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Materialise NV
10/24/2024
Good day, and thank you for standing by. Welcome to the Q3 2024 Materialized 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. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Harriet Freed of Alliance Advisors.
Thank you for joining us today for Materialize's quarterly conference call. With us on the call are Brigitte DeVette-Weijen, Chief Executive Officer, and Kun Berges, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialize's strategic financial and operational performance for the third quarter of 2024. 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.materialize.com. The earnings press release 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 could impact the company's future business or financial results can be found in the company's most recent annual report on Form 20-F filed with the SEC. Finally, management will discuss certain non-IFRS measures on today's call. A reconciliation table is contained in the earnings release and at the end of the slide presentation. With that, I'd like to turn the call over to Brigitte DeVette-Biden. Brigitte, go ahead, please.
Good morning and good afternoon, and thank you everyone for joining us today. You can find our agenda on slide three. As always, I want to first summarize the highlights of our financial results for the third quarter in 2024. Then I will take you through some of the progress we've made in realizing our strategic priorities over the last couple of months. And after that, I will pass the floor to Koen, who will go into our third quarter numbers in more detail. Finally, I will come back and explain how we view the remainder of 2024. When we've completed our prepared remarks, we'll be happy to respond to questions. Now, looking at our key results for the third quarter summarized on page four, I am very pleased to report that we performed strongly in all of our business segments and once more delivered profitable results this quarter with a strong improvement compared to last year. we realized strong quarterly revenues of 68.7 million euro, growing more than 14% compared to the third quarter last year and demonstrating growth in all segments. We realized a gross margin of 57.2% in the third quarter, which is up from the 56% for the comparable period of 2023. This solid performance enabled us to increase our adjusted EBITs to €4.4 million representing 6.4% of our revenue without compromising on our continued investments to drive future growth. This translates into a net profit of €3 million or €5 cent per share. Our net cash position at the end of the third quarter was €63.1 million. Koen will elaborate further on these results in his remarks later in this call. Now moving now to slide five, I am very pleased with our progress made on the main strategic priorities. First, in medical. We accelerated our growth thanks mainly to the progress made in our core markets. For the second time in our company's history, medical was the strongest revenue generator, accounting for 44% of revenue this quarter. Now, this is evidence that our mass personalization strategy is working and that our investments are paying off. Now, what do I mean by mass personalization? we continuously ask ourselves how we can serve more patients with personalized approaches rather than just benefiting a lucky few. And in the last few years, we've made strategic investments to broaden the population we are reaching. Some examples. Thanks to our U.S. manufacturing plant, we have managed to bring our personalized solutions to trauma patients. Trauma patients are patients that need to have a solution in days, not in weeks. As a reminder, the US facility enables us to deliver parts with much shorter and more reliable lead times. Thanks to this plant and the investment we made there, we managed to triple the number of trauma cases we treated per quarter compared to the number we treated before the opening of the plant. And we are now delivering solutions faster than any other provider in the US market. And we therefore expect our penetration of this market to continue and generate further growth in the future. Now, as a second example, I would like to point to the investments we are making in our Mimics platform to expand our position in the research and engineering market. In this market, we have traditionally built a strong position with our Mimics Innovation Suite, a software suite that is used by researchers and engineers to segment the medical images of a patient, create a 3D model, and prepare a treatment plan on this basis, or design a patient-specific implant or instrument for the patient at hand. In order to accelerate the adoption of these patient-specific approaches, we need to make this workflow a lot easier and faster and integrate it with the rest of the healthcare ecosystem. And this is what we are achieving with our cloud-based Mimix platform called Mimix Flow. Earlier this year, we released the case management capabilities on Mimix Flow. We released it to medical device companies earlier this year after a release to the hospitals end of last year. Among other benefits, This solution enables customers to manage their workflows end-to-end, enforce quality management and embed traceability in reporting, create visibility for all stakeholders