Materialise NV (MTLS) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Materialise fourth-quarter 2015 financial results conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Harriet Fried of LHA. Ma'am, you may begin.

Thank you for joining us today for Materialise's 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 fourth quarter and full year. To access the slides, if you have 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 this morning can also be found on that page.

Before we get started, I would 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 20-F for fiscal year ended December 31, 2014, filed with the SEC on April 30, 2015.

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.

Now I would like to turn the call over to Peter Leys. Peter, go ahead, please.

Thank you, Harriet, and thank you, everyone, for joining us today. The agenda for our call is, as always, on slide 3.

I will begin with a brief recap of our results for the quarter, after which Fried will give you some insights on our new product positioning and brand architecture, which we launched just yesterday. After that Johan will go through our numbers in detail. And then I will come back on to take you through our operational performance for 2015 and some of our strategic imperatives for the current year. After we have completed our prepared remarks, we will be happy to answer your questions.

Before I begin, let me point out that, as you probably saw in this morning's earnings announcement, we renamed our business segments this quarter as part of our rebranding exercise that Fried will address shortly. Our three segments are now called Materialise Software, Materialise Medical, and Materialise Manufacturing. Except for the name, nothing changed from a financial reporting perspective.

Turning to slide 4 you will see the highlights of our fourth-quarter results. They show yet another quarter of successful execution on our strategy of offering a unique combination of high-end software and printing services.

We achieved top-line growth of 19% in the fourth quarter of 2015. Our total revenue for 2015 was EUR102 million, as compared to EUR81.4 million in 2014. This represents a top-line growth of 25.4% or EUR20.6 million. This does not take into account deferred revenue from annual software sales and maintenance contracts, which rose by another EUR3.6 million from EUR9.5 million last year to EUR13.1 million in 2015.

Importantly, in this year's fourth quarter, each of our three segments contributed positively, both to our top and to our bottom line. As you will recall, since the fourth quarter of 2014 we of been investing heavily in expanding our global salesforce and in growing our product portfolio, which inevitably impacted our profitability in the short term.

While we intend to continue to invest in sales and marketing and R&D, we believe we now have the potential to gradually start growing our adjusted EBITDA going forward. Our fourth-quarter performance definitely underscores this potential with an adjusted EBITDA of EUR3 million, which is more than 3 times higher than the EUR0.9 million of adjusted EBITDA that we realized in the fourth quarter of last year.

So to sum up, we are pleased with the quarter and very confident about our future growth prospects. I will now turn the call over to Fried, who will give you a brief description of some recent developments in our product positioning and brand.

Good morning, everybody. We are coming out of our 25th anniversary year, closing another five years of outstanding growth in the history of Materialise. While we are very proud of the achievements of the entire team here at Materialise, we never stand still and our focus is already fully on the next five-year period.

Yesterday we launched our new corporate branding at AAOS, the American Academy of Orthopedic Surgeons. The new branding is accompanied by an updated graphical styling, as you can see on our slides, but the key of the exercise is to provide a clearer and more comprehensive positioning of our technology and products. The goal of our new product architecture is to be better able to tailor our products to different customer groups, while at the same time we guarantee that all our solutions remain part of one cohesive technology platform, a platform that constitutes the backbone for 3D printing applications.

As 3D printing applications are maturing, they have the potential to reach more and more diversified customer groups. As a result, customization and ease-of-use will become key factors to reach the growing market of users of those 3D printing applications. A key advantage of our new product architecture is that we can provide customers with solutions that are, on one hand, more tailored to their specific needs and much more user-friendly, but that on the other hand, do not make any concessions on quality and reliability where Materialise is known for.

In our medical segment for instance, we now offer the Materialise Mimics Care Suite in addition to the Materialise Mimics Innovation Suite. The Care Suite is a platform that is dedicated to in-hospital use. It includes the new Mimics Imprint software that can be used by radiologists to prepare 3D-printed models, as well as pre-operative planning services, surgical guides, or personalized implants depending on the personal need of the hospital surgeons.

This offering is completely tailored to the workflows of the different medical specialties such as radiology, cardiology, orthopedics within the hospital setting. Simultaneously, researchers and product developers, who work in a totally different way, will be able to continue to rely on the Materialise Mimics Innovation Suite, which addresses all aspects of medical image-based device development. The Innovation Suite gives researchers and product designers access to the most comprehensive toolbox in the industry, enabling them to study and develop implants based on all variants of medical images that can be used in combination with a variety of tools such as CAT systems, EVA systems, and other simulation tools.

