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Materialise Reports First Quarter 2018 Results

LEUVEN, Belgium — (BUSINESS WIRE) — May 4, 2018 — Materialise NV (NASDAQ: MTLS), a leading provider of additive manufacturing software and of sophisticated 3D printing services, today announced its financial results for the first quarter ended March 31, 2018.

Highlights – First Quarter 2018

Executive Chairman Peter Leys commented, “In the year’s opening quarter, we focused as planned on advancing the many initiatives and collaborations we have implemented in recent years to position Materialise at the heart of the additive manufacturing ecosystem. Our efforts showed particular success in Materialise Medical, where we realized revenue growth of 20% and achieved a record EBITDA margin of 17%. Our recently acquired ACTech business also turned in an excellent performance and is strengthening our multi-faceted business model. We believe we are on track to meet our financial guidance for 2018.”

ACTech

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 first quarter of 2018, resulting in increases to our revenues, operating expenses and net result, among other items.

First Quarter 2018 Results

Total revenue for the first quarter of 2018 increased 37.5% (2.4% excluding ACTech) to 43,899 kEUR (32,702 kEUR excluding ACTech) compared to 31,921 kEUR for the first quarter of 2017. Total deferred revenue from annual software sales and maintenance contracts amounted to 20,839 kEUR at the end of the first quarter of 2018 compared to 18,723 kEUR at the end of 2017. Adjusted EBITDA increased to 5,224 kEUR from 2,813 kEUR primarily as a result of the contribution by ACTech. Excluding ACTech, Adjusted EBITDA decreased to 2,383 kEUR. The Adjusted EBITDA margin (Adjusted EBITDA divided by total revenue) in the first quarter was 11.9% (7.3% excluding ACTech) compared to 8.8% in the first quarter of 2017.

Revenue from our Materialise Software segment decreased 2.9% to 8,326 kEUR for the first quarter of 2018 from 8,575 kEUR for the same quarter last year. Including deferred revenues from software sales and maintenance of 1,807 kEUR, the segment’s sales increased 7.5% compared to the prior-year period, reflecting a 26.4% increase of recurrent sales from annual and renewed licenses and maintenance fees. Segment EBITDA decreased to 2,324 kEUR from 2,993 kEUR while the segment EBITDA margin was 27.9% compared to 34.9% in the prior-year period.

Revenue from our Materialise Medical segment increased 20.3% to 11,946 kEUR for the first quarter of 2018 compared to 9,932 kEUR for the same period in 2017. Compared to the same quarter in 2017, revenue from our medical software grew 18.1%, and revenue from medical devices and services grew 21.5%. Segment EBITDA was 2,060 kEUR compared to 314 kEUR while the segment EBITDA margin increased to 17.2% from 3.2% in the first quarter of 2017.

Revenue from our Materialise Manufacturing segment increased 76.3% to 23,632 kEUR for the first quarter of 2018 from 13,407 kEUR for the first quarter of 2017. Segment EBITDA increased to 3,133 kEUR from 1,322 kEUR while the segment EBITDA margin increased to 13.3% from 9.9% for the same quarter in 2017. ACTech contributed revenue of 11,202 kEUR and segment EBITDA of 2,841 kEUR, with a segment EBITDA margin of 25.4%. Excluding ACTech, revenue decreased 7.3% to 12,430 kEUR and segment EBITDA decreased to 292 kEUR.

Gross profit was 23,955 kEUR, or 54.6% of total revenue, for the first quarter of 2018. Excluding ACTech, gross profit was 19,938 kEUR, or 61.0% of total revenue, compared to 18,477 kEUR, or 57.9% of total revenue, for the first quarter of 2017.

Research and development (“R&D”), sales and marketing (“S&M”) and general and administrative (“G&A”) expenses increased, in the aggregate, 19.4% to 23,374 kEUR for the first quarter of 2018 from 19,579 kEUR for the first quarter of 2017. Excluding ACTech, operating expenses increased, in the aggregate, 9.6% to 21,456 kEUR. Excluding ACTech, R&D expenses increased from 4,592 kEUR to 5,610 kEUR while S&M expenses increased from 9,608 kEUR to 9,844 kEUR and G&A expenses increased from 5,379 kEUR to 6,002 kEUR.

Net other operating income decreased by 469 kEUR to 549 kEUR compared to 1,018 kEUR for the first quarter of 2017. Excluding ACTech, net other operating income decreased by 172 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 1,130 kEUR from (84) kEUR for the same period prior year, primarily as a result of the contribution by ACTech. Excluding ACTech, operating result amounted to (672) kEUR. The decrease in the operating result (excluding ACTech) was the result of the 9.6% increase in operating expenses, which was offset in part by the 7.9% increase in gross profit. The operating result was also negatively affected by depreciation cost, which increased from 2,568 kEUR to 4,006 kEUR (or to 2,968 kEUR excluding ACTech).

