voxeljet AG (NYSE: VJET) (the “Company”, or “voxeljet”), a leading provider of high-speed, large-format 3D printers and on-demand parts services to industrial and commercial customers, today announced consolidated financial results for the third quarter ended September 30, 2019.
Highlights - Third Quarter 2019 compared to the Third Quarter 2018
Total revenues for the third quarter decreased 37.7% to kEUR 4,436 from kEUR 7,121
Gross profit margin decreased to 19.5% from 32.5%
Systems revenues decreased 56.3% to kEUR 1,636 from kEUR 3,744
Services revenues decreased 17.1% to kEUR 2,800 from kEUR 3,377
Restructuring of voxeljet UK
Lowered full year 2019 revenue guidance to between kEUR 24,000 and kEUR 27,500
Revenue for the fourth quarter of 2019 is expected to be in the range of kEUR 9,000 to kEUR 12,500.
Dr. Ingo Ederer, Chief Executive Officer of voxeljet, commented, “At voxeljet, it is our mission to establish new manufacturing standards. For metal parts, we have introduced VJET X last year and we are working on a project for a leading German automotive OEM. For functional plastic parts, we are thrilled to launch our new HSS-X 1000 3D printer at next week's formnext show. At the show in Frankfurt, we will present a prototype version of the HSS-X 1000 for series production of sports equipment, consumer goods & electronics, for mobility & transportation and similar end user markets. We believe this new 3D printer possesses a six times higher build volume than 3D printers from our closest competitors. In short, we continue to innovate and are very excited about the opportunities ahead.”
Third Quarter 2019 Results
Revenues for the third quarter of 2019 decreased by 37.7% to kEUR 4,436 compared to kEUR 7,121 in the third quarter of 2018.
Revenues from our Systems segment, which focuses on the development, production and sale of 3D printers, decreased 56.3% to kEUR 1,636 in the third quarter of 2019 from kEUR 3,744 in last year’s third quarter. The Company delivered three new 3D printers in the third quarter of 2019 as well as in last year’s third quarter. In the third quarter of 2019, the Company sold smaller printers compared to larger platforms in the comparative period last year, which resulted in significantly lower revenues. Systems revenues also include all Systems-related revenues from consumables, spare parts and maintenance. Those Systems-related revenues increased in the third quarter year over year, which reflects the higher installed base of 3D printers in the market and the associated growth in aftersales activities. Systems revenues represented 36.9% of total revenues in the third quarter of 2019 compared to 52.6% in last year’s third quarter.
Revenues from our Services segment, which focuses on the printing of on-demand parts for our customers, decreased 17.1% to kEUR 2,800 in the third quarter of 2019 from kEUR 3,377 in the comparative period of 2018. This was mainly due to lower revenue contributions from the German operation. Revenues from the German operation reflected the slight slowdown of the economy in Western Europe, mainly related to the automotive industry. Revenue contributions from our subsidiary voxeljet America Inc. (“voxeljet America”) also decreased mainly due to fewer orders placed under a volume contract which started in July 2018. This was partially offset by higher revenue contribution from voxeljet China Co. Ltd. (“voxeljet China”), mainly due to a growing market penetration in the region, which is accompanied by a larger customer base. Revenues from voxeljet UK Ltd. (“voxeljet UK”) slightly increased.
Cost of sales was kEUR 3,571 for the third quarter of 2019 compared to kEUR 4,810 for the third quarter of 2018.
Gross profit and gross profit margin were kEUR 865 and 19.5%, respectively, in the third quarter of 2019 compared to kEUR 2,311 and 32.5% in the third quarter of 2018.
Gross profit for our Systems segment decreased to kEUR 357 in the third quarter of 2019 from kEUR 1,197 in the third quarter of 2018. This was mainly related to the decrease in revenues of kEUR 2,108 compared to the last year’s same period. Gross profit margin for this segment decreased to 21.8% in the third quarter of 2019 compared to 32.0% in the third quarter of 2018. Gross profit margin from the sale of 3D printers was almost flat, while Systems-related revenues contributed a significant lower gross profit margin due to a higher portion of Systems-related revenues stems from printhead sales with lower gross profit margin.
