voxeljet AG
Q2 2019 Earnings Call Transcript

Published: 16 Aug 2019

[Operator:]

Greetings, and welcome to the voxeljet AG Second Quarter 2019 Financial Results Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recordedI would now like to turn the conference over to your host, Mr. Johannes Pesch, Director, Investor Relations and Business Development for voxeljet. Thank you. You may 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 second quarter financial results for the period ended June 30, 2019. 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. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance upon them. Forward-looking statements are also subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed. 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 statements 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, Chief Executive Officer of voxeljet.

[Dr. Ingo Ederer:]

Thank you, Johannes, and good morning, everyone. Thanks for joining us today for our second quarter call. We are happy with the results for the first half of 2019. Revenue from our Systems segment for the first six months this year is up 40% compared to the same period last year, which was two units of VJET X are installed at the leading German car makers plant and we are starting printing. As you know the frame contract for this consisted of five units and we expect to receive the order for the next three VJET X units in the coming weeks.Let's turn to Slide 4. This year we are celebrating our 20th anniversary and are looking back at a multitude of exciting projects. Remember, we basically started in a garage unit and fast-forward today, products made with our technology are flying in states and we are implementing with VJET X and additive manufacturing solution for true mass production.In our Indirect Part segment, we addressed the need of our customers for production-ready solutions and start to commercialize high performance products like VJET X and HSS.In our Direct Part segment, we have successfully entered the market for direct and functional parts with High Speed Sintering. We have build on the knowledge we have accumulated in the development of VJET X and HSS to accelerate the commercialization of large direct parts production platform. The HSS production solution combined with new materials should be a game-changing combination. We will present a first version of this new printer at the Formnext show in Frankfurt later this year.Our goal today is the same as it has been 20 years ago. We want to establish a new manufacturing standard with pioneers in technology, we put high emphasis on relentless research and development with a clear focus in mind to expand our total addressable market for new and improved products and applications. The vision statement we shared throughout the year represents who we strive to be every day, and essentially how we operate across all aspects of our business as we build this company for the long-term.On Slide 5, we have highlighted our unique selling propositions, which are strongly aligned with the growing trend for higher performance products across all of our end-use markets. We differentiate ourselves from competitors by build size, mature 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.Looking at Slide 6 and our integrated business model. It balances long with short sales target and helps us to maintain close relationships with our customers. In our System segment, we manufacture and sell industrial grade high-speed large-format 3D printing systems geared towards mass production of complex models, modes and direct parts. The primary target for this segment is to sell multi-system contracts. In addition to that, we put a high emphasis on after sales activities and are already seeing positive results from these initiatives.In our Services segment, we operate these systems and facilities around the world to offer affordable on-demand access to our technology. The primary target for this segment is to sell large multi-year volume contracts. We are in advanced talks with several parties for such volume contract all across the world. In addition to that, offering services is a great cash flow positive marketing tool to convince customers to purchase 3D printers.Slide 7 shows our global sales network and production footprint. As you can see, we have reached and established position in all major markets in Europe, USA, as well as China. We continue to expand our sales teams around the world by investing in sales leadership, additional application engineers and training. To complement this, we focus on educating our channel partners to ensure true global coverage.Turning to Slide 8, in May this year, we officially opened our new factory in Shanghai. We have a lot of customers coming in and are very excited for this new building and the opportunities it brings both in our Services and System segment. This new facility was build to our specifications and is free of rent for 36 months beginning in March 2019. We plan to sort and manufacture certain parts of our printers at this facility to lower the cost of our equipment and increase our addressable market, especially in the Asia region.On Slide 9, we see some of the potential applications of our products and selective customers. Over the last 20 years, we have been working with leading companies from a variety of industries to produce parts that cannot be produced in any other way with traditional methods of manufacturing.In the automotive sector, for example, we support the manufacturing of the most complex engine components, like cylinder heads or turbochargers to improve engine and overall vehicle performance. Meanwhile, we’re also printing, for example, battery casings for optimized heating and cooling in electric vehicles. We see significant opportunities for revenue growth across our portfolio of solutions for the remainder of 2019 and beyond.On the right side of this slide, you can see an illustration of our new large HSS printer. We are very excited to present this platform for the first time to the public in the Formnext show in Frankfurt in November this year. This is really exciting news as we expect the new HSS printer to expand our addressable market considerably, besides VJET X this project has the highest priorities in our R&D and manufacturing teams.Let's now start with the formal part of the presentation. I will begin with an overview of the second quarter results, Rudi will then provide a more in-depth view of our financials and our outlook for the third quarter of 2019. Following his comments, we will be happy to take your questions.Let's turn to Slide 11. We had a very exciting GIFA show in Düsseldorf this year where we presented our new lineup of high-speed 3D printers. We had three different printers at the show

[Rudi Franz:]

