voxeljet AG
Q4 2020 Earnings Call Transcript

Published: 31 Mar 2021

[Operator:]

Greetings. Welcome to the Voxeljet AG Fourth Quarter and Full-Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Johannes Pesch. Thank you. You may now begin.

[Johannes Pesch:]

Thank you, operator. And good morning, everyone. With me today are Dr. Ingo Ederer, Voxeljet's Chief Executive Officer, and Rudi Franz, Voxeljet's Chief Financial Officer. Yesterday, after the market closed, Voxeljet issued a press release announcing its fourth quarter and full-year financial results for the period ended December 31, 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.

[Ingo Ederer:]

Thank you, operator. And good morning, everyone. Thank you, Johannes. Good morning everyone. Thank you for joining us on our earnings call today. Let's turn to slide 4. Our roots reach back to the year 1995 with the first successful dosing of UV-resins. In the context of a hidden project, initial 3D printing tests were performed at the Technical University of Munich. I co-founded the company on May 5, 1999 and as a spin-off from the university with the key vision in mind to establish new manufacturing standards. Today, we provide our customers a strategic competitive advantage by upgrading their existing conventional production methods through additive manufacturing solutions. We push technological boundaries and develop new generative processes for the serious production of complex components. On slide 5, you can find some more information about Rudi and myself. We and our supervisory board together hold roughly 20% of the company. We are happy to announce that we both extended our contracts just recently with a clear plan in mind and are fully committed to make this success for all stakeholders. Let's turn to slide 6 and some thoughts on the additive manufacturing market. As you can see, Wohlers Associates projects growth to accelerate over the next years. This growth will be driven by a larger share of safe manufacturing. How big could this opportunity become? If we assume that the global economy is about $80 trillion and if we assume that manufacturing accounts for 60% of it, this would put the manufacturing economy at around $12.8 million. If additive manufacturing captures only 5% of it, this could potentially become a $640 billion industry.

[Rudolf Franz:]

