Belgium’s software and 3D printing services provider Materialize reported a drop of nearly twenty percent in its Q3 2020 financial results.

Materialize’s revenue fell from € 50.4 million in the third quarter of 2019 to € 40.7 million in the third quarter of 2020, representing a decrease of 19.2 percent. During Q3 2020, the firm’s medical segment grew, but it was not enough to offset the significant revenue cuts seen within its manufacturing and software divisions.

The company’s software business H1 was proven to be resilient to the impact of the pandemic in 2020, and other industry developers such as Autodesk also reported revenue growth during Q2 2020. In Q3 2020, however, content software revenue declined by 12.7 percent due to economic uncertainty surrounding the outbreak due to the company’s tight spending.

In a call with analysts and investors, executive chairman Peter Leyes claimed that despite the firm’s revenue decline in Q3 2020, there were reasons to be optimistic in Q4. “Given the challenging environment, Materialize has done well this quarter thanks to the continued hard work and inspiring contributions of our entire workforce,” Leyes said.

“While our manufacturing revenue and, to a lesser extent, the software segment declined in the midst of the epidemic, our medical segment grew its revenue by an impressive 11 percent,” he said.

Materialize Q3 2020 Financial Results

Materialize revenue is reported in three segments: software, medical and manufacturing. Only the company’s medical division showed revenue growth during the third quarter, rising from € 15.4 million in the third quarter of 2019 to € 17.1 million in the third quarter of 2020, an increase of 10.8 percent.

The firm’s medical growth was primarily driven by a 14.5 percent increase in revenue derived from its equipment and services, while income from its medical software grew 3.1 percent. In terms of Materialize’s overall software segment, its revenue fell from € 10.8 million reported in the third quarter of 2019 to € 9.4 million in Q3 2020, representing a decrease of 12.7 percent.

During Q3 2020, the company’s recurring software revenue increased by 15.9 percent, but this was not reflected in the segment’s performance, indicating that potential customers are cutting spending. Manufacturing was the worst-performing division of the materialize business, producing € 14.1 million in Q3 2020, a 41.3 percent drop on the € 24.1 million generated in Q3 2019.

According to the company, the epidemic was the primary reason behind the decrease in its manufacturing revenue, with its core infotech business showing the biggest revenue shortfall of 60 percent. Materialize reported a drop in demand within its major automotive and aerospace businesses, a sector that typically accounted for more than half of its industrial revenue.

Implement investment in future development

Despite the company’s overall decline in revenue during Q3 2020, it has opted to increase its spending on R&D to 4.2 percent and invest in new opportunities for future growth. Earlier this month, Materialize announced a strategic investment in customized eyewear firm Ditto, and Lez explained the rationale behind the $ 9 million outlay.

Lay explained, “The alliance aims to strengthen Ditto’s state-of-the-art virtual training platform by optimizing materials and adding 3D printing functionalities.” “The sale of Ditto’s digital eyewear solutions will generate a royalty stream for Materialize, and we believe the collaboration will help promote other pioneering initiatives.”

Along with its Q3 Financial, the firm also announced the acquisition of insole manufacturer Superfeet’s share in the dynamic foot measurement technology of competitor RSscan. Materialize aims to continue to work with Superfeet in the future to develop a more comprehensive personalized insole product line and to meet the footcare needs of customers in the medical industry.

Fried VanCrain, CEO and founder of Materialize, was keen to highlight the importance of the ongoing partnership of the companies. “3D printing and design technology has great potential to help both consumers and health professionals improve comfort, health, and performance through personalized footcare,” VanCrain said.

“I am particularly excited that we have been able to strengthen our strategic partnership with Superfeet in such a way that both partners will be able to focus solely on their personal strengths,” he said.

A Strong End of the Year for Physicization?

In his closing remarks on the earnings call, Leyes stated that although the company’s industrial activities are slowly recovering from the effects of the epidemic, it will not be immediately apparent in its financials.

Materialize’s Q3 2020 figures still benefited from backorders, and as demand decreased during the year, this was likely to be reflected in its future results.

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