Gross profit for our Services segment decreased to kEUR 508 in the third quarter of 2019 compared to kEUR 1,114 in the third quarter of 2018. This was partially due to the impacts from restructuring of voxeljet UK amounting to kEUR 284. The Company decided to consolidate 3D printing process to serve all customers in Europe from the German service center and restructure the voxeljet UK entity. The restructuring includes reduction in headcount and disposal of certain assets. The Company will also early-terminate the lease of the Milton Keynes facility during the fourth quarter of 2019. This will help to reduce overall costs and should lead to improved gross profit margins by realizing economies of scale in the German service center. voxeljet UK will expand its sales team and will focus on selling 3D printed parts and 3D printers. In addition gross profit from the German service center as well as voxeljet America decreased, mainly related to lower revenues. The gross profit margin for this segment decreased to 18.1% in the third quarter of 2019 from 33.0% in the third quarter of 2018. This was related to the restructuring of voxeljet UK as well as lower gross profit margin from voxeljet America as result of higher costs related to higher maintenance expenses compared to the last year’s same period. Gross profit margin from the German service center slightly increased due to a lower number of printhead replacements in the third quarter of 2019 compared to the third quarter of 2018.
Selling expenses were kEUR 1,687 for the third quarter of 2019 compared to kEUR 1,990 in the third quarter of 2018. Shipping and packaging expenses were a main driver of the selling expenses and can vary from quarter to quarter depending on quantity and types of products sold, as well as the destinations of where those goods are being delivered. The decrease was mainly due to lower distribution expenses as a result of the decrease in revenues. The third quarter of 2019 was also impacted by charges related to the restructuring of voxeljet UK which amounted to kEUR 35.
Administrative expenses were kEUR 1,567 for the third quarter of 2019 compared to kEUR 1,494 in the third quarter of 2018. This was mainly due to restructuring charges amounting to kEUR 212, which have been recorded in the third quarter of 2019 at voxeljet UK. This was partially offset by lower consulting fees related to our SAP ERP system in the third quarter of 2019 compared to last year’s same period.
Research and development (“R&D”) expenses increased to kEUR 1,888 in the third quarter of 2019 from kEUR 1,660 in the third quarter of 2018. The increase of kEUR 228 was mainly due to higher personnel expenses related to an increase in headcount in order to support further research and development projects.
Other operating expenses in the third quarter of 2019 were kEUR 36 compared to kEUR 195 in the prior year period. This was mainly due to lower losses from foreign currency transactions of kEUR 22 for the third quarter of 2019 compared to kEUR 105 for the third quarter of 2018.
Other operating income was kEUR 787 for the third quarter of 2019 compared to kEUR 267 in the third quarter of 2018. The increase was mainly due to higher gains from foreign currency transactions amounting to kEUR 642 for the third quarter of 2019, an increase of kEUR 553 compared to last year’s third quarter.
The changes in foreign currency losses and gains were primarily driven by the valuation of the intercompany loans granted by the parent company to our UK and US subsidiaries.
Operating loss was kEUR 3,526 in the third quarter of 2019, compared to an operating loss of kEUR 2,761 in the comparative period in 2018. This was primarily related to significantly lower gross profit accompanied by higher operating expenses in the functions administration and research and development, partially offset by lower selling expenses for the third quarter of 2019 compared to the third quarter of 2018. In addition, other operating income recorded a significant increase in the third quarter year over year. Operating loss was significantly influenced by foreign currency impacts. The net gains and losses from foreign currency transactions on operating loss (considering changes in other operating expenses and other operating income) in the third quarter year over year was positive kEUR 636. The total impact on operating loss related to the restructuring of voxeljet UK amounted to kEUR 531.
Financial result was negative kEUR 370 in the third quarter of 2019, compared to a financial result of negative kEUR 1,042 in the comparative period in 2018. The improvement was mainly related to lower finance expenses related to the revaluation of derivative financial instruments amounting to kEUR 106 compared to kEUR 805 in the last year’s same period. Financial result included interest expense for long-term debt of kEUR 250 (Q3 2018: kEUR 238).
Net loss for the third quarter of 2019 was kEUR 3,914 or EUR 0.80 per share, as compared to net loss of kEUR 3,797, or EUR 1.02 per share, in the third quarter of 2018. This is based on a weighted average number of ordinary shares outstanding of 4.836 million for the three months ended September 30, 2019, as compared to 3.720 million ordinary shares outstanding for last year’s same period.
Based on a conversion rate of five American Depositary Shares (“ADSs”) per ordinary share, net loss was at EUR 0.16 per ADS for the third quarter of 2019, compared to a net loss of EUR 0.20 per ADS for the third quarter of 2018. Earnings per share is computed by dividing net income attributable to stockholders of the parent by the weighted-average number of ordinary shares outstanding during the periods. Earnings per ADS is calculated by dividing the above earnings per share by five as each ordinary share represents five ADSs.
