Earnings Call Transcript - MTLS Q4 2023

Operator, Operator

Good day and thank you for standing by. Welcome to Q4 2023 Materialise Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would like now to turn the conference over to our first speaker today, let me please introduce Harriet Fried of LHA. Please go ahead.

Harriet Fried, LHA

Thank you everyone 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 fourth quarter of 2023, as well as the year 2023 as a whole. To access the slides, if you have not done so already, 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 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 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 call. A reconciliation table is contained in the earnings release and also at the end of the presentation. And now, I’d like to turn the call over to Brigitte de Vet. Brigitte?

Brigitte de Vet, CEO

Good morning and good afternoon, and thank you everyone for joining us today. I’m very pleased to present our fourth-quarter and full-year 2023 results today. You can find the agenda for our call on slide three. Now, as you know, I took over the role of the CEO of Materialise on January 1st. So before we go into the official agenda, I will start sharing my first observations six weeks into this role. I will then summarize the highlights of our financial results for the fourth quarter and the full year 2023, and I will dive deeper into some key achievements we realized in the past year. Then I will pass the floor to Koen, who will go into more detail through our fourth-quarter numbers. Finally, I will come back and explain what we expect 2024 to bring. When we’ve completed our prepared remarks, we would be happy to respond to questions. So to start with, over the last couple of weeks, I’ve spent a lot of time listening and learning from customers, partners, industry stakeholders, and our employees at Materialise. First, let me reflect on what I heard about the market for additive manufacturing. As you know, 2023, and in particular Q4, has been a challenging year for many players in this market. Rising geopolitical instability combined with increased economic uncertainties and high interest rates made companies more hesitant to invest in new technologies, while R&D efforts were often also reduced, resulting in less prototyping demand. That being said, the fundamentals of the market are sound, driven by the demand for flexible, sustainable, and cost-effective production methods. Additive manufacturing is the go-to technology for prototyping and this market is very mature. At the same time, the shift from prototyping to end-use products is well underway, and additive manufacturing is being adopted in more and more sectors and applications. This shift is especially clear in end-use parts that are customized, such as personalized products for medical applications, and as the adoption of personalization increases, this market will continue to grow. We are also seeing an increased adoption of additive manufacturing for serial end-use parts, such as in the aerospace sector. Aerospace is a good example where leading companies have adopted 3D printing as a critical competence to maintain their competitive edge in the industry, enabling the production of parts that could not be traditionally manufactured. Additive manufacturing allows for the creation of more robust, reliable structures that are both cost and weight efficient, and it speeds up the design and manufacturing process. Moreover, it aligns with the commitment of leading players in this segment to sustainability by using less energy and resources, creating fewer emissions, and allowing for easier recycling and reuse of waste materials. As the technology matures, we will see more significant applications of additive manufacturing, and we believe this market is bound to continue to grow. After speaking with many customers, partners, and industry stakeholders, it is clear that Materialise is a leading player in this additive manufacturing industry. We are strategically well-positioned with our deep know-how, a thorough understanding of customer needs, and the unique combination of software, hardware, and mindware. We believe we are well-placed to drive and benefit from the market trends I just described. First, as additive manufacturing is increasingly used for serial end-use parts, I believe we are well-placed to benefit from our software suite, enabling efficient, high-quality additive manufacturing operations at scale, and with our differentiating printing services, enabling companies to make the shift to end-use parts. Second, as the adoption of personalized end-use products increases, we will see growth in our medical and wearable business. Now, looking specifically at our results for 2023, summarized on page four, we can see this potential reflected in our 2023 numbers. Despite the difficult market conditions that I referred to, we grew our revenue over the year by 10% with growth across all segments. Our total revenue increased 10.4% to €256.1 million. Our adjusted EBITDA increased 65% to €31.4 million from €19 million in 2022. Net results turned into a net profit of €6.7 million from a net loss of €2.2 million in 2022. Our cash position as of year-end was €127.6 million. Now, for the fourth quarter specifically, our revenue increased 4.1% to €65.3 million. Deferred revenue for maintenance and licenses fees grew to €44.9 million and adjusted EBITDA almost doubled to €8.5 million or 13% of revenue. Net loss was minus €0.5 million or minus €0.01 