Good day, and thank you for standing by. Welcome to the Second Quarter 2025 Materialise NV Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Harriet Fried of Alliance Advisors. Please go ahead.

Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Brigitte de Vet, Chief Executive Officer; and Koen Berges, 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 2025. 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 press 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 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 in 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 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 conference call. A reconciliation table is contained in the earnings release and at the end of the slide presentation. With that, I'd like to turn the call over to Brigitte de Vet. Brigitte, go ahead, please.

Good morning, and good afternoon to all of you. Thank you for joining us today. You can find the agenda for our call on Slide 3. First, I will summarize the business highlights for the second quarter of 2025. Then I will pass the floor to Koen, who will take you through the second quarter financials. Finally, I will come back and explain what we expect the remaining months of 2025 to bring. When we've completed our prepared remarks, we will be happy to respond to questions. Moving to Slide 4 for the highlights of the second quarter 2025. We celebrated our 35th anniversary in the second quarter of this year. 35 years ago, our founders, Wilfried Vancraen and Hilde Ingelaere started their journey to build a better and healthier world, thanks to the power of additive manufacturing. I'd like to take this opportunity to thank all of our employees for the incredible energy and hardship they put into growing the adoption of additive manufacturing every single day. In the 35 years, we have grown into a leading profitable cash flow positive company in this sector, and we keep pushing the boundaries. Our strategic position remains excellent as we benefit from the ongoing R&D investments in strategic areas, driving long-term value creation in our growth segments. I am very proud that this quarter again, we made significant progress in our medical business. As you know, in our medical business, our strategy is to grow in existing markets and in new markets in order to reach more patients with our personalized solutions. This is what we call our mass personalization strategy. Now one of the new markets that we are developing is the respiratory market. Two years ago, we launched a dedicated 3D surgical planning solution with a focus on addressing…

Thank you, Brigitte. Good morning or good afternoon to all of you on this call. I'll begin with a brief overview of our key financial results, as shown on Slide 5. While our Medical segment once again achieved high double-digit growth this quarter, total consolidated revenue decreased year-over-year by 5.8% to EUR 64.8 million. Our gross profit margin remained strong and increased to 58.3% in the second quarter of this year, reflecting changes in our revenue mix, but also as a result of our ability to optimize direct production costs despite inflationary pressure. Adjusted EBIT for the second quarter of 2025 amounted to EUR 3.1 million, showing a strong increase compared to prior quarters despite the lower revenue that was generated, reflecting once more the positive impact of targeted cost control. The net result for the quarter amounted to a profit of EUR 0.2 million despite being impacted by large unfavorable effects from exchange rate fluctuations. During the first half of 2025, we generated a positive free cash flow, which led to a net cash position of EUR 63 million at the end of Q2, an increase of EUR 2 million versus the beginning of the year. In the following slides, I will elaborate further on these results. As a reminder, please note that unless stated otherwise, all comparisons are against our results for the second quarter of 2024. I would also like to draw your attention to a modification we have made in the adjustments definition that we apply to our adjusted EBIT and adjusted EBITDA. As of this quarter, we will also be adjusting these non-IFRS metrics for costs related to nonrecurring corporate initiatives, restructurings and reorganizations. We believe this modification will allow for a more correct comparison across periods, while it brings us in line with general…

Thank you, Koen. Let's turn to Page 13. I'll conclude my remarks with a discussion of our full year 2025 guidance. As we move through 2025, we see a risk that geopolitical volatility and macroeconomic uncertainty intensified and also further impact the business climate for the remainder of this year. Unfavorable foreign exchange fluctuations might also add to the pressure on our revenue line and reported net results. We, therefore, believe it is prudent to slightly reduce our revenue guidance for the full year from the earlier communicated range of EUR 270 million to EUR 285 million to a range of EUR 265 million to EUR 280 million. We remain convinced, though, that the fundamentals of our business are solid and resilient and believe that further structural cost efficiencies will allow us to safeguard operational profitability. So despite the slightly lower revenue outlook, we, therefore, are confirming, reconfirming our adjusted EBIT guidance range of EUR 6 million to EUR 10 million for fiscal year 2025, in line with our earlier communications in February and April of this year. This concludes our prepared remarks. Operator, we're now ready to open the call to questions.

