Materialise Reports Third Quarter 2017 Results

LEUVEN, Belgium--(BUSINESS WIRE)--Nov. 9, 2017-- Materialise NV (NASDAQ:MTLS), a leading provider of additive manufacturing software and of sophisticated 3D printing services, today announced its financial results for the third quarter ended September 30, 2017.

Highlights – Third Quarter 2017

  • Total revenue increased 12.4% from the third quarter of 2016 to 32,307 kEUR, with increases in all three business segments.
  • Adjusted EBITDA increased 15.0% from 2,833 kEUR for the third quarter of 2016 to 3,259 kEUR.
  • Revenue and Adjusted EBITDA guidance for 2017 updated to reflect the acquisition of ACTech on October 4, 2017.

Executive Chairman Peter Leys commented, “During the third quarter, Materialise invested significantly in our future growth, finishing our new production and office facilities in Poland and Belgium and completing negotiations for the acquisition of ACTech GmbH in Germany, a full-service manufacturer of complex metal parts. The expertise and in-house infrastructure of ACTech GmbH position us to accelerate the development of our existing metal competence center, including our software suite for 3D metal printing. Simultaneously, we continued to execute on other elements of our strategy: we were the first to receive the U.S. green light for our 3D-printed maxillofacial implants that will allow our long-term collaborator DePuy Synthes to bring these products to market in the United States. Meanwhile, our three segments all continued to contribute to our topline growth and generated positive EBITDA.”

Third Quarter 2017 Results

Total revenue for the third quarter of 2017 increased 12.4% to 32,307 kEUR compared to 28,736 kEUR for the third quarter of 2016, with gains in all three of our segments. Total deferred revenue from annual software sales and maintenance contracts amounted to 16,607 kEUR at the end of the third quarter of 2017 compared 16,799 kEUR at the end of the fourth quarter of 2016. Adjusted EBITDA, which in the third quarter of 2017 excludes 266 kEUR of expenses related to the acquisition of ACTech, increased to 3,259 kEUR from 2,833 kEUR as a result of the combination of continued revenue growth (12.4%) and a lower increase in operational expenses compared to the third quarter of 2016. The Adjusted EBITDA margin (Adjusted EBITDA divided by total revenue) in the third quarter of 2017 was 10.1% compared to 9.9% in the third quarter of 2016.

Revenue from our Materialise Software segment increased 10.4% to 8,422 kEUR for the third quarter of 2017 from 7,632 kEUR for the same quarter last year. Segment EBITDA rose to 3,362 kEUR from 2,814 kEUR while the segment EBITDA margin was 39.9% compared to 36.9% for the prior-year period.

Revenue from our Materialise Medical segment increased 9.3% to 10,421 kEUR for the third quarter of 2017 compared to 9,537 kEUR for the same period in 2016. Compared to the same quarter in 2016, revenues from our medical software grew 24.6%, and revenues from medical devices and services grew 2.1%. Segment EBITDA was 1,170 kEUR compared to 754 kEUR while the segment EBITDA margin increased to 11.2% from 7.9% in the third quarter of 2016.

Revenue from our Materialise Manufacturing segment increased 16.3% to 13,456 kEUR for the third quarter of 2017 from 11,567 kEUR for the third quarter of 2016. Segment EBITDA decreased to 499 kEUR from 1,723 kEUR while the segment EBITDA margin decreased to 3.7% from 14.9% for the same quarter in 2016. While last year’s third quarter segment EBITDA included 460 kEUR related to an updated accounting valuation of resin materials stock, in the 2017 period, segment EBITDA was affected by higher cost of sales from the sales of eyewear scanners.

Gross profit was 17,873 kEUR, or 55.3% of total revenue, for the third quarter of 2017 compared to 16,937 kEUR, or 58.9% of total revenue, for the third quarter of 2016.

Research and development (“R&D”), sales and marketing (“S&M”) and general and administrative (“G&A”) expenses increased, in the aggregate, 8.5% to 19,509 kEUR for the third quarter of 2017 from 17,974 kEUR for the third quarter of 2016. R&D expenses increased from 4,389 kEUR to 4,701 kEUR while S&M expenses increased from 8,299 kEUR to 8,753 kEUR. G&A expenses increased from 5,286 kEUR to 6,055 kEUR. The G&A expenses for the third quarter of 2017 included a portion of the expenses related to the acquisition of ACTech, which are excluded from Adjusted EBITDA.