While the Care Suite and the Innovation Suite address different user groups and have different functionalities and user interfaces, they both form parts of and rely on the Materialise Mimics backbone technology. With our new branding and product architecture, we want to send a clear message to our customers that while our various product offerings will continue to be based on Materialise key technology, they will simultaneously be equipped with user interfaces and functionalities that are specifically tailored to their needs and easy to use.

We are confident that in Materialise Medical, the new branding which replaces many different stylings and independent medical products from Materialise itself but also from our daughter companies Mobelife, OBL, and OrthoView, this will now become a much better positioned product line within the 3D printing ecosystem for medical applications. And we believe that this will not only bring value to Materialise, but also to other companies in the medical field.

We have devised a similar new product architecture for our Materialise Software and Materialise Manufacturing segments and this will be launched at relevant industry events in the near future.

With that introduction, I will turn the call to Johan to give you more details on our financial results.

Thank you, Fried. I will start with a brief review of our consolidated revenue on slide 6. In each of the seven slides I cover, I will focus our results for the quarter, although certain data for the year are also shown for reference. For clarity, please note that when we refer to sales, this means revenues plus deferred revenues.

Following our strong first three quarters, we again generated significant revenue increases in each of our segments for the fourth quarter, in the process increasing revenue by 19% quarter over quarter. Materialise Manufacturing accounted for somewhat over 41% of our revenue in the fourth quarter, Materialise Medical 34%, and Materialise Software 25%. Across all segments the revenue from software sales and parts together contributed 75% of total revenue.

Breaking down our top-line performance by type of business, revenue from software sales, including both 3D printing and medical software, accounted for 37% of our total Q4 revenue compared to 35% in the same quarter of last year. Revenue from our end parts manufacturing, including medical end parts, represented approximately 38% of the fourth-quarter revenue. The remaining 25% was generated through the production of prototypes.

Moving to slide 7, consolidated adjusted EBITDA more than tripled to EUR2.979 million from EUR927,000 over the fourth quarter of 2014 as a result of the combination of continued strong revenue growth and a moderate increase in operational expenses. Our adjusted EBITDA margin increased from 3.9% in last year's fourth quarter to 10.6% in this year's period.

Slide 8 summarizes the results of our medical software -- of Materialise Software segment. There, following in the footsteps of the year's first three quarters, revenue grew 35%, fueled by our expanded product portfolio, strong growth in OEM revenue, and new license sales. We delivered a year-over-year increase in sales from new software licenses of 30% on the strength of solid execution across all regions.

Sales generated from and through printer OEMs grew 72% and the fast-paced sales increase reflects the continued cultivation of opportunities worldwide. In this segment, EBITDA grew 63%. EBITDA margin increased from 30.7% to 37.1% in the fourth quarter of 2015.

Turning to slide 9, you will see that total revenue in our Materialise Medical segment grew 9% for the quarter. Medical Software sales grew 17% over last year's fourth quarter, representing 35% of the total medical segment. Direct sales of complex surgery devices continued to grow, increasing 10.6% over last year's fourth quarter and sales from our medical collaboration partners also rose by 14.4%, a confirmation of the turnaround made in the third quarter.

EBITDA for the medical segment rose from EUR501,000 in the prior year to EUR747,000. EBITDA margin increased to 7.8% from 5.7%.

Now let's turn to slide 10 for details about fourth-quarter performance of our Materialise Manufacturing segment. There revenue rose 17% with sales of end parts increasing 39% over last year's fourth quarter and accounting for 37% of the segment's sales, up from 31% last year. We added 16 printers, bringing our total to 138.

Our two growth businesses, RapidFit and i.materialise, performed well, with sales up 27% for the quarter. EBITDA rose to EUR1.033 million from a small loss of EUR38,000 for the same period last year, while margin increased to 9.3% from minus 0.4%. Excluding i.materialise and RapidFit, the EBITDA margin was 14.3% compared to 12.4% for the same quarter last year.

