Q3 2026 Materialise NV Financial Results Conference Call - MATERIALISE NV

Financial Performance:

• Consolidated revenue grew 2% year-over-year to €67.7 million; organic growth (excluding divestitures) reached nearly 5%.
• Gross profit increased to €39 million with a gross margin of 57.7% (up 90 bps YoY).
• Adjusted EBIT was €2.5 million (3.7% margin); Adjusted EBITDA was €8 million (11.9% margin).
• Net profit for the quarter was €1.4 million (€0.02 per share).
• Year-to-date (YTD) Adjusted EBITDA improved 33% to €8.8 million; YTD Adjusted EBITDA up 12% to €25.7 million.
• Net cash position strengthened to €82.5 million, an increase of nearly €12 million from the start of the year.
• Operating cash flow was nearly €10 million for the quarter; YTD free cash flow totaled €22.8 million, more than double the prior year.
• R&D expenses rose 12% YoY to €12.8 million to support innovation; S&M and G&A costs remained stable (under 2% increase excluding one-time costs).
• Deferred revenue for software maintenance and licenses decreased to €45 million; total deferred revenue on the balance sheet stood at €59 million.

Guidance and Future Outlook:

• Reconfirmed full-year 2026 revenue guidance of €273 million to €283 million, absorbing the impact of recent divestitures.
• Reaffirmed full-year 2026 Adjusted EBIT guidance of €12 million to €14 million, a range raised in August.
• Outlook emphasizes continued execution on strategy, cost discipline, and increased investment in focus areas to drive profitable growth.
• Management expects the final quarter to maintain strong cash generation despite seasonal patterns.
• Full absorption of divestiture impacts (Fit and Eye) is complete within the current guidance.

Business Segments and Product Lines:

• Medical: Revenue grew nearly 10%, driven by Medical Devices and Software (both ~10% growth). Adjusted EBITDA margin held at 27.4%.
  • Launched sterile packaging for surgical solutions and updated Mimics/Light CMF software for greater clinical autonomy.
  • Expanded AI-powered Mimics Cardiac workflow for transcatheter aortic valve replacement.
  • Added dedicated workflows for thoracic and liver resection planning in the soft tissue segment.
  • Secured a partnership with the Superhuman Center (Ukraine) for cranio-maxillofacial reconstruction.
• Manufacturing: Reported revenue decline of 6% overall, but grew 1.5% organically; Series production grew >30% YoY.
  • New "Fitz Dynaprint" orthotic solution saw volumes triple in North America and double in the UK/Ireland post-launch.
  • Invested in metal additive manufacturing capacity for larger defense components and quality assurance R&D (EU Sun Visa project).
• Software: Revenue declined 4% to €9.9 million due to cautious spending and extended sales cycles; Recurring revenue stabilized at 84% of segment revenue.
  • Closed strategic CoEM NPI deals with leading aerospace customers.
  • Integrated CoEM Bricks with Identify3D for part-level digital security and traceability.

Market and Competitive Landscape:

• Medical segment is experiencing strong momentum in personalized surgical solutions across reconstructive, cardiac, and soft tissue oncology fields.
• Manufacturing growth is driven by high-value series production in aerospace, defense, and semiconductor sectors, though prototyping demand remains softer.
• Software segment faces a challenging industrial spending environment with extended sales cycles, particularly for series manufacturing solutions compared to prototyping.
• Management highlights a shift towards balanced revenue mix between series production and prototyping, with aerospace and defense acting as key growth pillars.

Risks and Challenges:

• Software revenue pressure stems from cautious customer capital expenditure and longer sales cycles for complex series manufacturing solutions.
• Inventory impairment charges of €0.2 million were recorded due to the earlier transfer of iWare assets.
• One-time operational costs impacted Q3 adjusted EBIT, though operational spending remains disciplined.
• Currency fluctuations had a limited negative impact on results.

Management Commentary and Tone:

• Tone was confident and strategic, emphasizing discipline in cost management while aggressively investing in R&D.
• Management highlighted the "balanced situation" between series production and prototyping in manufacturing as a sign of a maturing business model.
• Strong emphasis on the robustness of the balance sheet and cash generation capabilities to fund future growth.
• CEO Brigitte De Vette and CFO Koen Bergus (referred to as Kuhn/Kun in transcript) projected stability and confidence in hitting 2026 targets despite headwinds in software.

Analyst Questions and Answers:

• Troy Jensen (Cantor Fitzgerald) asked about the split between series production and prototyping; management declined to disclose exact splits but noted a "balanced situation."
• Jensen inquired about drivers behind manufacturing growth; management confirmed aerospace and defense are highlights, but growth is broad-based including semiconductor, automotive, and broader transportation (e.g., boats, heavy equipment).
• Jensen questioned the stagnation in software revenue despite increasing production applications; management explained that sales cycles for series manufacturing (CoEM) are significantly longer and more complex than prototyping, creating temporary drag on revenue recognition despite strategic alignment.

Other Key Points:

• Company repurchased €7.5 million of shares in the first three quarters of 2026 (1.5 million ADS, 2.4% of share base).
• Upcoming participation in Formnext (November) and Euronext Tech Leaders Forum (Paris, December) to showcase CoEM ecosystem and additive manufacturing standards.
• Total operating expenses rose 7.8% YoY, primarily due to targeted R&D growth and one-time costs.
• Gross debt increased to €71 million following a €15 million drawdown on a committed credit facility.