Voxeljet AG (VJET) 2020 Q3 法說會逐字稿

Greetings. Welcome to the voxeljet Third Quarter Financial Results Conference Call. (Operator Instructions) Please note, this conference is being recorded.

At this time, I'll turn the conference over to Mr. Johannes Pesch, Director of Investor Relations and Business Development. Mr. Pesch, you may now begin.

Thank you, operator, and good morning, everyone. With me today are Dr. Ingo Ederer, voxeljet's Chief Executive Officer; and Rudolf Franz, voxeljet's Chief Financial Officer.

Yesterday, after the market closed, voxeljet issued a press release announcing its third quarter financial results for the period ended September 30, 2020. The release as well as the accompanying presentation for this conference call is available in the Investor Relations section of the company's website at voxeljet.com.

During our call, we may make certain forward-looking statements about the company's performance, including expectations on the results from our current order backlog. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance upon them. Forward-looking statements are all subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed, including the risks and uncertainties caused by the current COVID-19 pandemic and the resulting uncertainty in the global economy.

For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statement contained in our press release as well as the risk factors contained in the company's filings with the Securities and Exchange Commission.

With that, I would now like to turn the call over to Ingo, the Chief Executive Officer of voxeljet.

Thank you, Johannes. Good morning, everyone. Thank you for joining us on our earnings call today.

Let's turn to Slide 3. Our roots reach back to the year 1995 with the first successful dosing UV resins. In the context of a hidden project, initial 3D-printing tests are performed at the Technical University of Munich.

Our company was founded on May 5, 1999, as a spin-off from the University with a key addition in mind to establish new manufacturing standards. We want to do this by developing new generative or 3D processes for the serious production of complex components.

In early 2018, we were approached by a leading German carmaker who asked us if we were able to develop and design a high-speed, fully automated 3D production line. This carmaker wants to use additive manufacturing to make its releases more efficient. Towards the end of 2018, we designed a deal with them for the development of our new 3D-printing solution, VJET X.

Let's turn to Slide 4. Now we are extremely excited to report that while it might have taken us a bit longer than initially anticipated, we have reached 3 significant milestones with VJET X and the new, large High Speed Sintering 3D printer over the last month.

First, we received the follow-up orders for 3 additional VJET X units: 1 VJET X unit was ordered in August 2020, and 2 VJET X units were ordered in September 2020. The follow-up orders came as part of a frame contract concluded in 2018 between us and our partners and the German carmaker. The first 2 VJET X units were ordered mid-2018, and we installed them mid-2019 at the carmaker's facility. Since then, we have significantly improved the printers and post-processing infrastructure. This follow-up order brings the current total to 5 VJET X units for this carmaker.

Second, I would like to highlight that we have received a sort of technical pre-acceptance from the carmaker and our partners in September this year for the first 2 units. We now expect to book revenue for all 5 units mid-2021. We have summarized the key events in a time line in one of the later slides.

And third, as explained in our conference call earlier this year, the most critical step in the development of the large High Speed Sintering printer is to make sure to have a stable temperature across build areas. This becomes exponentially more challenging the larger the build area is. We believe we have found a clever solution for this problem and have filed IP accordingly. Now we have put it all together this month, and the results were good. First printing tests on the large High Speed Sintering printer were successful, and we are extremely excited about the new opportunities and markets we tend to address with this.

Before we start with the formal part of the presentation, let's quickly remind those who are new to that what we do. Slide 6 summarizes some key data about our company. On the right side of this slide, you can see our VX4000 3D printer, and it is operated in our on-demand parts production center in Germany.

On Slide 7, you can find some more information about Rudi and myself. Taken together, we hold roughly 20% of the company. We are happy to announce that we have both extended our contracts just recently with a clear vision in mind and are fully committed to make this a success for all stakeholders.