per share, including the impact from impairments on goodwill, tangible and intangible assets of minus €4.2 million. Koen will elaborate further on these results in his remarks later in this call. Moving to slide five, I would now like to share some specific highlights per segment, starting with our Software segment. Our software suite is an essential toolkit in the additive manufacturing industry, and with the additions and improvements made in 2023, we are helping to accelerate the shift to end-use products that I described. Our CO-AM platform plays a particularly critical role in this shift, as it enables companies to run additive manufacturing production at scale. Throughout 2023, we have continued to onboard partners and add functionality to CO-AM. In the fourth quarter alone, we announced important partnerships with HP and Ansys, and we added functionality that helps in monitoring production and ensures the quality of parts. Also, for Magics, we have released new functionality specifically targeted at metal production, which obviously plays a critical role in the production for end-use parts. Last but not least, we released the next generation of our Build Processors, massively increasing machine performance and ultimately reducing the cost of parts, which is critical in the adoption of additive manufacturing in the production of end-use parts. This continued investment in the Software segment strengthens our future position in the market for end-use parts even further, and while the topline growth in 2023 was soft due to the general economic uncertainty, we feel well-positioned for the moment when the market recovers. Continuing now with our Manufacturing segment, our additive manufacturing services are a well-established provider of prototyping services and we continue to perform well in this market despite a very challenging environment due to macroeconomic and geopolitical uncertainty. At the same time, our additive manufacturing services can help customers take first steps into additive manufacturing for end-use parts, and this market is growing in selected segments such as aerospace, medical equipment, and wearables. We are realizing that there’s a growth opportunity for us in this market, and we have established our certified manufacturing services, which offer customers documented and validated parts production, clearly differentiating us in the market. As one of the largest and most complete additive manufacturing facilities in Europe, we are well-versed in scaling production to the next level for our customers. With a comprehensive range of production-grade materials and technologies, a knowledgeable team, polymer and metal competence centers, and more, we can fully support customers that want to embrace additive manufacturing for end-use products. While the second half of 2023 was challenging, given the market circumstances, we are proud to have made progress in key market segments such as aerospace, where we announced several important partnerships. For example, we partnered with GKN Aerospace, a leading multi-technology Tier 1 aerospace supplier, and later in the year, we initiated a three-party partnership with Proponent, a large independent aerospace distributor, and Stirling Dynamics, a certified aerospace design organization. In these partnerships, we will leverage combined expertise to enhance the adoption of 3D printing for finer parts in the aerospace industry. Additionally, we continue to invest in our motion and eyewear business, positioning us for revenue growth in the future in the wearable segment. Lastly, I want to talk about some highlights from our Medical segment. As Koen will show in the numbers, we continue to see very healthy growth in our Medical segment. We have now surpassed the threshold of €100 million in revenue, and while we felt the impact of the difficult economic climate in software sales to medical device companies, as they reduced their R&D programs and postponed investment in additional software licenses, we continued to grow the number of cases delivered to patients around the world and managed to increase revenue by almost 20% for the full year. Furthermore, we made progress in some of our strategic programs, positioning us very well for future growth. In particular, I would like to highlight the opening of our metal manufacturing plant in the U.S. This is a significant milestone, as it will enable us to further reduce our lead times to deliver cases, opening up new markets, such as for personalized products for trauma patients. These patients cannot afford to wait for weeks to have the product delivered. I would also like to highlight the limited launch of Mimics Flow, a case management solution now offered to hospitals to streamline and organize their point-of-care 3D printing labs. As the adoption of 3D printing in hospitals at the point-of-care increases, customers need a tool to handle this increased amount of cases efficiently, collaborate between clinicians, 3D lab leaders, and engineers, and enforce quality management within their 3D workflows. This is what Mimics Flow does, thereby enabling and accelerating the increased adoption of personalization. It is a limited launch, as we will take the year 2024 to learn more about the potential of Mimics Flow and expand the launch to other segments in 2025. In summary, our Medical segment illustrates the potential of a smart combination of hardware and software with a thorough understanding of customer needs. Now over to Koen for more details on our financial results.

