Ladies and gentlemen, thank you for standing by and welcome to the Materialise Q2 2021 Financial Results Call. I would now like to hand the conference over to your host, Ms. Harriet Fried of LHA. Ms. Fried, please go ahead.
Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Fried Vancraen, Founder and Chief Executive Officer of Materialise, Peter Leys, Executive Chairman, and Johan Albrecht, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's strategic, financial, and operational performance for the second quarter of 2021.
To access the slides, if you have not already done so, please go to the investor relations section of the company's website at www.materialise.com. The earnings release 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 company's plans, expectations, and growth prospects, among other things.
These forward-looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed, including competitive dynamics and industry change. Any forward-looking statements, including those related to the company's future results and activities, represent management's estimates as of today and should not be relied upon as representing their estimates as of any subsequent date.
Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes in expectations. A 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 in the company's most recent annual report on Form 20-F filed with the SEC. Management will discuss certain non-IFRS measures on today's call. A reconciliation table is contained in the earnings release and also at the end of the slide presentation. With that, I'd like to turn the call over to Peter Leys. Peter?
Thank you, Harriet, and thank you everyone for joining us today. You can find the agenda for our call on slide three. As the first item on our agenda, I will summarize the highlights of our financial results for the second quarter of 2021. I will pass the floor to Fried, who 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 will walk you through our second quarter numbers in more detail.
Finally, I will come back and give you some observations about what we currently believe the rest of the year may bring. When we've completed our prepared remarks, we will be happy to respond to any questions that you may have. Let's turn to slide four, which summarizes the highlights of our financial results.
Quarter-over-quarter, our revenues grew 33% to EUR 50.7 million, and our adjusted EBITDA more than doubled to EUR 6.9 million. These results are, we believe, excellent. Of course, the 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 a result, while the comparison between last year's and this year's second quarter remains very relevant, it may provide less insights into our current 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 to better understand the trends of where our business is going on the short term, as well as against the same period of 2019, which we believe is a better reference period than the horrible year 2020.
I would like to share some of the conclusions of these additional benchmarking exercises with you. On a sequential basis, compared to Q1 2021, our revenues grew by 11.3%, and our adjusted EBITDA increased by a stunning 30%. Not only do these numbers confirm that our business is recovering from the crisis, they also show the recovery is happening at 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 also increased when you compare them with our results of the same period in 2019. To be more precise, our revenues grew by 5% and our adjusted EBITDA increased 37%. This tells us not only that we are swiftly recovering from the crisis, but in fact that we are back on the track of posting genuine and healthy growth.
These, we believe, very solid and promising results underscore what we had explained during our recent capital increase. The newly raised funds will not just be used to help us recover or to help us return to growth, which are things that we are already experiencing today. In fact, we 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 CMF market, and the go-to-market of our wearables platforms in general, and of Materialise Motion in particular. With that, I would now like to pass the floor to Fried, who will explain our current intentions with respect to the use of proceeds in more detail. Fried?
Thank you, Peter. Indeed, we intend to allocate the bulk of the proceeds we raised to the key growth drivers that we discussed at length during our last earnings call. Let me briefly reiterate what these are. First, we will continue to invest in the expansion and innovation of our two market-leading horizontal software platforms, Magics and Mimics.
The Magics platform, as you know, enables users of AM technology to be more productive, more cost-efficient, and more sustainable. The sales of our Magics flagship product remained strong throughout the pandemic and showed again considerable growth in Q2. We are currently in the process of adding more extensive process planning and manufacturing execution functionality to our platform, and we are also making many Magics functionalities 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 end part manufacturing market. As many of you know, we believe we can significantly accelerate these efforts through the acquisition of the Link3D later this year, that we intend to finance entirely from our balance sheet.
The Mimics Care and Innovation Suites help researchers, medical device companies, and hospitals to engineer on the human anatomy, which in a number of instances, will lead to the 3D printing of unique anatomical models and personalized medical devices. Over the last couple of years, the successful introduction of our Mimics platform in hospitals has contributed significantly to the overall success of our Medical segment.
