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spk00: Greetings, and welcome to the VoxelJet AG first quarter 2022 earnings 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, Mr. Johannes Esch, Director of Investor Relations and Business Development for VoxelJet. Thank you. You may begin.
spk02: Thank you, operator, and good morning, everyone. With me today are Dr. Ingo Ederlein of Watsons Chat, Chief Executive Officer, and Rudy Franz, Watsons Chat's Chief Financial Officer. Yesterday, after the market closed, Watsons Chat issued a press release announcing its first quarter financial results for the period ended March 31, 2022. The release, as well as the accompanying presentation for the conference call, is available in the investor relations section of the company's website at watsonschat.com. During our call, We may make certain forward-looking statements about a 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 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 of Officejet.
spk01: Thank you, Johannes. Good morning, everyone. Thank you for joining us on our earnings call today. Please 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 5, 1999, as a spin-off from the university with a clear vision in mind to establish new manufacturing standards. Today, we provide our customers a strategic competitive advantage by upgrading their existing conventional production methods to additive manufacturing solutions. We push technological boundaries and develop new generative processes for the production of complex components. Let's turn to slide five, where we describe our technology. In the additive manufacturing market, there are likely more than 10 different technologies each with its specialized field of application. We use a technology called binder shedding. Binder shedding is especially suited for high volume manufacturing because of its potential to scale. With our VJX technology, we are pushing new boundaries. On slide six, you can find a high level overview of our company, including recently achieved milestones. We believe these will help us on our mission to establish new manufacturing standards. On slide seven, you can see pictures of our production facilities in Germany, the US, and China. Let me briefly explain our two business segments. In the services segment, top 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 in services help us balance the typical long sales cycles in our system segment. Customers come from various industries, including automotive, aerospace, general engineering, as well as art and architecture. In the US, one of our largest on-demand printing clients is a supplier to a leading space exploration company. 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. Let's turn to slide eight and an illustration of the wide range of applications of our technology. We are encouraged by the many discussions that we are having with different players in a broad variety of industries. They are all seriously looking at adopting our technology for well-chosen applications. To give you some examples, there is an innovative yacht company producing several thousands of advanced propellers with our technology. These new propellers have a shape that cannot be made conventionally. Because of this complex shape, the propellers create much less turbulences in water and have therefore a substantially improved efficiency. There are leading US-based exploration companies using our technology to make parts of their rockets more aerodynamic. There are car makers who use our technology to make their vehicles more lightweight and more energy efficient. There's a leading university in Zurich, Switzerland, the ETH, using our technology to make the most amazing concrete structures. and there are many, many more. Let's turn to slide nine and some thoughts on the additive manufacturing market. As you can see, Wohler's associates project grows to accelerate over the next years. This growth will be driven by a larger share of sales to manufacturing. 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. We have been working with leading industrial OEMs since our foundation. We sold our first 3D printers to BMW and Daimler more than 20 years ago. Our technology has evolved significantly over the last years in terms of speed, accuracy, and the degree of automation of the whole process chain. Slide 10. shows our global sales network and production footprint. As you can see, we have reached an established position in all major markets in Europe, USA, as well as Asia. We have halted our activities in Russia and Belarus until further notice. Turning to slide 11, on the left side, we have summarized our USPs. We differentiate ourselves from our competitors by build size, material diversity, and speed. This leads to a complete set of industrial 3D printers to support critical demanding applications and address the challenges and needs that are most important to our customers. Each model can be used with multiple material sets. For example, we offer the VX1000 3D printer for the printing of highly accurate sand casting molds, for ceramics, or as a plastic polymerization printer. On the bottom right side of this slide, you can see some of our new products. With these new printers, we believe we can increase our total addressable market considerably. We can target new applications within existing customer groups, for example, with VJX. With high-speed centering, we can address both new and existing markets, like, for example, audio equipment, automotive interiors, and exterior ceilings, gaskets, walls, grippers, and other consumer products. Let's start with the formal part of the presentation of slide 13. I will begin with an overview of the results for the first quarter. Woody will then provide a more in-depth view of our financials for the first quarter and our outlook for 2022. Following his comments, we will be happy to take your questions. We are off to a good start. We are extremely busy in our on-demand 3D printing segment, with revenue up more than 60% year over year, and absolute gross profit almost tripled. It is great to see that this growth comes from a wide variety of applications. Projects for space exploration and yachts in the US, large orders from the art and architecture sector in