Slide 11 provides the highlights of our income statement for the fourth quarter. In keeping with trends in the year's first three quarters, gross profit increased 18% year over year, while gross margin decreased moderately to 59.1% from 59.5% for last year's fourth quarter. In addition to the increase in depreciation expense associated with the 16 new printers the Company purchased over the past four quarters, the continued efforts in the setup of the new production line in Materialise Medical and Materialise Manufacturing should also be taken into account.

Research and development and sales and marketing remained relatively stable at, respectively, EUR4.7 million and EUR9.3 million. General and administrative expenses increased EUR592,000 or 19%. The increase in G&A expenses reflects the organization put in place subsequent to the IPO. Meanwhile, the spending in G&A has remained in line with the past three quarters.

Other income net also remained stable at EUR2.2 million and includes EUR2 million related to withholding tax exemptions for qualifying researchers, development grants, and partial funding of R&D projects. With a gross profit increase of EUR2.5 million, we posted an operating profit of EUR932,000 compared to an operating loss of EUR901,000 for the same quarter of last year. Net financial results remained flat versus the same period last year -- EUR356,000 compared to EUR368,000 in the fourth quarter 2014 -- reflecting the continued positive effect of exchange rates on the portion of the Company's IPO proceeds held in US dollar.

Now please turn to slide 12 for a recap of balance sheet and cash flow highlights. Our balance sheet remains strong with minimal debt, accounting for only 15% of total liabilities and equity at quarter end. We ended the quarter with cash and cash equivalents, including held-to-maturity investments, of EUR50.7 million compared to EUR48.7 million as of September 30, 2015, and EUR61 million as of December 31, 2014.

Total deferred income amounted to EUR16.6 million compared to EUR12.4 million at year-end 2014. The deferred annual software sales and maintenance contracts rose to EUR13.1 million from EUR9.5 million 12 months ago. Capital expenditure was EUR3.1 million compared to EUR5.4 million for the fourth quarter of 2014. Cash flow from operations increased significantly to EUR2 million from a negative position of minus EUR400,000 last year.

With that overview I will turn the call over to Peter to discuss our operational highlights.

Thank you, Johan. If you could please turn to slide 13, where we have summarized our operational achievements for the year and also listed some of our priorities for 2016. As always, there are far too many efforts underway to go into too great detail, so allow me to just touch on the most important items in each segment.

In 2015, Materialise successfully rolled out our backbone of 3D printing software and services, enabling many 3D printing applications and supporting even more 3D printing operations. While certain parts of the additive manufacturing markets did have a hard time last year, our continued growth shows that the industry's backbone stayed very robust. This year we intend to continue to build and rollout our technology platform throughout the three (inaudible) ecosystem, both directly and indirectly.

Looking first at Materialise Software, in 2015 we strengthened our leadership position in the traditional 3D printing market through a balanced combination of structured partnerships and direct sales. Simultaneously, Materialise Software expanded its technology platform in order to meet the high demands of end part manufacturing.

We launched a broad framework of bill processors, introduced control panels that are dedicated to additive manufacturing, and developed a new version of Magics that is both voxel-based and 3MF compatible. In 2016, Materialise Software will continue to execute on its backbone strategy through a further expansion of our direct and indirect sales footprint and through continuous innovation of our technology platform.

Moving to Materialise Medical, last year we successfully implement at the switch from perpetual the annual licenses, opened up our surgical guide platform, and increased the sales reach of our complex surgery solutions. This year Materialise Medical intends to further execute and accelerate that strategy through the launch of the Materialise Mimics Care Suite in the hospital market, the further implementation of our opened guide platform, and continued growth of the direct and partnered sales of our patient-specific implants.

Finally, in 2015 Materialise Manufacturing started offering metal printing services, both in Belgium and in Germany; engaged in co-creation sessions with many key players who look at using 3D printing for reasons other than rapid phototyping; and played a leading role in various high-profile end part manufacturing projects. In 2016, Materialise Manufacturing will continue to concentrate on the production of end parts and will simultaneously become more and more active as the incubation center for new and meaningful vertical applications of 3D printing.

So now if you will turn to slide 14, I will take you through our guidance for fiscal 2016. As we indicated in this morning's press release, we expect to report full-year consolidated revenue between EUR115 million and EUR120 million. These numbers do not include the EUR3 million to EUR4 million of additional deferred revenues, which we expect to generate in 2016 from annual software licenses and software maintenance contracts.

