Materialise reports flat Q1 2021 revenue growth causing 6% share price dip

Shares in the Belgian software and 3D printing service provider Materialise (MTLS) have fallen 6% after it failed to report annual revenue growth within its Q1 2021 financials. 

During Q1 2021, the company generated €45.5 million in revenue, a reduction of 1.5% on the €46.2 million reported in Q1 2020, which was the last quarter of normal pre-pandemic trading. Despite seeing marginal annual growth within its Software and Medical segments, the firm’s Manufacturing arm continued to struggle over the period, with its revenue declining 8%. 

Following the results’ publication, shares in Materialise have fallen from $32.87 to $30.88, potentially reflecting unease among investors that the company has been unable to return to pre-COVID revenue levels. 

According to Materialise’s Founder Peter Leys, the firm’s Q1 results represent a continuation of its sequential quarterly recovery, and demonstrate the ongoing impact of COVID-19 on client demand. “While the global economy was still significantly impacted by the pandemic, Materialise performed well,” said Leys. 

“We continued to bounce back, and our revenue came close to the level of the first quarter of 2020, which predated the pandemic,” he added. ”We are particularly encouraged by the fact that, alongside the revenue growth of Materialise Medical, which has been performing very strongly since Q3 2020, Materialise Software also posted growth this quarter.”

Materialise recently launched its new Metal Competence Center in Bremen, Germany. Photo via Materialise.
Materialise recently launched a new Metal Competence Center in Bremen, Germany. Photo via Materialise.

Materialise’s Q1 2021 financials 

In general, Materialise’s revenue is reported across three segments: Software, Medical, and Manufacturing. Of these divisions, Software became the company’s fastest growing during Q1 2021, generating €10.2 million, 4.1% more than the €9.8 million reported in Q1 2020. Given that the firm’s software revenue had declined by 7% in Q4 2020, its performance represents a significant quarterly recovery. 

Materialise’s Medical segment also continued to grow over the course of Q1 2021, bringing in a total of €16.2 million, which represents a 3.7% increase on the €15.6 million reported in Q1 2020. Interestingly, the firm’s recurring Software revenue actually fell by 6.3% across the quarter, suggesting that the division’s growth is being driven by new clientele. 

By contrast, revenue generated by the company’s manufacturing segment fell from the €20.8 million raised in Q1 2020, to just €19.1 million during Q1 2021. Materialise managed to offset some of these losses by reducing its labor spending by €800,000 over the same period, but the division’s EBITDA still declined by 6% due to the costs of its fixed unused capacity. 

Revenue (€)Q1 2020Q2 2021Variance (%)Variance (€)
Total 46.2m45.5m-1.5-0.7m

A software-focused growth strategy 

Materialise recently opened a new 3,500 sq. meter 3D printing facility and struck a deal to offer its Bluesint PA12 with Sindoh’s machines, but these developments didn’t impact on its Q1 financials. In the shorter term, the company has invested heavily in expanding on its software portfolio, making several advances that optimize its performance within medical applications over the last three months. 

Back in February 2021, Materialise announced that it had developed a custom Magics slicing software for Boston MicroFabrication’s (BMF’s) Micro Stereolithography (PμSL) systems. Since then, the firm has added a new cardiovascular procedure to its Mimics medical planning program, a version of which, was used to perform the world’s first double hand and face transplant

Significantly, just last month, the firm also acquired the option to buy Link3D. The potential purchase, which Materialise still intends to carry out by the end of the year, could allow the company to build on its existing Manufacturing Execution System (MES) offering, and work towards its broader goal of establishing an all-in-one subscription-based cloud platform. 

In fact, alongside its investment in eyewear firm Ditto and footwear producer RSscan last year, the firm’s CEO Fried Vancrean believes that buying Link3D will allow Materialise to build a “future-proof” portfolio. “We believe that the potential acquisition of Link3D will accelerate our strategic growth significantly,” said Vancrean. 

“Link3D has developed a suite of mission-critical tools and applications for customers in the aerospace, automotive, medical and other competitive highly-regulated industries,” he added. “[The deal] can significantly accelerate the role of Materialise’s software platform, allowing it to provide customers with seamless and cost efficient access to an integrated 3D printing software suite.”

A LAAO device is used to regulate blood flow to the left atrium. Image via Materialise.
Materialise upgraded its Mimics Enlight software during Q1 by adding a new cardiovascular procedure. Image via Materialise.

A cautious approach to 2021

Materialise anticipates that its sequential quarterly recovery will accelerate into Q2 2021, with revenue projected to increase by 10%, rising to around €50 million. In particular, the company believes that the increased number of automotive and industrial orders seen within its manufacturing division, will soon enable it to return to pre-COVID revenue levels. 

With a liquid capital of €108 million, the company also intends to gradually increase its expenditure during the year ahead, and aggressively chase further opportunities for growth. However, despite the growing optimism surrounding Materialise’s financial performance, it remains wary of the potential impact of a pandemic third wave, thus it hasn’t issued guidance for the year ahead. 

“We are cautiously optimistic that the positive trend we have been seeing in the first months of the year will continue throughout the rest of 2021,” concluded Leys. “But in view of the unpredictability of the COVID-19 crisis, our visibility remains too uncertain to provide quantitative guidance for the full year of 2021.”

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Featured image shows Materialise’s recently-launched Metal Competence Center in Bremen, Germany. Photo via Materialise.