Ladies and gentlemen thank you for standing by, and welcome to the Q3 2020 Materialise Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today Harriet Fried, of LHA. Thank you. Please go ahead.

Thank you for joining us today for Materialise's quarterly conference call. With us 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 strategic financial and operational performance for the third quarter of 2020. 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 earlier this morning can also be found on that page. Before we get started, I’d like to remind you that management may make forward-looking statements regarding the Company’s plans, expectations and growth prospects among other things. 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 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. 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 on the call today. You can find the agenda for our call on Slide 3. While we fully recognize that the continuing COVID-19 pandemic is having a devastating impact on the personal lives of many people around us, we believe that nevertheless the third quarter of 2020 has been a promising period for Materialise as a company. First and foremost, we have experienced an exceptional sense of commitments, responsibility and solidarity throughout our entire workforce worldwide. The solid results for the quarter, and the many initiatives that we will talk about during this call illustrates the dedication and tenacity that more than 2,000 Materialise team members have shown over the last couple of months. As the first item on our agenda, I will summarize as always the highlights of our third quarter results. During the last couple of months, Materialise has done much more however than just weathered the storm. As most of you undoubtedly noticed, we announced strategic collaborations and investments in both our eyewear and footwear verticals. I will share some further transactional and financial data about the Ditto and RS Print transactions and the second item on the agenda. Then, I will pass the floor to Fried, who will give you more context about our wearable strategy in general. Fried will also spend some time explaining how these two transactions will strengthen the position that we are building in both the eyewear and the footwear industry. After that, as always, Johan will walk you through our third quarter numbers in more detail. This time Johan will also spend some extra time on the internal digitalization project that we have launched recently. And finally, I will come back to give you some qualitative insights into what we currently…

Good morning and good afternoon, everyone. Thank you for joining us today. As Peter already mentioned, our medical activities rebounded quickly and solidly after the lockdown in Q2. Interestingly, but not surprisingly, we saw a similar swift rebound to pre COVID levels of both of eyewear and footwear activities. The good results of our healthcare and wearables verticals underscored that on the short term, meaningful applications of 3D printing are less cyclical and resistant sensitive. In our opinion, these good numbers also indicate that on the longer term, these applications will gain more and more traction in the new post Corona economy. Encouraged by the success of our investments in healthcare applications, Materialise started developing personalized solutions for the wearables market as early as 2014. Because we realized that 3D printing in general and personalization in particular, can offer exceptional, value in wearable applications, as much as it does in medical applications. There is indeed a great analogy that can be drawn between the suite of solutions that we offer in the medical market, and the personalized solutions that we offer to the eye and footwear markets. In both instances, our solutions start by scanning patient or customer specific data. On the basis of the custom input, we then offer the expert being a surgeon, a pathologist or an optician you’ll need insights in the morphology and needs of his patient or customer. Both our medical and wearable solutions subsequently involve an important design step that is on the one hand, highly automated, in order to be cost effective. But on the other hand, remains human centric, as it always requires the control and input of the healthcare professional. Also in both instances, we can offer customized 3D printed devices in the form of custom implants, insoles or eyewear frames.…

Thank you, Fried. I’ll begin with a brief review of our consolidated revenue on Slide 8. 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 2019. This year’s third quarter revenue decreased 19.2% to €40.8 million the COVID continue impacting our Software and even more our Manufacturing segments. Our Medical segments grew by double-digits again. For the quarter Materialise software accounted for 23% of our total revenue. Materialise Medical for 42% and Materialise Manufacturing for 35%. Gross segment revenue from software products increased to 36% of our total revenue. Moving to Slide 9, you will see a consolidated adjusted EBITDA numbers for the third quarter consolidated adjusted EBITDA amounted to €6,023,000 a decrease of €2 million compared to Q3 last year where we reported a record quarter of €8,022,000. The €2 million decrease should be seen in the light of a quarterly revenue decline of €9.7 million. And besides the effect of reduced variable cost of sales, the medical saving initiatives we implemented had a substantial impact on keeping our EBITDA margin at 14.8% just one percentage point below last year's 15.9%. Slide 10, summarizes the results of our Materialise Software segment. Here revenue decreased 12.7% sales were 16% below last year’s period but also 16% of both Q2, 2020. Compared to the third quarter of last year, non-recurring revenue decreased 39% while recurrent revenue increased to 16%. In fact, increased sales from renewed licenses and maintenance fees softened the decreases in new licenses and services caused by continued industry weakness, especially in Europe. Although OEM sales decreased 30% from last year's period, they also grew and recovered and grew again…

Thank you, Johan. Before we open the floor to questions, we want to try and give some positive insights about what the fourth quarter of 2020 may still have in-store for us. The fourth quarter is traditionally our most important and strongest period of the year. However, as the COVID-19 pandemic continues to disrupt everyday life, the markets in which we operate and macroeconomic conditions in general. It is difficult to predict how this will impact our final quarter this year in 2020. Our software business, like main software businesses traditionally peaks in the last quarter of the calendar year. The current circumstances however, it is uncertain to predict to what extent frozen budgets and spending cuts in the manufacturing markets may continue to impact our software sales, even in this important fourth quarter. As you definitely will remember, our medical business was impacted abruptly and significantly during the second quarter of this year, but rebounded even stronger this year. While we are working hard together with our customers to continue the third quarter's upward trend into the fourth quarter, there is a risk that history will repeat itself and that a second abrupt shutdown of the hospitals that we serve will impact our medical sales significantly again in Q4. Finally, our manufacturing activity, which has traditionally relied heavily on the automotive and aerospace industries, is expected to continue to suffer significantly. Yes, our sales teams are focusing on new business opportunities with success, but those will not impact our revenues sufficiently in Q4 to counterbalance the decline of our existing businesses in the coming months. Accordingly, the outlook for the short-term remains unclear. You can be sure, though, that we are being disciplined in managing our business. And just as importantly, are dedicated to pursuing our vital R&D programs and our strategic investment initiatives, which we believe will position Materialise very well for the coming years. Obviously, our balance sheet and liquidity are areas of strength in this respect. This operator concludes our prepared remarks. So we are now ready to open the call to questions.

