As Materialise (Nasdaq: MTLS) transitions to new leadership, its third-quarter 2023 earnings set a promising tone for the incoming era. After three decades at the helm, Wilfried Vancraen is set to pass the torch, with Brigitte de Vet-Veithen poised to assume the role of CEO. In this strategic reshuffling, Vancraen won’t be departing the scene; instead, he will transition to Chairman of the Board of Directors, effective January 1, 2024. In this backdrop of change, the company demonstrated a significant increase in total revenue, adjusted EBITDA, and net profit. Additionally, reflecting investor optimism, the stock price rose from an opening of $5.02 to a closing of $5.45 on the day of the earnings release – a jump of 8.57%.
As Materialise navigates through key transitions, the third-quarter results solidify the company’s financial trajectory and offer confidence to its stakeholders. The positive performance not only sets a promising stage for de Vet-Veithen’s upcoming leadership but also highlights Vancraen’s continued involvement in his new role.
Though set to be the new face of Materialise’s leadership, de Vet-Veithen is not new to the company. During an earning call with investors, Vancraen emphasized her leadership over the past seven years, especially after she took over the general management of Materialise’s medical segment, making it the most profitable among the company’s various segments.
“Over her tenure at the helm of Materialise Medical, she has grown this segment to become the most profitable of all the company segments today. We are confident that under her leadership, Materialise will continue its track as a built-to-last company. Brigitte will provide continuity as over the last 7 years she delivered ample proof that you could guide her management team in delivering value to patients and all other stakeholders in the medical device companies and hospitals,” added Vancraen.
Diving deeper into the quarterly earnings, the report suggests that the company is on a robust growth path. A 3.2% increase in total revenue, climbing to €60 million ($63.6 million) from last year’s €58.3 million ($62 million), demonstrates Materialise’s market resilience and adaptability. More notably, its adjusted EBITDA saw a 55% leap to €7.9 million ($8.4 million), compared to the previous year’s €5 million ($5.3 million). Furthermore, the adjusted EBITDA margin, which explains the company’s earning capacity, stood at an impressive 13.1%, up from 8.7% last year. Additionally, the net profit for the period skyrocketed by 184% to €4 million ($4.2 million). These numbers reveal a lot about the efficiency with which the company uses its resources and capital.
Executive Chairman Peter Leys weighed in on the results, underscoring the consistent demand for Materialise’s products and solutions. Despite challenging global macroeconomic conditions, Materialise’s consolidated revenue grew by 3% year-on-year. A significant driver of this performance was the continued double-digit revenue increase of the company’s medical segment, further highlighting de Vet-Veithen’s impactful leadership. Revenue from Materialise’s medical segment increased by 13.4% to €24.3 million ($25.7 million) and accounted for 40% of the company’s total revenue.
In contrast, the brand’s manufacturing segment faced some challenges, seeing a slight dip of 3.8% in revenue. These variances across segments are typical for diversified companies, especially during economic instability, highlighting the importance of a diversified portfolio for stability. Materialise’s CFO Koen Berges indicated that over the past summer months, less favorable market conditions impacted the company’s manufacturing segment. Revenue here decreased to €25.1 million ($27 million), mainly due to a general slowdown in the prototyping markets. Executive management suggested that more challenging market conditions impacted the segment’s revenue and gross margin. Still, they managed to contain indirect costs and continued investments in their motion and eyewear business lines as planned.
When it comes to the operational side of the business, the gross profit achieved by Materialise is noteworthy. Climbing to €33.7 million ($35.7 million), it now represents 56% of the revenue, an improvement from the 55% recorded in the third quarter of 2022. It’s essential to understand that this increment, although seeming marginal, can have important implications for stakeholders. What’s more, the combined operational expenses, spanning across research and development, sales and marketing, and general administration, saw a 4.2% reduction, settling at €32 million ($34 million)
As of September 30, 2023, Materialise’s cash and cash equivalents are solid at €134 million ($142 million). After accounting for gross debt, their net cash position was an impressive €67.7 million ($71.6 million), reinforcing the company’s strong financial standing amid unforeseen economic turbulence.
Future’s bright blueprint
During the earnings call, Vancraen shared critical insights about the 3D printing industry’s trajectory. He emphasized that while the value of 3D printing is now widely acknowledged, the focus has shifted from “why” to “how” it can be beneficial. However, there are challenges in scaling up, mainly due to having so many different systems and tools trying to work together. Vancraen showed how, back in the ’90s, Intel made the actual computer parts, and Microsoft provided the software. They worked closely together, ensuring their products meshed well, making computers more accessible and efficient. This sort of teamwork is missing in today’s 3D printing world. Right now, there are so many different tools and systems, and getting them all to work together is costly and time-consuming, says Vancraen.
“The companies in the 3D printing industry must commit resources to ensure that our printers and accompanying software are compatible with an array of devices, operating systems and file formats. This does not only incur costs but also divest resources that could otherwise be channeled into innovation and growth. As such, this complexity may hinder the growth of the 3D printing industry, where interoperability and compatibility are paramount. As a consequence, the advent of distributed manufacturing is delayed,” adds Vancraen.
As the company looks ahead, the guidance for 2023 remains optimistic. Materialise projects full-year revenues to be within the range of €255 million ($270 million) to €260 million ($275 million). The Adjusted EBITDA guidance remains steady, estimated to be between €28 million ($30 million) and €33 million ($35 million) for the fiscal year.
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