Nine Months Ended September 30, 2019 Results
Revenues for the nine months ended September 30, 2019 decreased by 13.7% to kEUR 15,051 compared to kEUR 17,435 in the prior year period.
Systems revenues were kEUR 6,180 for the first nine months of 2019 compared to kEUR 7,002 for the same period last year. The Company sold seven new and one used and refurbished 3D printers during the first nine months of 2019, compared to four new and three used and refurbished 3D printers in the prior year period. Systems revenues also include all Systems-related revenues from consumables, spare parts and maintenance. The decrease of revenues within the Systems segment is mainly related to lower revenues from the sale of 3D printers, as the Company sold smaller platforms in 2019 compared to the same period in the prior year. This was partially offset by growing Systems-related revenues, reflecting the higher installed base of 3D printers in the market and the associated growth in aftersales activities. Systems revenues represented 41.1% of total revenue for the nine months ended September 30, 2019 compared to 40.2% for the same period in the prior year.
Services revenues were kEUR 8,871 for the nine months ended September 30, 2019 compared to kEUR 10,433 for the same period last year. This decrease of 15.0% was mainly due to significantly lower revenue contributions from the German operation. Revenues from the German operation reflected the slight slowdown of the economy in Western Europe mainly related to the automotive industry. Revenue contributions from voxeljet America as well as voxeljet UK were almost flat. The revenue increase from our Chinese service center was mainly related to a growing market penetration in the Asian sales region, which is accompanied by a larger customer base.
Cost of sales for the nine months ended September 30, 2019 was kEUR 10,747, a decrease of kEUR 394, over cost of sales of kEUR 11,141 for the same period in 2018.
Gross profit and gross profit margin for the nine months ended September 30, 2019 were kEUR 4,304 and 28.6%, respectively, compared to kEUR 6,294 and 36.1% in the prior year period.
Gross profit for our Systems segment decreased to kEUR 1,717 for the nine months ended September 30, 2019 from kEUR 2,051 in the same period in 2018. This decrease was mainly due to the decrease in revenues of kEUR 822. Gross profit from the sale of 3D printers decreases for the nine months ended September 30, 2019 compared to last year’s same period. This was partially offset by increased gross profit from Systems-related revenues. The gross profit margin for this segment was almost flat amounting to 27.8% compared to 29.3% for the prior period.
Gross profit for our Services segment decreased to kEUR 2,587 for the nine months ended September 30, 2019 from kEUR 4,243 in the same period of 2018. This was mainly related to the significant decrease in revenues in our German service center. In addition, gross profit from voxeljet America significantly decreased due to higher depreciation expenses related to a VX4000 system, which was capitalized in the third quarter of 2018. Furthermore, voxeljet UK recorded a restructuring charge of kEUR 284 within the gross profit. The gross profit margin for this segment decreased to 29.2% for the first nine months of 2019 from 40.7% in the same period in 2018. This was mainly related to lower gross profit margin from the German service center as a result of lower utilization but also related to the restructuring of voxeljet UK. Gross profit margin contribution from voxeljet America decreased due to the capitalization of a VX4000 system as mentioned above.
Selling expenses were kEUR 5,125 for the nine months ended September 30, 2019 compared to kEUR 5,384 in the same period in 2018. Shipping and packaging expenses as a main driver of the selling expenses could vary from quarter to quarter depending on quantity and types of products, as well as the destinations where those goods are being delivered. The year over year decrease is mainly due to lower distribution expenses corresponding to the decrease in revenues. The impact on selling expenses for the third quarter of 2019 related to the restructuring of voxeljet UK amounted to kEUR 35.
Administrative expenses increased by kEUR 473 to kEUR 4,591 for the first nine months of 2019 from kEUR 4,118 in the prior year’s period. This was mainly due to the restructuring charges amounting to kEUR 212 which have been recorded at voxeljet UK in the third quarter of 2019. In addition, there was a slight increase in headcount resulting in higher personnel expenses as part of management’s remediation efforts on the material weaknesses in internal controls over financial reporting identified in the prior year.
R&D expenses increased to kEUR 5,295 for the nine months ended September 30, 2019 from kEUR 4,771 in the same period in 2018, an increase of kEUR 524, or 11.0%. The increase was mainly due to increased expenditures for personnel as well as higher material expenses to support existing and future projects. For material expenses, the consumption is usually driven by project type and phase.
Other operating expenses for the nine months ended September 30, 2019 were kEUR 422 compared to kEUR 612 in the prior year period. This was mainly due to lower losses from foreign currency transactions amounting to kEUR 395 for the nine months ended September 30, 2019 compared to kEUR 437 in the prior year’s period.