on case status, and enable easier collaboration with stakeholders across the ecosystem, for example, to get approvals. This solution is a valuable extension of our offering for customers that process a large number of personalized cases per year and need to find ways to efficiently manage these larger volumes. It is seamlessly integrated with Mimix, our market-leading desktop-based segmentation and planning software. Since the launch of this solution, we have already managed to contract 10 customers and expect the update to continue in the fourth quarter and throughout 2025. In the coming years, we will continue to bring out additional cloud-based functionality that will make it easier and faster for customers to treat personalized cases. Now, turning to software. We made significant progress on multiple fronts. First, we made progress in previously announced partnerships, delivering first results that are truly encouraging. As an example, in the second quarter, we announced the collaboration with NTOP in order to enable the processing of complex and large design and STL files. We announced an early access program at RAPIDS in June. We have now selected 12 companies for this program from 57 that applied. setting us up for demonstrating the value in additional use cases in the future. Another example, in the first quarter this year, we signed an agreement with Digifabster, a cloud-based SaaS quoting and e-commerce solution for advanced manufacturing companies. In the third quarter, we signed our first CoEM sale, including the Digifabster solution in the configuration. Second, we also announced new partnerships, for example, with form labs and strategies. But most importantly, we made significant progress in materialized magics, leveraging our new products to further strengthen our position in key strategic accounts in sectors like Irish-based and on-demand manufacturing. As an example, we see increased adoption of our metal support workflows, with more companies migrating to our advanced automated support generation solution, E-Stage for Metal Plus. E-State for Metal Plus reduces the time spent on support design by up to 90% while minimizing human error and build crash risk. I'm also pleased to share that the usage and adoption of our latest version of Magix, Magix 28, is accelerating at a much faster rate compared to previous releases. After the release in June, almost 50% of our active customer base is already using the latest Magix release while it is still in its early lifecycle phase compared to other supported versions. This version is quickly replacing legacy versions in the market, a clear indicator of how customers are recognizing the improved features, such as the new lattice model or the new nesting modules. This is helping us drive a broader transition, ensuring that our customers stay up-to-date with the latest advances in 3D printing technology. Now, last but certainly not least, I'm very pleased with the progress on our next-generation matrix PPs. We released the desktop deployment of our next generation BPs in the first quarter this year, and have already contracted more than 20 partners. The advanced algorithms of the next generation BP significantly improve build time and quality, thanks to, for example, its advanced strategies for multi-lasers, and enable a variety of collaboration models, including the possibility for customers to build their own BPs, thanks to the availability of our SDKs. Turning now to manufacturing, We celebrated the opening of our second plant at ACTEC and will ship the first part in the fourth quarter. With this second plant, we are expanding our capacity and enhancing our ability to handle huge and heavy parts. In addition, the extension of our capacity and the new equipment is a critical step to address the market for more complex metal parts in the market for small series. Now, why is this important? This strengthens our position in a market that we are traditionally strong in, the automotive market, where the development of electric cars brings the need for more complex casted components for electrical drivetrains and chassis. Second, it opens market opportunities in new segments, such as agriculture, mining, construction, and marine vehicles, where parts are typically larger and heavier, and therefore more difficult to handle. The complexity of parts in these segments is increasing, for example, to achieve better thermodynamic cycles in the engines with maximum fuel efficiency. The combination of high-precision printing, casting, and complex post-treatment that we can offer at UCTEC is ideal for this, and we are therefore very well positioned to serve this need. It's interesting to note that customers in all of these segments are turning to UCTEC for two reasons. First, they are looking for fast and reliable prototyping solutions. But second, what is very exciting is that with the new plan, we are also able to deliver small series. Now, the additional capacity in the new equipment strengthen our position for both types of offerings. We are gradually reorganizing our operational flow in the fourth quarter and will then ramp up our capacity throughout 2025 and 2026. We expect the temporary impact of the operational startup in the fourth quarter. Now, Koen will take you through the detailed financial results by segment.