Let's turn to Slide 8 where we describe our technology. In the additive manufacturing market, we have probably more than 10 different technologies, each with its specialized field of application. We use a technology called binder jetting. Binder jetting is especially suited for high-volume manufacturing because of its potential to scale.

Looking at Slide 9 is our integrated business model. With this integrated model, we can capture business either as 3D printer sale or on-demand printing contracts.

In the Services segment, on the left side of the slide, we operate our own 3D printer in 3 facilities around the world to offer affordable, on-demand access to our technology. The barriers to entry are very low as customers just need to send in the 3D data, and we will print parts for them. This is a great and easy way for our customers to understand new business opportunities in 3D printing. The short sale cycles in Services help us balance in the typically long sales cycles in our Systems segment.

In our Systems segment, we manufacture and sell industrial-grade IP, large-format 3D-printing systems geared towards mass production of complex models molds and direct parts. Systems revenue also includes recurring revenue from the sale of consumables, maintenance contracts, upgrades and other aftersales activities.

Going forward, we expect to benefit from the increased demand for solutions for the additive series production. We anticipate to commercialize 3D production cells with multiple 3D printers each, like in the project with the carmaker, and sell the large-volume contracts for 3D-printed parts.

Slide 10 shows our global sales network and production footprint. As you can see, we have reached and established position in all major markets, in Europe, the U.S. as well as Asia. We focus on educating our channel partners to ensure true global coverage.

Turning to Slide 11. We differentiate ourselves from our competitors by build size, material diversity and speed. Our printing systems are modular, versatile and highly scalable and, therefore, uniquely positioned to support critical demanding applications and address the challenges and needs that are most important to our customers.

We have established excellent relationships with blue-chip customers from various industries. Products made with our technology are flying in space, make mobility more efficient and new engineering solutions possible.

Let's start with the formal part of the presentation. I will begin with an overview of the results for the third quarter. Rudi will then provide a more in-depth view of our financials and our outlook for the rest of the year. Following his comments, we will be happy to take your questions.

Turning to Slide 13. Total revenue for the third quarter this year increased 11% to EUR 4.9 million as compared to the third quarter last year. This is primarily related to a strong increase in Systems revenue, which was partially offset by a decrease in our on-demand printing segment where revenues decreased by roughly 20% as compared to the third quarter 2019.

We had 5 additional large 3D printers at our customer facilities, but could not yet put revenue for them. Among those are the 3 VJET X units for which we now expect to book revenue with 2021 together with the other 2 VJET X units. For the other 2 large-scale printers, which are already at our customers' facilities, we could not complete the installation due to further restrictions related to COVID-19.

In the EU, revenues in the Services segment are already on the same level as in the third quarter 2019. And this trend seems to continue as we saw a strong order inflow in our EU service center over the last week. We are busy until the end of the year.

In the U.S., we are roughly 30% below the third quarter of 2019. Looking ahead, things are starting to improve in certain parts of the U.S. as well. For example, we are printing patterns for the casting of components for space rockets for a supplier to a leading U.S.-based exploration company. Revenue in the Services segment in the U.S. were up 6% from the second quarter of 2020.

Looking at the Systems segment, total revenue for the third quarter was EUR 2.7 million. We booked revenue on 2 larger 3D printers. As said earlier, we expected to book revenue for 4 additional 3D printers, which are already at our customer facilities. We continue to experience delays with the printer installations due to the COVID-19 pandemic, for example, the international travel restrictions. We are also carefully watching the resurgence of COVID-19 cases and reimpositions of travel restrictions and lockdowns on certain parts of the world as they may continue to have adverse effect on our business.

We saw a strong increase in aftersales revenue, especially when compared to the second quarter of this year. But also when comparing it to the third quarter 2019, we saw a double-digit growth in the aftersales segment in this year's third quarter.

Looking at the right side of this slide, and gross margin -- profit margin from Services improved. The increase was driven by gross margins of close to 40% in our German service center and offset by lower contribution from the U.S. and China.

