Good day. And thank you for standing by. Welcome to the Q2 2022 Materialise NV’s Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Harriet Fried from LHA. Please go ahead.

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 strategic, financial and operational performance for the second quarter of 2022. 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 release that was issued earlier today 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 activity, 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 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 also 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. As always, you can find the agenda for our call on Slide 3. As the first item on our agenda, I will summarize the highlights of our financial results for the second quarter of 2022. Then I will pass the floor to Fried, who will give you more insights into our active business line, to which we are pursuing a new vertical opportunity for our manufacturing business. After that, Johan will walk you through our second quarter numbers in more detail. And finally, I will come back to give you some observations about what we currently believe the rest of the year may bring. When we’ve completed our prepared remarks, we will be as always happy to respond to any questions that you may have. So let’s turn to Slide 4, which summarizes the highlights of our financial results. In the second quarter of 2022, we recorded €58.1 million in revenues, representing a growth of almost 15% compared to last year’s period. Also, and importantly, deferred revenue for maintenance and license fees further increased €3.8 million compared to the end of last year, mainly driven by the strong sales performance in our medical segments. Our adjusted EBITDA for the quarter amounted to €4.2 million, compared to €6.9 million last year and was impacted both by our continued investment in our CO-AM solutions. And by inflation related higher expenses in particular, renovation costs. Our earnings for the quarter are $0.02 per share. And with that, I would like to pass the floor to Fried, who will explain the investments we plan to make in our ACTech business line and the market opportunities method presents. Fried?

Thank you, Peter. Good morning, and good afternoon, everyone. The launch of CO-AM, which we discussed at length during our Q1 call, received a warm welcome at the RAPID show in Detroit in May. We are in discussions with multiple parties that want to use or join the new CO-AM platform. But as you know, those strategic interactions do take time to develop. In today’s call, we want to discuss a major opportunity that we have signed together with our ACTech team in Germany. Let me give you some background for this decision and an explanation of its potential and benefits. Not only on our financial results, but also on efforts to offset global warming. You’ll see some images that illustrate our efforts for this business on Slide 5 and Slide 6. Our manufacturing activities have not only recovered to pre-COVID levels, but even reached a new height in Q2 2022. They exceed the Q2 2019 levels by more than 10%. Importantly, our manufacturing business did not simply bounce back to pre-COVID levels. It also significantly changed its focus to what we believe are the most promising segments and verticals for 3D printing. In executing this strategy, we have significantly reduced the role of the automotive sector in our plastics manufacturing activities. Compared to last year, in our contract manufacturing business, the industrial goods and medical device projects grew 25% while automotive projects remained stable at the low level of 2021. Although, the amount was rising in 2022, we have refused to grow low margin automotive prototyping projects in plastics. Instead in the legacy automotive subcontracting, we have been focusing our efforts where we have a large competitive edge, for instance, on large stereo-lithography parts printed on our Mammoth printers. As part of that same strategy, we encouraged as it…

Thank you, Fried. I would begin with a brief review by consolidated revenue on Slide 7. As a reminder, when I refer to sales in our presentation, we mean revenues plus change in deferred revenues. Also please note that unless otherwise stated all comparisons in this call are against our results for the second quarter of 2021. Revenue increased 15% to €58.1 million. The increase took place in all three segments. The growth in our Software segment was 6%, our Medical segment grew by 19% and revenue in manufacturing increased 14%. Importantly, deferred revenues from software license and maintenance fees further increased and were up €3.8 million compared to the end of last year, further, under scoring the strong software sales performance within our Medical segment. For the second quarter of 2022, Materialise Software accounted for 18% of our total revenue Materialise Medical for 36% and Materialise Manufacturing for 46%. Cross segment revenue from software products represented 30% of our total revenue. Moving to Slide 8. You will see our consolidated adjusted EBITDA numbers for the second quarter of 2022. Consolidated adjusted EBITDA was €4,240,000 compared to €6,925,000 for the same period last year. Our adjusted EBITDA reflected the negative effect of our investments in new business, labor resources and inflation. Slide 9 summarizes the results of our Materialise Software segment. Software revenue increased 6.1% to €10,642,000 driven by 12.7% sales from renewed licenses and by usage from deferred revenue. Revenue from non-recurring sales decreased 9.5%. We look forward to converting the positive feedback we’ve received on our CO-AM platform and applications into significant sales growth. Although, we expect to see these effects only in the midterm because of the introduction time and because of the nature of the cloud solutions we offer. In fact, the typical cloud pricing model…

Thank you, Johan. Before opening the floor to questions we want to try and give some insights into what we currently believe the remainder of 2022 will bring. Our business performs well. The consecutive revenue growth posted by each of our segments in the first and in the second quarter of this year strengthens our confidence that our full year 2022 revenues will be at least 10% higher than the previous year. At the beginning of the year we announced that we intended to accelerate our investments in particular in our CO-AM platform, and that this would result in a lower EBITDA than last year. Since then, global inflation and the effects of the war for talent have become higher and more persistent than initially expected. Despite these worsening macroeconomic circumstances, we currently intend to continue to execute on our growth plans even if these efforts will weigh more on our bottom line this year than we had initially anticipated. As a result, we currently expect that our consolidated EBITDA for the full year 2022 will be in the range of €20 million to €25 million. With this, I would like to conclude our prepared remarks. So operator, you can now open the call to questions.

