Q2 2021 Materialise NV Earnings Call
[music].
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue the standby. Thank you for your patience.
Uh huh.
Hum.
[music] for now.
Oh.
[music].
Hello.
[music].
Yes.
Ladies and gentlemen, thank you for standing by and welcome to the Materialise Q2, 2021 financial results call. At this time all participants are in a listen only mode. After the speaker.
Cash and there will be a question and answer session to ask the question. During the session you will need to press star 1 on your telephone. Please be advised the today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your host Ms. Harriet fried of LHC misread.
Go ahead.
Thank you for joining us today for materialize this quarter He conference call with us on the call of free to fund from founder and Chief Executive Officer of Materialise.
Peter Leys, Executive Chairman and Johan Albrecht Chief Financial Officer.
Today's call and webcast for being the company.
The new 5 slide presentation that reviews, Materialises strategic financial and operational performance for the second quarter of 2021 to.
To access the slides if you have novel already done. So please go to the Investor Relations section of the company's website at Www Dot Materialise Dot com.
As the lease that was issued earlier today can also be found there.
Before we begin I'd like to remind you that management may make forward looking statements regarding the companys plans expectations and growth prospects among other things.
These forward looking statements are subject to known and unknown certainties, uncertainties and risks that could cause.
Actual results could differ materially from the expectations expressed including competitive dynamics in the industry change.
Any forward looking statements, including those related to the company's future results and activities represent managements estimates as of today and should not be relied upon as representing the estimates as of any.
Subsequent day.
Management disclaims any duty to update or revise any forward looking statements to reflect the future events or changes in expectations.
The more detailed description of the risks and uncertainties and other factors that could impact the company's future business or financial results can be found on the company's most recent.
Recent annual report on form 20-F filed with the SEC.
Finally management will discuss certain non buyer for us measures on today's call. A reconciliation table is contained in the earnings release and also at the end of the slide presentation.
And with that I'd like to turn the call over to Peter Hey, Peter.
Thank you.
And thank you everyone for joining us today.
You can find the agenda for our call on slide 3.
As the first of all items on our agenda I will summarize the highlights of our financial results for the second quarter of 2020 of them.
Then.
We'll pass the floor to fleet.
We will give you more insights into our current intentions with respect to the use of the proceeds that we raised earlier this month.
After that Johan on we're working through our second quarter numbers in more detail finally, I will come back and give you some observations.
<unk> about what we currently believe the rest of the year may bring them.
And when we've completed our prepared remarks, we will be happy to respond to any questions that you may have.
So.
Let's turn to slide for which summarizes the highlights of our financial results.
Quarter over quarter, our revenues grew 33% to $50.7 million in Europe.
And our adjusted EBITDA more than doubled the $6.9 million Euro.
These results are we believe excellence.
Of course.
Second quarter of 2020, the benchmark was the quarter in which our business as a whole suffered the most from the COVID-19 crisis.
As the results while the comparison between last year's of this year's second quarter remains very relevant.
It may provide the best insight into what to put.
Performance than the insights that quarter to quarter comparisons provide in more normal circumstances.
Therefore internally in 2021, we also benchmark our results against the previous quarter.
The better understand the trends of where our business.
<unk> is building on the short term.
As well as against the same period of 2019, which we believe is a better reference periods and the horrible year 2020.
So I would like to share some of the conclusions of the additional benchmarking exercises with you.
On the sequential basis.
But on prepared for the first quarter of 2021.
Our revenues grew by 11, 3%.
And on adjusted EBITDA increased by a stunning 30%.
But only the these numbers confirm that our business is recovering from the crisis.
They also show the recovery.
The company had a swift pace.
That is in fact faster than what we had expected only a few months ago.
Importantly, our second quarter revenues and adjusted EBITDA.
<unk> increased when you compare them with our results of the same period in 2019.
To be more precise a.
Our revenues grew by 5% and on adjusted EBITDA increased 37%.
This tells us not only that we are specially the coverage from the crisis, but in fact that we are back on the track of posting genuine and.