Thank you, Brigitte. Good morning or good afternoon to all of you on this call. I'll begin with a brief review of our consolidated revenue on slide six. As a reminder, please note that unless stated otherwise, all comparisons in this call are against our results for the third quarter of 2023. In this year's third quarter, total revenue increased 14% to 68.7 million euro. We reported growth in all three of our business segments, with strongest increase coming from our medical segment, which grew by more than 24% and posted record high quarterly revenue figures. In spite of the further conversion of our software business model to recurring revenue streams and the continued challenging market conditions that our manufacturing segment faced, Also, both of these segments grew in the third quarter, more specifically by 3% and 9%, respectively. As you can see in the graph on the right side of the page, materialized medical now accounted for 44%, materialized manufacturing for 40%, and materialized software for 16% of total revenue. In the third quarter, our medical segment took over the role of largest revenue generators for manufacturing. Year-to-date, we now generated over €201 million of revenue, which is 5.4% above the same period in 2023. The amount of deferred revenues in our balance sheet related to software license and maintenance fees amounted to €41.1 million at the end of September. Total deferred revenues on our balance sheet were €47.4 million, also at the same moment at the end of the quarter. Now on slide seven you will see that our consolidated adjusted EBIT and EBITDA numbers for the third quarter of 2024. Consolidated adjusted EBIT increased to 4.4 million euro compared to 2.3 million euro for the corresponding period of 2023. Top line growth in combination with continued focus on leveraging scaling effects and cost control led us to an 89% increase in operational performance while we continued investing in our future growth businesses. The adjusted EBIT margin for the quarter was 6.4%, compared to 3.9% last year. Consolidated adjusted EBITDA for the third quarter amounted to €9.9 million, increasing from €7.9 million last year. Our adjusted EBITDA margin reached 14.4%, compared to 13.1% the prior year. Year-to-date, we have now generated €10.9 million of adjusted EBIT and €27.2 million of adjusted EBITDA. Moving now on to slide 8, you will notice that the quarter's total revenue in our materialized medical segment increased, as said, by almost 25%. This strong growth was generated by higher revenue coming from medical devices and services sales and by higher revenue from our medical software, which grew respectively by 28 and 16%. Within our medical devices and services activity, we drew both direct and partner sales. As a result of top-line growth and cost discipline, the adjusted EBITDA of the medical segment grew to €9.9 million, with an adjusted EBITDA margin that increased to 32.8%. These numbers now also included the impact from FEOPs, the acquisition that we completed in July, and which in its current development phase is contributing negatively to our EBITs. Year-to-date, our medical segment realized €84.5 million of revenue. up by 15% from last year, with an adjusted EBITDA of €26 million, representing almost 31% of adjusted EBITDA margin. Slide 9 summarizes the results of our materialized software segments. In the third quarter, software revenue grew by almost 3%. The negative revenue impact of our further transition to a cloud and subscription-based business model was more than offset by strong direct sales in our preprint segments. Recurring revenue from software maintenance and licenses sales, including COAM, increased by 9%. On the other hand, non-recurrent revenue decreased by 12%. The adjusted EBITDA in our software segment increased in the third quarter of this year to almost 2 million euro, representing an adjusted EBITDA margin of 17.8%. while we continued the R&D development efforts in CoEM, and particularly on the factory management capabilities. Year-to-date, our software segment realized €32.8 million of revenue and an adjusted EBITDA of €4.4 million, representing 13.5% of adjusted EBITDA margin. Now let's turn to slide 10 for an overview of the performance of our materialized manufacturing segments. As in prior quarters, also in Q3, our manufacturing segment faced a challenging market environment, which was mainly reflected in continued weak prototyping demand. Nonetheless, we managed to grow revenue by 9% compared to the third quarter of last year, fueled by growth in AgTech and in certified manufacturing. here again we posted the strongest growth in our strategic aerospace and medtech focus areas in spite of the top line growth and further realization of operational efficiencies cost pressure and less consulting income led to a lower adjusted ebitda of 4.7 million euro representing an adjusted ebitda margin of 2.6 year-to-date our manufacturing segments