Anthony Gerstein - Director of Business Development and IR Ingo Ederer - CEO Rudi Franz - COO and CFO

Troy Jensen - Piper Jaffray Rob Stone - Cowen and Company Ken Wong - Citigroup Ananda Baruah - Brean Capital Jason North - Jefferies Brandon Wright - Stephens Inc.

Greetings, and welcome to the voxeljet First Quarter 2015 Earnings Conference 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 recorded. It is now my pleasure to introduce your host, Anthony Gerstein, Director of Business Development and Investor Relations of voxeljet. Please go ahead, sir.

Thank you, operator and good morning everyone. With me today are Ingo Ederer, voxeljet’s Chief Executive Officer and Rudi Franz, voxeljet’s Chief Operating Officer and CFO. Yesterday after the market closed, voxeljet issued a press release announcing its first quarter results for the period ending March 31, 2015. 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.de/en. 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 SEC. With that, I would now like to turn the call over to Ingo Ederer, Chief Executive Officer of voxeljet. Ingo?

Thank you, Anthony and good morning, everyone. Thank you for joining us on the call today. I'm going to give a brief overview of our results for the quarter and then update you on the status of our strategic initiatives. Rudi will then provide a more detailed review of our financial results for the period and will discuss our guidance for 2015, which is unchanged. We will then open the call up for your questions. Turning please to slide four of the slide presentation and summary of our highlights for the first quarter. First, total revenues more than doubled over the prior period -- prior year period with significant increases in both business segments. Second, we generated positive cash flow from operating activities and third, we successfully implemented a new ERP system in January 2015. Now, looking at each of these points in greater detail. For the quarter, total revenues increased approximately 104% to EUR5.6 million from EUR2.7 million last year. System revenues increased nearly 115% to EUR2.8 million from EUR1.3 million in the first quarter of 2014. We sold four printers for the quarter, which included two new and refurbished systems and two new systems compared to two new systems in the last year same period. Used and refurbished systems generally have a lower attributable gross margins than new systems which contributed to a lower overall gross margin in the segment in this year's quarter. Additionally, one of the two new systems we sold in the quarter was a beta machine, which is eventually the first machine of a production series and look forward to a customer at a discount. This also contributed to the segment's lower margin. Services revenues in the first quarter increased 94% to EUR2.8 million from EUR1.4 million in the last year same period. The increase was the result of growth at our services in Germany and contributions from our subsidiary in UK. Our subsidiary in US began printing on demand products for customers in January using one printer and consequently its revenue contribution was not significant to our first quarter's results. We now have three printers operating in that facility. Overall, I'm pleased with our performance, customer interest and quoting activity remains strong in both business segments and the outlook for printer sales is positive based on our backlog, which was approximately EUR2.6 million at March 31, 2015. We have been experiencing a lot of interest in the activity in the U.S. market, we think this is because we now a direct operating presence in the United States for our subsidiary near Detroit as well as the strengthening U.S. dollar since we sell our printers in euros. Both of these are positives for us. Our cash management during the quarter was good as we generated over EUR0.7 million of cash from operating activities and finished the quarter with nearly the same amount of cash as at the end of 2014. We successfully implemented a new ERP system across all our subsidiaries in January 2015 which facilitates the next step of growth. Our finance team did a great job achieving this and the next step is to implement an ERP module regarding material and warehouse management. This will further strengthen our supply chain and provide us even greater confidence of our financial controlling procedures. Turning now to an update of our strategic growth initiatives on slide 6. We are confident about our strategic direction and continued to execute on our plan as outlined in previous call. Turning please to slide 7, as previously said, the expansion of our German headquarters last year has been very favorable as we increased both services and systems for the production capacity. Services revenue from Germany increased 30% in the first quarter of 2015 compared to the first quarter of 2014. On the next slide, number 8, in October 2014, we established our subsidiary in the UK through the acquisition of Propshop, which primarily sells to film and entertainment industry with 3D printing and scanning services. It’s basically another service center and we have a lot of opportunities to increase utilization there in different industrial markets in the U.K. In January 2015, we began printing on-demand parts at our service center in the U.S. near Detroit, which is shown on slide 9 through 11, the facility is planned to have similar printing capacity as our German facility by the end of 2016. We recently held our second customer seminar there, and had great attendance. We expect the Detroit service center to grow revenue progressively throughout the year with installation of additional printers, including VX4000 towards the end of this year. Our next service center locations will largely be in Asia, specifically we are looking at both India and China and we expect to make some announcements later this year. The next driver to our growth strategy on slide 12 is our focus on continued innovation and advancement in technology through ongoing research and development in the areas of materials, components and printers. To be more specific, in the area of materials, we are improving both existing and new material sets to improve the quality of printing and also increase the adoption of the technology by expanding the customer base and addressable markets. An example of this is Phenolic-Direct-Binding, PDB for sand applications which are discussed in detail on the last conference call. With respect to components, an example of our efforts here would be related to the optimization of our printer technology and other associated technology -- technical equipment to improve the overall printing process. And with respect to machine development, we offer one of the industry's broader portfolios of printers for industrial and commercial production. Our initiative here is to standardize and offer uniform quality across all our systems. Overall, our focus on research and development will strengthen our position in the industry and contribute to our long-term future growth. Turning now to slide 13 please. Our expanded sales and marketing presence will increase our market penetration and facilitate the adoption of our technology. We have been successful adding many new people or agents and we receive enquires nearly every week from parties interested in working with us. That brings me to the end of my part of the formal presentation. I will now turn the call over to Rudi. Rudi?