Thank you, Ingo, and good morning, everyone. We remain committed to increase our levels of profitability and sales. We are closely managing discretionary expenses, while maintaining investments that will drive future profitable growth and I think we’re striking the right balance here. Our partner for potential future printer sales is well filled with sales opportunities in various phases of completion, we continue to work hard to turn these prospects into orders.We put the highest emphasis on managing our sales pipeline as accurately as possible and are investing a significant amount of our time into monitoring the progress of our colleagues all around the world. I would like to begin by providing financial details and adding some additional context to our results before discussing our outlook for the rest of 2019.Turning to Slide 21. Our total revenue decreased 12% to €5.1 million in the second quarter compared to €5.3 million in last year's second quarter. The reason is that Services revenues in EMEA were slightly lower in May and early June. This was mainly related to low orders from France, since Senate has picked up again. Overall demand is good and based on the current information we expect the next month to be similar as with the previous years in terms of Service revenues.The U.S and Chinese service centers continue to ramp up nicely and contribute higher revenues. In Systems, we had strong after sales activities as a consequence of higher install base of our printers and more focused after sales activities like offering modular maintenance contracts.Gross profit and gross margin in the quarter were €1.5 million and 32% compared to €1.9 million and 35.2% in last year's second quarter. The decrease was mainly related to lower gross profit margin contribution from the Services segment, as a result of lower utilization in the German service center and high depreciation expense in the U.S facility, as we added additional 3D printers last year to meet the growing demand.The next slide show our segment reporting for the quarter. On Slide 22, revenues from our Systems segment, which includes revenues from selling 3D printers, consumables and spare parts as well as maintenance, increased 13.1% to €2.1 million from €1.9 million in last year's second quarter. This is excellent news.As mentioned in prior calls, the recurring revenues portion from our population of 3D printers continues to grow. The reason is twofold

[Operator:]

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Troy Jensen with Piper Jaffray. Please proceed with your question.

[Troy Jensen:]

Hey, gentlemen. Thanks for taking my questions here.

[Rudi Franz:]

Hi, Troy.

[Troy Jensen:]

I guess, first -- hi, Rudi. Hi, Ingo. Hey guys, so I just want to talk about kind of the Q4 implied guidance here. I mean if we go to the midpoint of your guidance for September, it implies you got to do, like a €11.5 million, just stay at the low end of your range. So can you just talk about the visibility that you have for that implied December quarter number?

[Rudi Franz:]

So we just talk about Q3, Troy, and the visibility on those numbers is reflected by the guidance. I would say we see the growing revenue of our service center activities plus the revenues, which we see from our other system related revenues, as secured. We have backlog on hand, which we currently shipping or installing to clients. And based on the information we believe that guidance which have been given is very likely, but I can't predict -- I can't make it closer simply because of we don't know when we get to sign off on the individual printer, it always can move from one month to the other and specially end of September. For example, it's a pretty, I would say, a pretty busy month, so we are cautious. On Q4, we have a pretty good overview currently already. We are currently shipping equipment already in the relevant market for installation, meaning that's part of the backlog. And we have equipment in the relevant market, meaning in the U.S and in China to be in a position to sign off on revenue on relatively short notice [ph]. And so that prepared for achieving pretty strong Q4 quarter.

[Troy Jensen:]

Okay. So can I add just a couple more on that. I know you guys talked about the big European customer and you've shipped to and you guys expect to three more orders shortly. Will those orders convert into revenues this year? Is that something that slips into 2020?

[Rudi Franz:]

So you know that the first machines have been installed this year. To be realistic, we expect revenue for these two systems in next year. So that is a certain sign of procedure needed and this is a big, big company, so they will go according to the sign off procedure. The new order, which we expect to come in, in the upcoming weeks with three machines is set for installation for end of next year. With the timetable we have had on the first two systems, we don't believe that we can account these three for revenue in 2020. So it's order 2021.

[Troy Jensen:]

Okay. All right. Understood. And then how about just -- Ingo, for you to the European automotive that something we have heard for the past eight, nine months that it's weak. It sounds like for you guys it was just weak in France, if I heard you correctly, and I mean how confident are you that we’ve bottomed now and we can grow from here?

[Dr. Ingo Ederer:]

So, surely that the automatically industry has currently a hard time especially in Europe. We don't see it for this moment in our Services business too much as you know we have various clients, we have also big chunk of our market is coming outside of automotive. The clients we have on typically also for a few suppliers, they have long-term contracts with their customers. So for the moment we're doing fine, but of course we are cautious and looking carefully at the markets for the moment. We don't see it as dramatic as maybe other reports in the news. Interestingly also with the Systems segment, the Systems segment demand is a very strong. Currently we don't see any influence on the Systems inflow with the current discussions here, you can follow in the media. So maybe this is something for the next year. For the moment, as said, market is very strong, demand is strong. So all good for this moment.

[Troy Jensen:]

Okay, good. All right, guys. Well, good luck in the second half here.

[Dr. Ingo Ederer:]

Thank you very much.

[Rudi Franz:]

Thank you, Troy.

[Operator:]

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Dr. Ederer for any final comments.

[Dr. Ingo Ederer:]

Thank you. The momentum we are driving is grounded in strong product innovation. As mentioned in the beginning, we are a technology company whose mission is to establish a new manufacturing standard. The foundation of our success will always be inspiring and innovative product. It is how we drive distinction in the marketplace and it is a competitive advantage under any market conditions. While our organic investment remains the primary engine for growth, we made partner with other industry players in the investment that accelerate our life cycle value strategy and strengthen our vertical capabilities, like, for example, it is the case with VJET X. Wrapping things up, I am excited about both our progress and our prospects and we are competing aggressively for our total addressable market, the largest opportunity in our history with a lot of room to grow market segment share. In some of our segments, we are facing new research and competitors and in other segments, we are the new competitor. But in all cases, competition brings out very best in our company. Thank you for joining today's call and we're looking forward to speaking to you again in November. Thank you.

[Rudi Franz:]

Thank you.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.