In Systems, gross margin improved to 39.5%. If we break this down, the gross margin contribution from 3D printer sales was around 40%, and the contribution from our consumables segment around 60%. This was offset by lower gross margin contribution from the maintenance team as several works were restricted by the effect of COVID-19.

Slide 14 breaks down order backlog by quarter, revenue by geography and operating expenses by category. I would like to highlight that order backlog for 3D printers was growing during the first 9 months of 2020, which is great news. One reason, obviously, is that we could not recognize revenue on printers as we anticipated. But if you compare the 9-months revenue from our Systems segment this year with the same period in 2019, we were only 5% below.

In August, we received a follow-up order for another VJET X system; and in September, the follow-up order for additional 2 VJET X units, bringing the total to 5 VJET X units in order backlog now.

When looking at revenue by geographic region, please keep in mind that this can fluctuate short term, especially when larger units are sold. Long term, we target an easy distribution across the 3 regions to hedge against risk from local events.

At the right side of the slide, we have summarized operating expenses as a percentage of quarterly revenues. We are happy to report that we have reduced operating expenses significantly as a result of implementing a structural efficiency program at the beginning of 2020. We expect to see full P&L impact from the fourth quarter of 2020 onwards. Annual savings from this program are estimated to be in the range of EUR 2.5 million to EUR 3 million.

Let's move to Slide 15 and an update on our growth drivers: VJET X and High Speed Sintering. We call them growth drivers because we believe we can sell multiple units of production cells over these -- of these new printers to individual clients. Keep in mind, these printers are made for automated industrial production.

Let's turn to Slide 16 and then updated -- an update on VJET X. On this slide, we compare the cost for printing aluminum of several production technologies, for instance, direct metal printing, casting, 3D printing and casting profile and sheet metal and so on.

From this, we can really see why we believe our -- this technology is so important. In a production scenario, fully automated 3D printing integrated into conventional casting lines is around 1,000x cheaper than direct metal 3D printing; EUR 1,000 per kg versus EUR 1 per kg. Again, this is not to say that direct metal printing itself is not interesting, the application area is just different. Both technologies can complement each other very nicely.

Let's turn to Slide 17 and why we believe this technology is important for us. Here, we have summarized the potential revenue and gross profit expectations over a 10-year period. These numbers are illustrated because we are not there yet.

For one production line consisting of 25 VJET X units and over a period of 10 years, we would arrive at roughly USD 128 million in revenue and USD 73 million in gross profit. More than 80% of this 10-year total would be recurring revenue. The printers are basically running 24/7 and high speed, which means we expect the printer engine to be replaced and refurbished 2 times a year.

That is our current expectation and subject to change as we learn more from the VJET X units already installed. Also, please check the note on the bottom of the slide where we have summarized some of the assumptions and risks associated with this model.

As mentioned earlier, we expect to book revenue for the first 5 VJET X units in 2021. On Slide 18, we have summarized key events in development and commercialization of VJET X. On Slide 19, we have included a link to the printer in action.

Let's turn to Slide 20 and an update on High Speed Sintering. With HSS, we combine the advantages of 2 existing additive processes. Final part properties from selective laser sintering and high throughput from binder-jetting.

As you can see from this slide, there are not too many companies in the area of thermal powder execution. HSS is similar to HP's MJF with a few critical distinctions.

First, we use different printheads. We have developed a self-adjusting sintering technology, especially the sintering solution is pretty clever, and we have filed IP for this. Second, with just only one ink, this makes our system more efficient in a production scenario. Taken together, this allows us to build new 3D printers with larger build areas and lower running costs.

Similar to VJET X, we want to offer our customers a polymer sintering production solution. We are collecting interesting leads and are currently in the process of setting up a beta program. We are working with a large chemical company on the qualification of new materials for HSS. One R&D's release of this company listed our company every other week, and the result has been very aggressive.

