Highlights – Third Quarter 2020
Total revenue was 40,785 kEUR for the third quarter of 2020 compared to 50,449 kEUR for the 2019 period.
Total deferred revenues from annual software sales and maintenance fees were 26,833 kEUR compared to 27,667 kEUR at December 31, 2019.
Adjusted EBITDA amounted to 6,023 kEUR for the third quarter of 2020, with an Adjusted EBITDA margin of 14.8%, driven mainly by the Materialise Medical segment’s strong 32% EBITDA margin. The EBITDA margins of the Materialise Software and Materialise Manufacturing segments were 33% and (2%), respectively.
Net result for the third quarter of 2020 was (366) kEUR, or (0.01) EUR per diluted share, compared to 1,001 kEUR, or 0.02 EUR per diluted share, for the 2019 period.
Total cash was 110,691 kEUR at the end of the quarter.
Third Quarter 2020 Results
Executive Chairman Peter Leys commented, “Given the challenging environment, Materialise performed well this quarter, thanks to the continued hard work and inspiring contributions of our entire workforce. While the revenues of our Materialise Manufacturing and, to a lesser extent, Materialise Software segments decreased in the midst of the COVID-19 pandemic, our Materialise Medical segment grew its revenues by an impressive 11% and posted a record EBITDA margin of 32%. Further building on the success we had with some of our medical applications, we made a strategic investment in our eyewear initiative, in connection with our previously announced collaboration with Ditto, and, on October 29, 2020, we announced an increased investment in our footwear platform through the acquisition of RS Print and RS Scan. In the third quarter, we also increased our overall ongoing R&D efforts by more than 4% and began implementing an internal digital transformation program, including a new e-commerce portal and new customer relationship management (CRM) and enterprise resource planning (ERP) systems.”
Total revenue for the third quarter of 2020 decreased 19.2% to 40,785 kEUR compared to 50,449 kEUR for the third quarter of 2019. Adjusted EBITDA decreased to 6,023 kEUR from 8,022 kEUR. The Adjusted EBITDA margin (Adjusted EBITDA divided by total revenue) for the third quarter of 2020 was 14.8% compared to 15.9% for the third quarter of 2019.
Revenue from our Materialise Software segment decreased 12.7% to 9,478 kEUR for the third quarter of 2020 from 10,860 kEUR for the same quarter last year. Recurring revenue of Materialise Software increased by 15.9%. Segment EBITDA decreased to 3,114 kEUR from 3,769 kEUR while the segment EBITDA margin was 32.9% compared to 34.7% for the prior-year period.
Revenue from our Materialise Medical segment increased 10.8% to 17,161 kEUR for the third quarter of 2020 compared to 15,488 kEUR for the same period in 2019. Compared to the third quarter of 2019, revenues from our medical software grew 3.1% and revenues from medical devices and services increased 14.5%. Segment EBITDA increased to 5,477 kEUR compared to 2,795 kEUR while the segment EBITDA margin was 31.9% compared to 18.0% for the third quarter of 2019.
Revenue from our Materialise Manufacturing segment decreased 41.3% to 14,154 kEUR for the third quarter of 2020 from 24,127 kEUR for the third quarter of 2019. Segment EBITDA decreased to (293) kEUR from 3,862 kEUR while the segment EBITDA margin was (2.1)% compared to 16.0% for the third quarter of 2019.
Gross profit was 23,220 kEUR, or 56.9% of total revenue, for the third quarter of 2020 compared to 29,023 kEUR, or 57.5% of total revenue, for the third quarter of 2019.
Research and development (“R&D”), sales and marketing (“S&M”) and general and administrative (“G&A”) expenses decreased, in the aggregate, 11.9% to 24,176 kEUR for the third quarter of 2020 from 27,439 kEUR for the third quarter of 2019. In the third quarter of 2020, we increased our R&D expenses by 4.2%, while our cost reduction initiatives in S&M and G&A resulted in decreases of 18.7% and 11.7%, respectively, compared to the third quarter of 2019.
Net other operating income was 1,157 kEUR compared to 1,332 kEUR for the third quarter of 2019.
Operating result decreased to 201 kEUR from 2,916 kEUR for the third quarter of 2019.
Net financial result was (1,331) kEUR compared to (966) kEUR for the third quarter of 2019. The share in result of joint venture amounted to 0 kEUR compared to (41) kEUR for the same period in 2019. Subsequent to the end of the third quarter, we agreed to acquire substantially all assets of RS Scan, our joint venture partner in RS Print, and thereby acquire the remaining 50% interest in RS Print.
The third quarter of 2020 contained income tax income of 764 kEUR, compared to an income tax expense of (908) kEUR in the third quarter of 2019.
As a result of the above, net loss for the third quarter of 2020 was (366) kEUR, compared to 1,001 kEUR for the same period in 2019. Total comprehensive loss for the third quarter of 2020, which includes exchange differences on translation of foreign operations, was (1,744) kEUR compared to 1,067 kEUR for the 2019 period.
At September 30, 2020, we had cash and equivalents of 110,691 kEUR compared to 128,897 kEUR at December 31, 2019. Gross debt amounted to 117,884 kEUR at September 30, 2020, compared to 127,939 kEUR at December 31, 2019. As a result, our net cash position decreased 8,151 kEUR during the first three quarters of 2020.
Cash flow from operating activities during the first three quarters of 2020 was 14,752 kEUR compared to 22,737 kEUR for the same period in 2019. Total capital expenditures for the third quarter of 2020 were funded with cash flow from operations and available cash, and amounted to 7,536 kEUR. This amount included capital expenditures of 1,846 kEUR related to our internal digital transformation program.
Net shareholders’ equity at September 30, 2020 was 131,399 kEUR compared to 142,675 kEUR at December 31, 2019.
2020 Outlook
Mr. Leys concluded, “As we move through the fourth quarter, traditionally an important period for our business, the COVID-19 pandemic continues to disrupt everyday life, the markets in which we operate, and macroeconomic conditions in general. Accordingly, the outlook for the short term remains unclear. We are being disciplined in managing our business, but, just as importantly, are dedicated to pursuing our vital R&D programs and our strategic investment initiatives, which we believe will position Materialise very well for the coming years. Our balance sheet and liquidity are particular areas of strength.”
