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3D Printing Certification

Materialise Q2 2020 revenue declines by more than 20 percent despite software growth 

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Belgian software and 3D printing certification service provider Materialise has reported a reduction in its operating revenue by more than 20 percent during Q2 2020. 

Materialise’s total revenue for Q2 2020 decreased by 21.2 percent to €38.1 million, from €48.4 million in Q2 2019. Despite continued growth in the company’s Software segment, it failed to offset the revenue declines in its Medical and Manufacturing segments compared to Q2 2019. 

Other companies have also suffered from reduced revenue during the second quarter, owing to the impact of the ongoing COVID-19 pandemic on customer demand. Groupe Gorgé reported a 35.2 percent revenue decline during Q2 2020, and 3D Systems announced a strategic refocus after the company’s revenue fell 28 percent. 

After the Q2 results were released, Materialise’s shares initially fell from $28.26 to $22.41, and are now at $25.07. 

In a call with analysts and investors, Executive Chairman Peter Leys explained how the pandemic had forced Materialise to make cost reductions during Q2. “In the second quarter, our business suffered materially from the COVID-19 pandemic. We were able to realize cost savings in both sales, marketing, and general administrative expenses, but maintained our strategically important research and development programs.” 

“While our R&D programs and financial strength give us a solid platform,” continued Leys, “we draw equal confidence from the many examples of resilience, creativity, and discipline that our workforce has shown worldwide throughout this difficult period.”

Materialise reported a reduction of 21 percent in its revenues during Q2 2020. Photo via Materialise.
Materialise reported a reduction of 21 percent in its revenues during Q2 2020. Photo via Materialise.

Materialise Q2 2020 financial results

Materialise revenue is reported in three segments: Software, Medical, and Manufacturing. The company’s Software business reported its most robust revenue growth for Q2 2020, generating €9.5 million compared to the €9.3 million reported in Q2 2019. When combined with the five percent increase in Software revenue generated in Q1 2020, the segment’s growth has remained flat across H1 2020.

The company’s Medical revenue declined from €14.5 million in Q2 2019 to €11.7 million in Q2 2020, a 19.3 percent decrease. Materialise’s Medical revenue had proved resistant to the pandemic’s impact in Q1 2020, reporting a 15.3 percent increase. COVID-related orders sustained the segment’s growth during the first quarter, but the additional activity wasn’t sufficient to drive continued growth into Q2. 

Manufacturing saw the most significant reduction in revenue, falling 31 percent in Q2 2020 compared to the same period last year. In Q2 2019, the firm’s Manufacturing business generated €24.5 million in revenue, but in Q2 2020, this fell to €16.7 million. The company attributed the decline in its Manufacturing revenue to the impact of the pandemic on-demand in its automotive and aerospace businesses.

Revenues Q2 2019 Q2 2020 Variance (€) %
Materialise Software 9.3m 9.5m +0.2m -2.1
Materialise Medical 14.5m 11.7m -2.8m -19.3
Materialise Manufacturing 24.5m 16.7m -7.8m -31.8
Unallocated  0.1m 0.2m +0.1m +50
Total segments 48.4m 38.1m -10.3m -20.8

Despite the company’s continued revenue decline from Q1 2020, its net losses have remained flat. In Q1 2020 Materialise reported a loss of €2.8 million, equating to -€0.05 per diluted share, while in Q2 2020, its loss was €1.9 million or -€0.04 per diluted share. 

The company continued to invest in its future during Q2 2020, with R&D spending staying flat at €6 million compared to €6.1 million in Q2 2019. Similarly, Materialise invested €5.7 million over H1 2020 in property, plants, and equipment, increasing 15.7 percent on the €4.8 spent in H1 2019. 

During the second quarter of 2020, Materialise released several software packages, which boosted its Software segment’s revenue growth. In Q2 2020, the firm brought an update to its Mimics Innovation Suite, with features integrating 3D printed models into hospital, medical imaging, and logistical workflows.

Materialise also launched its Mindware service during Q2 2020, designed to provide businesses with tailored advice on the implementation of 3D printing certification. As part of the company’s offering, specialists from dedicated verticals such as aerospace and medical are available for consultation.

Materialise's Software segment was the only part of its business which showed growth during the second quarter. Photo via Materialise.
Materialise’s Software segment was the only part of its business which showed growth during the second quarter. Photo via Materialise.

Recovering from the COVID-19 pandemic

On the earnings call, Leys explained that the effects of the COVID pandemic on the company’s Medical segment had created new growth opportunities in other areas. 

“While COVID-19 has created a dip in our medical activity in Q2, it has fundamentally increased the interest of hospitals in point-of-care 3D printing certification,” said Leys. “Many hospitals have used the 3D printing certification facilities during the pandemic to support their internal supply….