Germany, components for cooling of parts in electric vehicles in the UK, and so on. The high utilization leads to excellent gross margins in this segment of more than 40%. The high utilization also means that each printing shop is fully packed and there is less waste. What we have seen in the past is that on-demand printing revenue is a leading indicator for future sales of 3D printers. So this makes us very optimistic for our system segment as well. Let's look at the numbers in some more detail. Total revenue for the first quarter this year increased 14% to 4.6 million euros compared to 4.1 million euros in the first quarter last year. In services, our on-demand 3D printing segment, we saw a strong quarter with continued high demand for our products and quarterly revenues grew more than 60% from the first quarter last year. In systems, we sold one printer in the quarter as compared to two printers in the first quarter of 2021. As in the previous years, we expect the majority of systems revenue to come in during the second half of the year. Looking at the right side of this slide in gross margins, we are very pleased with high gross profit and gross profit margins in our services segment of more than 40%. Utilization is key, and we had more orders than printing capacity. In systems, we saw a lower gross margin as a result of product mix. We sold a small printer, which generates lower gross margins. We continue to see some challenges when it comes to lead times for certain electrical components for our printers, and we are working with our suppliers on this topic. Quick update on our principal R&D project on slide 14. Over the last weeks, we have made great progress with VJX in our project. With the leading carmaker, we were able to improve the output of good parts substantially over the last month. We achieved that by making changes to the post-processing setup. These improvements led to significantly improved parts accuracy and process stability and repeatability. With that, the consistency of the whole process has been greatly enhanced. Also, we recently installed a high-tech industrial microwave in our facility in Friedberg. We will use it to further develop the inorganics process and print parts and benchmarks for other customers. We are working full speed on our project with GE Renewable Energy, and there might be an opportunity to speed things up even further through additional funding from the US Congress. We are working on that topic together with our colleagues from GE. We have an excellent network in Washington, DC. If you obtain that additional funding, you could, for example, set up a second prototype version of the BFP printer in our Detroit facility in addition to the one being built in Germany. Regarding high-speed sintering, in two of the later slides, we have prepared illustrations of what an automated production cell could look like with our new high-speed sintering printer. We are very excited about this new printer and the opportunities it opens up in industrial manufacturing. Slide 15 breaks down order backlog by quarters, revenue by geography, and operating expenses by category. When looking at revenue by geographic region, we target an even distribution across the three regions to hedge against risk from local events. Let's move to slide 16 and a couple of illustrations of how we see the new HSS printer in an automated production setup. There's also a link to a video on the bottom of the slide. We plan to have centralized powder supply, which you can see on the top half of the picture. In the middle part of the picture, you can see the cooling stations. Once the printing is complete, the job boxes are moved to these stations and are actively cooled down. From there, the boxes move to the unpacking and finishing stations. In these stations, the non-scented powder material is automatically removed. This used powder can be sieved and filtered and then be added to the process again. You can achieve high recycling rates and low amounts of waste. On slide 17, you can see some of these steps in more detail. To sum up the first quarter, excellent growth rates and exciting projects in our on-demand printing segment, typically seasonality in our system segment, and good progress in key R&D projects. We have a lot to look forward to into the next months and years, and with that, I would now like to turn the call over to Rudi.
spk03: Thank you, Ingo, and good morning to everyone. Our aim is to deliver long-term value for our shareholders through attractive growth, stronger margins, and optimal deployment of capital. Our full attention remains firmly in driving operational execution to deliver these outcomes. We are making good progress with the planned saliently-stacked transaction of our facility in Germany. If everything goes according to plan, we should be able to sign a deal in the next month. We expect proceeds of approximately $30 million from this transaction and plan to use these proceeds to repay debt. At the end of April, I was visiting large customers in India, many of whom purchased our largest printer. I'm delighted about the many discussions that we are having with so many different players from a broad variety of industries and regions. Regarding COVID-19, we continue to work with some special measures in places around isolation contamination protocols to ensure the safety of our employees and to reduce risk of operational disruption. For 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 our first quarter 2022. After that, we are happy to take your questions. Turning to slide 19, total revenues increased 14.3% to 4.6 million euros in the first quarter of 2022 as compared to 4.1 million euros in last year's first quarter. Revenue from our 3D parts production centers in Germany and the U.S. continues to be strong, and it's great to see that this momentum is carrying on. In our services segment, this first quarter is one of the best quarters we had in quite some time. In system, we saw the typical seasonal patterns and as in previous year, expect to book the majority of revenues in the second half of this year. Cross-profit and gross margin in the quarter were 1.6 million euros and 34.3% compared to 1 million euros and 25.6% in the first year quarter of 2021. Let's break this