Healthy growth.
This belief there is solid and promising results underscore what we explained during our recent capital increase.
The newly raised funds with net cash used to help the cover or to help us return to growth.
Which are things that we already.
We're investing today in <unk>.
Fact, the intend to use these funds to further accelerate the key growth drivers of our business.
In particular, the continued rollout of our magics and mimics software platforms.
The expansion of our presence in the TNF market.
And the go to market of our Wearables platforms in general kind of materialized motion in particular.
And with that I would now like to pause for the fleet.
Who will explain our current intentions with respect to the use of proceeds.
In more detail.
Thank you Peter Indeed, we intend to allocate the bulk of the proceeds we raised through the key growth drivers that we discussed at length during our last earnings call.
And let me briefly debate what these are.
For us.
We will continue to invest in the expansion of innovation of our.
What gets the leading who is also the software platforms magic and mimics.
The magics platform.
No enabled users of Aam's technology to be more productive more cost efficient and more sustainable.
The sales of our magic's flagship.
Product remained strong throughout competitive net net and Joe again, considering the growth in Q2.
We are currently in the process of adding more expensive versus spending on manufacturing execution functionality to our platform.
And we are also making.
2 metrics functionality accessible through the cloud.
Both initiatives are intended to further expand our market share and to make our solutions, even more relevant in the developing and spark manufacturing market.
Yes.
As many of you know we believe we can significant.
<unk> accelerates these efforts through the acquisition of the into the day later this year.
We intend to finance entirely from our balance sheet.
The very scared and innovation suite help researchers medical device companies on hospitals to engineer.
Many of the on the human anatomy.
Which in the number of instances will lead to the 3 D printing of unique anatomical models and personalized medical devices.
Over the last couple of years the successful introduction of our revenue platform at the hospitals has contributed significantly to the overall success.
The year of our medical segment.
We are currently in the process of developing additional artificial intelligence functionality for limited and intent all sorts of introduced augmented reality of virtual reality functionality to the very sweet.
Today.
We are developing these new features internally.
The rest of fund raise we intend to increase of our internal development capacity and during the day exclude the 3 also undertake other.
Initiatives.
Given the acreage speed up some of these developments.
Yes.
They can't.
In addition to the software platforms.
The annualized and powers the limited number of specific meaningful applications of <unk> printing.
In the medical and in Paramedical feeds.
Our current circle.
He worked for US are situated in the orthopedic CMS footwear and island markets.
Each of the verticals in particular CMO of footwear and the shown significant growth to recently and we intend to continue to invest in initiatives net.
Salary net growth.
We are bringing our <unk> product portfolio to the market mainly to our partner Johnson <unk> Johnson.
The success of our CMS personalization platform is an important contributor to the overall success of our medical segment.
Equity capital.
The acquisition of engine plant in Brazil in 2019 allowed us to expand our product portfolio and CMS and to also be more present in markets, where a partner is less focus.
The defense of the recent capital increase we intend to continue to ensure.
And the success of our partnership with Jim Johnson.
And also to look at the M&A hectic opportunities that of Synergist similar to the strategic fit the tempting offers.
We have been active in the footwear market in particular, the vacuum production of Personalised in civil since 2000.
2042 of the joint venture of Tennessee.
In 2020 required of 100% of the shares of end of sprint and also substantially all of assets of other skin.
The company that made Russia, plaids and related software.
As a result of income have complete 1 stop shop.
But other offering for personalized insoles.
The solution is unique to the presence of the objective in the center of the state the dynamic aspect of the foot into account on the <unk>.
Disabilities substantiated basis.
He had also we intend to increase of expenditures of investments in particular with the view the of accelerating the go to the market.
And the private markets, we have visited the dedicated iva on the deck manufacturing items.
And of a room dedicated sales force that is active in Europe.
We have the number of ongoing initiatives that to the later the date of customer journey, but exceeding the choice of the production of of the face.
On both of those the physical production and indeed, the duration of the customer journey redoing, the not exclude M&A activity.