realized revenue of 83. €8 million with an adjusted EBITDA of €4.6 million, representing 5.5% of adjusted EBITDA margin. Slide 11 provides the highlights of our consolidated income statement for the third quarter of this year. Our gross profit increased to €39.3 million, representing a gross profit margin of 57.2%, an increase of 120 base points, compared to the gross profit margin realized in Q3 of last year. Direct cost increases were offset by efficiency gains and mixed effects. Our operating expenses in the quarter increased by €3.8 million, or 11.8% in aggregate, with the largest increase coming again from the higher R&D spend, which grew by 16% compared to last year. R&D investments remained mainly focused in our medical segments on the Mimix platform developments in our medical devices business and in our software segment on CoAM developments. Net operating income in the quarter was positive at €0.1 million compared to €0.7 million of last year. As a result of these elements, the group's operating result in the quarter was positive at €4.3 million compared to €2.3 million in last year's periods. Now in Q3, the net financial results amounted to a negative minus 1.1 million euro, mainly impacted by unfavorable currency exchange results of minus 1.8 million euro. The interest income from our cash reserves more than offset the declining interest expense and are gradually decreasing financial debts. Income tax expenses in the quarter amounted to minus 0.1 million euro. and all of this resolved once more in net profit for the quarter equaling 3 million euro representing 5 euro cents per share compared to a 4 million euro or 7 euro cents per share for the same period of last year now please turn to slide 12 for a recap of the key balance sheet and cash flow highlights also in the third quarter of 2024 our balance sheet remains strong Our cash reserve at the end of the quarter amounted to €116 million. Loan and risk repayments totaling almost €5 million over the quarter reduced our gross debt to €53 million. Since the beginning of this year, we further reduced our gross debt position by €11.5 million. The resulting net cash position at the end of the third quarter was a set €63.1 million. remaining stable compared to the position at the beginning of this year, although down by €4.4 million from the position at the end of the second quarter. This decrease in the third quarter is mainly the result of increased CAPEX investments and of the FEOPs acquisition that we funded from our own means. Compared to the end of last year, we reduced our net working capital by €2.6 million, mainly as a result of reduced rate receivables. The total deferred income position amounted to 47 million euro, of which 41 million was related to deferred revenue from software license and maintenance contracts, as mentioned earlier in the call. As you can see from the graph on the right side of the page, cash flow from operating activities for the third quarter amounted to 6.9 million euro, slightly below the operational cash flow generated in the third quarter of last year. and as a result of working capital movements. Capital expenditures for the quarter, on the other hand, amounted to a high 7.3 million euro, higher than average, mainly as a result of intensified investments in the new AgTech plans and the acquisition of FAOPS. As a result of this, our free cash flow over the third quarter of 2024 turned negative by minus 3.1 million euro. The operational cash flow amounts to €25 million after nine months into 2024, which is up by 26% compared to the same period of last year, while also the year-to-date free cash flow is positive by €4.2 million, in spite of a higher investment volume. As mentioned in our earlier calls, the CAPEX investments in our new active facility will continue for some time, as we add additional machinery and gradually ramp up throughputs. And with that, I'd like to hand the call back to Brigitte.
Thank you, Kun. Let's now turn to page 13. I'll conclude my remarks with a discussion of our full year 2024 guidance. The consistently strong operational performance of our business segments throughout the first nine months of the year strengthens our confidence that we will land our full year revenue within the earlier communicated range of 265 to 275 million euros. We're also maintaining our adjusted EBIT guidance of 11 to 14 million euro for 2024. We're taking a conservative stance for the last quarter of 2024, given the weaker prototyping demand that we have seen in recent months. In addition, this guidance reflects the integration cost and further product portfolio investments of our recent FIOPS acquisition, as well as the startup of the new architect plant. This concludes our prepared remarks. Operator, we are now ready to open the call to questions.
Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by. Our first question comes from Troy Jensen from Kanner Fitzgerald. Your line is now open.