Koen Berges, CFO

Thank you, Brigitte. I’ll begin with a brief review of our consolidated revenue on slide six. As a reminder, please note that unless otherwise stated, I will discuss fourth-quarter and full year 2023 results in comparison to the same periods of 2022. In the last quarter of the year, we increased our revenue by 4.1% to €65.3 million. Less favorable market conditions continued and mainly impacted our Manufacturing segment and, to a lesser extent, also our Software segment, resulting in a revenue decrease of 2% and 4%, respectively. Materialise Medical, on the other hand, continued to grow by double digits, increasing its revenue by 15%. Materialise Software accounted for 17% of our total revenue, Materialise Manufacturing for 40%, and Materialise Medical for 43%. Deferred revenues from Software maintenance and license fees grew again in the last quarter of 2023 by €4.8 million, bringing the total amount carried on our balance sheet to €44.9 million at the end of the year. For the full year, our revenue grew to €256.1 million, representing an increase of 10.4% compared to 2022. We saw growth in all three of our business segments during the year, with the largest growth coming from Medical, which posted a 20% year-on-year growth rate. Our Manufacturing segment grew its revenue by almost 7%, while Software grew by 2%. Moving now on to slide seven, you will see our consolidated adjusted EBITDA numbers for the fourth quarter, as well as for the full year. Consolidated adjusted EBITDA for the fourth quarter amounted to €8.5 million, doubling from the €4.3 million in 2022. Our adjusted EBITDA margin reached 13%, compared to 6.8% the prior year. Full-year adjusted EBITDA ended at €31.4 million, compared to €19 million in 2022, representing an increase of 65%. Our adjusted EBITDA margin for the full year reached 12.3%, compared to 8.2% last year. Slide eight summarizes the results of our Materialise Software segments. In the fourth quarter, Software revenue decreased as mentioned by almost 4% to €11.3 million, but included more revenue deferral. Our recurring revenue from Software maintenance and license sales, including CO-AM, increased again by 5%. On the other hand, non-recurring revenue further decreased by 16%, driven by the transition from perpetual license sales to cloud and subscription-based agreements, but also by lower demand from OEM machine sales. Adjusted EBITDA increased to €1.3 million, representing an adjusted EBITDA margin of 11.2%. On a full-year basis, our Software segment increased its revenue by 2% to €44.4 million, which translated into a significantly higher adjusted EBITDA of €7.5 million, representing an adjusted EBITDA margin of 16.8%. Moving now on to slide nine, you will notice that the quarter’s total revenue in our Materialise Medical segments increased by 15%. This solid growth rate was realized both by medical software and by revenue from medical device sales, which grew respectively by 13% and 16%. Adjusted EBITDA grew to €9.4 million, compared to €6.4 million last year. The EBITDA margin increased to 33.6% as a result of scaling effects. On a full-year basis, our Medical segment surpassed the €100 million threshold, realizing now €101.4 million of revenue, which translated into an adjusted EBITDA of €26.5 million, representing an adjusted EBITDA margin of 26.2%. The share of medical software revenue remains stable around 31% of the total segment’s revenues, but due to the software sales, as explained by Brigitte earlier, less software revenue was deferred to future periods compared to the prior year. Now let’s turn to slide 10 for an overview of the performance of our Materialise Manufacturing segments. In the fourth quarter, Manufacturing continued to operate in a difficult market environment with lower prototyping demands. As a result, revenue decreased by 2% to €26.2 million. Accordingly, adjusted EBITDA dropped to €0.6 million at an adjusted EBITDA margin of 2.1%, compared to a 5.6% margin last year. On a full-year basis, Manufacturing still grew its revenue by 7% to €110 million, realizing €7.5 million of adjusted EBITDA, which represents an EBITDA margin of 6.8%, slightly down from 8% in the prior year. Slide 11 provides the highlights of our income statement for the fourth quarter and the full year. For the fourth quarter of 2023, our gross profit margin was 57.5%, up from 56.9% last year. For the full year, the margin was 56.7%, again up from 55.5% over 2022. Continued cost focus helped us to reduce our operating expenses also in the fourth quarter by €2.5 million or 6.5% compared to last year’s quarter. For the full year, operating expenses are in the aggregate 1.4% lower than the prior year. Our net operating income was negative in the quarter by €3.3 million, compared to a positive €0.6 million last year. This quarter included nevertheless a non-recurring impact of €4.2 million for impairments related to goodwill, tangible and intangible assets of our engine plant in Brazil and of Materialise Motion. As a result of these elements, the group’s operating result was negative in the quarter by €1.1 million, compared to a loss of €1.5 million in last year’s period. For the full year, the operating result was positive at €5.6 million, compared to a loss of €2.9 million last year. In Q4, net financial expenses amounted to €0.2 million, including a currency exchange loss of €1 million, mainly reflecting the changed U.S. dollar-euro position, interest income of €1.3 million from our cash reserves, and interest expense on our financial debt of around €0.4 million. Income tax in the quarter amounted to a positive effect of €0.8 million, compared to €0.4 million last year. The net loss for the fourth quarter was €0.5 million, representing a loss of €0.01 per share compared to a net loss of €4.6 million or a loss of €0.08 per share for the 2022 periods. For the full year, we realized a net profit of €6.7 million, resulting in a profit of €0.11 per share, compared to a net loss of €2.2 million, or a loss of €0.04 per share last year. Now please turn to slide 12 for a recap of balance sheet and cash flow highlights. Also in the fourth quarter of 2023, our balance sheet remained strong. Our cash reserve amounted to around €128 million at the end of the year, compared to €141 million at the end of 2022. Loan repayments of €17 million reduced our gross debt to €64 million. Our resulting net cash position at the end of the year was €63 million, up by €3 million compared to a year earlier. Cash flow from operating activities for the full year amounted to €20.2 million, compared to €22.3 million last year. A higher contribution from P&L components was offset by growing working capital requirements. Capital expenditure for the quarter amounted to €2.5 million and to €11.8 million for the full year. None of these were externally financed. And with that, I’d like to hand over the call to Brigitte again.