[Operator Instructions] Our first question comes from the line of Troy Jensen from Cantor Fitzgerald.

So maybe just a quick question on -- well, congrats on the opportunity here with J&J on the respiratory side. I wondered maybe could you quantify that opportunity? Is that something that could be as big as this maxillo craniofacial opportunity you've had with them? Or just if you could help size it a little bit, that would be helpful.

Yes. So that's obviously a very good question. I think -- so I want to make a couple of comments on this. So first, I think we need to keep in mind that this is a very new market. So the craniomaxillofacial and the orthopedic markets are existing mature markets, where the respiratory market is a new market. Now when we say new markets, it's really markets that we still are building. So it's the very start of a long journey. So to reach the size of some of our existing markets, we're taking years. So that gives you a bit of a feeling for when to expect some of that impact. The second comment I want to make is, certainly, revenue impact is not to be expected this year. At the very earliest, it's going to be next year. Third comment is that this is a pilot collaboration. So it's a very first step in the direction in this respiratory market. So while this is a really important milestone that will open up the respiratory market and in this collaboration, I'm really convinced that this is a game changer. It is a new market and opening up new markets and developing markets as a leader in those markets, it's a long journey.

Maybe a couple of questions for Koen. First of all, EUR 20 million in debt you guys took out during the quarter. And did I hear you say there's -- you're taking out more? I'm sorry, I tuned a little bit during the end of the call, but is that correct?

No, that is correct, Troy. It is part of an earlier agreement we made a couple of years ago, where we had -- where we signed into a new additional facility of EUR 50 million, 5-0, and which was -- which foresaw a delayed drawing in 3 tranches, 2 tranches in the course of 2025 and the last tranche in the middle of 2026. So we are honoring those commitments on engagements, and we are now -- we have made the first drawing of EUR 20 million in the second quarter.

Interesting. So I guess my first thought was that maybe you guys had a change of thoughts on acquisitions, but this is -- I mean, what would you do all of this additional cash on the balance sheet because, obviously cash flow positive and EBITDA positive and you kind of don't need it, but there are a lot of assets out there in the market right now. So I don't know.

Yes, that cash was indeed -- I think that was also the intention when the agreement with the bank was made and it's still the intention to put that cash to work, of course, not to put it on our bank account. So that is -- it's a bullet loan. So it is targeted at being used for CapEx or M&A investments in the future.

Okay. All right. Good luck. And then how about -- just quickly on the gross margins. I mean, they were obviously great this quarter despite the lower revenues. I'm assuming it's mainly mix or just given less Manufacturing sales, but was there other stuff behind that driving it better?

No, it's a combination of mix effects, indeed, like you said, more Medical, less Manufacturing. But it's also coming from the fact that we are able to reduce the production costs or the direct costs, both in our Medical segment and in our Manufacturing segment where they play a role. That's correct.

One moment for our next question. Our next question comes from the line of Alexander Craeymeersch from Kepler Cheuvreux.

Alexander Craeymeersch from Kepler Cheuvreux here. So maybe to pick up on that first question of Troy. So you have these new features and new pilots coming up. But the next it is, of course, you have still the markets that you're already active in and already very much growing in. I was just wondering if we could maybe get like a glimpse into the next years. Can we continue to expect like double-digit growth in this segment? That would be the first question. Second question would be on the revised top line guidance. It's down just 2%, but I'm just wondering what parameter you used? Is this just like the FX rate on the U.S. dollar that is declining? Or what was exactly used to -- that it prompted just a 2% decline? And then maybe if you could just talk a bit about the volume price dynamics in the Manufacturing segment.

