voxeljet AG

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's issued a press release announcing it's 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 results from our current order backlog.

Such forward-looking statements are not guarantees of the future performance, and therefore one should not place under 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, 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 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 for Voxeljet.

Thank you, Johannes. Good morning, everyone.

Thank you for joining us on our analyst call today. Let's turn to Slide 3.

With respect to the year 1995 with the first successful dosing of the e-resins [ph] in the context of heating project initial 3D printing tests are performed at the Technical University of Norman [ph]. Our company was founded on May 5, 1999 as a student of the University with the key mission in mind to establish new manufacturing standards.

We want to do this by developing new generated or 3D processes for the steered production of complex components. In early 2018, we were approached by a leading German carmaker who asked us if were able to develop and design a high-speed, fully automated 3D production line; this carmaker wants new additives manufacturing to make it's vehicles more efficient.

Towards the end of 2018, it is designed in yield with them for the development of our new 3D printing solution, VJET X. Let's turn to Slide 4.

Now, we are extremely sorry to report that while it might have taken us a bit longer than initially anticipated, we have reached three significant milestones in VJET X, and a new large high-speed influential 3D printer over the last month. First, we keep the follow-up orders for three additional VJET X unit, one VJET X unit was ordered in August 2020, and two VJET X units were order in September 2020.

The follow-up orders came as part of a framed contract concluded in 2018 between us and our partners and the German carmakers. The first two VJET X units were orders mid-2018 and it is sold in mid-2019 at the carmaker's facility.

Then we have significantly improved the printed and facility infrastructure to follow up orders during the current total five VJET X unit for this carmaker. Second, I would like to highlight we noted this, a total technical pre-acceptance from the carmaker and our partners in September this year for the three units.

In our aspect to book revenue for all five units mid-2021, we summarized the key events in the timeline in one of our 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 it to make sure to have temperature across this area since the company's financial year is more challenging the larger this area is.

We believe we have found a solution for this problem and filed IT accordingly. Now we have put it all together this month, and the impact of the goods plus 20 test on the large High Speed Sintering printer was successful, and we are extremely excited about the new opportunities and markets trends aggressively.

Before we start with the formal part of the presentation, let's quickly remind those who are new to that portion. Slide 6 summarizes some key data about our company.

On the right side of this slide, you can see as we sort out our 3D printer, as it is operated in our on-demand parts production center in Germany. On Slide 7, you can find some more information about Rudi [ph] and myself; taken together, we hold roughly 20% of the company.

We are happy to announce that we have both extended our contract just recently, we have a clear vision in mind and are fully committed to make this a success for all stakeholders. Let's turn to Slide 8, let me describe our technology in the additive manufacturing market, we have probably more than 10 different technologies, each with it's specialized field of application.

We use a technology called binder-jetting; binder-jetting is especially suited for high volume manufacturing because of it's potential to scale. Looking at Slide 9 at our integrated business model; with this integrated model, we can capture business either as we produce a sale or on-demand printing contracts.

In the services segment, on the left side of the slide, we operate our own 3D printer facilities around the world to offer affordable on-demand access to our technology. The various entries are very low as customers adjusting to send in the 3D data and the newsprint part for them.

This is a great and easy way for our customers to understand, new business opportunities in 3D printing. The short phase time conservatively helped us balancing typically long sales cycles in our system segment.

In our systems segment, we manufacture and sell industrial grade i.e. large format 3D printing systems geared towards mass production of complex models, mode and direct parts.

Systems revenue also include recurring revenue from the sale of consumable, maintenance contract upgrades, and other offices activity. Going forward, we expect to benefit from the increased demand for solutions for additive series production.

We anticipate to commercialize 3D production cells with multiple 3D printers each like in the project with the carmaker with large volume contracts for 3D printed parts. Slide 10 shows our global sales network and production footprint.

As you can see, we have reached an established position in all major markets; Europe, US, as well as Asia. We focus on educating our channel partners, ensure true global coverage.

Turning to Slide 11, we differentiate ourselves from our competitors. I do find mature diversity in place.

Our printing systems are modular, versatile and highly scalable, and therefore uniquely positioned to support critical demanding applications and face the challenges it needs that are most important to our company. We have established excellent relationship 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 €4.9 million as compared to the third quarter last year. This is primarily related to a strong increase in systems revenue, which were partially offset by a decrease in our on-demand printing segment, our revenue increased by roughly 20% as compared to the third quarter 2019.

We had five additional large 3D printers at our customer facility, but could not yet booked revenue for them. Among those are three units for which we now expect to book revenue in 2021, granted with the other two [indiscernible].

For the other two last sale printers, which are already at our customer's facility, we could not complete the installation due to travel restriction 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 new service center over the last week. We are busy until the end of the year.

In the U.S., we are roughly 30% lower in third quarter of 2019. Looking ahead, things are starting to improve in certain parts of the U.S.

as well. For example, we have printing patterns for the casting of components for free floated or 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 our €2.7 billion.