Finally the.
We moved into a new metal of the printing centering Raven in Germany in the first quarter of 2021.
The official opening for October settlement.
Metal is 1 of the growth drivers of our manufacturing unit.
While we expect of continuous growth of the particular subsegment of Mccain on ice manufacturing, we do not plan and the M&A activity in that area.
Are we.
We do intend to intensify our partnership collaborations with metal machine on infectious to achieve seamless and hygiene cotton maintenance metals repainting work growth in the new facility.
Which would also benefit Materialise software.
To conclude.
The material is coming out of the growth.
Switched to the new the growth in other.
The focus areas and with the.
So on and strengthened balance sheet that will allow us to accelerated growth with internal estimates as the next.
The amount of initiatives and Johan will know provide you with the numbers that prove this statement.
Thank you for priest.
It was a brief review of of consolidated revenue on the slide 6 as of.
A reminder of unready for for sales in the presentation, you mean revenues gross to correct revenues.
Possibly some of those us unless otherwise stated comparisons for this call on the gun slung results for the second quarter of 2020.
Like pieces of it to review because of the second quarter of 2020 was pretty significantly impacted by the COVID-19 crisis of the sometimes referred to 2019 to make the bigger small compatible.
Revenue was 57 million euro for the period, 33% for both of the level of of the same for you did last year the.
The positive growth to place in all 3 of the segments.
To go overnight focus segments of 5%.
Political stigma on scoop, 50% of revenue.
The new manufacturing increased 39%.
Compared to the second quarter of 2019 on overall revenue grew by 5%.
By of hope the growth of 8% of its software and the very short of 21% of revenue increase in medical.
When the vaccine revenues reflect for some lower in Q2, 2021.2019, but the the covered 22% for the first quarter of 2021.
The potency deferred revenue from software license of maintenance fees increased by 1 set of the million euro compared to the end of book last year further.
Further underscoring the strong software sales performance with the Gulf of our software on our medical segments in the second quarter.
For the second quarter of 2021, the GMI software the conference for 20 per cent of our total revenue, which is less medical for 230 for a material has been affected for 46% cash.
Segments revenue from software process of predicts the presumptions, 31% of the total revenue.
Moving to slide.
You will see a consolidated adjusted EBITDA numbers for the second for it.
Consolidated adjusted EBITDA on more than doubled increasing from 3.382 million judo lost teeth too.
For 6.925 million disputed for the revenue growth, 5% compared to 2019 EBITDA grew 37%.
This increase compared to 2019 was the result of a variety of positive factors first of revenue growth second and improved gross margin triggered by increased in sourcing and continues productivity improvements and thirdly disciplined sponge.
In particular, the suspect to overhead.
Importantly, the increase of our EBITDA multiple at the expense of what are the disbanding, which actually increased by 12% compared to Q2.2019.
The initiatives to enhance our internal business application platform continue and are still on track.
Slightly summarizes the results of of Materialise softer segment.
The revenue increase for 2% 2 tons of the New Bureau of <unk>.
6% compared to the queue to 2019 the for.
Revenue grew of additional offer many of Europe.
So.
The current sales increased towards the 4%, which will offset by a smoldering usage of deferred revenue from the license of maintenance fees compared to the last year.
And on the recurring revenue increase the 15% didn't buy new perpetual license fees.
Royalty income.
Even the margin was 31, 2% or 3.1 million euro compared to 3.8 million.
As the segment of the local.
Received governmental support disputed last year.
Cost of growth and wait to get on with increased efforts in order.
The number of digital transformation project EBITDA. Nevertheless, this quarter's EBITDA was 52% of 1.1 billion Euro hired sending Q2.2019.
Moving out of the slide 9.
You will see the total of revenue and on Materialise Medical segment increased by almost 50% to 17 and the Hoffman in Europe.
More meaningful is the 21% growth compared to the people that make second quarter of 2019.
Revenue for medical software sales grew 16 for some compared of 2019 or revenue from the medical devices of service increased 22% compared to the queue to 2019.