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

Fried, you mentioned, you're seeing a buildup of orders. I know it won't maybe impact kind of the financials near-term, but which verticals are you seeing this buildup come from and what types of customers and where these projects that were previously delayed or any other commentary there you can provide?

First of all, we are not talking about manufacturing segments, and what I would call the traditional industrial segments, where we see that at least the automotive sector is very prudently re-investing in projects. It's still either compared to the summer holidays period, we see that several projects that were on hold on being I will stress it slowly released. We do see a healthier situation in what I would call industrial machines and medical devices for instance, where business is getting back to a more normal level. And finally, we also see that our online business is recovering to let's call it normal level. But as you know, the impact of aerospace and automotive, which represents more than half of the normal industrial activities is still huge. And in aerospace, we don't see any positive sign as of now.

And then another question for me. Nice to see the kind of investments on the wearable side but how should we think about opportunity in eyewear and footwear in particular?

Well, like we tried to indicate those are two lines that compared to medical are still in an early phase. So the numbers are quite small, but nevertheless, at this moment on an annual basis already in the order of magnitude of €5 million that we see their big growth opportunities for Materialise in the longer-term as these are really multi-billion dollar markets overall in which this can be significant measures.

And then maybe last one, and maybe for everyone on the call, it'd be a good reminder, but what is Materialise involvement in 3D metal printing today and what are the - how do we think about opportunities there longer-term?

Well, we have a limited metal activity compared to the plastics activity in manufacturing. Nevertheless, as you have indicated is this growing at this moment now. And when I'm talking about metal activity, I'm talking about real metal direct printing with selective laser melting technologies. Because on the other hand, we have the other deck activities that do the prototyping project for the automotive industry that are more considerable, but are severely hit by the crisis situation. So the metal 3D printing is also in the order of magnitude over a few million euros.

And there are no further questions at this time, I would like to turn the call - I do apologize. We do have an additional question from the line of Gregory Ramirez with Bryan Garnier.

We'll come back to the medical division because the EBITDA margin is a very impressive, obviously, probably very positive impact on cost management because probably there is the immediate effect of what you did at the end of Q1 and in Q2. Regarding prospect, I'd like to figure out both for the medical division and for Materialise as a group. What is the cost savings you have done at this point, which are sustainable for next year, you need something around 20%, 30%, 40%?

Yes, the cost savings they are in cost containments in hiring that we work in a more efficient - even more efficient way. Excuse me the percentage of revenue.

Yes, to what extent to those cost savings as a percentage of revenue?

Not as a percentage of revenues, but we would say - compared to the million euros which you have made in cost savings. What percentage of this amount is sustainable for next year?

Oh, yes, I mean, - excuse me, I didn't hear that question well, but the savings that we have realized were approximately €1.2 million in the quarter in the medical segment.

Gregory, we were a bit confused by the question, but maybe let me rephrase it. And if I rephrase it wrongfully, you probably are hitting that is to what extent the very high record EBITDA margin within medical is actually sustainable or to what extent it is the results of prosthetic measures that are not structural and will not be maintained.

Yes, this is a - yes, this is true. This is obviously my question, but also looking at Materialise as a group, all the cost savings you have made up to now and what is the percentage of these cost savings for the group, which can be sustainable for next year. Whatever we need to deliver for revenues that you can generate next year, anyway, we don't really know what will happen for next year. Yes.

The cost savings that we have realized to a certain extent are temporary measures that will not be continued to the other way. There are a lot of scale effects that have been realized that you will maintain in future as well. So, that will happen as well for the other segments as well. We have realized cost savings, we have found in certain places we used to work more even more efficiently, and that will be continued in future. But certain measures that are being given and supported by the governments, when that stops that will be - it would not be 100% that couldn't be continued, but at that moment, we will also be count as well to have the top line growth as well and to continue realizing nice margins.

And there are no further questions at this time. I would now like to turn the call back over to the speakers for closing remarks.

Thank you all for joining us today. In closing, we would like to emphasize that while the morale of Materialise is energizing and very positive, our thoughts are also with those who are suffering from the crisis, be it from a health or financial perspective or otherwise. We wish them strength and courage. We don't have any trips or conferences scheduled at the moment that bring us physically closer to you. Also, we decided not to attend for next year. However, you are all invited to attend the Digital Materialise Think-In series, where our software and manufacturing segments will present some of the new products and solutions that will hit the market shortly. The launch event of the digital Think-In series is scheduled for November 18. Attendance is free, but requires a simple pre-registration through our website. We hope to see you there. Thank you and goodbye for now.

This concludes today's conference call. You may now disconnect.