Business context and reporting period
Materialise NV filed this annual report on Form 20-F for the fiscal year ended December 31, 2020. The filing reports annual results, not standalone fourth-quarter results; Q4-specific financial values are not clearly provided in the filing text. Financial statements are prepared under IFRS as issued by the IASB, and 2019 comparatives were restated for the final accounting of the Engimplan acquisition.
The company provides additive-manufacturing software, medical software and devices, and 3D-printing and manufacturing services through Software, Medical and Manufacturing segments.
Financial results and liquidity
Amounts below are in euros; financial statement figures are in millions unless indicated otherwise.
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | €170.4 | €196.7 |
| Gross profit / margin | €94.0 / 55.2% | €109.6 / 55.8% |
| Operating profit (loss) | (€4.6) | €6.9 |
| Net profit (loss) | (€7.3) | €1.6 |
| Adjusted EBITDA (unaudited) | €20.4; 12.0% margin | €26.7; 13.6% margin |
| Net cash from operating activities | €30.0 | €28.4 |
| Cash and cash equivalents at year-end | €111.5 | €128.9 |
| Loans, borrowings and lease liabilities | €115.1 | €127.9 |
Investing cash outflow was €28.3 million, including €17.7 million of capital expenditures, acquisitions and convertible-loan investments. Financing cash outflow was €16.9 million; the company raised no new borrowings in 2020 and repaid borrowings and leases. Cash declined by €15.2 million, including adverse exchange-rate effects. Total assets were €327.7 million and equity was €133.1 million at year-end. No undrawn credit lines remained.
Segment revenue and Adjusted EBITDA:
| Segment | FY2020 revenue | FY2019 revenue | FY2020 Adjusted EBITDA / margin | FY2019 Adjusted EBITDA / margin |
|---|---|---|---|---|
| Software | €39.1m | €41.7m | €13.4m / 34.3% | €13.8m / 33.2% |
| Medical | €61.7m | €60.8m | €13.9m / 22.5% | €10.8m / 17.7% |
| Manufacturing | €69.6m | €94.2m | €2.5m / 3.7% | €12.2m / 12.9% |
Material changes versus the prior comparable period
- Revenue fell 13.3%, driven mainly by Manufacturing, down 26.0%; ACTech revenue declined €18.2 million amid weakness in automotive and aerospace.
- Medical revenue grew 1.5%, while Software revenue fell 6.2%. Software recurring revenue rose 14.9%, but non-recurring revenue declined 26.7%.
- Gross margin declined 0.6 percentage points. Operating loss replaced prior-year operating profit; net loss was €7.3 million versus net income of €1.6 million.
- Adjusted EBITDA fell 23.5%. Research and development expense increased 16.1% to €27.1 million, while sales and marketing and general and administrative expenses declined.
- Operating cash flow increased 5.6%, with working-capital improvements offsetting lower Adjusted EBITDA. Year-end cash fell by €17.4 million from 2019.
Outlook, risks, contingencies and unusual items
- COVID-19 and outlook: The pandemic adversely affected all three segments. Management expected continued impact in 2021, with gradual sequential revenue growth possible as conditions improved, but said visibility beyond Q2 2021 was very limited. Its then-current scenarios indicated going concern remained appropriate and credit covenants would not be breached in 2021; these assessments were explicitly uncertain.
- Liquidity and investment: Management expected liquidity to cover operating requirements for at least 12 months. It intended to maintain investment in innovation where possible, while acknowledging that prolonged disruption could pressure cash and competitiveness. EIB covenant terms were temporarily waived or adjusted in response to COVID-19.
- Impairments: FY2020 included €4.6 million of impairment charges: €2.1 million for the tracheal-splint development project and €2.5 million for Engimplan goodwill and intangible assets. The FDA rejected two IDE submissions for the tracheal-splint project, delaying expected commercialization by about two years.
- Acquisitions and investments: Materialise acquired the remaining interests in Engimplan and RS Print in 2020 and acquired substantially all RS Scan assets. The filing also discloses convertible loans to Fluidda and Ditto; both companies were loss-making. Subsequent to year-end, Materialise recorded a 2021 impairment of €3.79 million on its Ditto loan after business objectives were not met and repayment uncertainty increased.
- Legal matters: Dentsply Implants claims €2.7 million over an alleged wrongful termination of a supply agreement; Materialise appealed the ruling in Dentsply’s favor at first instance. In a separate patent case, Zimmer Biomet sought indemnification from Materialise; trial was scheduled for October 2022. No amount was accrued for the patent litigation contingency.
- Controls and audit: Management and KPMG reported material weaknesses in internal control over financial reporting, including risk assessment, monitoring, journal-entry review and controls over internally produced information. KPMG issued an adverse opinion on ICFR effectiveness as of December 31, 2020. The financial-statement audit opinion was unqualified, and management said the weaknesses had not caused identified material misstatements.
- Other risks: Key exposures include competition and technology shifts, medical-device regulation, customer and industry concentration, supplier constraints, foreign-exchange volatility, cybersecurity and privacy, and the uncertain pandemic recovery. Management stated that it had no present intention to pay dividends in the foreseeable future.
Important facts for investors to verify
- Confirm the FY2020 results against the audited IFRS statements and distinguish them from any Q4-only figures, which the filing text does not clearly provide.
- Track the recovery of Manufacturing and ACTech, and whether segment margins improve from FY2020 levels.
- Assess cash use, debt repayments, covenant compliance and the impact of having no undrawn credit facilities.
- Monitor remediation of the disclosed material weaknesses and any subsequent auditor assessment of internal controls.
- Follow the Engimplan impairment assumptions, tracheal-splint regulatory path, Ditto loan recovery and the outcomes of the Dentsply and patent proceedings.