The new for medical software sales accounted for 31% of the segments revenue.
Adjusted EBITDA early quadrupled to reported on the Hoffman the Euro from 1.1 million, which was also 65% higher than in Q2.2019.
Of the combined resolve of continue top line grew production efficiencies in sourcing programs and lowered the operating expenses. The EBITDA margin increased to 26% from tons per cent last year and 90% of in Q2.2019. This whole why we ask.
Some of the rated the execution of our R&D programs.
Wow, that's a certain for slide zone for the overview of the queue to proposals of on the Tms manufacturing segment.
Revenue increased 39% or 6 and a half million to 23.3 million total.
Importantly, the revenue also increased 22% for more than 4 billion for for.
First of all sorts of of this year as you were able to translate the positive signs of free loaded in the previous quarter in particular from automotive and the discharge client segments into effective the revenue growth.
The justice EBITDA for the courtroom gross to 1.850 million euro compared to 650000 in 2020 as.
Is the level of the capacity usage increased gross margin of victory to free Corona levels operating expenses of you made 3% below Q2.2019.
As a result of the EBITDA margin improves from 8% from 4% last year.
Slightly 11th provides the highlights of our income statement for the second quarter for.
The profit margin grew to 56.1 percentage from 52.3 per cent and 50 for 8%. The Q2.2019. The solid margin was due to the increased revenue the higher level of the capacity usage of productivity improvements in all of our segments.
Operating expenses increased 18.3% compared to last use of question when approximately 20% that of narration cost for 6 through various government support programs.
Our sales of marketing for the link increased 80% Genei expenditures increased by 22 per cent and research and development of expenses between the date that the existing levels throughout the crisis was 6.8 million euro or 800, thousands of higher the last year's the quarter.
This gorgeous net operating income was $843 compared to 892 sales of last year.
As a result of all of these elements of the groups operating profit was 2 million important under 21000 journal compared to other operating loss of $1.9 million in last year's persistent.
Compared to 2019 of small vertebrae of the note of.
$6 for a small please hold.
The financial results was positive.
1.2 million euro compared to the negative 200 thoughts on in the previous period.
And the previous year. The result of includes currency exchange gains of $2 for 1 million euro, including on a portion of of the phones bj's during the quarter.
The second quarter of 2021 contained vehicle tax expenses of 131 cells of Bureau, compared to the positive for 191 cells in the second quarter of 2020.
Profit for the quarter was 3.443 million euro compared to let the loss of.
960 line subtle for the twins 20 period.
Oh, please turn to the slide 12 for the recap of balance sheet and cash flow highlights.
In June 2021 that balance sheet was boosted by the type of increase of 70 for 3 million Euro from the issues of for a million new shares. This excludes of 14.4 million U S dollars gross proceeds from the issuance of 600000 additional new shares following the food.
The exercise of the creature into.
July of.
June 30th of cash amount of 182.8 million euro compared to 111, and a half million dollars at the end of last year when are both of which position decreased by 8.2 million Euro 2.106.8 million.
For the $18.7 million of artist where short term as of June.
Excluding the chemical increase our net cash position improve for 8 million Journal in Q2.2021.
Equity increased 70.547 million for 208.8 million Euro as of combined the result of the capital increase of $74.3 billion. The first 6 months at the most amounting to 200 results Juno.
And the pull of this conversion differences of 1 on the half million Euro.
Total deferred revenue the amount of 237.2 million Euro the increase of 2.23 million compared to December 31.2020.
Of the touch of 7.2 million.
2 million related to annual software sales of maintenance contracts vs 32 million as of.
The last year.
Cash flow from operating activities for the second quarter of 2021, where $8.9 million euro compared for $7 million for the the subject 20 period. This sort of cash of operating cash flow consists of EBITDA of 7.3 million Euro what are working capital improved 1.6 million.
Capital expenditures for the court that the amount of 2 million Euro of we're not finance.