Brigitte de Vet, CEO

Thank you, Koen. Now let’s turn to page 13 to take a look at the outlook for 2024. In 2024, we expect the uncertain macroeconomic and geopolitical environment to continue, at least for a large part of the year. In this environment, it remains important that we stay focused on our key priorities. First of all, it is critical that we maintain the momentum in our Medical segment through continued product innovation and leveraging our manufacturing facility in the U.S. to deliver cases with shorter lead times and address those new market segments that I talked about earlier. Second, in our Software segment, we need to remain focused on capturing the growth opportunities, in particular in the market for end-use parts. Last but not least, in our Manufacturing business, we need to capture the growth in selected market segments in order to drive revenue in 2024. And as part of this plan, we will open the new manufacturing plant for ACTech towards the end of this year to capture the opportunities we see in casting. I’ll conclude my remarks on slide 14 with a discussion of our full-year 2024 guidance. We expect revenues in 2024 to be in the range of €265 million to €275 million, representing healthy growth despite the continued uncertainty of the macroeconomic and geopolitical environment. With our guidance reflecting this uncertainty, we believe Materialise is ideally positioned in the market for additive manufacturing software and services associated with personalized products. Thanks to our strong product portfolio, continued investments in innovation, and our strong financial foundation. We expect growth in all three of our segments. The growth of our Materialise Software revenue will be further temporarily impacted by the transition towards a cloud-based subscription business model that we are continuing to implement. As you will have noticed going forward, we will be providing guidance on adjusted EBIT. We believe our consolidated adjusted EBIT is a more useful guidance measure as it includes the periodic cost of capitalized tangible and intangible assets used in generating revenue in our business and will allow for a better assessment of our expected performance and profitability. However, we will continue to report the segment adjusted EBITDA of our three business segments. The expected revenue growth will result in an adjusted EBIT, which we currently anticipate to total between €11 million and €14 million for 2024. This guidance reflects our stride towards profitable growth in what we believe will remain an uncertain macroeconomic and geopolitical environment. This concludes our prepared remarks. Operator, we’re now ready to open the call to questions.

Operator, Operator

Thank you. The first questions come from Jacob Stephan with Lake Street Capital Markets. Your line is now open.

Jacob Stephan, Analyst

Hey, guys. Thanks for taking my question. Congrats on the solid revenue growth here year-over-year. You talked a little bit about your Michigan facility here. I’m just curious to hear, how has that facility ramped over the last few months and how do you think about your capacity utilization there currently?