We are currently in the process of developing additional artificial intelligence functionality for Mimics and intend also to introduce augmented reality and virtual reality functionality to the Mimics Suite. Today, we are developing these new features internally. With the funds raised, we intend to increase our internal development capacity and do not exclude that we also undertake other initiatives and if they could speed up some of these developments.
Second, in addition to the software platforms, Materialise empowers a limited number of specific, meaningful applications of 3D printing, both in medical and in paramedical fields. Our current so-called key verticals are situated in the orthopedic, CMF, footwear, and eyewear markets. Each of those verticals, in particular CMF and footwear, have shown significant growth recently, and we intend to continue to invest in initiatives that will accelerate that growth.
We bring our CMF product portfolio to the market mainly through our partner, Johnson & Johnson. The success of our CMF personalization platform is an important contributor to the overall success of our Medical segment. The acquisition of Engimplan in Brazil in 2019 allowed us to expand our product portfolio in CMF and to also be more present in markets where our partner has less focus.
With the funds of the recent capital increase, we intend to continue to invest in success of our partnership with Johnson & Johnson and also to look at M&A active opportunities that offer synergies similar to the strategic fit that Engimplan offers. We have been active in the footwear market, in particular the design and production of personalized insoles since 2014 through the joint venture RS Print.
In 2020, we acquired 100% of the shares of RS Print and also substantially all assets of RSscan, the company that makes pressure plates and related software. As a result, we now have complete one-stop shop product offering for personalized insoles. This solution is unique and patent protected in the sense that it takes the dynamic aspect of the foot into account on a scientifically substantiated basis.
Here also, we intend to increase our expenditures and investments, in particular with a view to accelerating our go-to-market. In the eyewear market, we have built a dedicated eyewear additive manufacturing line in Poland and have our own dedicated sales force that is active in Europe. We have a number of ongoing initiatives that relate to the digital customer journey preceding the choice and/or the production of the frames.
On both fronts, the physical production and the digitization of the customer journey, we do not exclude M&A activity. We moved into a new Metal 3D printing center in Bremen, in Germany, in the first quarter of 2021. The official opening is planned for October 7th. Metal is one of the growth drivers of our manufacturing unit. While we expect continuous growth of that particular sub-segment of Materialise Manufacturing, we do not plan any M&A activity in that area. However, we do intend to intensify our partnership collaborations with metal machine manufacturers to achieve seamless and highly automated metal 3D printing workflows in the new facility, which will also benefit Materialise Software.
To conclude, Materialise is coming out of the Corona crisis with renewed growth in our key focus areas and with a solid and strengthened balance sheet that will allow us to accelerate the growth with internal as well as external initiatives. Johan will now provide you with the numbers that prove this statement.
Thank you, Fried. I begin with a brief review of our consolidated revenue on slide six. As a reminder, when we refer to sales in our presentation, we mean revenues plus deferred revenues. Please note that unless otherwise stated, comparisons in this call are against our results for the second quarter of 2020.
Like Fried did earlier, because the second quarter 2020 was very significantly impacted by the COVID-19 crisis, I will sometimes refer to 2019 to make the figures more comparable. Revenue was EUR 50.7 million for the period, 33% above the level of the same period last year. The positive growth took place in all three segments. The growth in our Materialise Software segment was 5%, our Medical segment grew 50%, and revenue in Manufacturing increased 39%.
Compared to the second quarter of 2019, our overall revenue grew by 5%, driven by a healthy growth of 8% in Software and a very strong 21% revenue increase in Medical. Manufacturing revenues were 5% lower in Q2 2021 than in 2019, but recovered 22% from the first quarter of 2021. Importantly, deferred revenues from software license and maintenance fees increased by EUR 1.7 million compared to the end of last year, further underscoring the strong Software sales performance within both our Software and our Medical segments in the second quarter.
For the second quarter of 2021, Materialise Software accounted for 20% of our total revenue. Materialise Medical for 34%, and Materialise Manufacturing for 46%. Cross-segment revenue from software products represented 31% of our total revenue. Moving to slide seven, you will see our consolidated adjusted EBITDA numbers for the second quarter.