Thank you Ingo. Good morning everyone. I'll now take you through the financials. Turning to slide 15, total revenues increased 104% to EUR5.6 million in Q1 2015 compared to EUR2.7 million in Q1 2014. Gross profit and gross margin for the quarter were EUR1.9 million and approximately 34% respectively compared to EUR1.1 million and 39% in the last year’s quarter. The next slide show our segment reporting for the quarter, slide 16. System revenue increased 115% to EUR2.8 million in the first quarter of 2015 from EUR1.3 million in the last year’s quarter. We sold four printers in this year’s first quarter compared to two printers in the last year same period. As Ingo already stated, two of the systems were used in the service contract and one of the two new systems were the better machine which we sold to a customer at a discounted price. Systems revenue represented 50% of total revenue in the first quarter of 2015 compared to 48% in last year’s quarter. Gross profit and gross margin for our Systems segment in the quarter was around EUR8 million and 27%, respectively, compared to around EUR4 million and 30% in last year’s same period. Gross margin of Systems segment was negatively impacted by the product mix, which we discussed already, specifically higher costs related to our increased headcount as we pursue our growth strategy as it contributed negatively to our margins. We anticipate that gross margin of Systems segment will improve as we’re going to see increased Systems revenues and leverage the prior investments in our business. As our business continues to grow over the coming quarters, we expect gross margin in the Systems segment to be in the range of 40% to 45%, consistent with the outlook we’ve given in the prior period. Slide 17, Service revenues increased 94% to EUR2.8 million in the first quarter of 2015 compared to EUR1.4 million in the same quarter of 2014. The increase was due primarily to revenue contribution from our subsidiary voxeljet UK, which contributed EUR912,000 [ph] to Services. We also continue to benefit from the expansion of our service center in Germany, where Service revenue increased nearly 30% compared to last year’s first quarter. Revenue contribution from our [indiscernible] was not material to our quarterly results. Gross profit for our Services segment increased to EUR1.1 million in the first quarter of 2015 from around [ph] EUR7 million in the first quarter of 2014. Gross margin decreased to 40% from 48% in the last year’s quarter. The decrease in gross margin was related to increased headcount costs in pursuit of our growth strategy. As of March 31, 2015, 34 people were employed in our Service segment compared to 16 at March 31, 2014, an increase of more than 100%. Product mix and strategies in the first quarter of 2015 was less favorable compared to the first quarter of 2014. Looking now through the rest of the income statement on slide 18. SG&A expenses were EUR3.0 million in the first quarter of 2015 compared to EUR1.3 million in last year’s quarter. This increase is primarily due to increased headcount and costs associated with being a public-traded company. Our marketing efforts continue to expand as we have increased headcount and attended several shows and fairs. Research and development expenses were EUR1.6 million compared to more than EUR8 million in last year’s quarter as we continue to support a number of active projects in various stages of development. Operating loss was EUR1.5 million in the first quarter of 2015 compared to an operating loss of more than EUR6 million in the prior year period. Total comprehensive loss for the quarter was EUR1.8 million or EUR0.49 per share compared to comprehensive loss of over EUR7 million or EUR0.22 per share in the prior year quarter. Turning now to slide 19, which shows selected balance sheet items. At March 31, 2015, the company had cash and cash equivalents of approximately EUR7.9 million and short-term investments held in five bond funds of nearly EUR40 million. Total debt at March 31, 2015 was approximately EUR3.3 million and the weighted average shares outstanding for the quarter was 3.7 million, which equates to EUR18.5 million of ADSs. We believe that our balance sheet positions us well for the long-term and we have been diligent in our cash management. As Ingo stated, cash from operating activities in the quarter was over EUR7 million. Moving on to slide 20 and our revenue guidance for the year, which is unchanged. For the full year 2015, revenues are estimated to be in the range between EUR23 million and EUR24 million. The primary drivers of anticipated revenue growth are expected to be increased global System sales, continued Service revenue growth at our facility in Friedberg, Germany, contribution from Voxeljet of America, which began operating in January 2015, and the full year’s contribution from voxeljet UK. Based on these factors, we expect Services revenue growth to outpace Systems revenue growth in 2015. With respect to our operating expenses for the year, we expect SG&A spending in the range of EUR11 million and EUR13 million and R&D spending to be approximately EUR6 million to EUR8 million. CapEx spending for 2015 should be in the range of EUR5 million to EUR7 million. This concludes my formal remarks. And with that, we will now open the call up for your questions. Q - Troy Jensen: Congrats on a really nice quarter, gentlemen.

