Belgian software and 3D printing service provider Materialise has reported a revenue decline of nearly twenty percent in its Q3 2020 financial results.
Materialise’s revenue fell from €50.4 million in Q3 2019 to €40.7 million in Q3 2020, representing a decrease of 19.2 percent. During Q3 2020, the firm’s Medical segment returned to growth, but this wasn’t sufficient to offset the significant revenue reductions seen within its Manufacturing and Software divisions.
The company’s software business had proved resilient to the pandemic’s impact in H1 2020, and other industry developers such as Autodesk also reported revenue rises during Q2 2020. In Q3 2020 though, Materialise’s software revenue fell by 12.7 percent, as company’s tighten spending due to the economic uncertainty surrounding the COVID-19 outbreak.
In a call with analysts and investors, Executive Chairman Peter Leys claimed that despite the firm’s revenue decline in Q3 2020, it had reasons to be optimistic heading into Q4. “Given the challenging environment, Materialise performed well this quarter, thanks to the continued hard work and inspiring contributions of our entire workforce,” said Leys.
“While the revenues of our Manufacturing and, to a lesser extent, Software segments decreased in the midst of the COVID-19 pandemic, our Medical segment grew its revenues by an impressive 11 percent,” he added.
Materialise’s Q3 2020 financial results
Materialise’s revenue is reported in three segments: Software, Medical, and Manufacturing. Only the company’s Medical division showed revenue growth during the third quarter, increasing from €15.4 million in Q3 2019 to €17.1 million in Q3 2020, a rise of 10.8 percent.
The firm’s Medical growth was primarily driven by a 14.5 percent increase in revenue gained from its devices and services, while income from its medical software increased by 3.1 percent. In terms of Materialise’s overall Software segment, its revenue declined from the €10.8 million reported in Q3 2019, to €9.4 million in Q3 2020, representing a reduction of 12.7 percent.
During Q3 2020, the company’s recurring Software revenue increased by 15.9 percent, but this wasn’t reflected in the segment’s performance, showing that potential clients are cutting back on spending due to COVID-19. Manufacturing was the worst-performing division of Materialise’s business, generating €14.1 million in Q3 2020, a 41.3 percent decline on the €24.1 million generated in Q3 2019.
According to the company, the pandemic was the primary reason behind its Manufacturing revenue reduction, with its core Infotech business showing the largest revenue decrease at 60 percent. Materialise also reported a decline in demand within its key automotive and aerospace businesses, an area that normally accounts for more than half of its industrial revenue.
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Materialise invests in future growth
Despite the company’s overall fall in revenue during Q3 2020, it has opted to slightly increase its spending levels on R&D by 4.2 percent and to invest in new opportunities for future growth. Earlier this month, Materialise announced a strategic investment in customized eyewear firm Ditto, and Leys explained the reasoning behind the $9 million outlay.
“The purpose of the collaboration is to strengthen Ditto’s state-of-the-art virtual training platform by adding Materialise’s customization and 3D printing functionalities,” explained Ley. “The sales of Ditto’s digital eyewear solutions will generate a royalty stream for Materialise, and we believe that the collaboration will help boost other pioneering initiatives.”
Alongside its Q3 financials, the firm also announced the acquisition of insole producer Superfeet’s share in competitor RSscan’s dynamic foot measurement technology. Materialise aims to continue working with Superfeet in the future to develop a more comprehensive personalized insole product line, and address the footcare needs of clients in the medical industry.
Fried Vancraen, CEO and Founder of Materialise, was keen to highlight the importance of the companies’ ongoing partnership. “3D printing and design technology have great potential to help both consumers and healthcare professionals improve comfort, health and performance through personalized footcare,” said Vancraen.
“I am particularly excited that we have succeeded in strengthening our strategic partnership with Superfeet in such a way that both partners will be able to fully concentrate on their individual strengths,” he added.
A strong finish to the year for Materialise?
In his closing remarks on the earnings call, Leys said that although the company’s industrial activities are slowly recovering from the pandemic’s impact, this wouldn’t be immediately apparent in its financials. Materialise’s Q3 2020 figures still benefited from backorders, and as demand has decreased during the year, this is likely to be reflected in its future results.
Although Leys conceded that the firm’s revenue recovery depends on the trajectory of the pandemic, he added that he was optimistic about potential growth opportunities. The company’s Medical segment continues to benefit from the reopening of surgeries, and Q4 is traditionally its strongest part of the year.
What’s more, Materialise’s investment in new technologies and R&D could also pay dividends in the near future. The company is holding a digital ‘Think-In’ event on November 18th, 2020, in which it will virtually launch a new range of products. As a result, Leys concluded that the firm has positioned itself well for the challenges that lie ahead in an unpredictable Q4.
“The outlook for the short term remains unclear,” said Leys. “We are being disciplined in managing our business, but, just as importantly, are dedicated to pursuing our vital R&D programs and strategic investment initiatives, which we believe will position Materialise very well for the coming years.”
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Featured image shows people using Materialise’s 3D printing software. Photo via Materialise.