Materialise Reports Second Quarter 2018 Results
August 8, 2018
LEUVEN, Belgium--(BUSINESS WIRE)— August 7, 2018— Materialise NV (NASDAQ:MTLS), a leading provider of additive manufacturing and medical software and of sophisticated 3D printing services, today announced its financial results for the second quarter ended June 30, 2018.
Highlights – Second Quarter 2018
- Total revenue increased 34.1% from the second quarter of 2017 to 45,076 kEUR, driven by strong performances in our Materialise Medical segment and in theACTech business within our Materialise Manufacturing segment, which we acquired in October 2017.
- Total deferred revenue from annual software sales and maintenance contracts increased by 2,419 kEUR to 21,142 kEUR from 18,723 kEUR at year-end 2017.
- Adjusted EBITDA increased 90.9% from 2,732 kEUR for the second quarter of 2017 to 5,216 kEUR.
- Net result was 369 kEUR, or 0.01 EUR per diluted share, compared to (955) kEUR, or (0.02) EUR per diluted share, over the same period last year.
Executive Chairman Peter Leys commented, “The past several months have been an especially exciting period for Materialise. We delivered another set of good results for the second quarter, with particularly strong performances from our Materialise Medical segment and the ACTech business we added to our Materialise Manufacturing segment last October. This performance again demonstrates the benefits of our company’s diversified business model. In July, we announced a collaboration with BASF through which this leading chemicals company has invested US$25 million in Materialise to accelerate the advancement of the 3D printing sector through the development of innovative applications and new materials. We expect this collaboration to create siginficant new business opportunities in new markets over time. We also raised US$44.85 million in gross proceeds through a successful public offering of ADSs representing our shares, which included the full exercise of the underwriters' over-allotment option to purchase additional ADSs.”
On October 4, 2017, we acquired ACTech, a full-service manufacturer of complex metal parts. As described in more detail below, the acquired business has increased the scope of our Materialise Manufacturing segment’s operations and had a significant impact on our results of operations for the second quarter of 2018, resulting in increases to our revenues, operating expenses and net result, among other items.
Second Quarter 2018 Results
Total revenue for the second quarter of 2018 increased 34.1% (1.5% excluding ACTech) to 45,076 kEUR (34,113 kEUR excluding ACTech) compared to 33,612 kEUR for the second quarter of 2017. Total deferred revenue from annual software sales and maintenance contracts amounted to 21,142 kEUR at the end of the second quarter of 2018 compared to 18,723 kEUR at year end 2017. Adjusted EBITDA increased to 5,216 kEUR from 2,732 kEUR primarily as a result of the contribution by ACTech. Excluding ACTech, Adjusted EBITDA increased to 3,245 kEUR. The Adjusted EBITDA margin (Adjusted EBITDA divided by total revenue) in the second quarter of 2018 was 11.6% (9.5% excluding ACTech) compared to 8.1% in the second quarter of 2017.
Revenue from our Materialise Software segment increased 9.9% to 9,131 kEUR for the second quarter of 2018 from 8,305 kEUR for the same quarter last year. Segment EBITDA amounted to 2,859 kEUR compared to 2,952 kEUR in the prior-year period, while the segment EBITDA margin (the segment’s EBITDA divided by the segment’s revenue) was 31.3% compared to 35.5% in the prior-year period.
Revenue from our Materialise Medical segment increased 16.5% to 12,400 kEUR for the second quarter of 2018 compared to 10,646 kEUR for the same period in 2017. Compared to the same quarter in 2017, revenue from our medical software decreased 5.2%. Including deferred revenues from software and maintenance fees, medical software sales increased 8.9%. Revenue from medical devices and services grew 28.8%. Segment EBITDA was 2,124 kEUR compared to 758 kEUR while the segment EBITDA margin increased to 17.1% from 7.1% in the second quarter of 2017.
Revenue from our Materialise Manufacturing segment increased 61.8% to 23,387 kEUR for the second quarter of 2018 from 14,455 kEUR for the second quarter of 2017. Segment EBITDA increased to 2,264 kEUR from 1,241 kEUR while the segment EBITDA margin increased to 9.7% from 8.6% for the same quarter in 2017. ACTech contributed revenue of 10,958 kEUR and segment EBITDA of 1,971 kEUR, with a segment EBITDA margin of 18.0%. Excluding ACTech, revenue decreased 14.0% to 12,429 kEUR and segment EBITDA decreased to 293 kEUR.