Other operating income was kEUR 1,468 for the nine months ended September 30, 2019, compared to kEUR 1,036 in the prior year period. The increase was mainly due to higher gains from foreign exchange transactions amounting to kEUR 1,088 for the nine months ended September 30, 2019, compared to kEUR 690 in comparative period in 2018.
The changes in foreign currency losses and gains were primarily driven by the valuation of the intercompany loans granted by the parent company to our UK and US subsidiaries.
Operating loss was kEUR 9,661 in the nine months ended September 30, 2019, compared to an operating loss of kEUR 7,555 in the comparative period in 2018. This was primarily driven by the significant decrease of gross profit accompanied by higher operating expenses within the functions administration and R&D, compared to the nine months ended September 30, 2018. This was partially offset by higher other operating income, decreased other operating expenses and lower selling expenses. Operating loss was influenced by foreign currency impacts. The total year over year impact from gains and losses from foreign currency transactions on operating loss (considering changes in other operating expenses and other operating income) for the nine-month period was kEUR 440 positive. The overall impact on operating loss related to the restructuring of voxeljet UK amounted to kEUR 531.
Financial result was negative kEUR 894 for the nine months ended September 30, 2019, compared to a financial result of negative kEUR 902 in the comparative period in 2018. Financial result mainly consists of interest expense for long-term debt amounted to kEUR 745 in the nine months ended September 30, 2019, compared to kEUR 705 for the nine months ended September 30, 2018. The impact related to the revaluation of derivative financial instruments amounted to negative kEUR 87 (nine months ended September 30, 2018: negative kEUR 89).
Net loss for the nine months ended September 30, 2019 was kEUR 10,617, or EUR 2.16 per share, as compared to net loss of kEUR 8,464, or EUR 2.27 per share in the prior year period. This is based on a weighted average number of ordinary shares outstanding of 4.836 million for the first nine months ended September 30, 2019. Compared to the last year’s same period, the number of ordinary shares outstanding was 3.720 million.
Based on a conversion rate of five ADSs per ordinary share, net loss was EUR 0.43 per ADS for the nine months ended September 30, 2019 compared to net loss of EUR 0.45 per ADS in the prior year period.
Business Outlook
Our revenue guidance for the fourth quarter of 2019 is expected to be in the range of kEUR 9,000 to kEUR 12,500.
For gross profit margin, we expect gross profit margin to be above 40% for the fourth quarter of 2019 rather than for the full year and adjusted EBITDA to be neutral-to-positive also for the fourth quarter of 2019 rather than for the second half of the year ending December 31, 2019. Those changes are a result of lower than expected gross profit for the third quarter of 2019. In addition, we are increasing the projected range for R&D expenses for 2019 from the previously disclosed kEUR 5,500 to kEUR 6,000 to kEUR 6,500 to kEUR 7,000 to reflect increased expenses for the development of VJET X. For full year guidance, we expect:
- Full year revenue is expected to be in the range of kEUR 24,000 and kEUR 27,500
- Gross profit margin for the fourth quarter of 2019 is expected to be above 40%
- Operating expenses for the full year are expected as follows: SG&A expenses expected to be in the range of kEUR 12,000 and kEUR 12,500 and R&D expenses projected to be approximately kEUR 6,500 to kEUR 7,000. Depreciation and amortization expense is expected to be between kEUR 3,750 and kEUR 4,000.
- Adjusted EBITDA for the fourth quarter of 2019 is expected to be neutral-to-positive. Adjusted EBITDA is defined as net income (loss), as calculated under IFRS accounting principles before interest (income) expense, provision (benefit) for income taxes, depreciation and amortization, and excluding other operating (income) expense resulting from foreign exchange gains or losses on the intercompany loans granted to the subsidiaries.
- Capital expenditures are projected to be in the range of kEUR 2,000 to kEUR 2,500, which primarily includes ongoing investments in our global subsidiaries.
Our total backlog of 3D printer orders at September 30, 2019 was kEUR 4,867, which represents seven 3D printers. This compares to a backlog of kEUR 3,392 representing six 3D printers, at December 31, 2018. As production and delivery of our printers is generally characterized by lead times ranging between three to nine months, the conversion rate of order backlog into revenue is dependent on the equipping process for the respective 3D printer, as well as the timing of customers’ requested deliveries.
At September 30, 2019, we had cash and cash equivalents of kEUR 6,573 and held kEUR 5,099 of investments in bond funds and one note receivable amounting to kEUR 1,309, which are included in current financial assets on our consolidated statements of financial position.
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