Net other operating income increased by 45 kEUR to 1,414 kEUR compared to 1,369 kEUR for the third quarter of 2016.

Operating result decreased to (222) kEUR from 332 kEUR for the same period in the prior year. This decrease was the result of the increase of 8.5% in R&D, S&M and G&A expenses, which was offset in part by the increase in gross profit of 5.5%. The operating result was also negatively affected by depreciation cost, which increased to 2,918 kEUR from 2,144 kEUR for the third quarter of 2016, and by the 266 kEUR of expenses related to the acquisition of ACTech.

Net financial result was (593) kEUR compared to (124) kEUR for the prior-year period, reflecting variances in currency exchange rates, primarily on the portion of the company’s IPO proceeds held in U.S. dollars versus the euro.

Net loss for the third quarter of 2017 was (1,413) kEUR compared to net loss of (52) kEUR for the same period in 2016. The 2016 period contained income tax expense of (191) kEUR compared to (433) kEUR this quarter. The variance of (242) kEUR in income tax, the decrease in the net financial result of 469 kEUR, a decrease of (96) kEUR in the share in the loss of a joint venture and the decrease of the operating result by (554) kEUR explain the increase in the net loss for the third quarter of 2017. Total comprehensive loss for the third quarter of 2017, which includes exchange differences on translation of foreign operations, was (1,568) kEUR compared to (511) kEUR for the same period in 2016.

At September 30, 2017, we had cash and equivalents of 48,099 kEUR compared to 55,912 kEUR at December 31, 2016. Cash flow from operating activities in the third quarter of 2017 was 2,518 kEUR compared to 4,315 kEUR in the same period in 2016.

Net shareholders’ equity at September 30, 2017 was 76,060 kEUR compared to 79,033 kEUR at December 31, 2016.

2017 Guidance

Mr. Leys concluded, “We are adjusting our revenue and Adjusted EBITDA guidance for 2017 to reflect our acquisition of ACTech in the fourth quarter. For fiscal 2017, we now expect to report consolidated revenue between 140,000 – 143,000 kEUR and Adjusted EBITDA between 13,000 – 14,000 kEUR. Separately, based on year-to-date software sales, we are revising our outlook for deferred revenue from annual licenses and maintenance in 2017 and now expect an increase between 2,000 – 3,000 kEUR as compared to 2016.”

The company previously expected to report consolidated revenue between 128,000 - 134,000 kEUR and Adjusted EBITDA between 10,500 – 13,500 kEUR in 2017, with amounts closer to the high end of those ranges. The amount of deferred revenue generated in 2017 from annual licenses and maintenance was previously expected to increase by an amount between 4,000 - 5,000 kEUR as compared to 2016.

Non-IFRS Measures

Materialise uses EBITDA and Adjusted EBITDA as supplemental financial measures of its financial performance. EBITDA is calculated as net profit plus income taxes, financial expenses (less financial income), shares of loss in a joint venture and depreciation and amortization. Adjusted EBITDA is determined by adding non-cash stock-based compensation expenses and acquisition-related expenses of business combinations to EBITDA. Management believes these non-IFRS measures to be important measures as they exclude the effects of items which primarily reflect the impact of long-term investment and financing decisions, rather than the performance of the company's day-to-day operations. As compared to net profit, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the company's business, or the charges associated with impairments. Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities. The company believes that these measurements are useful to measure a company's ability to grow or as a valuation measurement. The company's calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. EBITDA and Adjusted EBITDA should not be considered as alternatives to net profit or any other performance measure derived in accordance with IFRS. The company's presentation of EBITDA and Adjusted EBITDA should not be construed to imply that its future results will be unaffected by unusual or non-recurring items.

Exchange Rate

This press release contains translations of certain euro amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from euros to U.S. dollars in this press release were made at a rate of EUR 1.00 to USD 1.1806, the reference rate of the European Central Bank on September 30, 2017.

Conference Call and Webcast

Materialise will hold a conference call and simultaneous webcast to discuss its financial results for the third quarter of 2017 today, Thursday, November 9, 2017, at 8:30 a.m. ET/2:30 p.m. CET. Company participants on the call will include Wilfried Vancraen, Founder and Chief Executive Officer; Peter Leys, Executive Chairman; and Johan Albrecht, Chief Financial Officer. A question-and-answer session will follow management’s remarks.