Brigitte de Vet, CEO

Yeah. So, I can take that question, Jacob. It’s good to talk to you again. Yeah. So we’re very pleased actually with the ramp-up of the Michigan facility. Opening up a new metal facility is never easy. But we are very proud that, first of all, in the preparation of the opening, we stuck to our timelines all the way through, opening the facility in August, and we also managed to ship first cases in August according to our plan. The ramp-up is going very well, and we are therefore in 2024 already considering additional investments in that facility. So we are very pleased with the results there. As I mentioned earlier, the big advantage is that with these shorter lead times, we’re able to open up new patient segments. So, new segments of the market, and that is driving our growth, and we will continue to do so in 2024.

Jacob Stephan, Analyst

Okay. Awesome. That’s great to hear. Maybe just a touch deeper on the 2024 guidance. I’m curious how you’re thinking about kind of growth in the Manufacturing segment. You have referenced kind of prototyping weakness over the last couple of quarters here. But are you expecting that weakness to continue? It sounds like you’re signing some nice partnerships in the aerospace market, which we’ve heard has been strong. But just curious how you’re thinking about kind of the prototyping market and where that stands entering 2024.

Brigitte de Vet, CEO

Yeah. So I always like to differentiate between the prototyping and the end-use parts market because the dynamics are indeed different. Now if I look at our Manufacturing segment as a whole and the market that we’re serving there, the prototyping market has been under pressure and it’s mainly related to the macroeconomic difficulties and some other market dynamics. I would expect those to stay difficult throughout the year 2024, at least for a good part of the year. The dynamics in the end-use parts are slightly different; the geopolitical environment and the macroeconomic uncertainties impact as well. But we need to take a more granular look at where we can find pockets of investment that do exist in that market. I mentioned the aerospace segment, which has been a successful one for us and many other players over the last couple of years. There are others that we will be focusing on. So, it’s really for us in our Manufacturing segment, despite the more troubled market environments that many of us will still be in, I believe in the growth by focusing on those selected segments that we can benefit from. Prototyping is such, I mean, your question specifically goes to that, the market will stay difficult. Now, admittedly, I still am very convinced that with our differentiating position that in 2024, we can continue to grow on that side as well.

Jacob Stephan, Analyst

Okay. And just one last one for me here on Software. You could talk a little bit about your strategy, maybe how has your distribution strategy changed? Are you sticking with a direct sort of sales force, are you using a reseller model here? Just curious how you’ve adapted over the last six months to 12 months here?

Brigitte de Vet, CEO

And that is on the Software segment specifically?

Jacob Stephan, Analyst

Yeah.

Brigitte de Vet, CEO

Yeah. So the Software segment specifically, we’ve always used a multitude of channels. So we have a direct sales model combined with a channel model, and obviously, a close partnership with our OEM partners as well will help us put the products in the market. And we have continuously been doing that over the last couple of years, and I expect us to follow that same mix of strategies going forward.

Jacob Stephan, Analyst

Okay. Great. Thanks for all the color. Best of luck going forward here.

Brigitte de Vet, CEO

Thank you, Jacob.

Operator, Operator

Please stand by for the next question. The next question comes from Alexander Craeymeersch with Kepler Cheuvreux. Your line is open.

Alexander Craeymeersch, Analyst

Hi, this is Alexander. Congratulations to Koen, Brigitte, and the entire team on achieving a good profit this year. I have two questions. First, regarding the capacity expansion in the U.S. and ACTech, do you believe that the additional capacity expected to come online in the second half of this year will exert extra pressure on the margins? Secondly, how much capacity should we anticipate for these plans in both the U.S. and ACTech in 2024? Additionally, how should we view free cash flow generation this year, particularly concerning working capital developments? Thank you.

Brigitte de Vet, CEO

Okay. So that’s a lot of questions. I’ll take the first one talking about the ACTech investments specifically. So, Alexander, you’re obviously right on the short-term, that any additional investment always adds short-term pressure on the margin. At the same time, I think you all know us as a player that invests in the long-term. So we believe in the potential of that business. We actually see that we have missed opportunities because of lack of capacity in the past, and that’s what we want to rectify with that additional investment. So beyond the startup phase, the pressure on the margins should be equalized or neutralized. So that was for the first question.