On Slide 21, we present some of the products that can be printed with HSS. These are only some of the possible applications of HSS. We are also talking to customers from other industries, like all audio equipments, automotive interiors and exteriors, ceilings, gaskets as well as printers and other consumer products.

I would like to highlight we can achieve high-powder recycling rate with HSS, especially with the flexible key [material]. In Germany, we are currently working with 80% recycled material, which is very impressive. A high recycling rate is a key enabler for industrial production as the materials are a significant cost driver.

With that, I would now like to turn the call over to Rudi.

Thank you, Ingo. Good morning, everyone. Overall, we are happy with the quarter as we have made significant progress toward our strategic goals. The highlight certainly was the follow-up order from the carmaker for additional VJET X units.

We had expected to book revenues for 4 additional printers in the third quarter of this year, but we were also impacted by restriction due to COVID-19. For example, our installation teams could not travel to customer sites.

Service revenues in Europe is developing very nicely, and we are at the same level as in the third quarter of 2019. For the first 9 months of 2020, revenue contribution from our German service center was 5% below compared to the first 9 months of 2019. There's room to improve in the U.S. and in China, and our colleagues are working hard to collect orders.

We continue to monitor our costs very carefully. With the additional funds from the European Investment Bank disbursed in June 2020, we can continue our ambitious R&D targets. If you look at our P&L, you will not see revenue contribution from new products, while we expand all the cost savings here. Our expectation is that we can book revenue for the first 5 VJET X units mid-2021. This carmaker, for example, has largely (inaudible) when it came to the rollout of this technology.

Regarding COVID-19, we continue to work with some special measures in place around isolation and contamination protocols to ensure the safety of our employees and to reduce risk of operational disruption. Over the last weeks, cases have gone up, and we are monitoring the evolution -- evolving situation carefully.

I will now take you through the financials for the third quarter. After that, we are happy to take your questions.

Turning to Slide 23. Total revenues increased 11% to EUR 4.9 million in the third quarter of 2020 as compared to EUR 4.4 million in last year's third quarter. The increase was driven by higher sales in our Systems segment, (inaudible) different revenue from our 3D parts production site in Germany was on the same level as in the third quarter 2019. The revenue contribution from the U.S. was roughly 30% lower for the same period. China was almost flat.

Gross profit and gross profit margins in the quarter were EUR 1.6 million and 32% compared to EUR 0.9 million and 20% in last year's third quarter. If you break this down, Systems provide improved gross profit margins, close to the target covenant which we have given in the past. Absolute gross profit in this segment almost tripled as compared to the same period in the previous year.

Gross margins in Services also improved, driven by strong results in our German facility. Our U.S. and China service centers are working hard to improve their gross margin contribution so that we hit our guidance corridor of 40% on the group level as well.

The next slide show our segment reporting for the quarter. On Slide 24, revenues from our Service segment, which includes revenues from selling 3D printers, consumables and spare parts as well as maintenance, increased 64.2% to EUR 2.7 million from the third quarter of 2020 from EUR 1.6 million in last year's third quarter. It was especially good to see that revenues from our aftersales segment means continued business maintenance improved substantially over the second quarter for this year.

We are pleased with gross margin development in this segment. Gross profit margin increased to 39.5% in the third quarter of this year, up from 22% in the same period last year. Absolute gross profit in Systems segment almost tripled from EUR 0.4 million in the third quarter last year to EUR 1.1 million in the third quarter of 2020.

Early in the year, we implemented the first stage of our structural efficiency program, Essentials2020+. We expect to see a full P&L effect from the fourth quarter 2020 onwards and annualized savings of EUR 2.5 million to EUR 3 million.

Let's turn to Slide 25 with an overview of the development of order backlog for 3D printers in the last quarter. What we can clearly see is the positive trend of order inflow, which continued throughout the year, for example, with the additional orders for VJET X. At the end of the third quarter, order backlog for 3D printers was EUR 9.4 million.