To access the conference call, please dial 844-469-2530 (U.S.) or 765-507-2679 (international), passcode #98716965. The conference call will also be broadcast live over the Internet with an accompanying slide presentation, which can be accessed on the company’s website at http://investors.materialise.com.

A webcast of the conference call will be archived on the company's website for one year.

About Materialise

Materialise incorporates 27 years of 3D printing experience into a range of software solutions and 3D printing services, which together form the backbone of the 3D printing industry. Materialise’s open and flexible solutions enable players in a wide variety of industries, including healthcare, automotive, aerospace, art and design, and consumer goods, to build innovative 3D printing applications that aim to make the world a better and healthier place. Headquartered in Belgium, with branches worldwide, Materialise combines one of the largest groups of software developers in the industry with one of the largest 3D printing facilities in the world. For additional information, please visit: www.materialise.com.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our intentions, beliefs, assumptions, projections, outlook, analyses or current expectations, plans, objectives, strategies and prospects, both financial and business, including statements concerning, among other things, current estimates of fiscal 2017 revenues, deferred revenue from annual licenses and maintenance and Adjusted EBITDA, the benefits of the ACTech acquisition, completion of start-up activities associated with our new manufacturing facilities, results of operations, cash needs, capital expenditures, expenses, financial condition, liquidity, prospects, growth and strategies, and the trends and competition that may affect the markets, industry or us. Such statements are subject to known and unknown uncertainties and risks. When used in this press release, the words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “forecast,” “will,” “may,” “could,” “might,” “aim,” “should,” and variations of such words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon the expectations of management under current assumptions at the time of this press release. These expectations, beliefs and projections are expressed in good faith and the company believes there is a reasonable basis for them. However, the company cannot offer any assurance that our expectations, beliefs and projections will actually be achieved. By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. All of the forward-looking statements are subject to risks and uncertainties that may cause the company's actual results to differ materially from our expectations, including risk factors described in the company's annual report on Form 20-F filed with the U.S. Securities and Exchange Commission on May 1, 2017. There are a number of risks and uncertainties that could cause the company's actual results to differ materially from the forward-looking statements contained in this press release.

The company is providing this information as of the date of this press release and does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise, unless it has obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.

Source: Materialise NV

Investor:
LHA
Harriet Fried/Jody Burfening
212-838-3777
hfried@lhai.com

 

Consolidated income statement (Unaudited)

 
   

For the three months ended
September 30

 

For the nine months
ended September
30

(in thousands, except per share amounts)   2017   2017   2016   2017   2016
    U.S.$        
                     
Revenue   38,142     32,307     28,736     97,840     83,000  
Cost of sales   (17,041 )   (14,434 )   (11,799 )   (42,102 )   (33,848 )

Gross profit

  21,101     17,873     16,937     55,738     49,152  
Gross profit as % of revenue   55.3 %   55.3 %   58.9 %   57.0 %   59.2 %
                     
Research and development expenses   (5,550 )   (4,701 )   (4,389 )   (14,424 )   (13,521 )
Sales and marketing expenses   (10,334 )   (8,753 )   (8,299 )   (28,370 )   (26,647 )
General and administrative expenses   (7,149 )   (6,055 )   (5,286 )   (17,205 )   (15,225 )
Net other operating income (expenses)   1,669     1,414     1,369     3,660     4,433  
Operating (loss) profit   (263 )   (222 )   332     (601 )   (1,808 )
                     
Financial expenses   (1,249 )   (1,058 )   (182 )   (3,294 )   (1,688 )
Financial income   549     465     58     2,132     1,037  
Share in loss of joint venture   (195 )   (165 )   (69 )   (596 )   (368 )
(Loss) profit before taxes   (1,158 )   (980 )   139     (2,359 )   (2,827 )
                     
Income taxes   (511 )   (433 )   (191 )   (825 )   (812 )
Net (loss) profit of the period   (1,669 )   (1,413 )   (52 )   (3,184 )   (3,639 )
Net (loss) profit attributable to:                    
The owners of the parent   (1,669 )   (1,413 )   (52 )   (3,184 )   (3,639 )
Non-controlling interest                    
                     
Earnings per share attributable to ordinary owners of the parent                    
Basic   (0.04 )   (0.03 )   (0.00 )   (0.07 )   (0.08 )
Diluted   (0.04 )   (0.03 )   (0.00 )   (0.07 )   (0.08 )
                     
Weighted average basic shares outstanding   47,325     47,325     47,325     47,325     47,325  
Weighted average diluted shares outstanding   47,325     47,325     47,325     47,325     47,325  
                               
