing segment does not experience any unexpected downward swing and that our software sales include the high level of recognizable revenue for Q4 that we currently expect. While the key driver for EBITDA generation within Materialise remains top line growth, we also expect some positive contribution from the continuous improvement programs that we have launched within our organization. And with this, we would like to conclude our prepared remarks. So operator, we are now ready to open the call to questions.

[Operator Instructions] Your first question comes from the line of Troy Jensen with Piper Jaffray.

Hey gentlemen, congrats on the nice results.

Thank you, Troy.

Thank you.

Hey Peter, for you, it sounds like is the most convictions coming from is software growth, right, when you look at kind of Q4 forecast here. So just be curious if you can dive in a little bit. Is it the traditional 3D software versus 3D healthcare? Is it OEM partners that are really ramping? Or is it these a new generation of APIs that Fried mentioned in his prepared remarks that are given you guys that kind of confidence.

The software growth that I refer to Troy, first and foremost to the sales of our traditional software tools that are sold within our Software segment. But I would like to add, and we – where we touched upon that during the prepared remarks that we’ve seen a fairly strong rebound of our OEM sales, which were soft in the first half of the year. They were much stronger in Q3 and we expect that they will continue to contribute in Q4 and that they will continue to help us continue the trend of growing sales within the Software segment in Q4. That being said, we will need all the help we can in Q4 and we also expect that the medical software sold within our Medical segment will also contribute to what we expect to be a good solid and strong fourth quarter. Now the APIs a new product introduction tools that Fried refer to, they will not contribute to our top line in Q4. If anything they explain for a part our continued investment in R&D, but they are exciting because they show that we are just not relying on the successful products that we have been relying on for such a long time that we are revamping and actually making that software backbone fully ready for the next generation of end parts production applications.

So then maybe for Fried, just to piggyback of Peter’s comments on the strength in the OEM partners for software sales. I’m assuming that’s production applications and be curious to know kind of what Materialise is also seeing in their manufacturing for kind of more of a effort to get a growth in production?

Well, first of all, like Peter said, the tools we are currently selling or mostly the – yes, legacy products of Materialise all by they’re used more and more for production applications, especially on the metal side. We also see in our own reduction that there is increase demand for metal production components where prototyping is playing a much smaller role. But if Materialise can maintain a steady position, at this moment in the soft climate, it is mostly because the growth of certified manufacturing in our manufacturing operations. So this is showing that this transition to end part manufacturing continues.

And how about Fried, I’d love to get your thoughts to on just a European automotive vertical. Have we bottomed here given kind of coming out of Q3 now, is there any improve visibility kind of go into next year with a European auto?

Well, it remains – let’s say a difficult answer, a different – difficult question to answer. At this moment, there are quite some raise of hope that the situation will improve, especially in product development for the automotive sector, although the exact timing of that rebound is still questionable. And definitely as what we are currently generating in revenues in Q4 is based on what was sold before. The impact of the automotive sector in Q4 will still be really, yes – bad. But for next year there is hope, many levels that the situation will improve. But we don’t know whether did this start will be as of the beginning of the year or the second quarter or only the second half of the year. That’s still very cloudy.

Right, appreciate it. I have a just last question from me within medical, I’m assuming these roughly stable and most of the growth is coming from CMF and some of the new applications.

That’s correct.

Yes.

Same trends as previous quarters.

Great. Well, perfect. Congrats again, guys, and good luck in Q4.

Thank you, Troy.

Thank you.

[Operator Instructions] Your next question comes from the line of Jason Celino with KeyBanc Capital Markets.

Hi, guys. How’s it going?

Hey, Jason.

Just a couple of questions for me. First question, it looks like Engimplan contributed a little bit under €2 million for the medical revenue. Is that correct? Or – and then, I know it’s still early, but what it’s been early feedback like since you both have come together.

So the revenue, this was contributed in Q3 over the two months of August and September, when we started consolidating 1st of August is €1,029,000.

Yes. And the operational level of course these are the first month now that we are collaborating. We are very happy with the positive mindset and the results of our new colleagues in Brazil. But let’s say, and this is a medical sector to integrate the product portfolios of Materialise into the Brazilian market and the other way around will take us approximately one year, because of all the regulatory hurdles that need to be met.

Got it, great. And then thinking about the steps you’re taking throughout your organization to maximize effectiveness. Maybe can you talk about what some of those steps are and how those are going?

It’s – I mean, we haven’t launched any particular or specific program, James. It’s just that we – as these are difficult and uncertain times, where from a growth perspective, we are doing well. We are keeping an eye on our cost base and are making today even more shorter than we did yesterday, that the dollar that we do spend are spent for the right verticals and for the right initiatives. So it’s more a matter of being even more focused and disciplined than anything else without losing, of course, sites of the growth drivers that we have identified and that we will continue to invest in.

And I want to add to that, of course, our operational costs and especially our 3D printing cost is something where we work on continuously to improve the productivity of our machines and which is the basis for our software tool development.

Okay, great. And last question, actually, if I could just build off of Troy’s question, in the auto OEMs in Europe, relative to maybe a quarter ago, would you describe maybe no change in overall condition or any incremental commentary you’d like to add?

Well, the key element why some of the developments are not growing faster, remains the uncertainty about the regulatory climate for the new generations of both cards that exist, and there many people in the auto sector hope that some clear decisions will be made by the different governments and by the European union with regard what the new emission standards and so on will be this holding back some of the developments.

Okay, great. I appreciate the color. Thank you.

Thank you.

Your next question comes from the line of Gregory Ramirez with Bryan Garnier.

Yes, thank you. Good afternoon. Just maybe more clarification and the question, it’s related to your guidance for the full year. You mentioned that it will be at the lower end of the range. After Q2, you mentioned only, it will be at the low end of the range for EBITDA – adjusted EBITDA exceeding Engimplan. Now, does your guidance includes Engimplan and do we have also to expect that the low end of the guidance applies to revenues as well, that is to say that total revenues include the Engimplan will be more towards €196 million and €204 million. Thank you.

Thank you, Greg for this question and it will allow us to take away any doubts if there will be any. We maintain that, when we guide towards the lower end of the initial range that relates to EBITDA. As I said in the prepared remarks, the biggest EBITDA generator within Materialise is still our revenue growth. So the main caution really relates to the range for EBITDA and not as much to the deferred revenue range that we provided nor more importantly to the recognized revenue range that we provided. The second part, Greg, of your question, I think related to Engimplan. Definitely in last call, we were still hopeful that we would be able to use the Engimplan contribution to our EBITDA as a kind of safety buffer, let’s say. To help us meet the bottom of the range, it’s €29 million. If you’re listening carefully to our prepared remarks now we really – fully also rely on the full contribution by our friends in Rio Claro in Brazil to allow us to get to that bottom end or lower end of the EBITDA range.

Okay, great. Thank you very much.

Sure. You’re welcome.

I’m showing no further questions at this time. I would now like to turn the conference back to Peter Leys.

Thank you. Thank you operator, and thank you all for joining us today. As Fried already mentioned earlier for next, it’s coming up in the week of November 2019. So we very much look forward to being there and what a particular we look forward to meeting some of you in the course of those three to four days. Thank you all and enjoy the rest of the day and the week. Bye.

Goodbye.

Goodbye.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.