Thank you, Troy.

Hey, maybe to start with Ingo, you guys mentioned the beta-systems sold in the quarter, I guess I didn’t know of any new machines you’re developing and that would be shipping beta units, could you just explain a little bit more what this beta-system was?

Hi, Troy. Thank you for this question. In fact, we don’t specifically name what customer and what system it was and can leave you with that it was one of the recently introduced machines.

Why would you be considering a beta, I mean is this working on product or material developments or…?

What, we are usually doing is, we have built initial machines in our own Services department to start learning with them and we have also initial customers, which are getting those machines, we sell them as a beta machine.

Okay. All right, understood. And then how about with respect to the Detroit facility, you were talking about similar square footage exiting 2016 as your German facility. Would you expect contribution from that service peer to be equivalent to what the German facility is doing for them?

So, we expect that the phase there will ramp up accordingly to the capacity increase. And as we stated, we want to see there a similar capacity, printing capacity as in our German facilities, so the expectations are clear.

Okay. Then last question kind of two-part, and then I will leave the floor. Can you guys give us a sense for when you expect to see a multi-system orders from one customer and may be any traction you’re getting to your continuous platform?

So we already – that’s a question, we already sold the continuous printer. We have installations out there, we are collecting data from these installations. I think for the moment, we are in-line with the expectations we have on that system. And to see multiple installations at single sites, I think everything is in progress there, we are into discussion about several installations in different places where we see multiple installations just be made upfront.

Perfect. Keep up the good work gentlemen.

Thank you very much.

Thanks, Troy.

Thank you. Our next question today is coming from Rob Stone from Cowen and Company. Please proceed with your question.

Hi, good morning guys. I wanted to ask with respect to the backlog if you could provide any color on expected timing of delivery of the systems in backlog. I recognized that revenue doesn’t happen for customer acceptance, but just in terms of over what time period the systems in backlog should be delivered? And then what the order pipeline looks like since your backlog at least in euros was [indiscernible] for a while?

So the lead time for our systems is generally in between six months. So it means you can definitely see them -- certain number of this backlog invoiced within the next two quarters. And the question is what is our -- few on the future business that we are working against a needless – which is pretty good show, so we are quite confident to reach our numbers, all the discussions are good. Actually despite other companies, we don’t see any decrease in interest in big platforms, the opposite is the case. So we’re quite fine with that, we’re quite pleased.