On Slide 26, Services revenue decreased 21% to EUR 2.3 million in the third quarter 2020 compared to EUR 2.8 million in last year's third quarter. Services gross profit increased 25% in the third quarter of 2020 from 18% in last year's same quarter. The improvement was driven by strong gross margin contribution from the German service center of roughly 40%.

Looking now to the rest of the income statement on Slide 27. Selling expenses were EUR 1.3 million in the third quarter of 2020. The majority of our selling expenses are personnel expenses and distribution expenses such as trade and commissions for sales engines. This compares to EUR 1.7 million in last year's third quarter.

Administrative expenses of EUR 1.5 million as compared to EUR 1.6 million in the same quarter last year. Keep in mind, we typically spend more than EUR 1 million in ordering fees for the year and over EUR 5 million in legal consulting fees.

Research and development expenses, EUR 1.5 million in the third quarter compared to EUR 1.9 million in last year's third quarter. Most of the R&D expenses is related to VJET X and the new HSS printer.

Operating loss of EUR 3 million in the third quarter 2020 compared to an operating loss of EUR 3.5 million in the comparative period last year. The improvement is largely driven by reduced operating expenses across all functions, high gross margins and higher revenues throughout the Systems segment.

Net loss for the quarter was EUR 4 million or EUR 0.82 per ADS compared to a net loss of EUR 3.7 million or EUR 0.76 in the prior year same quarter. The higher loss was driven by noncash expense from the revaluation of the derivative financial instrument with the European Investment Bank.

We have provided the same presentation for the 9 months ended September 30, 2020, on Slide 28 through 31. Slide 32 shows selected balance sheet items. At September 30, 2020, the company's cash, cash equivalents and short-term investments in bond funds was roughly EUR 8.9 million.

Total debt at September 30, 2020, was approximately EUR 26.6 million. Of this, EUR 25.5 million are noncurrent and long term. Long-term debt primarily consists of EUR 50 million from the EIB Horizon 2020 venture program. Weighted average number of shares outstanding for the quarter were 4.836 million ADS.

Moving now on to Slide 33 and our financial guidance for the full year. Full year 2020 revenue range is now expected to be between EUR 20.7 million and EUR 22.7 million from previously EUR 26 million to EUR 30 million. The key driver for the adjustment was the date of first revenue recognition of VJET X and the continued impact of COVID-19.

SG&A spending is expected to be in the range of EUR 13 million to EUR 13.25 million. R&D spending is expected to be between approximately EUR 5.75 million to EUR 6.25 million.

Depreciation and amortization expenses are expected to be between EUR 3.5 million and EUR 3.75 million. Cash CapEx spending for 2020 is projected to be in the range of EUR 0.5 million to EUR 1.0 million, which primarily consists of ongoing investments in our global subsidiaries.

Adjusted EBITDA, which includes the impact of foreign exchange valuation, is expected to be neutral to positive for the fourth quarter of 2020. Revenue for the fourth quarter of 2020 is expected to be in the range of EUR 8 million and EUR 10 million.

This concludes my remarks. And with that, we will now open the call for your questions. Operator?

(Operator Instructions) Thank you. At this time, I'll turn the floor back to management for closing remarks.

Thank you. With the follow-up order for VJET X, we reached a significant milestone in our mission to bring 3D printing into high-volume industrial production. This is actually a news as it not only highlights the significance of our technology, but also the confidence this leading German carmaker has in the new solutions and the players behind it.

Together with our partners, we can today offer solution for the next version of complex, like metal parts, at what we believe to be a fraction of the cost compared to other players in the additive manufacturing industry.

We plan to follow a similar path with our new, large High Speed Sintering printer and are extremely excited about the new opportunities in markets we tend to address with it.

Thank you for joining us on today's call, and we're looking forward to speaking with you again next year. Thank you.

Thank you very much.

Thank you, everyone. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.