We expect to benefit from the investments we made in 2015 to expand our sales and marketing reach, but as we already said last quarter, we do intend to moderate our future spending increases in sales and marketing. In R&D, we intend to continue to invest in selective programs, especially to fuel the longer-term growth of Materialise Software and Materialise Medical. These programs include our x-ray knee guide systems and our 3D printed tracheal splints program.

We expect to report adjusted EBITDA of between EUR7 million and EUR9 million, for an adjusted EBITDA margin between roughly 6% and 7.5%. Again, these numbers do not include the EUR3 million to EUR4 million of deferred revenue which we expect to generate from software sales in 2016.

Given the increasing portion of revenue from our Materialise Software and Materialise Manufacturing segments, we expect our financial results in 2016 to reflect the seasonality of these businesses. Our software and manufacturing businesses are particularly strong in the second and even more in the fourth quarter, but are less robust in the first quarter.

Finally, the continued growth of Materialise in general, and of Materialise Manufacturing in particular, will require continued capital expenditures in 2016, resulting in an expected increase in depreciation of approximately 30%.

Before opening the floor to questions, I would like to take a minute to express our sincere gratitude to all of the Materialise collaborators for the great efforts they put into building and rolling out our backbone in 2015. Operating in a rapidly-changing technological environment is, as such, not easy and becomes even more challenging when the Company, like we have, engages in an accelerated investment mode to put the IPO proceeds at work as fast as possible. And when, on top of all that, the general economy begins to show some signs of uncertainty.

In spite of all these challenges, we have been able to exceed the growth perspectives that we had aimed for ourselves in 2015 and we have closed the year with a positive adjusted EBITDA that is very promising for the years to come. This achievement would not have been possible without the dedication, enthusiasm, and discipline of each and every one of our 1,300 employees.

A special word of thanks goes to our team in Kiev. In addition to all the challenges that I just described, they were confronted with political turbulences. Remarkably, in the midst of the crisis, they never cried out for help, but on the contrary, they constantly reached out to us, offering their help to make the world a better and healthier place. This positive attitude has been truly inspirational for the entire company.

With this I would like to conclude our prepared remarks, so operator, we are now ready to open the call to questions.

(Operator Instructions) Troy Jensen, Piper Jaffray.

Congrats on a really solid fourth quarter. So Peter, or maybe Johan, just to challenge you guys a little bit on your guidance.

If you look at your business here, you ended the year on a strong note. Software grew 42% last year and accelerated up 2014. Medical seemed to turn the corner; it also accelerated. You did 16% growth. And the manufacturing business also accelerated to 24% growth.

So can you balance the strength you've seen recently and throughout the year with kind of the midpoint of your guidance being only 15% growth for next year?

First and not unimportantly, Troy, when you really look at our guidance on revenue, the way we look at it in the Company we look at revenue as such, but we really should add deferred revenue. And as we intend to continue to grow stronger in our software sales than in our product sales and services, this will impact our revenue as such, which hence we believe will land somewhere between EUR115 million and EUR120 million.

But we do believe that growth, operational growth for the Company, as such, will be stronger as we believe that 2016 will bring another additional amount of deferred revenues in the range of EUR3 million to EUR4 million. So the combination of those two, I think, shows that we are very confident that we will just be able to continue to walk along the path that we have walked in 2015.

All right, that's fair, I guess. I will follow-up on that.

But how about --? I'd like to hit a few of the questions, so I'll start with Stryker. They announced some internal 3D printing capabilities in the quarter here. My assumption is it's just metals. So can you give us an update with that partnership?

And then, to that point, can you talk about how much or where are you guys now with your internal metal production capability?

Yes, it's Fried here. Well, Stryker is one of the many orthopedic companies we are working with, and for sure, all of those companies are now seriously investing in 3D printing as one of their key production technologies. So indeed they bring to the market now several metal components, but in the future it's fair to expect that more materials will be added to the range.

I have always expressed my belief in the fact that 3D printing would become one of the main production technologies, even for orthopedic companies. And what you see is that this is happening step by step.

Maybe you also saw the announcement that Biomet Zimmer has announced or launched a new 3D printed ankle implant as well. And you will see several announcements from many other orthopedic companies on top of that.

Okay. And your internal metal capabilities, [have they] materialized?

Yes, our metal production lines are, to some extent, working. I say to some extent because the certification processes are still ongoing. As you know, we aim especially at certified manufacturing. In medical this not only means that the line as such needs to be certified, but that every product that goes on to those lines needs to receive its certification.

