Materialise Reports Higher Profits for Q2 2021, Revenue Up

After a pandemic-laden 2020, Materialise (Nasdaq: MTLS) is set to benefit in 2021 owing to a solid recovery from its medical and manufacturing segments. The Belgian software and 3D printing service provider also has $110.4 million from the sale in the United States of four million American Depositary Shares (ADSs) to further accelerate several key growth drivers of its business. In particular, the continued rollout of its Magics and Mimics software platforms, an expansion in the cranio-maxillofacial (CMF) markets, and the go-to-market of wearables platforms in general and of the Materialise Motion footcare business line in particular.

Materialise saw earnings and revenue increase during the second quarter. As a result, the company posted a net profit of €3,4 million ($4 million) or 6 euro cents ($0.07) per share for the three months ending June 30, 2021, compared to a loss of €2 million ($2.4 million) or 4 euro cents ($0.05) per share year over year. In addition, the company reported a 33% on-year rise in revenue to €50.7 million ($60.2 million) from €38.1 million ($45.2 million). This year-on-year revenue growth reflects increases in all three business segments: software was up 5.2%, manufacturing increased 38.7%, and medical surged up 49.5%.

Materialise CEO Wilfried Vancraen holding 3D printed part. Image courtesy of Materialise.

CEO Wilfried Vancraen told investors during the quarterly earnings call on July 29, 2021, that the key verticals for its medical and paramedical segment remain orthopedics, CMF, footwear, and eyewear and that the business intends to continue investing in initiatives that will accelerate its growth. For example, Vancraen highlighted that the success of Materialise’s CMF personalization platform (which exists thanks to a partnership with Johnson & Johnson) is an important contributor to the overall success of its healthcare division and that the company plans to keep investing in said partnership as well as other synergically-relevant merger and acquisition opportunities.

Determined to accelerate growth, Vancraen said Materialise would continue investing in the expansion and innovation of its market-leading horizontal software platforms, Magics and Mimics. Over the last couple of years, the introduction of the 3D medical imaging processing Mimics software in hospitals has contributed significantly to the overall success of the medical portfolio. Moreover, the CEO explained that they are currently developing additional artificial intelligence (AI) functionality for Mimics and intend to introduce augmented reality and virtual reality functionality to the Mimics Suite. Via the new funds raised from the shares sold, Materialise expects to increase its internal development capacity and could consider undertaking other initiatives to speed up some of these developments.

Sales of the Magics flagship product – a software that enables users of AM technology to be more productive, cost-efficient, and sustainable – remained strong throughout and better than Mimics, showing considerable growth in the second quarter of the year, revealed Vancraen. To expand customer market share for this product, Materialise makes many of the software’s functionalities accessible through the cloud. Additionally, plans to move on with the acquisition of fellow software developer Link3D are still spot on, and the deal could happen by the end of 2021. The union will eventually allow customers seamless access between Link3D software and Materialise’s Magics 3D print suite to further broaden connectivity and visibility across the entire AM workflows and ensuring clients can scale their 3D printing capabilities across complex supply chains while achieving “greater operational excellence.”

Materialise Magics 3D print suite. Image courtesy of Materialise.

During the quarter, Materialise managed to revert its numbers to pre-pandemic levels, with revenue growth of 5% compared to 2019. Additionally, EBITDA numbers for the second quarter more than doubled, increasing from €3.4 million ($4 million) last year to €6.9 million ($8.2 million) this period, a 37% growth. Materialise Chief Financial Officer Johan Albrecht attributed this increase to various positive factors, including an improved gross margin triggered by increased insourcing and continuous productivity improvements.

Furthermore, as capacity usage increased, gross margin returned to pre-Covid levels, and operating expenses remained 3% below Q2 2019. As a result, the EBITDA margin improved to 8% from 4% last year. The 3D printing business had a strong quarter as revenues increased over the past months, and further recovery in the industry is expected for the third and fourth quarters of the year.

For the remainder of 2021, management auspices a positive, albeit fragile and fairly diverse, global trend of businesses gradually recovering from the pandemic crisis.

Executive Chairman Peter Leys commented, “assuming that the strength continues in the right direction over the next few months, we currently expect our consolidated revenues for the entire year 2021 to exceed the level that they reached in 2019, which was close to €197 million ($234 million). We also see a likelihood of our revenues come to close to €200 million ($237 million). This would represent a growth compared to 2020 between 15% and 17%.”