Net financial result was (710) kEUR compared to (142) kEUR for the prior-year period. The financial result included (167) kEUR net financial expenses related to ACTech. Excluding ACTech, the variances primarily reflected increases in the interest expense on the company’s financial debt and variances in the currency exchange rates, primarily on the portion of the company’s IPO proceeds held in U.S. dollars versus the euro. The share in loss of joint venture decreased to (103) kEUR from (389) kEUR for the same period last year.

The first quarter of 2018 contained income tax expense of 500 kEUR, of which 416 kEUR was related to ACTech, compared to 201 kEUR in the first quarter of 2017.

As a result of the above, net loss for the first quarter of 2018 was (183) kEUR (or (1,402) kEUR excluding ACTech), compared to net loss of (816) KEUR for the same period in 2017. Total comprehensive loss for the first quarter of 2018, which includes exchange differences on translation of foreign operations, was (278) kEUR compared to a loss of (694) kEUR for the same period in 2017.

At March 31, 2018, we had cash and equivalents of 44,697 kEUR compared to 43,175 kEUR at December 31, 2017. Cash flow from operating activities in the first quarter of 2018 was 6,200 kEUR compared to 1,603 kEUR in the same period in 2017. Net shareholders’ equity at March 31, 2018 was 76,631 kEUR compared to 77,515 kEUR at December 31, 2017.

2018 Guidance

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.

Non-IFRS Measure

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 1.2321, the reference rate of the European Central Bank on March 31, 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, Friday, May 4, 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 #7784338. 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 more than 25 years of 3D printing experience into a range of software solutions and 3D printing services, which Materialise seeks to 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 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)

 

For the three months ended
March 31,

For the three
months ended
March 31,

In 000 2018       2018       2017 2018       2017
U.S.$ € € € €
 
Revenue 54,088 43,899 31,921 43,899 31,921
Cost of sales (24,573) (19,944) (13,444) (19,944) (13,444)
Gross profit 29,515 23,955 18,477 23,955 18,477
Gross profit as % of revenue 54.6% 54.6% 57.9% 54.6% 57.9%
 
Research and development expenses (6,918) (5,615) (4,592) (5,615) (4,592)
Sales and marketing expenses (13,059) (10,599) (9,608) (10,599) (9,608)
General and administrative expenses (8,822) (7,160) (5,379) (7,160) (5,379)
Net other operating income (expenses) 676 549 1,018 549 1,018
Operating (loss) profit 1,392 1,130 (84) 1,130 (84)
 
Financial expenses (1,910) (1,550) (919) (1,550) (919)
Financial income 1,036 840 777 840 777
Share in loss of joint venture (127) (103) (389) (103) (389)
(Loss) profit before taxes 391 317 (615) 317 (615)
 
Income taxes (616) (500) (201) (500) (201)
Net (loss) profit for the period (225) (183) (816) (183) (816)
Net (loss) profit attributable to:
The owners of the parent (225) (183) (816) (183) (816)
Non-controlling interest − − − − −
 
Earnings per share attributable to owners of the parent
Basic 0.00 0.00 (0.02) 0.00 (0.02)
Diluted 0.00 0.00 (0.02) 0.00 (0.02)
 
Weighted average basic shares outstanding 47,428 47,428 47,325 47,428 47,325
Weighted average diluted shares outstanding 47,428 47,428 47,325 47,428 47,325
           

Consolidated statements of comprehensive income (Unaudited)

 

For the three months ended
March 31,

For the three
months ended
March 31,

In 000 2018       2018       2017 2018       2017
U.S.$ € € € €
 
Net profit (loss) for the period (225) (183) (816) (183) (816)
Other comprehensive income
Exchange difference on translation of foreign operations (117) (95) 122 (95) 122
Other comprehensive income (loss), net of taxes (117) (95) 122 (95) 122
Total comprehensive income (loss) for the year, net of taxes (342) (278) (694) (278) (694)
Total comprehensive income (loss) attributable to:
The owners of the parent (342) (278) (694) (278) (694)
Non-controlling interest − − − − −
       

Consolidated statement of financial position (Unaudited)

 

As of March
31,

     

As of December
31,

In 000 2018 2017
€ €
Assets

Non-current assets
Goodwill 18,504 18,447
Intangible assets 27,770 28,646
Property, plant & equipment 88,339 86,881
Investments in joint ventures 31
Deferred tax assets 332 304
Other non-current assets 3,022 3,667
Total non-current assets 138,967 137,976

Current assets
Inventories 10,426 11,594
Trade receivables 39,635 35,582
Other current assets 9,927 9,212
Cash and cash equivalents 44,697 43,175
Total current assets 104,685 99,563
Total assets 243,652 237,539
 

As of March
31,

 

As of December
31,

In 000 2018   2017
€ €
Equity and liabilities
Equity
Share capital 2,735 2,729
Share premium 80,209 79,839
Consolidated reserves (4,603) (3,250)
Other comprehensive income (1,898) (1,803)
Equity attributable to the owners of the parent 76,443 77,515
Non-controlling interest − −
Total equity 76,443 77,515