Thank you, Ingo. And good morning, everyone. Overall, we are happy with the last month. We made significant progress in our research project and were able to get additional funds and to accelerate the commercialization of our new product. In January 2021, we sold 621,170 new ADS for gross proceeds of $10 million. In February 2021, we sold additional 443,414 new ADS for gross proceeds of $12 million. Both trade equity offerings were placed with institutional investors in the Us and Europe. With that, current shares outstanding are 5.9584 ADS million. Pro forma cash, taking expected net proceeds of the two offerings into account, is around $29 million at the end of the fourth quarter 2020. On-demand printing revenue in Europe continued to develop very nicely in the fourth quarter of 2020 and we are significantly above the fourth quarter 2019. This increase was offset by a decrease in the US and in China. We continue to monitor our costs very carefully and have implemented a structural efficiency program, which Ingo spoke about, towards the end of 2019. We start to see full P&L impact from the fourth quarter 2020 onwards with annualized savings in the range of €2.5 million to €3 million. Regarding COVID-19, we continue to work with some special measures in place around insulation and contamination protocols to ensure the safety of our employees and to reduce risk of operational disruption. Over the past few weeks, COVID-19 cases have increased in certain areas of the world and we are monitoring the evolving situation carefully. I will now take you through the financials for the fourth quarter and full-year 2020. After that, we are happy to take your questions. Turning to slide 25. Total revenues decreased 7% to €8.9 million in the fourth quarter of 2020 as compared to €9.6 million in the last year's fourth quarter. While we have sold fewer printers overall, we saw the higher number of large scale printers, which generate higher revenues. Revenues from our 3D printed parts production center in Germany was strong in the fourth quarter 2020, with a significant increase compared to the fourth quarter 2019. The increase was offset by a decline in the US and China. Gross profit and gross margin in the quarter were €2.98 million and 34% compared to €2.9 million and 30% in the fourth quarter of 2019. We break this down, Systems provided increased gross profit margin closer to the target corridor we have given in the past. Gross margins in the Service also improved, driven by strong results in our German facilities. Our US and Chinese service center are working hard to improve their gross margin contribution. The next slide shows our segment reporting for the quarter. On slide 26, revenues from our Systems segment, which includes revenues from selling 3D printers, consumables and spare parts as well as maintenance, decreased 8% to €6.7 million for the fourth quarter of 2020 from €7.3 million for the fourth quarter of 2019. We sold 6 new and 2 refurbished printers this quarter versus 6 new and 5 refurbished printers in the fourth quarter 2019. Product mix was different as we sold more large scale printers which generate higher revenue and gross margin. It was good to see that revenues from our aftersales segment, means consumables and maintenance, continued to contribute strongly. Gross margin from the sale of 3D printers was again above 40% and gross margins from the sale of consumables above 50%. Gross profit margin for the whole segment increased to 35.9% from 35.3% in the fourth quarter of 2019. Earlier this year, we implemented our structural efficiency program extension to 2020 plus, where we start to see full P&L effect from the fourth quarter 2020 onwards and expect annualized savings of €2.5 million to €3 million. Let's turn to slide 27 and an overview of the development of order backlog for 3D printers over the last quarters. At the end of the fourth quarter, order backlog for 3D printers were €6.8 million, which is an increase of 145% as compared to the fourth quarter of 2019. On slide 28, Services revenue decreased 5% to €2.2 million in the fourth quarter of 2020 compared to €2.3 million in the same quarter 2019. Services gross profits increased to 27% in the fourth quarter of 2020 from 13% in the same quarter of 2019. The improvement was driven by strong gross margin contribution from the German service center and roughly 40%. Looking now to the rest of the income statement on slide 29. Selling expenses were €1.7 million in the fourth quarter of 2020. The majority of our selling expenses are personnel expense and distribution expenses such as freight and commissions for sales agents. This compares to €2.0 million in the fourth quarter of 2019. Administrative expenses were €1.7 million as compared to €2.4 million in the fourth quarter of 2019. Keep in mind, we typically spend more than €1 million in auditing fees per year and €0.5 million in legal consulting fees. Research and development expenses were €1.8 million in the fourth quarter compared to €1.9 million in the same quarter 2019. Most of our R&D expenses is related to VJET X and the new HSS printer. Operating loss was €2.7 million in the fourth quarter 2020 compared to an operating loss of €3.2 million in the comparative period last year. The improvement is largely driven by reduced operating expenses across all functions and improved gross margins in our Service segment. Net loss for the quarter was €3.7 million or €0.77 per ADS compared to a net loss of €3.7 million or €0.70 in the prior year's same quarter. The improved operating result was offset by a non-cash expense from the revaluation of the derivative financial instruments with the European Investment Bank as part of the financial result. We have provided the same presentation for the full year ended December 31, 2020 on slides 30 through 33. Slide 34 shows selected balance sheet item at December 31, 2020. The company had cash, cash equivalents and short-term investments and bond funds of roughly €8.3 million. We increased our cash position with the two offerings in January and February 2021 that added gross proceeds of $22 million. Total debt at December 31, 2020 was approximately €27.1 million. Of this, €27 million are long term. Long-term debt primarily consists of €15 million from the EIB's Horizon2020 venture program. Weighted average number of our shares outstanding at December 31, 2020 were 4.836 million ADS. Current shares outstanding are 5.9584 million ADS. Moving now on to slide 35 and our financial guidance for the full year of 2021. Full-year 2021 revenue guidance is expected to be between €22.5 million and €27.5 million. SG&A spending is expected to be in the range of €11 million to €11.9 million. And R&D spending is expected to be between €6.0 million and €6.25 million. Depreciation and amortization expenses are expected to be between €3 million and €3.25 million. Cash CapEx spending for 2021 is projected to be in the range of €1.0 million to €1.25 million, which primarily consists of ongoing investments in our global subsidiaries. Adjusted EBITDA, which excludes the impact of foreign exchange valuation, is expected to be neutral to positive for the fourth quarter of 2021. Revenue for the first quarter of 2021 is expected to be in the range of €3.75 million and €4 million. This concludes my remarks. And with that, we will now open the call for your questions. Operator?

[Operator:]

. Our first question comes from Troy Jensen with Lake Street Capital.

[Troy Jensen:]

Congrats on the results and I'm happy to hear you extended your contracts. Ingo, could you just expand a little bit on your comment that you believe your share in manufacturing is higher than any other 3D printing company?

[Ingo Ederer:]

Well, we have delivered so far mainly large manufacturing platforms, while most of the other companies are dealing with smaller platforms, significantly less performance and mainly used in production of prototypes and mock-ups, while our printers, I would say, 90% used for production of parts which are really in use. So, all these printers we have installed, for instance, they have a capacity. We already calculated that, if you take the volumetric output of these printers, for instance, they can compare with hundreds of other 3D printers of other companies.