The financial investment of Q2 of 2021, including the the 2 million you, what's the option price and the 1.1 million dollar goofing capital of low paid to link to the.
In line with the in the Ultimate made in our lost earnings Court Cole.
Covid.
Thank you.
If you could find the of turn the bank the slide 13.
And before opening the sort of questions.
He would like to try and give you some insights and what we couldn't believe the remainder of 2021 may bring.
The currently see a positive.
Albeit fragile instead of the diverse.
Global trend of businesses gradually recovering from the pandemic of crisis.
Assuming that this trend continues in the right direction over the next few months.
It kind of the expect our consolidated revenues for the entirety of 2021 to the exceeds the level of the day of each in 2019.
Which was close to 197, maybe on Europe's.
We also seek a likelihood of our revenues from the close.
Close to 200 million.
This was the represents a growth.
Compared to 2020 between 15 and 17%.
As is traditionally the case for our business.
That the majority of the revenues of of the second half of this year will come from a particularly strong fourth quarter.
As our revenues grow the intent to increase our operational of expenses accordingly, with the view to accelerating of growth in the near future.
For the on line with Love seat explained earlier.
Therefore, the currently believes that adjusted EBITDA for the full year 2021 will reach up to 25 million per year.
And with this I would like to conclude our prepared remarks.
So operator, please go ahead and open the call to the questions.
Thank you as a reminder to ask the question here, what with the Pet Star 1 on your telephone.
For your question past the council. Please stand by a volley comes out of the Q&A roster.
I first question, what kind of kind of cable Salina Keybanc Mountain <unk> go ahead.
Hi, Thanks for taking my question.
I guess you know.
For my first line now when you say there are of covering the end market that's happening in a more swiftly the unexpected now the that can I get the C. About maybe from the linearity of perspective had the added this develop nuclear of the quarter was it wasn't more immediate dark and the just the confidence from the corner at the Hall.
Yeah.
Of course, we cohort of multiple markets.
And overall the trend is has been positive through all of the quarter.
Certainly as a number of show.
In the medical we have seen a continuous increase in sales.
But that was also drove for for software.
The only market. This is relatively unstable the adult of logic market.
No 1 on the suffering from Covid, we assume but as many of you know is suffering from.
The supply chain.
Problems and is still in a very unstable face.
Okay and then for my second question as it relates to the to the commentary for the end of the year you mentioned that you could exceed.
2019 revenue of levels.
As it relates to the manufacturing segment.
And there's also a segment that that could exceed 2019 levels. Thank you.
Jason as you.
As you see in the past few for for US also on this quarter I mean, we have continuously and also strategically been growing in particular, our software and and medical segments.
And while manufacturing has recovered and it'd be expect that it will continue to recover.
We do not expect that the mix between the 2 segments in 2021 will be the same as the mix that it wasn't 2019 and as a result of the continued the exercise of our strategic priorities, we do expect that software and in particular medical.
Will represent a more important parts of of the overall revenue.
Great. Thank you I appreciate the color.
Sure. Thank you.
As a reminder of ladies and gentlemen of you would like to ask the question. Please pass the sky than the 1 for our next question of all kind of Primal Troy Jen thing with like the cap at all go ahead.
Hey, gentleman congrats on the nice for those.
Hey, Troy. Thank you. Thank you Troy.
Okay. So I guess I got a few questions here I guess I'll start out with digital manufacturing. It seems like this past quarter of the first half of the sheer has been a surge in the interest rate and we've seen in shape ways fathom and fast radius kind of all.
And of the smart can be of specs and really they're just doing 3 printing Nancy Nancy and injection molding and you have some software right to automate that in.
Just curious you guys of spot so I mean, I know you're huge in through the printing I'm, assuming you've got C. N C. In injection moulding with the with a C T and as the schedule manufacturing are.
Just manufacturing in general for you guys segment, an area that you think is going to be the grew up the habit.
Well.
We.
We are for the mentally <unk>.
Can you repeat the company Mb.
The intent to remain.
Very focused on.
Cough <unk>.