Consolidated adjusted EBITDA more than doubled, increasing from EUR 3,382,000 last year to EUR 6,925,000 this period. While the revenue grew 5% compared to 2019, EBITDA grew 37%. This increase compared to 2019 was a result of a variety of positive factors. First, our revenue growth. Second, an improved gross margin triggered by increased insourcing and continuous productivity improvements. Thirdly, disciplined spending, in particular with respect to overhead.
Importantly, the increase of our EBITDA did not come at the expense of our R&D spending, which actually increased by 12% compared to Q2 2019. The initiatives to enhance our internal business application platform continue and are still on track. Slide eight summarizes the results of our Materialise Software segment. Software revenue increased 5.2% to EUR 10 million and 7.6% compared to Q2 2019. Deferred revenue grew an additional EUR 500,000 .
Recurrent sales increased 24%, but were offset by a smaller usage of deferred revenue from license and maintenance fees compared to last year. Non-recurring revenue increased 15%, driven by new perpetual license fees and royalty income. EBITDA margin was 31.2% or EUR 3.1 million compared to EUR 3.8 million. As the segment did not receive governmental support as we did last year, remuneration costs rose.
Weighed together with the increased efforts in R&D and our digital transformation project on our EBITDA. Nevertheless, this quarter's EBITDA was 52% or EUR 1.1 million higher than in Q2 2019. Moving now to slide nine , you will see that total revenue in our Materialise Medical segment increased by almost 50% to EUR 17.5 million. More meaningful is a 21% growth compared to the pre-pandemic second quarter of 2019.
Revenue from medical software sales grew 16% compared to 2019, where revenue from medical devices and services increased 23% compared to Q2 2019. Revenue from medical software sales accounted for 31% of the segment revenue. Adjusted EBITDA not only quadrupled to EUR 4.5 million from EUR 1.1 million, but was also 65% higher than in Q2 2019.
As a combined result of continued top-line growth, production efficiencies, insourcing programs, and lowered operating expenses, the EBITDA margin increased to 26% from 10% last year and 19% in Q2 2019. This all while we accelerated the execution of our R&D programs. Now let us turn to slide 10 for an overview of the Q2 performance of our Materialise Manufacturing segment. Revenue increased 39% or EUR 6.5 million to EUR 23.3 million.
Importantly, revenue also increased 22% or more than EUR 4 million from the first quarter of this year, as we were able to translate the positive signs that we noted in the previous quarter, in particular from automotive and industrial client segments, into effective revenue growth. Adjusted EBITDA for the quarter rose to EUR 1,850,000 compared to EUR 650,000 in 2020. As the level of capacity usage increased, gross margin returned to pre-corona levels.
Operating expenses remained 3% below Q2 2019. As a result, EBITDA margin improved to 8% from 4% last year. Slide 11 provides the highlights of our income statement for the second quarter. Gross profit margin grew to 56.1% from 52.3% and 54.8% in Q2 2019. This solid margin was due to the increased revenue, the higher level of capacity usage, and productivity improvement in all of our segments.
Operating expenses increased 18.3% compared to last year's quarter, when approximately 20% remuneration cost was saved through various government support programs. Sales and marketing spending increased 18%, G&A expenditures increased by 23%, research and development expenses, which we maintained at existing levels throughout the crisis, were EUR 6.8 million or EUR 800,000 higher than last year's quarter. This quarter's net operating income was EUR 843,000 compared to EUR 892,000 last year.
As a result of all these elements, the group's operating profit was EUR 2,421,000 compared to an operating loss of EUR 1.9 million in last year's period and compared to 2019, where we noted a EUR 36,000 a small result. Our financial result was +EUR 1.2 million compared to a -EUR 300,000 in the previous year. The result includes currency exchange gains of EUR 2.1 million, including on a portion of the funds we raised during the quarter.
The second quarter of 2021 contained income tax expenses of EUR 131,000 compared to a +EUR 191,000 in the second quarter of 2020. Net profit for the quarter was EUR 3,443,000 compared to a net loss of EUR 1,969,000 for the 2020 period. Now please turn to slide 12 for the recap of balance sheet and cash flow highlights. In June 2021, our balance sheet was boosted by the capital increase of EUR 74.3 million from the issuance of 4 million new shares.