Great. I have a couple of expenses related question for Rudi, if I may. The first one is, did you have any one-time effects in the quarter related to implementation of ERP? And then also if you could just walk through the detail on the other expense/income item, which was higher than the run rate that we have seen in recent quarters? Thanks.

So first, we implemented the ERP system already in Q4 and all related costs in our Q4 numbers. In Q1, we had very little numbers from external resources, means the implementation company, so that was not heavily affected. The increase in SG&A is primarily related to the growth of the business in Q1, have in mind, we operate out of three locations now, here in Friedberg, in Canton and in London, and as well have in mind that Ingo said that the service center in the US contributed very little in Q1 to the revenue and gross margin, but the costs were there that are the strong drivers. So more people, more facilities and there is nothing more to add.

Yeah, Rudi, I understand the increase in SG&A and R&D because of your increased activities in several locations. My question was actually on the EUR1.25 million net income item below the R&D and SG&A, if you could…?

That’s I would say almost EUR1 million, as we stated in our 6-K is related to foreign currency transaction.

Okay. So that’s essentially a one-off for this quarter?

That’s a one-off for the quarter.

Okay. Thank you.

Welcome.

Thank you. Our next question is coming from Ken Wong from Citigroup. Please proceed with your question.

Hey, thanks a lot guys. Ingo, several of your peers have noted demand softness in the market and I guess, I just wanted your take on what you guys are seeing – I mean, it sounds like you said that there is not much of a demand shift in large platforms. But just in terms of the vertical that you guys cater to, are you guys seeing any pull back?

As you know, we are active in automotive industry and foundry industry, and as an industrial market like aerospace, especially the aerospace market is extremely picking up, so actually we are completely fine. In out of all the sectors, we got good results and good prospects.

Got you. So I guess you guys also cater a little bit to the energy sector, what I recall, are you seeing any weakness in the oil and energy sector?

Actually, no. Interesting point is that with one energy sector may be slowing down, another energy sector is going up, so we have -- maybe the oil is going down, but the nuclear is going up, so everything is fine. And energy is needed, so we are okay.

Got you. That sounds fantastic. And then second, you guys mentioned phenolic binders as an area of potential growth going down the line. Are you guys starting to see good customer adoptions here, or when would you expect to see an uplift in terms of the usage of PPD [ph]?

Fantastic. Thank you for the good question. So we are looking on the machines, which are prepared for delivery in Q4. We are already trending here with that material for our customer service, so for the moment everything is on track. So you will see first installation secured for this year.

Got you. And the last one for Rudi, you guys had pretty good headcount in 2014. As you look to 2015, now that you've got the US built out, you guys have taken on Propshop, how should we think about headcount growth into the year?

So, currently we run on approximately 210 colleagues the truck minus [ph] and I would say by the end of the year, we believe that we have in the range between 240 and 250 people in our group.

Okay, perfect. I will pass it along. Thank you, guys.

Thank you.

[Operator Instructions] Our next question today is coming from Ananda Baruah from Brean Capital. Please proceed with your question.

Thanks, guys. Congratulations on a solid quarter and thanks for taking the question. I have I guess just a few if I could. First, I think only mix was a bit of a theme this quarter. It sounds like there is some mix shift both in systems and services. Could you give us a sense of what you anticipate mix to be like in both of those segments as you move through the year and maybe there was particularly, well, not particularly but incrementally in services what you expect the mix to look like both in [indiscernible] as we go through the year?

The first question, I would like to answer that we expect service revenue slightly higher than system revenues in 2015.

Ananda, you are asking about the mix in each segment, what the question was?

That's correct. Yeah. And then [indiscernible]

So we don't talk about the individual mix. I'd just say that the two segments we have got, we believe that systems revenues are slightly higher than -- service revenues are slightly higher than system revenue.

Okay. Ending for full year.

We just talk about 2015.

And then, guys, how should we think about, I guess, service gross margins for the balance of the year? Rudi made comments about what the expectation is for the systems gross margins for the balance of the year, but how about on the service margin side?