down. Gross margins in services almost doubled to 41.7% in the first quarter of 2022 from 23.2% in the first quarter of 2021 as a result of high utilization. This is excellent to see in systems with smaller printers, which generate lower gross margin. The next slide shows our segment reporting for the quarter. In slide 20, revenues from our system segment, which includes revenues from selling 3D printers, consumables, and spare parts, as well as maintenance, decreased 32.1% to 1.4 million euros for the first quarter of 2022, from 2.1 million euros for the first quarter of 2021. We sold one new printer this quarter compared to two new printers in the first quarter of 2021. This type of seasonality is typically for our industry, where you see a majority of printer sales happening in the second half of a year. Therefore, this quarter is not representative of the margins we can achieve in our system segment. On slide 21, services revenue increased 63.3% to 3.2 million euros in the first quarter 2022. compared to 2.0 million euros in the same quarter 2021. Services cross-profit margins almost doubled to 41% in the first quarter of 2022 from 23.2% in the same quarter 2021. The improvement was driven by strong gross margin contribution from German and the US 3D parts production centers. Absolute cross-profits almost tripled to 1.4 million euros in this year's first quarter from 0.5 million euros in the same quarter last year. Looking now to the rest of the income statement on slide 22, selling expenses increased to 1.6 million euros in the first quarter of 2022 from 1.5 million euros in the same quarter last year. The increase is in line with the increase in revenue and primarily related to higher distribution expenses. Administrative expenses were 1.7 million euros as compared to 1.5 million euros in the first quarter of 2021. Keep in mind, we typically spent more than a million euros in auditing fees per year and over 5 million euros in legal and consulting fees. Research and development expenses were 1.4 million euros in the first quarter of 2022 compared to 1.6 million euros in the same quarter 2021. These expenses are usually driven by individual projects, especially through the consumption demand of external services and may vary significantly from quarter to quarter. Operating loss was €1.1 million in the first quarter of 2022 compared to an operating loss of €2.7 million in the comparative period last year. The improvement was mainly due to a positive net impact of quarter-to-quarter changes in other operating expenses and other operating income amounting to €1.2 million. In addition, gross profits improved significantly. Net loss for the quarter was 0.7 million euros or 10 euros compared to a net loss of 8.3 million euros or 1.51 euros in the prior year's same quarter. Slide 22 shows selected balance sheet items. At March 31, 2022, the company had cash, cash equivalents, and short-term investments in bond funds of roughly 20 million euros. Total debt at March 31st, 2022 was approximately 27.4 million euros. As mentioned in the beginning, we plan to repay all debt that proceeds from the planned salaried respect transaction of our headquarters in Germany. These assets are currently part of property plan and equipment and non-current assets. The value of real estate has appreciated significantly over the last years in our area, and we estimate a value for the whole complex of approximately 30 million dollars. Rated average number of shares outstanding at March 31st, 2022 were 7,026,711 AES. This is also the current number of shares outstanding. Moving now on to slide 24 in our financial guidance for full year 2022, which remains unchanged. Revenue for the second quarter of 2022 is expected to be in the range of 5 to 6 million euros, and this concludes my remarks. And with that, We will now open the call after your attention, operator.
spk00: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Brian Kinslinger with Alliance Global Partners. Please proceed with your question.
spk05: Great. Thanks so much. You mentioned in terms of the VJX, the progress you were able to improve with the output of goods. Can you update us on the business development efforts with this automotive client? With these changes, do you have visibility into when they might purchase another batch of printers? Have those discussions began? And if so, Anything you can share would be great.
spk01: Absolutely. Thank you for this question. So with these improvements, we already see that the customer is helping us with own marketing activities in his field of suppliers. And I think this is probably the more important impact that he forces, hopefully then, suppliers to invest in that type of technology. This is something we are looking for because the outlook, including the supplier chain, is much better than if you just look at the single manufacturer. So yes, we are optimistic that it's going forward, that we receive further orders, not just from this automaker, but also from the supply chain. It will take a little bit of time to get these orders. Please have in mind that next year is the main foundry show, it's the GIFA. We believe that for this point in time that we probably see incoming orders for this technology.
spk05: Great. And have you started conversations with those suppliers or is it right now your customer that's having the conversations and you'll be having them shortly?
spk01: We are already in contact with most of them, but of course it's very important that the final customer is talking good about this solution. So that's why we highly appreciate now that they are starting to do so.
spk05: That's great. And then in terms of the GE project, if the federal funding does happen, from the US, what might the new timeline look like? Does that pull it up six months? Does it pull it up a year? It's a long timeframe right now. So anything, details on what that means for the timeline would be great.
spk01: So actually, it is hard for us for this moment to talk precisely about the timeline. So we know that there are budgets available for such a project. and we are fighting with GE to get a part, a slice of these budgets. The outlook for this moment is that we may have a start of such a project within this year.
spk05: In the remaining year.