This excludes the $14.4 million gross proceeds from the issuance of 600,000 additional new shares following the full exercise of the greenshoe in July. At June 30th, our cash amounted to EUR 182.8 million compared to EUR 111.5 million at the end of last year, where our borrowings position decreased by EUR 8.2 million to EUR 106.8 million.
Only EUR 18.7 million of our debt was short-term at the end of June. Excluding the capital increase, our net cash position improved EUR 4.8 million in Q2 2021. Equity increased EUR 75.7 million to EUR 208.8 million as a combined result of the capital increase of EUR 74.3 million. The first six months net loss amounting to EUR 200,000, and a positive conversion differences of EUR 1.5 million. Total deferred revenue amounted to EUR 37.2 million, an increase of EUR 2.3 million compared to December 31st, 2020.
Of the EUR 37.2 million, EUR 32 million were related to annual software sales and maintenance contracts versus EUR 30.2 million as of end last year. Cash flow from operating activities for the second quarter of 2021 were EUR 8.9 million compared to EUR 7 million for the 2020 period. This quarter, our operating cash flow consisted of EBITDA of EUR 7.3 million, while our working capital improved EUR 1.6 million.
Capital expenditures for the quarter amounted to EUR 2 million and were not financed. The financial investment of Q2 2021 included a $2 million option price and a $1.1 million working capital loan paid to Link3D, in line with the announcement made in our last earnings call. Peter?
Thank you, Johan. If you could kindly turn the page to slide 13. Before opening the floor to questions, we would like to try and give you some insights in what we currently believe the remainder of 2021 may bring. We currently see a positive, albeit fragile and fairly diverse, global trend of businesses gradually recovering from the pandemic crisis.
Assuming that this trend continues in the right direction over the next few months, we currently expect our consolidated revenues for the entire year 2021 to exceed the level that they reached in 2019, which was close to EUR 197 million. We also see a likelihood of our revenues coming close to EUR 200 million. This would represent a growth compared to 2020 between 15% and 17%.
As is traditionally the case for our business, we expect that the majority of the revenues of the second half of this year will come from a particularly strong fourth quarter. As our revenues grow, we intend to increase our operational expenses accordingly with a view to accelerating our growth in the near future, fully in line with what Fried explained earlier. Therefore, we currently believe that adjusted EBITDA for the full year 2021 will reach up to EUR 25 million. With this, I would like to conclude our prepared remarks. Operator, please go ahead and open the call to questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question will come from Jason Celino with KeyBanc. One moment, please go ahead.
Hi. Thanks for taking my questions.
Hey, Jason.
For my first one, when you say the recovery in your end markets is happening more swiftly than expected, that is definitely good to see, but maybe from a linearity perspective, how did this develop through the quarter? Was it more immediate, or is it just the confidence from the quarter as a whole?
Yeah. Of course, we cover multiple markets, and overall, the trend has been positive throughout the quarter. Certainly, as our numbers show, in Medical, we have seen a continuous increase in sales, but that was also true for Software. The only market that is still relatively unstable is the automotive market, which is no longer suffering from COVID, we assume, but as many of you know, is suffering from supply chain problems and is still in a very unstable phase.
Okay. For my second question, as it relates to the commentary for the end of the year, you mentioned that you could exceed 2019 revenue levels. As it relates to the Manufacturing segment, is this also a segment that could exceed 2019 levels? Thank you.
Jason, as you've seen in the past few quarters, also in this quarter, we have continuously and also strategically been growing, in particular, our Software and Medical segments. While Manufacturing has recovered, and we expect that it will continue to recover, we do not expect that the mix between the three segments in 2021 will be the same as the mix that it was in 2019. As a result of the continued exercise of our strategic priorities, we do expect that Software, and in particular, Medical, will represent a more important part of the overall revenues.
Great. Thank you. Appreciate the color.
Sure. Thank you.
As a reminder, ladies and gentlemen, if you would like to ask a question, please press the star, then one key. Our next question will come from Troy Jensen with Lake Street Capital. Please go ahead.