And the same is true for the metal in the aerospace industry. So we have our metal lines operational. We do operate it for manufacturing outside of certified business already, but our real aim is to get aerospace certification, as we have for plastic also, for metals by the middle of this year.

Last question and I'll cede the floor. Can you just let us know what the next milestone will be for your x-ray product and, best case scenario, when do you think that can be commercialized now?

Certainly we have incurred a serious delay there. We are currently in negotiations with the FDA to come to a new methodology to submit the 510(k), because we were not able to convince the FDA with the previous methodology. And this is going to delay us at least one year.

All right, gentlemen, good luck in 2016.

Julian Mitchell, Credit Suisse.

This is Lee Sandquist on for Julian Mitchell. On a total company basis you mentioned we were at a point where we could now start growing adjusted EBITDA in the medical segment. EBITDA margins increased in Q4 after several quarters of decline, so do you think that we are at an inflection point for margins in this segment?

In the medical segment, yes, we are at an inflection point, though I want to explain that investments in the medical segment are more long term. So do not expect this to jump high immediately simply because there is, at this moment, so many opportunities that need to be developed.

I was very positive in my answer to Troy about the prospect in the orthopedic market, but all of these are in start-up phase so they still require investments at this moment. And we do not expect that we will have a very high jump in EBITDA already on short notice, while in longer term we keep believing that medical is one of the highest-value components of Materialise.

Great, thank you. Could you guys also please touch on any top-line trends you have seen in January and February?

It's early to really -- and we typically give guidance on the full year and then wait till we close a quarter to report on our results for the quarter. So if you allow us, I would rather not give just numbers to the Street that have not been internally verified and reviewed to give any reasonable comfort.

Okay, that's fine.

In the guidance we explained that it's kind of seasonality, but which has nothing to do with the expectation that we have or see in the market. And that's information that we passed already in the call before. That is something that you should take into account.

Yes, we were a bit soft on Q1. It's basically because of seasonality and not because of things that we have seen the last weeks or so.

Okay, thank you. I'll pass it on.

Ben Hearnsberger, Stephens Incorporated.

Thanks for taking my question. I wanted to ask a higher-level question first on what you are seeing in the industry. We know that systems growth stimulates your software growth, so I guess if you could kind of talk through what you are seeing in the systems industry and how you're thinking about growth for that piece in 2016.

Well, there is a mixed message in the system sales, especially metal machines have been still reporting very healthy growth rates. On the plastics side, the situation is of course much different, as you all know, so it's a mixed bag. But I think there, as I have expressed in previous calls, the best indicator remains the increase in consumable products where we still see a positive trend, a tendency also in the plastics.

Okay. As a follow-up to that, are you -- this is kind of the message we've heard from the industry and from you guys over the past year in terms of this kind of bifurcation between metals and plastics. It sounds like that commentary remains at this point as you look out on 2016.

Well, we hope for a revitalization of the plastics business, but not to the point where we were in 2014, while metals will continue to do good we think.

You should also bear in mind, plastics is just a business that is more mature than the metals, so that metals grows stronger than plastics should, as such, not come as a surprise.

Sure, sure. I think everyone is just looking for where we see plastics stabilize, so that was kind of the spirit of the question, but I will move on and ask a question about your medical segment.

It looks like several areas grew double digits; software, direct sales, and then partner sales grew double digit. And I know segment growth was around 8%. So what was the drag or what piece of that business dragged on the segment growth?

It's a good catch, Ben, and what Johan explained as part of his prepared remarks is that when we gave you growth numbers of the three parts of the business -- the sales of software, the direct sales of our surgery products, and then the partnered sales of our guides -- those were sales numbers, revenue and deferred revenue. The aggregate number that we always give for each segment is a revenue number after deduction of deferreds.

Now our medical software continues to grow very significantly, but obviously, as you know, we've made the switch there from annual sales -- from perpetual sales to annual sales, so there's quite a bit of revenue that we are deferring there.

Okay, that's helpful clarification.

A single-digit number for the entire segment.

Right, okay. One last one. On the rebranding, I guess what ultimately drove kind of this vertical group rebranding or focus? And are you realigning the sales force along these same lines?