spk01: And it will last then at least for 12 months, probably 24 months.
spk05: Great. And then the higher services demand, what's driving it? Is that one customer or is it several new customers. I'm just trying to understand, you know, it took a nice jump up and is that sustainable? Will it accelerate from here or will it pull back?
spk03: It's existing customers. It's both existing and new customers. But what we see is that existing customers simply order higher volumes. So they really use the technology for production. And what we have seen over the last couple of weeks and months with the supply chain constraints, they really started to think about supply chains and order more in Europe and the US, which definitely then has driven the increase in service center activities.
spk01: I think it's related to the pandemic. Since the pandemic is almost over, we see release of budgets also for R&D activities. And this helps also further fueling our channel.
spk05: That's great. Lastly, with the sale and leaseback, the price, the sale price isn't putting your market cap. That's just micro caps these days, which is crazy. But do you have an estimated tax you may need to pay on those proceeds? I take it the 30 million in U.S. dollars doesn't include that.
spk03: Can you please repeat your question, Brian? I didn't get it.
spk05: Yeah. Yeah. I'm just curious. Uh, you mentioned that, uh, the proceeds from the sale of your facility and then the lease back, you'll get $30 million roughly. Can you pay taxes on that? And if so, what is the estimated tax rate you'll pay them?
spk03: So the, uh, because of having a significant carried forward law, uh, we will not pay any taxes. That is the current view of our consultants. So we can take this in and can use the proceeds for paying that, uh, paying back the debt to EIV and a local bank. Great.
spk05: Thanks so much.
spk03: You're welcome.
spk00: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Jacob Steven with Lake Street Capital Markets. Please proceed with your question.
spk04: Hey, good morning. Congrats on the good results this quarter. Maybe just digging into the facilities and the service segment, what's really been the strongest vertical for you guys? Has it been aerospace, industrial? I'm just trying to get some more color around that.
spk01: It is interestingly different from region to region. So I would say probably aerospace is very strong in the U.S., and here general industry and automotive is very strong here in Europe. why we see infrastructure very strong in China.
spk04: Okay. And you guys had said that you have new customers, they're ordering more, higher volumes. Have you seen any of those projects ramping up or maybe tapering off? And how can we think about utilization going forward?
spk03: Definitely increasing, just because of the reasons Ingo mentioned. So what we believe is that the utilization goes up by a higher usage in manufacturing. So for sure, R&D project drives the growth, but to me, and when I talk to the team and the clients, the higher adoption rate in manufacturing will drive it going forward.
spk01: In addition to that, what Rudi said, we see that more and more projects with serial production come into our services segment. One of them we talked in the script here is about this propeller thing for instance. This is a serial manufacturer of propellers and they are doing this wire additive for our 3D printing because it's not possible to make it different. And we see other similar projects where we have also printing molds and cores, for instance, for metal castings in a similar complexity range which are hard to make in a different way. And this is good to see that more and more customers are willing to invest in 3D printing as a production method and allowing also their suppliers to work with us on such projects. You know, it's always a risk and win question, and it's good to see that the acceptance of this technology takes real place.
spk03: I think in addition to what Ingo says, certain printers which we use are now used for, I would say, 10 years, if you talk about a week per thousand, for example. So if we talk about reliability, this is the main driver in production. People want to use this 24-7, and we have clients operating our equipment 7,000 hours a year, and this is only possible with reliable equipment. And I think when we discuss about technologies from competition, some say higher output rates, but never talk about reliability. Does it happen once a day, or is it happening 365 days a year? So I think all this together nowadays helps to increase the utilization in services, increases the sale for new printers, and increases as well the acceptance in manufacturing.
spk04: Great. That was helpful. Maybe just switching over to backlog. It was up nicely sequentially here. So you guys talked about the electrical components. We're typically seeing that with a lot of other companies in the industry, but what are you guys doing to mitigate these challenges?
spk01: Well, this is a good question. Of course, we are trying to have a longer view on our supplier needs. So we monitor the supply chain very carefully. make longer-looking plants try to source also differently, means not just through the original supplier, but also through other means. Of course, we are not completely off the current problems, but I think we are doing it quite nicely and smart to at least achieve what we have there.
spk04: Okay, great. That's all the questions that I had, but congrats on the solid results.
spk01: Thank you.
spk04: Thank you.
spk00: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Dr. Edgar for any final comments.
spk01: Thank you. It was good seeing many of you again at this week's rapid show in Detroit, and thank you for joining today's call. We look forward to speaking with you again in our next earnings call. which we expect to take place in August with results of the second quarter in 2022. Thank you for this time and see you then. Bye-bye. Have a good weekend.
spk03: Have a good weekend.
spk00: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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