voxeljet AG

Greetings and welcome to 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jonas Pesch. Thank you. You may begin.

Thank you, operator, and good morning, everyone. With me today are Dr. Ingo Ederer, Voxeljet's Chief Executive Officer, and Rudy 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. 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 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 including the risks and uncertainties caused by the current COVID-19 pandemic and the residing uncertainty in the global economy. For additional information concerning factors that could cause extra resides 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 WaffleJet.

Thank you, Operator, and good morning, everyone. Thank you, Giannis. Good morning, everyone. Thank you for joining us on our earnings call today. Let's turn to slide four. Our roots reach back to the year 1995 with the first successful dosing of UV resin. 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 5th 1999 as a spin-off from university with a clear vision in mind to establish new manufacturing standards. Today, we provide our customers a strategic competitive advantage by upgrading the existing conventional production methods to additive manufacturing solutions. We push technologically boundaries and develop new generative processes for their serious production of complex components. On slide five, 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. We have a clear plan in mind and are fully committed to make this success for all stakeholders. Let's turn to slide six 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 16% of it, this would put the manufacturing economy at around $12.8 trillion. If additive manufacturing captures only 5% of it, this could potentially become a $640 billion industry. I believe we are in an excellent position to capture our fair share of this growing market over the next years. Because what really differentiates us from the other players in the 3D printing industry is our focus on solutions for manufacturing or industrial production at scale. I would estimate that with our current portfolio of 3D printers, our share in sales to manufacturing is already higher than any of our competitors. I expect this to grow further significantly with VJX and the new high-speed sintering printer. I believe so, because we are working with leading industrial OEMs basically since our foundation. We sold our first 3D printers to BMW and Daimler in 2002. In addition, our technology evolved significantly over the last years in terms of speed, accuracy, and the degree of automation of the whole process chain. I firmly believe there is currently no other company in our industry who can offer a fully automated 3D printing line for large scale manufacturing like we do with the VJX. Let's turn to slide seven. Starting on the left side of the slide, you can see some of the highlights of the last seven years. In the years 2014 to 2016, We started our internationalization with own operations in the US, China and India. In 2017, we expanded our German headquarters and signed a deal with the European Investment Bank as part of their Horizon 2020 program. With this program, they support highly innovative tech companies. In 2018, we signed our first deal for VJX, collected additional funds from institutional investors and accelerated the development of HSS. In 2019, we moved into a new state-of-the-art production facility in Shanghai. Mid-2019, we presented VGNX for the first time to the public at a leading trade show in Germany. At the end of 2019, we presented our new HSS printer for the first time to the public. Towards the end of 2019, we implemented a structural efficiency program to reduce mainly overhead in the system's functions. In 2020, we received additional funds from the European Investment Bank, moved to NAVTAC, and received follow-up orders for VJDX under the contract signed in 2018. We invented key new IP for HSS, like greyscale printing, and are finalizing the development of our new HSS production printer. So for the next years, we focus on commercialization and accelerated growth through our new products. On the right side of this slide, we have summarized some of the recent highlights. In January and February 2021, we were able to sell new shares for aggregate gross proceeds of $22 million to the company. Also early in 2021, we successfully printed parts on the new HSS printer using the full build area. We have included some pictures in one of the later slides. The quality of the parts is excellent, and we saw no thermal warping across the whole build area. The IP we have developed over the last years in HSS, especially regarding multiple self-regulating heat sources, is critical to this success. Before we start with the formal part of the presentation, let's quickly remind those who are new to that what we do. Let's turn to slide eight, where we describe our technology. In the additive manufacturing market, you have probably more than 10 different technologies, each with its specialized field of application. We use a technology called binder chipping. Binder chipping is especially suited for high volume manufacturing because of its potential to scale. On slide 9, you can see some of our products. It's starting with the 200 on the left and goes all the way to the 4000, which is the largest binder chipping system available in the market. The idea is that we have one platform with many applications. Each of these models can be used with multiple material sets. For example, we offer the 1,000 3D printer for the printing of highly accurate sand casting molds and as a plastic polymerization printer. We expect to also offer it as a high-speed polymer sintering printer. Looking at slide 10 and our integrated business model, With this integrated model, we can capture business either as a 3D printer sale or on-demand printing contract. In the services segment on the left side of this slide, we operate our own 3D printers in three 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. That is a great and easy way for our customers to understand new business opportunities in 3D printing. The short sales cycles and services help us balance the typical long sales cycles in our system segment. In our system segment, we manufacture and sell industrial-grade, high-speed, 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 after-sales activities. Slide 11 shows our global sales network and production footprint. As you can see, we have reached an established position in all major markets in Europe, the USA, as well as Asia. We focus on educating our channel partners to ensure true global coverage. Turning to slide 12. We differentiate ourselves from our 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. 