Materialise NV, a 28-year veteran of the 3D Printing/Additive Manufacturing ecosystem has been following a unique, successful strategy. Following Hannover Messe, where the collaboration of SAP, Materialise, and LEO Lane for an end-to-end distributed manufacturing solution was presented, Materialise also announced its 1st quarter 2018 results in an analyst conference call (more on that below). Together this prompted us to highlight Materialise and profile it here. A lot can be learned from Materialise’s insightful, smart, long-term strategy and how it leverages its deep ecosystem understanding that stems from its continuously evolving core software business.
It’s all about Enabling
Since its establishment in 1990, Materialise held a wider perspective than most companies in the nascent 3D printing industry. While a lot of innovation was centered around new printing technology and expanding what could be done physically, Materialise’s Founder & CEO Wilfried (Fried) Vancraen realized that the ecosystem surrounding the 3D printers needed innovation. Materialise began to address the pain of operating 3D printers. At the time, it was extremely difficult for 3D printers to read and interpret graphic representation (3D) computer files generated by CAD software, for example. Therefore, Materialise created a solution – the Materialise Magics software which translates these files into a format that is easy for the printer to read. This is in a sense similar to how a compiler takes high-level computer code and translates it to assembly or machine code for a given computer. Since then the company continued to develop software and services around 3D printing. “Very early on we decided software would be our focus, but to support all the people who develop machines, to support all those people who use machines, even if that was creating competition for us,” said Vancraen (above with the 3D Systems SLA 3D Printer in 1990). Just last year Vancrean was inducted into the TCT Hall of Fame as an acknowledgment for his meaningful contributions to the development and innovation in the field of additive manufacturing. Today Materialise’s software solutions can run an entire production floor with Streamics, their Production Management software.
Part of a Whole
“We believe we are too small to bring such an amazing technology as additive manufacturing to the entire world, and we are part of an ecosystem where we do this together with all the players.” said Vancraen when speaking about the 2017 Materialise World summit named “Think. Beyond. Together.” This was echoed by Materialise’s Executive Chairman, Peter Leys, at the 1st quarter 2018 results conference call last Friday. Leys highlighted the collaboration presented at Hannover Messe and commented: “These kinds of relatively straightforward combinations of existing products of different players in the ecosystem – in the case at hand products by Materialise, SAP, and LEO Lane – show that the digital supply chain is much more a reality than many people think. Provided, of course, that smart players in the ecosystem find each other and are willing to collaborate.” (below is the slide Leys used for this part of the call).
Partnerships are in line with the 5 principles Materialise holds dear – innovation, co-creation, integrity, people, and quality. Working not just for change’s sake but with the bigger picture in mind, thinking about how can the industry as a whole benefit leads to systematic thinking, joining forces, and ultimately to improve the ecosystem. We can attest to that.
Software as a Basis
Partnerships are one way to leverage Materialise’s expertise from its core software business but Materialise’s strategy over the years has been to leverage this expertise in other ways as well which allowed it to grow to the 3 prong company it is today. It is comprised of 3 segments: software, manufacturing, and medical. From its earliest days, Vancraen recognized the potential of AM in the medical industry. He even included it in the company’s mission statement: “Our mission is to innovate product development that results in a better and healthier world, through our software and hardware infrastructure, and an in-depth knowledge of Additive Manufacturing.” Materialise’s long-term investment in the medical field is now paying off and its medical segment ended 1Q18 with €12mm in quarterly revenues, as a result of year over year growth of 20%. Profitability increased to over 6 fold year over year and reached over €2mm. The growth was fueled by the rollout of Materialise’s TRUMATCH medical implants in the US in the 1st quarter following their FDA approval in September 2017 (below a patient-specific shoulder guide).
Materialise is not resting on its laurels, it is looking forward and following this strategy in additional directions. Materialise is investing in additional medical solutions but also in eyewear frames, insoles (below), and automotive quality fixtures. These initiatives require investment at the moment but Materialise expects that they will create additional profits in the future, as the medical sector already demonstrated. TRUMATCH, for example, has been in development since 2009. Since the pace of the ecosystem is ever increasing it’s reasonable to expect the time gap between investment and payoff to shrink for these newer initiatives. Automotive parts, for example, carried out at subsidiary RapidFit is already bearing some fruit. RapidFit was able to create fixtures that are 90% lighter thanks to the combination of Additive Manufacturing and Carbon Fiber (detail below).
Land and Expand
So far we’ve covered leadership and growth through partnerships and investments in R&D but we haven’t even reached the 3rd segment, Manufacturing, or another tool Materialise is using: acquisitions. Materialise operates a large, highly professional, manufacturing service (a.k.a. service provider) that had revenues of €53.7mm in 2017 (excluding the recent acquisition of ACTech), a little over half for prototypes and a little under half for end parts. This mix is probably not ideal since end part revenue is likely more sticky (recurring) than prototype revenues. However, in the 4th quarter of 2017, Materialise acquired ACTech, a manufacturer of short runs of complex cast metal parts. This will strongly tip the scale to end parts in this segment, although through other technologies, not necessarily Additive Manufacturing. ACTech adds about €10-11mm a quarter to the manufacturing segment revenues, almost doubling it, and at a much higher profitability rate than the existing business. However, it remains to be seen if this foray into non-additive technologies will be leveraged and pay off for Materialise or will the de-focus from its mission statement detract from this company who has kept its focus razor sharp for 28 years so far. Time will tell and we are certainly rooting for it and looking forward to continued collaborations and successes together.