We booked revenue on two larger 3D printers, as said earlier, we'd expected to book revenue for four additional 3D printers which are already at our customer's facilities. We continue to experience delays with the printer installations due to the COVID-19 pandemic; for example, due to international travel restrictions.

We are obviously naturally watching the resurgence of COVID-19 cases and reading positions of travel restrictions and lockdowns in certain parts of the world, as they may continue as well as effect on our business. We saw a strong increase in after sales revenue, especially when compared to the second quarter of this year.

But also when comparing it to the third quarter of 2019, we saw a double-digit growth in the after-sales segment in this year's third quarter. Looking at the right side of the slide and gross margin from a profit margin from services; we improved -- increased is driven by gross margins of 40% in our German services center, and offset by lower contribution from the U.S.

and China. In systems, gross margin improved to 39.5%; due to a great discount, the gross margin contribution from 3D printer sales was around 40%, and because it's linked from our consumer goods segment around 50%, which was offset by lower gross margin contribution from the maintenance team as travel was restricted by 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 nine months of 2020, which is great news.

One reason of this is that we could not recognize revenue on printers as we anticipated, but if you compare the nine months revenue from our services segment this year, yes, the same period in 2019; we were only 5% below. In August, we received a follow-up order from another VJET X system; and in September, the follow-up order for additional VJET X unit bringing the total to five VJET X unit in order backlog now.

And looking at revenue by geographic region, please keep in mind that this flip towards short-term, especially when larger units are sold. Long-term, it's hardly done easy distribution across the three 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 revenue, we are happy to report that we have reduced operating expenses significantly as a result of implementing an structural efficiency program at the beginning of 2020. We expect to see full impact from the fourth quarter 2020 onwards, annual savings from this program are estimated to be in the range of €2.5 million to €3 million.

Let's move to Slide 15, and an update on our growth drivers which generates high significance. Because with growth driver because we believe we can more units of production sales over the -- of these new printers to individual clients.

Keep in mind, these printers are made for automated industrial production. Let's turn to Slide 16, an update on VJET X.

On this slide we compare the cost per kg of aluminum of several production technology; for instance, direct metal printing, casting -- 3D printing and casting, profile and sheet metal and so on. From this, we can really see while we believe our technology is so important.

In our production scenario pre-moderated 3D printing is integrated into conventional casting line along 1,000 times cheaper than direct metal 3D printing; €1,000 per kg versus €1 per kg. Again, this is not to say that direct metal printing itself is not interesting, 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. As we have summarized the potential revenue and gross profit expectations over same year period, these numbers are illustrated because we are not there yet.

The one production line consisting of 25 VJET X units, and over a period of 10 years we would arrive at vastly US$128 million [ph] in revenue, and US$73 million in gross profit; more than 80% of this US total would be recurring revenue. The printers are basically running 24/7 at high speeds, which means we expect the printer engine to be tight and be serviced two 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 this slide that we have summarized some of the assumptions and views associated with this model.

As mentioned earlier, we expect to book revenue for the first five 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 combined the advanced two existing additive processes. Final part focuses 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 fueling powder based solutions. As it's soon that with H2 MTF [ph] with a few 3D printer extension.

First, we use different printers with developed and self-adjusting sintering technology, especially the sintering solution is pretty clever and we have filed 18 projects. Second, VJET is only one thing, this makes our system more efficient in our production and R&D.

Taken together, this allows us to build new 3D printers with larger build areas and no running costs. Similar to VJET X, we want to offer our customers a polymer sintering production.

We are collecting interesting leads and are currently in the process of setting up the VJET [ph] program. We are working with a large tenant, new company, on the qualification of [indiscernible].

One R&D colleague of this company said our company has every arguably, and the leads received have been very impressive. On Slide 21, we present some of the products that can be printed with HSS.

These are only some of the possible application of HSS; we are also talking to customers from other industries like oil equipment, automotive interiors and exteriors, meaning baskets to borrow drippers [ph] and other consumer products. I would like to highlight we can achieve high quality recycling rates with HSS with flexibility to raw material.

In Germany, we are currently working with 80% recycled material, which is very impressive. Our high impacting rate is the key enabled for industrial production as it matures on significant cost savings.

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

Thank you, Ingo. Good morning, everyone.

Overall, we are happy with the quarter as we have made significant progress towards our strategic goal. The highlights that we wanted follow-up orders from the carmakers positions voxeljet better [ph].

We had expected to book revenues for four additional printers in the third quarter of this year but we were also impacted by restriction due to COVID-19. As in turn, 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 third quarter of 2019.

For the first nine months of 2020, revenue contribution from VJET X [ph] was 5% below compared to first nine months of 2019. Assuming to improve in the rest of China, our colleagues are working hard to collect the order.

We continue to monitor our costs very carefully with the additional funds from the European Investment Bank received 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, always tends over the cost.

Our expectation is that we can do pleasantly for the first five VJET X units in 2021; this carmaker, for example, has multi-year trend when it came to the rollout of this technology. Regarding COVID-19, we continue to work some special measures in place along safety and contamination protocols to ensure the safety of our employee and to reduce risk of operational disruption.