Yes, so we -- over the last few years we have developed several products and even acquired some, like OrthoView, that fit hospitals, for instance. But, yes, we announced it when we acquired OrthoView that we would start integrating the salesforce with our own salesforce and the rebranding is a kind of external confirmation that is accompanied by a lot of internal work. Reorganizing some groups, but also, even at a product level, better and better integrating our different products so that they can collaborate well in a suite.

We do not want to be a company that has three salesforces that each go and visit the same hospital on a separate day: one with the software package, then the others with the guide solution, and then at the end of that same month a third team comes around to explain about our complex surgery implants.

What the rebranding expresses is that they really are all part of one suite and our sales force will now go to the hospitals and explain the full technology platform that we have on offer. And then we can tailor a solution for the hospital where they first start with our software solutions; integrate maybe some of the CMF applications that certain of their CMF surgeons want. So very flexibly we will now offer the full suite of our products.

Another reason why we do this is, while we have some competition on the software side and we have some competition on the guide side, there is, as far as we know, no competitor out there that has the full suite of integrated products like we have. So now our salesforce will be able to re-stress on that very strong competitive edge that we have by offering this new integrated suite of products to the markets.

Okay, gentlemen. Thank you very much.

(Operator Instructions) Bobby Burleson, Canaccord Genuity.

Thanks for taking my questions. So I guess the first one is can you give us some color on the top-line guidance in terms of maybe tiering strongest to weakest in terms of your expected growth for manufacturing software and medical this year?

If you look at the trends that you've seen in all the quarters that we have reported on since we started our public life, that trend will not change. So we expect that we will continue to see the strongest growth at Materialise Software, followed by strong, consistent growth within Materialise manufacturing. And what we expect is that Materialise Medical will gradually continue to catch up now that it has really made its turnaround a couple of quarters ago.

But that is going to be the order of magnitude that we expect in 2016.

Okay, great. Then you're obviously planning on adding machine capacity, it sounds like, in 2016. Can you give a little bit of color just in terms of the mix of processes that you plan on investing in? And how heavily skewed towards metal capacity is your investment this year?

Actually on the metal side, we may add a little bit of capacity, but as I said earlier, the capacity we installed up to now is not yet used to its full extent because we are still in the process of certifying certain products or certifying certain production lines. So that explains why only a few machines will be added in metals this year. Maybe in following years there can be an acceleration done once the certified lines are fully up and running.

The biggest investment does come in the plastics line where we continue to see -- well, a 39% rise in end parts manufacturing. That's quite significant and we truly believe that even more and more companies will discover additive manufacturing or 3D printing as manufacturing technology.

Great. And that brings me to my last question. Clearly, you see a need to invest in plastics capacity, but if you look more broadly at the industry, it seems like maybe your customers aren't investing at the same rate. And I'm wondering are there challenges in terms of some of your customers being able to run the machines effectively? And is that -- are those challenges maybe leading to more business for Materialise?

Why is that dichotomy, I guess, between service bureau investment and, say, maybe slower investment directly at customers for plastic capacity? Thanks.

It has cost Materialise in the past quite some effort to make the leap from being a prototype service provider to become a reliable manufacturer. And that's still a challenge for the entire industry.

Most of the machines are still developed truly for prototyping and the kind of reliabilities and repeatabilities that are needed in a manufacturing area are still a challenge for the individual machines and for the organizations around it. Materialise has invested quite heavily to design the systems that allow us to compensate for some of the effects of the current generation of machines and has a little bit cracked the code to do challenging manufacturing projects.

But I want to mention here that actually, in my opinion, that is one challenge, but the biggest challenge remains the education of the designers at the end customers. There Materialise has an extended engineering team that co-creates with customers on a continuous basis every day and helps them change their products from being designed for plastic manufacturing technologies to really redesigned products so that they are suitable for 3D printing.

And that is, in my opinion, the biggest impediment that we will still face a few years, this reeducation of the customer base.

Great, thanks for answering my questions.

Thank you. I'm showing no further questions at this time. I would now like to turn the call over to Mr. Peter Leys for closing remarks.

Thank you, operator, and thank you all for joining the call. I hope we have given you a good overview of our plans to further strengthen our position as the backbone of the 3D printing industry going forward.

Please note that Fried will be in New York to attend an investor conference the end of this month and we will issue an advisory release with details of Fried's traveling plans in the next two weeks or so.

Thank you all again for joining and have a good day. Bye.

Good bye.

Bye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.