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 fourth quarter. Woody will then provide a more in-depth view of our financials for the fourth quarter and full year 2020 and our outlook for 2021. Following his comments, we will be happy to take your questions. Turning to slide 14, total revenue for the fourth quarter this year decreased 7% to 8.9 million euros as compared to 9.6 million euros in the fourth quarter last year. In services, our on-demand 3D printing segment, we had an excellent quarter in Germany with a significant revenue increase as compared to the fourth quarter 2019. This increase was offset by lower revenue from the US and China. In systems, we sold eight printers in the fourth quarter last year as compared to 11 printers in the fourth quarter 2019. We sold a higher number of large-scale printers, which generates higher revenues and higher gross margins. Also, after-sales revenue increased as compared to the fourth quarter 2019. Looking at the right side of this slide and gross margins, despite lower revenue, we were able to generate higher gross profits. This is mainly a result of significantly increased gross margin contribution from our German 3D parts production center. In addition to that, we implemented a structural efficiency program at the end of 2019 and start to see full P&L impact on the fourth quarter 2020. Slide 15 breaks down order backlog by orders, revenue by geography, and operating expenses by category. We are happy with order backlog through 3D printers, which more than doubled as compared to the fourth quarter in 2019. When looking at revenue by geographic region, we target an even 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 revenues. We're happy to report that we have reduced operating expenses significantly as a result of implementing a structural efficiency program at the beginning of 2020. As mentioned, we see full P&L impact from the fourth quarter 2020 onwards. Annual savings from this program are estimated to be in the range of 2.5 to 3 million euros. Let's move to slide 16 and an update on our growth drivers, which is X and high-speed centering. We call them growth drivers because we believe they will help us capture a significant portion of manufacturing-related revenue. Keep in mind, these printers are made for automated industrial production. Let's start with high-speed sintering on slide 17. Over the next years, you will see that a growing number of parts currently made out of metal will instead be manufactured with high-performance plastic polymers. Engineering thermoplastic materials provide consistent strength and stiffness and outstanding impact performance for metal replacement. They are also lighter while offering excellent creep resistance and can maintain structural performance at higher temperatures and resist corrosion. We believe that the sales opportunity for 3D printing and the manufacturing of high-performance plastic polymers can become larger than the opportunity in metal 3D printing. We want to capture a significant portion of this growing market with our new large high-speed sintering printer. Thanks to some clever innovations in heat management, we can build larger build areas than any of our competitors. The powder reclaim rate of 80% in pH 12 helps us to reduce expensive waste and save our environment. And last but not least, you can top this with incredible short layer times. This whole package leads to unmatched low cost per part. We strongly believe that this technology will become a game changer in large scale production of plastic components. Let's turn to slide 18, and another innovation in high-speed sintering, grayscale printing. With our unique inkjet printer technology, we are able to print six different levels of gray, which indicate the amount of ink printed onto the powder. We can vary the amount extremely precisely in the picolita range. Different gray tones allow us to change the absorption of the thermal energy. That means that the darker the print area, the higher the absorption. This enables us not only to print different part properties within one layer, but also to influence these properties in all three dimensions. The benefits for our customers are better part accuracy and different material properties within one layer. On slide 19, we have summarized some details on the existing VX200 HSS printer. This is a platform for mature development, research, and small-scale production. Many customers and large chemical companies use this printer to qualify new materials for HSS. We can easily transfer this mature know-how to the large production printer VX1000 HSS. Slide 20 summarizes the polymer additive manufacturing technology landscape and its players. On slide 21, we have summarized key events in the development and commercialization of VJX. Just recently, we started to supply parts for pre-series production. We have shown that we can meet the extremely high quality requirements of this OEM consistently. Now it is about repeatability over a longer period of time. To my knowledge, this is currently the most ambitious project when it comes to bringing 3D printing into high-volume manufacturing. We expect to book revenue for the first VJDX units in mid-2021. Let's turn to slide 22. We are frequently asked if our technology is also relevant for electric vehicles. The answer is clearly yes, of course. While it is true that you have fewer components in electric vehicles, the geometries are still very complex and the demand for lightweight hollow structures is even higher. For example, we were 3D printing a lot of parts for the casting of structural components for a supplier to a leading US electric vehicle company in 2020. On the left side of this slide, you can see a new helical cooling channel for the engine or stator in an electric vehicle. The new layout has a greatly improved response time, which means it can reduce the temperature in an electric vehicle engine or battery in a significantly shorter time frame. We supplied the printed core set for the casting of this proof of concept. Our 3D printing technology makes the manufacturing of new engineering solutions possible. Therefore, it is highly relevant. With widget X, our customers have full flexibility in what they want to manufacture. On slide 23, we have included a link to the print-in action. With that, I would now like to turn the call over to Rudi. Rudi?