Gross profit was 24,788 kEUR, or 55.0% of total revenue, for the second quarter of 2018. Excluding ACTech, gross profit was 21,189 kEUR, or 62.1% of total revenue, compared to 19,388 kEUR, or 57.7% of total revenue, for the second quarter of 2017.
Research and development (“R&D”), sales and marketing (“S&M”) and general and administrative (“G&A”) expenses increased, in the aggregate, 22.9% to 25,700 kEUR for the second quarter of 2018 from 20,911 kEUR for the second quarter of 2017. Excluding ACTech, operating expenses increased, in the aggregate, 10.5% to 23,096 kEUR. Excluding ACTech, R&D expenses increased from 5,131 kEUR to 5,830 kEUR while S&M expenses increased from 10,009 kEUR to 11,038 kEUR and G&A expenses increased from 5,771 kEUR to 6,228 kEUR.
Net other operating income increased by 613 kEUR to 1,841 kEUR compared to 1,228 kEUR for the second quarter of 2017. Excluding ACTech, net other operating income increased by 557 kEUR. Net other operating income consists primarily of withholding tax exemptions for qualifying researchers, development grants, partial funding of R&D projects, currency exchange results on purchase and sales transactions, and the depreciation of intangible assets from business combinations.
Operating result increased to 929 kEUR from (295) kEUR for the same period prior year, primarily as a result of the contribution by ACTech. Excluding ACTech, operating result amounted to (122) kEUR.
Net financial result was (376) kEUR compared to (427) kEUR for the prior-year period. The financial result included (414) kEUR net financial expenses related to ACTech. The share in loss of joint venture increased to (141) kEUR from (42) kEUR for the same period last year.
The second quarter of 2018 contained income tax expense of 43 kEUR, of which 206 kEUR was related to ACTech, compared to 191 kEUR in the second quarter of 2017.
As a result of the above, net profit for the second quarter of 2018 was 369 kEUR or ((62) kEUR excluding ACTech), compared to net loss of (955) KEUR for the same period in 2017. Total comprehensive profit for the second quarter of 2018, which includes exchange differences on translation of foreign operations, was 422 kEUR compared to a loss of (1,403) kEUR for the same period in 2017.
As at June 30, 2018, we had cash and equivalents of 48,719 kEUR compared to 43,175 kEUR as at December 31, 2017. Cash flow from operating activities over the first six months of 2018 was 11,031 kEUR compared to 5,188 kEUR in the same period in 2017. Net shareholders’ equity as at June 30, 2018 was 77,053 kEUR compared to 77,515 kEUR as at December 31, 2017.
As detailed in the company’s year-end fiscal 2017 earnings announcement, in fiscal 2018, management expects to report consolidated revenue between 180,000 - 185,000 kEUR and Adjusted EBITDA between 22,000 - 25,000 kEUR. Management also expects the amount of deferred revenue the company generates from annual licenses and maintenance in 2018 to increase by an amount between 2,000 - 4,000 kEUR as compared to 2017.
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.
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 1.1658, the reference rate of the European Central Bank on June 30, 2018.
Conference Call and Webcast
Materialise will hold a conference call and simultaneous webcast to discuss its financial results for the first quarter of 2018 on the same day, Tuesday, August 7, 2018, 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 #8889356. 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.
Materialise incorporates more than 25 years of 3D printing experience into a range of software solutions and 3D printing services, which 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 2018 revenues, deferred revenue from annual licenses and maintenance and Adjusted EBITDA, the benefits of our collaboration with BASF and the ACTech acquisition, results of operations, cash needs, capital expenditures, expenses, financial condition, liquidity, prospects, growth and strategies (including our strategic priorities for 2018), 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 April 30, 2018. 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.
Consolidated income statement (Unaudited)
Consolidated statements of comprehensive income (Unaudited)
Consolidated statement of financial position (Unaudited)
Consolidated statement of cash flows (Unaudited)
Reconciliation of Net Profit (Loss) to EBITDA and Adjusted EBITDA (Unaudited)
1) Non-cash stock-based compensation expenses represent the cost of equity-settled and cash-settled share-based payments to employees
(2) During the periods presented, we did not incur any fees or costs in connection with acquisitions.
Segment P&L (Unaudited)
(1) Unallocated Revenues consist of occasional one-off sales by our core competencies not allocated to any of our segments. Unallocated Segment EBITDA consists of corporate research and development, corporate headquarter costs and net other operating income (expense).
Reconciliation of Net Profit (Loss) to Segment EBITDA (Unaudited)