Hey, good morning, good afternoon. Thanks for taking my questions. First off, I thought... Hello, Brigetta. But congrats, I was really impressed. I thought the revenue upside, gross margins, and OPEX being all above plan were pretty impressive, so keep up the good work. But to dive into the questions a little bit, a little bit on medical... Just thoughts on the sustainability of the growth here and profitability. What do flow-through margins look like? And what could EBITDA margins look like in the medical business if it continues to grow at this type of a pace?
So let me answer this question more qualitatively. As you know, we're not giving a long-term quantitative guidance typically. But to reflect on the medical business going forward, still a lot of potential in the medical sector to adopt personalized solutions. And the example I've given earlier on the trauma population, we're now with the US manufacturing plants. We are addressing part of that population. Honestly, we're still scratching the surface of that population. And it's just one example where I do think we can still drive up the adoption of personalized solutions in many of the different markets in which we are playing. So in terms of the sustainability of the growth, I think there's still a lot of potential in that segment. There's no reason why I would see that come at a different profitability level. If anything, with larger volumes, typically it gets a little easier to manage our margins. But there's no reason to believe why the profile will be different going forward.
Right, right. Well, to that point, Kuhn, could you confirm what the flow-through margins look like for medical business?
And when you say flow-through margins, what exactly do you mean?
An incremental million dollars, how much is going to go to the bottom, right? Typically, the additional million dollars, you know, more accretive than the first million dollars in a quarter, right? So what does the flow-through look like?
I don't know if I understand your question correctly, Troy, but the margins are currently around 30%, in the 30% range. The EBITDA margins, if that is what you're referring to, and that is, I think, what we see flowing through to our bottom line, EBITDA bottom line in the medical segments.
Okay, I understand. I was just trying to get, like, what a forecast could be on EBITDA margins, but I'll move on. So now comparing this, you've got two businesses that are roughly the same size. The medical is extremely profitable, but here we've got 3% EBITDA margins on the manufacturing business. So just thoughts on what you can do there, Birgitta, to improve profitability. Is scale going to be the answer? Or just some thoughts on that would be great.
So there's probably a couple of aspects that we need to mention here to answer your question. I mean, scale, obviously, scale will help. That is just in all of our business lines, scale is a driver that helps us get to better margins. Now, the second part of the answer I want to give is the shift that we are making and we need to continue to make away from prototyping more towards end-use parts in the segments where we see that our proposition has added value. We've talked about certified manufacturing in the past, We've talked about aerospace, the METEC segment, et cetera, being segments where the complexity and the requirements are such that our high level of know-how and the fact that based on the long experience that we have, we can handle these more complex and high-quality requirements. I think the position as well, and those are the segments where we need to – continue the journey that we're on and continue to increase to get to a healthier position in terms of margin.
All right, understood. Last question, then I'll cede the floor. But just on OPEX, going forward, you guys did a nice job here. It looks like it was down sequentially. I guess I always assume OPEX is going to grow modestly on a sequential basis on an absolute basis. But just thoughts on kind of where OPEX is going to trend for the next few quarters.
As you indicated, Troy, a large part of our OPEX is related to staff costs and personnel costs. So, there is continuous pressure on that where we see salaries gradually going up. So, indeed, that is something we certainly focus on to keep that under control. Same with third-party spend, where the larger we get, the more negotiation power we have, of course, on these kinds of expenses. that we are making.
So to be more specific, just like on an absolute basis for Q4, do you expect total expenses to be up, flat, or down sequentially?
In absolute or percentage?
In absolute basis, yes. I mean, you're not going through any cost. It seems like a lot of people in the industry now are going through cost cutting, right? So the OPEX is shrinking on a quarterly basis, but I don't think you guys are so much.
i don't see a particular reason why they would go down um so um in terms of absolute um number um now there's one element that you know when it comes to opex and i'm talking more relative so more more percentage-wise i mean you uh referred to scale earlier um our percentage-wise our opex our revenue number is going to drive the you know opus opex percentage to a large extent, so scaling will help. And now specifically for the fourth quarter, we've heard of being relatively conservative on the fourth quarter. So that is mainly on the revenue side, and therefore, you know, the OPEX percentage in the fourth quarter will take a slightly different profile than we have this quarter. Maybe that helps. That really helps.