[Troy Jensen:]

On High Speed Sintering patents, this grayscale sounds pretty interesting. Is anybody doing anything similar? Are you the only ones that really can have different material properties throughout HSS print?

[Ingo Ederer:]

Well, I cannot speak about the others. So, what we currently know is that we have filed patent application for this one. We are confident that we get this through. We have not seen a similar announcement from the closest competitors, which you will know is HP, for instance. So, we believe that we can secure this IP for our own application. Whether they have different ideas which are maybe outside of our IP, I don't know.

[Troy Jensen:]

And then also, I think you guys had a patent for high speed regarding just the heat or thermal inside the build envelope. Can you explain the importance of that?

[Ingo Ederer:]

Exactly. So, we have filed several IP. And I think what specialized us also in the area of IP is that we focus on the larger print beds, on the larger fields. And I think one of the differentiation factors is really here how we can provide an even heat contribution across the whole build area, which is on the larger builds much more difficult than on smaller build beds. And we are well positioned also IP-wise here.

[Troy Jensen:]

Can you just talk about the leading European automotive company. Seems traction is going well. I think you guys discussed that find. But can you just talk about other customers? If this company is really going to get a performance and fuel efficiency advantage using these water cooling jackets, when do you expect to see traction with other automotives?

[Ingo Ederer:]

Let me answer on the technology level. So, we see that many of the automotive companies are facing the same challenges. So, they currently are forced to develop electric drives for electric mobility. On the other hand, they have a current product portfolio and need to sell this product portfolio also under the new emission standards, with increased strictness in the future and, therefore, they are also forced to develop these combustion technology further. So, this means they are, let's say, all in the same boat and are carefully watching what are the options to have full flexibility in their production, with the possibility to change quickly from combustion engine technology to e-mobility. And therefore, I think the current VJET X project with this one OEM is a lighthouse project for us. All the others are carefully watching. And I think with the successful transfer of this project this year into real production, it will be probably a start enabler for similar projects with the other companies. So, we are already in contact with them. We know that they're clearly watching. And so far, we haven't deepened our talks because we're clearly focused on this one project with this OEM.

[Troy Jensen:]

Quickly, just for Rudi, I think you said, Germany was up nicely for you guys in the quarter or the year. US was down. If you look in your forecast now for 2021, are you assuming a recovery in the US and maybe weakness now in Germany because of the lockdowns?

[Rudolf Franz:]

I think, fortunately, here in Europe, we have not seen, at least for the last couple of months, an effect in respect of the lockdown. We expect, moreover, in the US a recovery, and the same in China. So, we are currently quite positive. Customers' feedback is good. And what we see in the order income and what we see from prospects, it makes us very, very positive and optimistic on the long run.,

[Troy Jensen:]

Last question and I'll cede the floor. But can you just talk a little bit about gross margins. To me, they're a little weak in the quarter. For services, once they get back to scale, do we think of that as like a mid-40s service gross margin and products also…

[Rudolf Franz:]

As we have seen that there was an impact in respect of revenue last year in Q2, partly in Q3, and the service center activity is what are the key drivers. They are amortization on equipment, labor. Those fixed costs are significant. And you can't sell off equipment as quick if your utilization goes down. So, you always have an impact. Currently, we have recovered and are on a level almost before COVID-19 started. And accordingly, I expect to come back to gross profits, which we have been used to in all areas, meaning in all service centers. For Germany, already, it's there. We have made our – I think our optimization program has helped us on that end. And in the US and China, we expect higher utilization rate, and accordingly, gross profits in the range of 40% plus.

[Operator:]

We've reached the end of the question-and-answer session. At this time, I'd like to turn the call back over to Ingo Ederer for closing comments.

[Ingo Ederer:]

Thank you, operator. So, we faced many challenges in 2020. And I'm very proud of how our team responded. We reduced operating expenses, increased gross margins, and most importantly, we were able to continue to invest in our long-term future success. We see a big opportunity in developing in front of us with more and more clients looking to use 3D printing in high volume manufacturing. As mentioned in the beginning, I believe we are in an excellent position to capture our fair share of this growing market over the next year. Thank you for joining today's call and we look forward to speaking with you again in our next call, which we expect to take place in May with the results for the first quarter 2021. Thank you and goodbye.

[Rudolf Franz:]

Thank you, everybody. Happy Easter. Bye-bye.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time and thank you for your participation.