LEUVEN, Belgium — (BUSINESS WIRE) — August 6, 2019 — 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, 2019.
Highlights – Second Quarter 2019
- Total revenue increased 7.4% to 48,404 kEUR for the second quarter of 2019 from 45,076 kEUR for the second quarter of 2018.
- Total deferred revenue from annual software sales and maintenance contracts increased by 2,218 kEUR to 24,824 kEUR from 22,606 kEUR at the end of 2018.
- Adjusted EBITDA amounted to 5,059 kEUR for the second quarter of 2019, or an Adjusted EBITDA margin of 10.5%.
- Net loss for the second quarter of 2019 was (297) kEUR, or (0.01) EUR per diluted share, compared to 369 kEUR, or 0.01 EUR per diluted share, for the same period last year.
Executive Chairman Peter Leys commented, “In spite of a macro-economic environment that continues to be challenging, Materialise reported another quarter of top-line growth. This was mainly driven by Materialise Medical, which continued to perform strongly with solid revenue growth and EBITDA performance, and also by Materialise Manufacturing, which realized a double-digit EBITDA margin and grew its revenues for the third consecutive quarter. This quarter, the contribution by Materialise Software to our revenue growth and Adjusted EBITDA margin was below our expectations as a number of sales were pushed out to the second half of the year. Our outlook for 2019 remains within our previous guidance range, with our results now including expected contributions from our August acquisition of a 75% stake in Engimplan. This investment, which will enable us to introduce the benefits of Materialise’s patient-specific 3D printing implants and expertise to the fast-growing Brazil market, is part of our strategy to accelerate our growing presence in the additive manufacturing ecosystem through carefully selected acquisitions and partnerships.”
Second Quarter 2019 Results
Total revenue for the second quarter of 2019 increased 7.4% to 48,404 kEUR compared to 45,076 kEUR for the second quarter of 2018. Adjusted EBITDA decreased to 5,059 kEUR from 5,219 kEUR. The Adjusted EBITDA margin (Adjusted EBITDA divided by total revenue) for the second quarter of 2019 was 10.5% compared to 11.6% in the second quarter of 2018.
Revenue from our Materialise Software segment increased 2.1% to 9,320 kEUR for the second quarter of 2019 from 9,131 kEUR for the same quarter last year. Segment EBITDA decreased to 2,055 kEUR from 2,859 kEUR while the segment EBITDA margin was 22.1% compared to 31.3% in the prior-year period.
Revenue from our Materialise Medical segment increased 17.3% to 14,546 kEUR for the second quarter of 2019 compared to 12,400 kEUR for the same period in 2018. Compared to the same quarter in 2018, revenues from medical devices and services grew 12.8%, and revenues from our medical software grew 28.0%. Segment EBITDA was 2,738 kEUR compared to 2,124 kEUR while the segment EBITDA margin increased from 17.1% to 18.8% for the second quarter of 2019.
Revenue from our Materialise Manufacturing segment increased 5.0% to 24,550 kEUR for the second quarter of 2019 from 23,387 kEUR for the second quarter of 2018. Segment EBITDA increased to 2,835 kEUR from 2,264 kEUR while the segment EBITDA margin increased to 11.5% from 9.7% for the second quarter of 2018.
Gross profit was 26,527 kEUR, or 54.8% of total revenue, for the second quarter of 2019 compared to 24,788 kEUR, or 55.0% of total revenue, for the second quarter of 2018.
Research and development (“R&D”), sales and marketing (“S&M”) and general and administrative (“G&A”) expenses increased, in the aggregate, 8.4% to 27,861 kEUR for the second quarter of 2019 from 25,699 kEUR for the second quarter of 2018.
Net other operating income decreased to 1,370 kEUR from 1,840 kEUR for the second quarter of 2018.
Operating result decreased to 36 kEUR from 928 kEUR for the same period in the prior year.
Net financial result was (190) kEUR compared to (376) kEUR for the prior-year period. The share in loss of joint venture amounted to (82) kEUR compared to (141) kEUR for the same period last year.
The second quarter of 2019 contained income tax expenses of (61) kEUR, compared to (42) kEUR in the second quarter of 2018.
As a result of the above, net loss for the second quarter of 2019 was (297) kEUR, compared to 369 kEUR for the same period in 2018. Total comprehensive income for the second quarter of 2019, which includes exchange differences on translation of foreign operations, was (727) kEUR compared to a gain of 422 kEUR for the same period in 2018.
At June 30, 2019, we had cash and equivalents of 108,865 kEUR compared to 115,506 kEUR at December 31, 2018. Gross debt amounted to 107,698 kEUR (including 5,050 kEUR lease liabilities from the new accounting standard IFRS 16), as compared to 106,037 kEUR at December 31, 2018. Cash flow from operating activities for the second quarter of 2019 was 4,759 kEUR compared to 4,831 kEUR for the same period in 2018. Total capital expenditures for the quarter amounted to 3,052 kEUR. This amount includes 366 kEUR of capitalized R&D expenditures from medical programs.
Net shareholders’ equity at June 30, 2019 was 135,781 kEUR compared to 135,989 kEUR at December 31, 2018.
Note on Comparability
As a result of the implementation of the new accounting standard IFRS 16, we have recognized additional lease assets and liabilities in the amount of 4,998 kEUR at January 1, 2019. At the end of the second quarter of 2019, the total commitment of lease assets and liabilities amounted to 5,050 kEUR. Our Adjusted EBITDA for the second quarter of 2019 was affected positively by the new standard as a result of the rental payments decrease of 644 kEUR; however, our operating profit was impacted by only 52 kEUR as depreciation expenses increased by 593 kEUR.
On July 31, 2019 Materialise agreed to acquire a controlling stake in Engimplan Holdings Ltda., a Brazil-based manufacturer of orthopedic and cranio-maxillofacial (CMF) implants and instruments. The expertise and in-house infrastructure of Engimplan are complementary to our existing medical devices business and will position us to expand our market position in Brazil while further building on the existing business of Engimplan. Materialise will acquire a mix of existing and new shares bringing its total shareholding to 75%, with the founding shareholders retaining the remaining 25%. All shares will be fully paid for in cash at the closing, which is expected to take place during the week of August 5, 2019 .
On July 1, 2019, we drew the second tranche of 25,000 kEUR from our 35,000 kEUR credit facility with the European Investment Bank. This tranche has an interest rate of 2.719% and principal repayment dates between 2022 and 2027.
The Company’s outlook for fiscal 2019 remains within our previous guidance range, and management continues to expect to report consolidated revenue between 196,000 - 204,000 kEUR, Adjusted EBITDA between 29,000 - 33,000 kEUR, and an increase in deferred revenue generated from annual licenses and maintenance of between 2,000 - 4,000 kEUR as compared to 2018. We expect a stronger financial performance during the second half of 2019, in part because of the expected revenue and EBITDA contribution from our pending acquisition of a 75% stake in Engimplan. We do expect Adjusted EBITDA for 2019 to be closer to the lower end of the range.
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.