Over the last week HSS sales gone up, 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 revenue increased 11% to €4.9 million in third quarter of 2020 as compared to €4.4 million in last year's third quarter.

The increase was driven by higher sales in our Q2 segment, as from larger 3D printers. Revenue from our 3D parts productions have been generally in same level.

I think third quarter 2019 had revenue contributions in the U.S. of roughly 30% lower for the same period, China was only flat.

Gross profit and gross profit margin the quarter were €106 million and 32% compared to €109 million and 20% in last year's third quarter. If you break this down, systems provided improved gross profit margin close to the target which we have given in the past; absolute gross profits in this segment almost tripled as compared to the same period in the previous year.

Gross margin from 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 they are with our guidance through operating for interest rates at improved level as well. The next slide shows our segment reporting for the quarter.

On Slide 24, revenues from our service segment which includes revenue from current 3D printers, consumables and spare parts and service maintenance increased 64% to €207 million from the third quarter 2020, from €106 million in last year's third quarter. And what we especially can see the ratings from our after-sales segments in consumer goods as maintenance improved in Chile from the second quarter of this year.

We are pleased that gross margin development in U.S. segment gross profit margin increased to 39.30% in the third quarter of this year, up from 22% in the same period last year.

As such gross profit in systems segment almost tripled from €4 million in the third quarter last year to €1.1 million in the third quarter of 2020. Earlier this year, we implemented the first stage of our structural efficiency program extension to 2020 plus; we expect to see full P&L effect from the fourth quarter 2020 onwards, and annualized sales as advised to €3 million.

Let's turn to Slide 25 and an overview of the development of order backlog for 3D printers in the last quarter. As we can clearly see it's the positive trend of order inflow, which continued throughout the year.

For example, with the additional orders for Chile [ph]. At the end of the third quarter, order backlog was at €9.4 million.

On Slide 26 service revenues increased 21% which was more than third quarter 2020 compared to €208 million last year's third quarter. Services gross profit increased 25% in third quarter 2020 from 18% in last year's same quarter.

This improvement driven by strong gross margin contribution from the German service center growing sales at 40%. Looking out to the rest of the income statement on Slide 27; selling expenses were €1.3 million in third quarter of 2020, majority of our selling and administration expense are linked to distribution expenses such as freight and commissions.

This compares to €1.7 million in last year's third quarter. Administrative expenses were €1.5 million as compared to €1.6 million in the same quarter last year.

Keep in mind, we typically spend more than €1 million and also increased to year-end responsibilities in major consultancies. Research and development expenses were €1.5 million in the third quarter compared to €1.9 million in last year's third quarter.

Most of our R&D expense is related to richer mix and the new HSS printer. Operating loss was €3 million in the third quarter 2020 compared to an operating loss of €2.5 million in the comparative period last year.

The improvement is largely driven by reduced operating expenses across all functions, high gross margins, and high revenue stream out there, services segment. Net loss for the quarter was €4 million or €0.82 per ADS [ph] compared to a net loss €3.7 million or €0.76 in prior year's third quarter.

The higher loss was driven by non-cash expense from the revaluation of the derivative financial instruments with the European Investment Bank. This provided the same presentation for the nine months ended September period 2020 throughout 2018.

Slide 32 shows selected balance sheet item. At September 30, 2020 the company's cash, cash equivalents and short-term investments in bond funds of roughly €8.9 million.

Total debt at September 30, 2020 was approximately €26.6 million. Of this, €25.5 million are non-current and long-term.

Long-term debt primarily consist of €15 million from EIB Horizon2020 venture program. Weighted average number of shares outstanding for the quarter equates to 8.6 million ADS.

Moving now onto Slide 33 and our financial guidance for the full year. Full-year 2020 revenue range is now expected to be between €20.7 million from currently €26.7 million.

The key driver for the adjustment was the date of first of revenue recognition of VJET X and the continued impact of COVID-19. SG&A spending is expected to be in the range of €13 million to €13.5 million and we're really expecting this factor to be between approximately €5 million to €6.25 million.

Depreciation and amortization expenses are expected to between €3.5 million and €3.75 million. Cash CapEx spending for 2020 is projected to be in the range of €1.5 million to €1.0 million, which primarily consist 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. Revenues for the fourth quarter of 2020 is expected to be in the range of €8 million and €10 million.

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

Operator?

Thank you. With the follow-up order for B2B we reached a significant milestone in our mission to bring 3D printing into high volume industrial production.

This is excellent news, and this not only highlights the significance of our technology, but also the confidence that leading German carmakers have in our solutions and the players behind it. Together with our partners, we tend to do offer solutions for the mass production of complex light metal parts, and 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 printers and are extremely excited about the new opportunities and markets potential addressed with it. Thank you for joining us on today's call, and we are looking forward to speaking with you again, next year.

Thank you.

Thank you very much.