All right. Thank you. [Operator Instructions] Our first question comes from the line of Jason Celino from KeyBanc. Please go.

Great. Thanks for taking my question. Nice to see the new growth opportunities within ACTech. The new plant looks to capitalize on that. How should we think about the timing of the €23 million investment that you talked about?

Well, a first portion is going to this year’s acquisition of the building. And that’s in the order of magnitude of €6 million to €7 million as it will include also some renovation works on this building. And as of next year, we will be able to start installing the equipment. And yes, the further investments will be in order of magnitude of €10 million in 2023 and yes, the remainder €7 million in 2024.

Okay. Perfect. And then the...

The turnover – sorry, the turnover of that is related to this investment is to some extent already started this year, but we try to handle some of it through subcontracting and it will only be handled internally as of the second half of next year.

Okay, perfect. Thank you. That makes sense. Staying on the Manufacturing segment, very solid performance, you talked about good order intake for the rest of the year. But did you see any pulling into the second quarter or at least just broad base strength?

Excuse me, I didn’t fully understand the question. Did we see any cooling or what did you say?

I mentioned pulling any orders filled in second quarter that may have come from prior quarters or upcoming quarters.

Well, I can tell you that that order intake and invoicing were quite in equilibrium, so order intake is still very solid at this moment.

Okay, excellent. I’ll pass it on to the next speaker.

Thank you, Jason.

One moment while we open up to next question. Your next question comes from Noelle Dilts from Stifel. Please go ahead.

Hi guys. Good morning.

Hello, Noelle. Good morning.

Hey, good morning. So first I was just hoping when you sort of look at the incremental headwinds to the profitability this year from inflation and the war for talent. Could you maybe just kind of parse out, which is more impactful? And I guess the reason I’m asking that question is just to think about, could these elements worsen in the back half of the year? Or do you feel like you’ve got a pretty good handle on how things are on sort of the forward trajectory at this point? Any thoughts around that would be great. Thank you.

Well, if you look at our cost base, the bulk obviously is remuneration for the knowledge company that we are. So the hit that our EBITDA is taking is definitely to a large extent associated with increased remuneration costs that on the one hand flow from the fact that we definitely want to keep as much talent as we currently have on boards. And on the other hand, as we want to continue to grow and want to continue to further invest taking new talent on board also requires more investments than we had initially anticipated. So that is increased remuneration costs because of that war for talent definitely is a very significant part of the increased total expenses that we are experiencing. And second, of course, and that also weighs as you have seen somewhat on our gross margin. Electricity costs, supplies of materials, also costs there have increased which also weigh on our results. As Johan has already indicated during his initial remarks, we have not been able to just because of a timing effect, not been able to pass all these increased expenses onto our customers, right. For some reason, just for simple timing effect, in other instances, in particular in medical, because we have contractual arrangements with our customers, which allow us to adjust prices for inflation and related increased costs at particular instances in the year. And these events just do not coincide perfectly. We will only be able to adjust some of the pricing in particular, in long-term contracts with our medical partners in the course of the second half of the year.

Right. Okay, great. And that actually ties into my second question basically, where I was going with that, which is, there have been some fairly recent, I don’t know developments or changes in the business, whether that’s launching CO-AM data lake or now really expanding ACTech. Any changes and how you’re sort of thinking about the longer term or multi-year margin potential for the business. If you could just touch on how you’re thinking about that, that would be great. Thank you.

Again, as Johan already indicated, we are – I mean, very optimistic about our CO-AM platform and also about the potential for margin generation that platform and the business model behind the platform will generate. But then as Fried indicated, we are in discussion with a number of parties. These discussions are disruptive for the parties because once they choose for a platform, they really make a multi-year engagement. So these onboarding discussions that are currently going on take time. And then subsequently obviously our business with these players will increase as their adoption of 3D printing increases. So the very solid margin that we expect from CO-AM and that gives us confidence that our software business will go back to the 30% and 35% plus margins that it shows only recently our confidence is very high but that is not going to happen in the first quarter. We think it’s more likely going to happen towards the end of next year.

Yes. Okay, great. Thank you very much.

Noelle, that relates to the spare business, on the longer term, we also expect continuation of the growth that we see in the medical segment. And then as in his section mentioned the promising growth of ACTech where we will double capacity, the capacity will not be doubled in revenue immediately. It’ll take some time that also looks promising where we also will have much higher margins and in traditional 3D printing manufacturing business lines. And then finally, we also mentioned that we continue investing in other new business lines like eyewear and motion, and also that takes time, but you would not invest in that if you don’t have an outlook of higher revenue over the next years with also nice margins to realize.

Appreciate the color. Thank you.

[Operator Instructions] There are no further questions at the moment. I would now like to turn the conference back to Peter Leys for the closing remarks.

Thank you, operator. And thank you all for joining us today on the call. We as always look forward to continuing our dialogue with you through investor conferences or in one-on-one virtual meetings or calls. So please reach out if you have any further questions. And for the moment, I would like to thank you again, say goodbye to all of you. And for those of you who have holiday ahead of you still happy holidays. Goodbye for now.

Goodbye.

This concludes today’s conference call. Thank you for participating. You may now disconnect.