Non-current liabilities
Loans & borrowings 82,598 81,788
Deferred tax liabilities 6,711 7,006
Deferred income 7,051 5,040
Other non-current liabilities 1,833 1,904
Total non-current liabilities 98,193 95,738

Current liabilities
Loans & borrowings 12,197 12,769
Trade payables 17,631 15,670
Tax payables 3,574 3,560
Deferred income 22,060 18,791
Other current liabilities 12,554 13,496

Total current liabilities 		68,016 64,286
Total equity and liabilities 242,652 237,539
     

Consolidated statement of cash flows (Unaudited)

 
For the three months ended March 31,
in 000 2018   2017
€ €
Operating activities
Net (loss) profit for the period (183) (816)
Non-cash and operational adjustments
Depreciation of property, plant & equipment 2,700 1,945
Amortization of intangible assets 1,305 623
Share-based payment expense 89 329
Loss (gain) on disposal of property, plant & equipment − (2)
Movement in provisions (16) 4
Movement reserve for bad debt 84 122
Financial income (667) (136)
Financial expense 1,067 359
Impact of foreign currencies 310 (81)
Share in loss of a joint venture (equity method) 103 389
(Deferred) Income taxes 501 204
Other (88) (72)
Working capital adjustment & income tax paid
Increase in trade receivables and other receivables (4,372) (3,452)
Decrease (increase) in inventories 1,147 (406)
Increase in trade payables and other payables 5,027 2,729
Income tax paid (807) (136)
Net cash flow from operating activities 6,200 1,603
        For the three months ended March 31,
in 000 2018   2017
€ €
Investing activities
Purchase of property, plant & equipment (4,275) (7,507)
Purchase of intangible assets (324) (327)
Proceeds from the sale of property, plant & equipment & intangible assets (net) 20 70
Acquisition of subsidiary − −
Investments in joint-ventures − (500)
Interest received 14 108
Net cash flow used in investing activities (4,565) (8,156)
 
Financing activities
Proceeds from loans & borrowings 12,413 7,710
Repayment of loans & borrowings (11,388) (756)
Repayment of finance leases (760) (728)
Capital increase 207
Interest paid (404) (152)
Other financial income (expense) 5 (166)
Net cash flow from (used in) financing activities 73 5,908
 
Net increase of cash & cash equivalents 1,708 (645)
Cash & cash equivalents at beginning of the year 43,175 55,912
Exchange rate differences on cash & cash equivalents (186) (196)
Cash & cash equivalents at end of the year 44,697 55,071
       

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

 

For the three months
ended 31 March

For the three months
ended 31 March

In 000 2018   2017 2018   2017
€ € € €
 
Net profit (loss) for the period (183) (816) (183) (816)
 
Income taxes 500 201 500 201
Financial expenses 1,550 919 1,550 919
Financial income (840) (777) (840) (777)
Share in loss of joint venture 103 389 103 389
Depreciation and amortization 4,006 2,568 4,006 2,568
 
EBITDA 5,136 2,484 5,136 2,484
 
Non-cash stock-based compensation expense (1) 88 329 88 329
Acquisition-related expenses business combinations − − − −
 
ADJUSTED EBITDA 5,224 2,813 5,224 2,813
(1)   Non-cash stock-based compensation expenses represent the cost of equity-settled and cash-settled share-based payments to employees.
                       

Segment P&L (Unaudited)

 
In 000

Materialise
Software

Materialise
Medical

Materialise
Manufacturing

Total
segments

Unallocated
(1)

Consolidated

€ € € € € €
 
For the three months ended March 31, 2018
Revenues 8,326 11,946 23,632 43,904 (5) 43,899
Segment EBITDA 2,324 2,060 3,133 7,517 (2,381) 5,136

Segment EBITDA % 		27.9% 17.2% 13.3% 17.1% 11.7%
 
For the three months ended March 31, 2017
Revenues 8,575 9,932 13,407 31,914 8 31,922
Segment EBITDA 2,993 314 1,322 4,629 (2,145) 2,484

Segment EBITDA % 		34.9% 3.2% 9.9% 14.5% 7.8%
(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 other operating income (expense).
       

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

 

For the three months
ended March 31,

For the three months
ended March 31,

In 000 2018   2017 2018   2017
€ € € €
 
Net profit (loss) for the period (183) (816) (183) (816)
Income taxes 500 201 500 201
Financial cost 1,550 919 1,550 919
Financial income (840) (777) (840) (777)
Share in loss of joint venture 103 389 103 389
 
Operating profit 1,130 (84) 1,130 (84)
 
Depreciation and amortization 4,006 2,568 4,006 2,568
Corporate research and development 490 509 490 509
Corporate headquarter costs 2,263 2,073 2,263 2,073
Other operating income (expense) (372) (437) (372) (437)
 
Segment EBITDA 7,517 4,629 7,517 4,629
 


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Investors:
LHA
Harriet Fried/Jody Burfening
212-838-3777
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