 

Consolidated statements of comprehensive income (Unaudited)

 
   

For the three months ended
September 30

 

For the nine months
ended September
30

(in thousands)   2017   2017   2016   2017   2016
    U.S.$        
                     
Net profit (loss) for the period   (1,669 )   (1,413 )   (52 )   (3,184 )   (3,639 )
Other comprehensive income                    
Exchange difference on translation of foreign operations   (183 )   (155 )   (459 )   (481 )   (1,898 )
Other comprehensive income (loss), net of taxes   (183 )   (155 )   (459 )   (481 )   (1,898 )
Total comprehensive income (loss) for the year, net of taxes   (1,852 )   (1,568 )   (511 )   (3,665 )   (5,537 )
Total comprehensive income (loss) attributable to:                    
The owners of the parent   (1,852 )   (1,568 )   (511 )   (3,665 )   (5,537 )
Non-controlling interest                    
                               
 

Consolidated statement of financial position (Unaudited)

 
   

As of
September
30

 

As of
December
31

(in thousands)   2017   2016
     
Assets        
         

Non-current assets

       
Goodwill   8,743   8,860
Intangible assets   11,219   9,765
Property, plant & equipment   62,643   45,063
Investments in joint ventures    
Deferred tax assets   408   336
Other non-current assets   2,740   2,154
Total non-current assets   85,753   66,178
         

Current assets

       
Inventories   8,642   7,870
Trade receivables   30,656   27,479
Held to maturity investments    
Other current assets   6,991   4,481
Cash and cash equivalents   48,099   55,912
Total current assets   94,388   95,742
Total assets   180,141   161,920
         
         
   

As of
September
30

 

As of
December
31

(in thousands)   2017   2016
     

Equity and liabilities

       
Equity        
Share capital   2,729     2,729  
Share premium   79,703     79,019  
Consolidated reserves   (4,779 )   (1,603 )
Other comprehensive income   (1,593 )   (1,112 )
Equity attributable to the owners of the parent   76,060     79,033  
Non-controlling interest        
Total equity   76,060     79,033  
         

Non-current liabilities

       
Loans & borrowings   46,532     28,267  
Deferred tax liabilities   932     1,325  
Deferred income   3,728     3,588  
Other non-current liabilities   2,220     1,873  
Total non-current liabilities   53,412     35,053  
         

Current liabilities

       
Loans & borrowings   7,033     5,539  
Trade payables   14,171     13,400  
Tax payables   967     926  
Deferred income   18,130     17,822  
Other current liabilities   10,368     10,147  
         

Total current liabilities

  50,669     47,834  
Total equity and liabilities   180,141     161,920  
             
 

Consolidated statement of cash flows (Unaudited)

 
   

For the nine months
ended September 30

(in thousands)   2017   2016
     
Operating activities        
Net (loss) profit of the period   (3,184 )   (3,639 )
Non-cash and operational adjustments        
Depreciation of property, plant & equipment   6,008     4,669  
Amortization of intangible assets   2,134     1,425  
Share-based payment expense   997     718  
Loss (gain) on disposal of property, plant & equipment   (7 )   (147 )
Fair value contingent liabilities       54  
Movement in provisions   21      
Movement reserve for bad debt   191     (2 )
Financial income   (416 )   (126 )
Financial expense   957     668  
Impact of foreign currencies   621     55  
Share in loss of a joint venture (equity method)   596     368  
Deferred tax expense (income)   (395 )   225  
Income taxes   1,219     587  
Other   (42 )   7  
Working capital adjustment & income tax paid        
Increase in trade receivables and other receivables   (5,916 )   (2,394 )
Decrease (increase) in inventories   (804 )   (828 )
Increase in trade payables and other payables   1,789     3,203  
Income tax paid   (1,251 )   (528 )
Net cash flow from operating activities   2,518     4,315  
             
     
   

For the nine months
ended September 30

(in thousands)   2017   2016
     
Investing activities        
Purchase of property, plant & equipment   (22,245 )   (6,816 )
Purchase of intangible assets   (3,739 )   (871 )
Proceeds from the sale of property, plant & equipment (net)   54     192  
Proceeds from the sale of intangible assets (net)   36      
Acquisition of subsidiary        
Investments in joint-ventures   (500 )    
Interest received   267     7  
Net cash flow used in investing activities   (26,127 )   (7,488 )
         