We'll follow up to you in here in a little bit, but... But congrats and keep up the good work.
Thank you. Thank you so much.
Our next question comes from Alexander Cremiers from Kepler Chevro. Your line is now open.
I have three questions on the AC-TEC plant. The first one would be, You mentioned that the ramp-up weighed and will still weigh on the manufacturing segment in terms of OPEX, but maybe could you specify that number? Second question would be, couldn't you mention that you expect some CAPEX for this plan going forward as you are planning some additional machinery, etc.? Maybe could you clarify how much CAPEX you still budget and what's the timing of this so we can... also get a bit of a grasp on the expansion topics going forward. And then, yeah, how do we need to see this in terms of additional revenues next year? So that's the three questions on the AC Tech plant specifically. Then I do have some other questions. Maybe one would be to actually coming back to a question of Troy before. I think he was more asking about the gross margins just to get a bit the sense of the operational leverage in that medical segment. If you could maybe give us some granularity in that respect, as I assume that the cost of goods sold is relatively stable in this segment. And then maybe the last question. Yeah, I think the new partnerships in software, how do you see that evolving in terms of the top line next year? Thank you.
So let me try to answer some of your questions. I hope I can remember all of them, Alexander.
Maybe I'll start with just on the AC Tech plant.
Yes, absolutely.
And a bit of revenues.
Yes, absolutely. And maybe just as a general comment. So at this point in time, we're not giving guidance on next year yet. So I'll stay away from that. And the second is we're not giving guidance for the specific business lines. So it's a bit more difficult. Now, let me maybe give you a bit more color by what we expect in the fourth quarter on the ACTEC plan and why we expect an impact on the fourth quarter. Mainly that is a revenue impact by the fact that we operationally get the second plant ready, which also involves transferring some of the equipment and the machines from one plant to the other, which obviously limits our capacity for a while. And that's why we do expect that impact. Now, I know you asked for quantifying that impact. But, you know, I can't do that. But it is an impact that leads us to be most conservative with our guidance. So you can draw a conclusion a little from there, if I can point you in that direction. Now I'll let Koen answer the question on the CAPEX.
To come back to the CAPEX, as Brigitte mentioned, we have started up the plant in the third quarter. which basically means that the investments on the building itself to a large extent have been completed. What remains and what will continue over some time is additional investments in machinery. And we have post-processing machinery already in place, and we will be gradually adding additional machinery as time goes by, taking into account that the delivery times on these machines are quite long. That will mean that also the CAPEX, tail of this project will take us, I would say, at least a year, a year and a half to up to two years before the full investment program has been completed. Where we are today, to give you an idea, we have always indicated the total investment volume to be north of that, between 30 and 40 million euro, and we have at this stage invested about 65% up to 70% of the total investment volume. But the rest will come. We see the peak now that will still continue a bit in the fourth quarter as there is also payment terms on the invoices from the suppliers that provide the goods that we include as investments. But the biggest peak will then gradually come down in the coming quarters. Hope that answers your question.
Thank you.
And then maybe speaking to your question on the gross margins on medical, I think you do see our gross margins on... Total. Okay, on total, yeah. So just qualifying comments on the gross margins, so our gross margins on medical are relatively comparable to what typically you would expect in the medical device business. and now the scaling effect drives further efficiencies there most on the longer term than on the shorter term so the profile is going to stay relatively similar on the shorter term and certainly when we talk about the next quarter or two okay that's very clear thanks and yeah the last question was just a small add-on on the software segment Yeah, so you asked around the new partnerships. Now, what was your specific question on the new partnerships?
Well, I mean, you've announced a lot of new partnerships and deals in the software segment. I was just wondering, because the segment has been a bit under pressure lately. Of course, you have growth, but in terms of profitability, etc. So I'm just asking more specifically towards the growth of next year. Of course, you don't give guidance, but at least we get a bit of a sense of what these deals look like.