Yes. So let me get started on your first question. So on the Medical segment, so the medical market as such, so structurally, again, I don't see a reason to see a change in the growth that we see in the -- currently in the medical market. So in the mix, obviously, we grow in the existing lines, we grow in the -- and then concurrently, we build the new market. And so the mix between existing and new as we go over the next couple of years, the mix might change, but in total, there's a lot of promise in the medical market, a lot of growth today. And there's -- in the future, continued promise in the medical market. I see that growth continue on an ongoing basis over the next couple of years, again, with potentially a different mix in the different markets that we are serving. That is why we are investing in the new markets to keep the growth going over the next couple of years. But overall, the medical business will keep on growing. So that was your first question. I forgot the second and the third. In the meantime, I should be writing down.

So the question on the guidance is just 2%, what was like exactly the reason why you said, okay, 2% cut instead of like, let's say, a 5% cut? Like what was the parameter you used for?

Yes. So the way we approach our guidance or the reforecast every quarter is obviously we -- so it's not a top down. Koen and I look at each other, and we look out of the window and think what percentage can we apply. It's a detailed exercise that we have with the different units, and we go through different business lines to estimate in the different business lines, how we look at what happens throughout the rest of the quarter. And every business line has a different forecast. Obviously, we look at medical difference in a different way than some of the Industrial segments. But within the Industrial segment, our focus segments, that are today growing very well. We think they will continue to grow, whereas others, I mean, automotive is one of them. We believe that they will continue to have a difficult time throughout the rest of the year. The U.S. market will continue to have a more difficult time than other geographies. So it's that whole mix that we go through, and it's that balance that has led us to this new estimation of our top line. So it's not one parameter, but it's a more detailed exercise that we have gone through. One of the factors that helps us, obviously, in those business lines where we have an order book to base our judgment on that is obviously a parameter that is helpful. Now you know that for not all of our business -- for some of our business lines that are more transactional, we don't have an order book to base our estimations on. So the more we have an order book that we can base ourselves on, the more visibility we have on the next quarter, but that's not the case for all of our business lines. So all of that taken into account led us to this new guidance that we have now issued.

And maybe if I then just can ask a small follow-up. Like which segment was then, let's say, underperforming versus the initial guidance or expectation?

So I think what you see in our current results, those that we have discussed today, it's pretty much for the second half of the year, I think the trend is pretty much what we see continue. I don't think I see -- so in the forecast that we've done for the next 6 months, there's no dramatic change in the trends when we look at the different business lines.

Yes. And then the last one was a bit on the volume price dynamics in Manufacturing.

The foreign price dynamics. Can you...

The volume price dynamics.

To reply to your question, Alexander, from a more financial point of view, I think as in any manufacturing environment, the challenge we also have in our Manufacturing segment is that part of the costs are, I would say, semi-fixed. So if the top line becomes under pressure and the semi-fixed cost is then typically related to the labor costs that the direct labor costs in order to complete the manufacturing processes. And that's, of course, always the challenge if the volume is under pressure to protect the margin, and that is difficult to a certain extent. And that is what we have been working hard on, I think, also in the second quarter to make that balance or to reduce the cost base in line with the top line that continues to be under pressure.

Yes. That's clear. And maybe if I can also ask a small follow-up, which would be -- so of the decline that we saw in the second half, like how much -- is that then mostly related to volumes? Or have you also seeing a decline in basically the cost base considering that effect?

In Manufacturing, you mean?

Yes.

You see a significant top line drop. And so that is a pure volume effect, certainly if you compare to last year. But I think if you also make the comparison to last quarter, you see that there is top line, which is volume pressure. We try to offset that, and you see that certainly if you compare the gross margin to the prior quarters that we try to compensate that to a certain extent in making our costs as variable as possible the direct costs, but that is only possible to a certain extent. So top line pressure adds to the gross margin result.

Thank you. At this time, I would now like to turn the conference back over to Brigitte de Vet for closing remarks.

Thanks again for joining us today. We, of course, look forward to continuing our dialogue with you through investor conference or one-on-ones or virtual meetings or calls. And please reach out if you have any questions. Thank you for now, and goodbye to you all.

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