<unk> the painting applications meaningful applications SBS Sbf's net so many times.
Which means net.
The do not intend to of substantially for rather on our scope to CNC machining and on the conventional manufacturing technology estimates.
The digital sales on top of it.
So.
I think the envy the difference.
In strategy for on.
The company for you you mentioned earlier.
Okay, Alright stand on the 3 D space I get it.
And then software competition.
Hearing in the system so.
Alright, I'll take on.
<unk>.
And another the show and.
Yeah that is only 5% of the revenue increase in.
The software.
6 months, but did as high.
24% sales increase.
In a segment due to the teeth.
Rather the.
That are associated with our Recoding income channels.
So we put the cash in on the revenue, but we have discredit total for the license periods.
This means.
Sure that that.
The software is highly of freaky.
Percentage bipolar existing customer base, where we see very high.
The new interface.
And on top.
Compared to the same period lost the more.
More than double the amount of of new users.
The show is that's our software.
And the moms.
And is not experiencing at this moment for a negative effects from competition.
So for me I guess on a dig into that a little bit I think it kind of of all my question in there, but if you just look at the software competition isn't that that's kind of picked up for you I think I said the injury can hp's kind of snuck went up together.
<unk> Gonna try to offer you know kind of the software package the customers.
Of your revenues on software is in the flat the summer marching can I get your comment deferred the outgrew rates of sales of growing but the.
On any concerns on some of these new entrants and competing effective agency.
Well the drawing the accounts.
The comments has to be having the spectrum from competition and we have the.
Similarly for no over the years.
Because we have all of these experienced competition.
But.
The.
We do believe that especially those new plants have quite of some hurdles the date.
I do think day are very ambitious in addressing a very broad scope of softness solutions, which is.
Hard to build up.
And the.
Yeah.
Then.
1 of the.
We do indeed have respect for their offerings and know that we have to begin for those 2.
Yep swiftly after the the date.
The new address in the software industry.
We believe we have a very slowly base.
Shouldn't be too afraid of competition.
Alright, perfect..1 last question I'll see the Florida for either Peter or you're on but I.
I guess I'd just be curious of any thoughts on keep 3 specifically I mean, we've got typically it's the season on slower quarter, alright, especially on Europe. The off saying that you know we've got you know just kind of the general recovery happening so.
I get the day queue for typically happens, but your thoughts on sequentially, what Q3 of them like.
Yes. Thank you Troy I think it is it is a good question and.
When we of tickets are of guidance we.
Really wanted to emphasize that we expect.
Q for that is not just the additionally, the strongest quarter, but also in terms of.
Continuous sequential growth and for the recovery with see that more happening also in queue for that in queue to be so we do expect to meet the the the 200 Mark that we sit there as an as an ambition that will mainly come from the fourth quarter, which basically means that you should not.
Expect much growth from 2223.
Perfect. Thanks, guys keep up the good of our channel.
If I can add maybe some 1 will point to the truly business.
If you look at the guidance of peace of has given the the Smiths include the effects of the group of deferred revenue from maintenance on license fees.
Even if the tradition due to the queue for the traditional the scorcher seasonal seasonal basis.
We also have the the effect of the group of sales of redundant the pillow to recognize the revenue against the 2 of them.
The expect also significant growth on the perspective.
Thank you hold on I'm, sorry for that question of what I'm looking at this time I would now like to turn the call back of the Mister Peter Lance for any further Vermont.
Thank you operator.
Thanks again for all of you for joining us today on the ball. We obviously look forward to continue on dialogue would you throw the investor conferences or in 1 on 1 version of meetings of calls.
We will have a physical and the presentation at rabbits in Chicago of this year with fixed plans for the presence.
If you want to talk to fit the order of the company Representatives at the rapid and have not yet reached out to US Please feel free to do so.
Thank you again and goodbye for now.
Ladies and gentlemen of conclude today's conference call. Thank you for your ticket to pay. Thank you may now disconnect.
[music].
Yeah.
[music].
[music].
Yeah.
[music].
[music].