Hey, gentlemen. Congrats on the nice results.
Hey, Troy. Thank you.
Thank you, Troy.
Thank you.
I got a few questions here. I guess I want to start out with digital manufacturing. It seems like, this past quarter or this first half of this year has been a surge in interest, right? We've seen Shapeways, Fathom, and Fast Radius kind of all enter this market via SPACs, and really, they're just doing 3D printing and CNC and injection molding, and you have some software, right, to automate that. Just curious, your guys' thoughts. I know you're huge in 3D printing. I'm assuming you've got CNC and injection molding with ACTech. Is this digital manufacturing or just manufacturing in general for you guys' segment, an area that you think is going to be a big growth driver?
Well, Troy, we are fundamentally a 3D printing company, we intend to remain very focused on key core 3D printing applications, the meaningful applications as we have said so many times. Which means that we do not intend to substantially broaden our scope to CNC machining and other conventional manufacturing technologies with a digital source on top of it. I think there we differentiate in strategy from the companies you mentioned earlier.
Okay. All right. Staying in 3D space. I get it.
Yeah.
Software competition or Peter, were you going to say something? Sorry. All right, I'll keep going.
As the numbers show, Yeah, there is only a 5% revenue increase in our Software segment. This hides a 24% sales increase in our segment, deferred effects that are associated with our recurring income flows. We got the cash in already, but yeah, we have to spread it over the license periods. This means, show that our software is still highly appreciated by our existing customer base, where we see very high renewal rates. On top, compared to the same period last year, we more than doubled the amount of new users, which shows that our software is still high in demand, and is not experiencing, at this moment, very negative effects from competition.
And so Fried I guess I want to dig into that a little bit. I think it kind of all my question in there. As you look at software competition, it seems like that's kind of picked up, right? I think I saw Dyndrite and HP's kind of snuggling up together. Shapeways is going to try to offer their software package to customers. Your revenues on software has been flat, December, March, and June. I get your comment, deferred revs grew, right? Sales are growing, but any concerns on some of these new entrants and competing, more effectively against you?
Well, Troy, we always have to be very respectful for competition, and we have been so for now over 30 years, because we have always experienced competition. We do believe that especially those new players have quite some hurdles to take. I do think they are very ambitious in addressing a very broad scope of software solutions, which is hard to build up. Yeah. Again, while we truly have respect for their offerings and know that we have to be careful to swiftly accommodate with the new trends in the software industry. We believe we have a very solid base, and we shouldn't be too afraid of competition.
Got you. All right, perfect. One last question, and I'll cede the floor for either Peter or Johan. I guess I'd just be curious on your thoughts on Q3 specifically. Typically it's a seasonally slower quarter, right? Especially more in Europe. Offsetting that, just the general recovery happening. I get the big Q4, it typically happens. Your thoughts on sequentially what Q3 could look like?
Thank you, Troy. I think it is a good question. When we articulated our guidance, we really wanted to emphasize that we expect Q4 that is not just traditionally the strongest quarter, but also in terms of continuous sequential growth and further recovery. We see that more happening also in Q4 than in Q3. We do expect to meet the 200 mark that we set there as an ambition. That will mainly come from the fourth quarter, which basically means that you should not expect much growth from Q2 to Q3.
Perfect. Thanks, guys. Keep up the good work, gentlemen.
If I can add maybe one more point to that, Troy, is that if you look at the guidance that Peter has given, that does not include the effect of the growth of deferred revenue from maintenance and license fees. Even if Q4 is a traditional best quarter on a seasonal basis, we also have there the effect of the growth of sales that we cannot recognize as revenue yet, but where we expect also significant growth from that perspective.
Thank you.
I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Peter Leys for any further remarks.
Thank you, operator. Thanks again to all of you for joining us today on the call. We obviously look forward to continuing our dialogue with you through investor conferences or in one-on-one virtual meetings or calls. We will have a physical representation at RAPID in Chicago this year, where Fried plans to be present. If you want to talk to Fried or other company representatives at RAPID and have not yet reached out to us, then please feel free to do so. Thank you again, and goodbye for now.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.