Yeah, and maybe I give you a bit of a view on what these partnerships do for us. So two comments here. One is, so we have indeed announced some new partnerships. Now, I've also reflected back on some of the partnerships that we closed earlier this year. And I thought that was important to do because at the end of the day, we can all announce partnerships, but if they don't lead to results, then what are they really doing? So, you know, I think what is important to note is in the third quarter, we actually had real results on these partnerships that were previously announced. And I've given the example of the ENSO partnership and the DigiPOP partnership to illustrate that, that we see good traction there. Now, second comment I want to make is that why is this so important for us? And why, you know, do I see these partnerships as an important element and why is that a good foundation for future growth next year and the years after. So at the end of the day, our customers need an end-to-end solution. And rather than building that end-to-end solutions with all the capabilities ourselves, I believe in a model of collaboration. We've talked about that a number of times in the previous calls as well. I believe in collaboration, and these partnerships illustrate that we can collaborate with others to bring that end-to-end solution, that complete solution, without doing the R&D investments ourselves. And having that end-to-end solution is, I believe, an important element for our customers and will drive further adoption of these software solutions in the future. Does that make sense?
Okay, yeah, thank you.
Thank you so much.
Our next question comes from Jacob Steffen from Lake Street Capital Markets. Your line is open.
Hey, thanks for taking my questions. I'll add my congratulations to the results here. Thank you, Jacob. Yeah, absolutely. I was just kind of wondering, you know, on the medical segment, obviously, like Troy mentioned, too, EBITDA margins have continued to impress. But I guess, can you help us kind of get a sense for, you know, at the new Michigan facility? I know trauma and, you know, personalized solutions are the kind of main, you know, things produced there, but maybe help us get a sense on the overall capacity at the new facility itself.
So, first clarification, maybe, so our U.S. manufacturing plant is indeed fully dedicated to the medical business.
So, you know, all we ship out of there are personalized devices, instrumentation or implants. The capacity is driven by two things. One is the number of machines and resources we have there, and the second is the space. At this point in time, we're not at the capacity limit, let me put it that way. I can't give you a specific number on what percentage of the capacity we are at, but there is room for adding capacity and extending that in the future.
Okay, and you made a comment that, you know, essentially you treated three times the number of trauma patients compared to kind of before the plant was up and running, but maybe help us understand, you know, is there room to, you know, 10x that, 20x that, any color there would be helpful.
Yeah. So without mentioning a specific number, I also made a comment earlier in this call that I said we're only scratching the surface.
So that's more kind of the relations that we need to look at. So it's not only we have potential to further double or triple. So the potential is effectively large here.
OK. And last one for me, just on kind of the software segment. Did I hear that correctly? You signed your first CoAM customer?
No.
So maybe I wasn't super clear here. So we have signed a whole range of CoAM customers. I don't have the exact number, but there's a lot of CoAM customers already since we launched the solutions a couple of years back. we now assigned the first customer that also has the DigiPopster solution. And so my point was more to illustrate that the partnership that we announced earlier this year, we now have actual sales coming out of this. And again, as I said earlier, it's nice to announce a partnership, but what really matters is what kind of growth that will drive for us with that partner.
Got it. And I guess just kind of to follow up on that, any kind of sense on, you know, when we can see the last kind of perpetual customers roll off and, you know, essentially be 100% SaaS? Yeah.
So that's going to take a very long time because, you know, the very last one. So I'm not saying that, you know, the significant amount of our business will stay perpetual because we really pushing hard and making very good progress in that switchover. But I do expect that there will be some customer segments, market segments that remain on perpetual for quite a while.
Okay. Got it. Appreciate the color. Thanks.
Thank you so much. I'm showing no further questions at this time. I would now like to turn it back to Brigitte for closing remarks.
Well, thank you again for joining us today. And we look forward to continuing our dialogue with you, obviously, through our investor conferences or one-on-one meetings or calls. And we obviously hope to see many of you during the upcoming form next in November. Please reach out to us if you have any further questions. So for now, thank you and goodbye.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.