Financing activities

       
Proceeds from loans & borrowings   22,794     7,004  
Repayment of loans & borrowings   (2,827 )   (2,116 )
Repayment of finance leases   (2,081 )   (1,293 )
Interest paid   (502 )   (406 )
Other financial income (expense)   (251 )   (7 )
Net cash flow from (used in) financing activities   17,133     3,182  
         
Net increase of cash & cash equivalents   (6,476 )   9  
Cash & cash equivalents at beginning of the year   55,912     50,726  
Exchange rate differences on cash & cash equivalents   (1,337 )   (245 )
Cash & cash equivalents at end of the year   48,099     50,490  
             
 

Reconciliation of Net Profit (Loss) to EBITDA and Adjusted EBITDA (Unaudited)

 
   

For the three
months ended
September 30

 

For the nine months
ended September
30

(in thousands)   2017   2016   2017   2016
         
                 
Net profit (loss) for the period   (1,413 )   (52 )   (3,184 )   (3,639 )
                 
Income taxes   433     191     825     812  
Financial expenses   1,058     181     3,294     1,688  
Financial income   (465 )   (58 )   (2,132 )   (1,037 )
Share in loss of joint venture   165     69     596     368  
Depreciation and amortization   2,918     2,144     8,142     6,094  
                 
EBITDA   2,696     2,475     7,541     4,286  
                 
Non-cash stock-based compensation expense (1)   297     358     997     717  
Acquisition-related expenses (2)   266         266      
                 
ADJUSTED EBITDA   3,259     2,833     8,804     5,003  
                         
     
(1)   Non-cash stock-based compensation expenses represent the cost of equity-settled and cash-settled share-based payments to employees.
     
(2)   Acquisition-related expenses of business combinations represent expenses incurred in connection with the ACTech acquisition.
     
 

Segment P&L (Unaudited)

 

(in thousands)

 

Materialise
Software

 

Materialise
Medical

 

Materialise
Manufact-
uring

 

Total
segments

  Unallocated  

Consoli-
dated

             
                         
For the three months ended September 30, 2017                        
Revenues   8,422     10,421     13,456     32,299     8     32,307  
Segment EBITDA   3,362     1,170     499     5,031     (2,335 )   2,696  
                         

Segment EBITDA %

  39.9 %   11.2 %   3.7 %   15.6 %       8.3 %
                         
For the three months ended September 30, 2016                        
Revenues   7,632     9,537     11,567     28,736         28,736  
Segment EBITDA   2,814     754     1,723     5,291     (2,816 )   2,475  
                         

Segment EBITDA %

  36.9 %   7.9 %   14.9 %   18.4 %       8.6 %
                                   
                         
(in thousands)  

Materialise
Software

 

Materialise
Medical

 

Materialise
Manufact-
uring

 

Total
segments

  Unallocated  

Consoli-
dated

             
                         
For the nine months ended September 30, 2017                        
Revenues   25,302     30,999     41,318     97,619     221     97,840  
Segment EBITDA   9,307     2,242     3,062     14,611     (7,070 )   7,541  
                         

Segment EBITDA %

  36.8 %   7.2 %   7.4 %   15.0 %       7.7 %
                         
For the nine months ended September 30, 2016                        
Revenues   22,044     27,849     33,080     82,973     27     83,000  
Segment EBITDA   7,181     238     2,410     9,829     (5,543 )   4,286  
                         

Segment EBITDA %

  32.6 %   0.9 %   7.3 %   11.8 %       5.2 %
                                   
 

Reconciliation of Net Profit (Loss) to Segment EBITDA (Unaudited)

 
   

For the three months
ended September 30

 

For the nine months
ended September 30

(in thousands)   2017   2016   2017   2016
         
                 
Net profit (loss) for the period   (1,413 )   (52 )   (3,184 )   (3,639 )
Income taxes   433     191     825     812  
Financial expenses   1,058     182     3,294     1,688  
Financial income   (465 )   (58 )   (2,132 )   (1,037 )
Share in loss of joint venture   165     69     596     368  
                 
Operating profit   (222 )   332     (601 )   (1,808 )
                 
Depreciation and amortization   2,918     2,144     8,142     6,094  
Corporate research and development   502     242     1,527     1,201  
Corporate headquarter costs   2,447     3,326     6,984     6,865  
Other operating income (expense)   (614 )   (753 )   (1,441 )   (2,523 )
                 
Segment EBITDA   5,031     5,291     14,611     9,829  

 

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