Koen Berges, CFO

Maybe I can pick up on your second part of the question, Alexander, and I’m going to split it into two parts: the free cash flow impacts of the facility expansions and then coming back to the working capital evolution. As to answering the question regarding free cash flow evolution, indeed, in the year 2024, we will see a heavy investment phase, especially with the ACTech plants that we will bring into production. There is already a part of the investments that we have taken in 2023 and even before. But indeed, a fair chunk of the amount will come in the first half of 2024 and that will impact our overall free cash flow generation this year, which, based on the current numbers, will be negative temporarily, just because we do this huge investment, and then as of the second half of the year, we will see the cash flow coming in gradually from the startup of the facility. Now, as to the metals U.S. plant, that investment was already taken in the past. There is, as Brigitte indicated, we’re contemplating further investments in the plant, but that will be to a minor amount compared to the initial investment and certainly compared to ACTech. Second, concerning working capital evolution, that is certainly something that we will be monitoring more closely going forward. As we are growing, we see an increased need for working capital requirements. But we do want to focus further on this to maintain a healthy operating cash flow and support our free cash flow generation in the months and years ahead of us. I hope that answers your question.

Alexander Craeymeersch, Analyst

Yeah. Okay. Thank you very much.

Brigitte de Vet, CEO

Thanks, Alexander.

Operator, Operator

Please stand by for the next question. The next question comes from Troy Jensen with Cantor Fitzgerald. Your line is open.

Troy Jensen, Analyst

Thank you for the opportunity to ask a question and congratulations on the impressive results. Brigitte, since you’ve been with the company for three months, I’m curious about the different areas of the business you’ve assessed. What changes or improvements would you consider implementing compared to Fried and Peter’s approach? Please choose your words carefully as I know they are listening.

Brigitte de Vet, CEO

I know. Thank you, Troy, and thanks for joining the call today. So, well, first of all, I want to stress that it’s been six weeks in the new role. So it’s still very early days. I knew you were going to ask the question, which is why I also added some remarks on how I look at things. I also clearly highlighted the priorities for us in 2024 after my first look at how things are going. It’s clear that the three priorities are maintaining Medical growth, capturing opportunities in Software and Manufacturing, and perhaps the biggest change being a more focused approach ensuring we realize growth potential despite the current environment. So I hope that answers your question.

Troy Jensen, Analyst

Yeah. No. Very good. So let me get just to the Medical business too. So if you look at total guidance, you have 4% kind of at the midpoint, but you said all three segments are going to grow. I mean, Medical has just been killing it, right? So you just had record revenues, you had record EBITDA margins. Yeah, I’d be curious to know the applications that are driving it currently, and then, if you’ve been growing 15%, 18%, 20% of the last three years in this Medical business, it seems like you’re forecasting it to slow down. So is that just conservative guidance or some thoughts, please?

Brigitte de Vet, CEO

Yeah. So it’s really two questions; if I understand you correctly. One is the mix of markets in which we grow, and the second is more specifically towards our guidance going forward. Let me answer the second part of your question first, because I’ll help us on the first part of your question. I highlighted in our current results or in the 2023 results that we saw Software sales to medical device companies, which is an important segment for us and that will weigh on our revenues in 2024. So that plays into our guidance for 2024, specifically for the Medical segment. The same obviously accounts for our Software segment, but that has an impact on the Medical segment. When it comes to segments where we see growth, the nice thing for us is that it’s a healthy mix of different segments, which balances the risk. The orthopedic segment is still very important for us. The CMS segment plays an important role too. Despite the softness in our medical sales, as Koen highlighted in his remarks, we’re still seeing growth; less than previous years but still growth towards the research and engineering markets in a broader way. So it’s a healthy mix.

Troy Jensen, Analyst

Perfect. All right. Thank you for the explanation and good luck going forward.

Brigitte de Vet, CEO

Thank you.

Operator, Operator

I show no further questions at this time. I would now like to turn the call back to Brigitte for closing remarks.

Brigitte de Vet, CEO

Thank you and thank you all for joining us today. As you’ve heard, Materialise has many initiatives underway to leverage and accelerate the growing adoption of additive manufacturing. We all look forward to continuing our dialogue with you throughout the upcoming investor conferences or our one-on-one virtual meetings or calls. If you do have any other questions, please feel free to reach out to us. Thank you all and goodbye for now.

Operator, Operator

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