So gross margin, so if you talk about gross margins in systems, by selling more printers and dividing the cost to more printers, the gross margins will go up. So we believe, over the year, over the next quarters, we see a better gross margin than now and can divide the current spending cost for more printers. In respect of service gross margins, we believe that we have a good chance of seeing margin in the range of 40% to 45% as indicated. I think we have stated in this script was that the product mix in the previous quarter was not as favorable and you saw this over the previous quarters that gross margins in service segment are between 40% and 48%. So our target currently is 40% to 45%, sometimes it's above, sometimes it’s below and long term 45% to 50%. So it's unchanged. I think the more revenue you generate the more productive, we can discuss this. But currently it's still an up and down, but I think it's a good corridor. So you know there is a ramp up phase in US. We have also slight ramp up in the UK adding more systems there and this has had impact on the gross margin. So for each individual running entity I think we are quite fine if it runs at certain capacity, so you should expect some improvement later this year.

And then just last one for me. You guys -- I mean very strong cash flow quarter this quarter. I believe previously [indiscernible] cash flow positive at some point in 2016, do you think you could have a chance to be cash flow positive this year, given the strong start to the year and you [Technical Difficulty]?

We didn’t give guidance on cash flow. We just, as we have stated, we gave guidance on our revenue expectation and we gave guidance on SG&A and R&D spendings and CapEx spending, i.e., with those numbers, I think all of us can do the math, I don’t believe that we can guide to a positive EBITDA, as such, our target is to achieve this in 2016 but not in this year, I think that will be too ambitious.

Got it, guys. Thanks a lot. Congrats again.

Thank you.

Thank you.

Thank you. Our next question today is coming from Jason North from Jefferies. Please proceed with your question.

Hi, guys. Are you still expecting second half revenues to be 55% to 60% of full year revenues?

We didn’t give guidance on how the split is, but usually we see more revenues in the second half of the year and currently as said, I just can repeat this, we believe that we have a very good chance of fulfilling our guidance and a printer more in Q2 could change that we have in respect of revenue distribution and it had moved to Q3, then it’s probably 45:55 or 40:60. I just -- we tried to talk about that we – guidance and we reaffirmed our guidance for the year.

Okay. And in the order book, are any of the ones in there used systems and then any type of timing you can give us in terms of the rebound from the systems gross margin?

Currently, there is no used system in the backlog. We plan to do at least another used system in this year, but it’s the only one in the remaining quarters, because we don’t have any used systems available. And the second part of your question, I couldn’t get it, could you please repeat it?

In terms of, do you expect the systems gross margin to rebound, any sense as to when that would occur?

Absolutely. We believe that we can rebound and we can – we should see a better gross margin over the year at 34 by assembling more printers and selling more printers, getting us a better number to revise the cost, therefore we believe the gross margins will increase over time.

Okay. And last one here is, looking at the ASP as you calculated, just taking your order of shipments divided by your systems revenues, it looks like your ASPs are actually okay, even though two of the systems were used, obviously just how you mentioned it’s such a good ASP number?

The average [indiscernible] is the same, and as said, on the used systems, they are occasionally in our quarters and we try to optimize our used sale business, just operating printers a year or one and a half years longer in our service center and then sell them and I think if we do this and be more careful, then we see it both at a gross margins on the used systems. Really, it’s a very good demand for used systems, therefore, we sometimes take it out earlier of our service center, we plan to operate systems now at least three years in our service center and then refurbish them and take them out and then we should reach at least a gross margin of 40% on a similar used printer, which has been a lot better. But in the past, we were not able to optimize this, but now we are in a better position maybe to slightly optimize our used sale business.

Okay. Thank you.

You’re very welcome.

Thank you. Our next question today is coming from Brandon Wright from Stephens Inc. Please proceed with your question.

Yeah. Thanks for taking my question guys. Just a quick one on the guide, given the nice top line results and optimistic market outlook and backlogs, just curious about your thought process behind keeping the guide in place, is this just kind of erring on the side of conservatism, I mean kind of a follow-up on that, what’s the FX environment that’s kind of baked in in the guide here? Thanks.

Make the second part and the first part I do it.

Just on the FX, there is no material consideration for FX since the time we gave it to you, it’s the same as it was original.

Got you.

First point, coming back to the guidance. We did a proper planning last year and we believe there is a very good chance of achieving our guidance and we don't want to increase guidance or want to lower guidance, currently we believe that we have a good chance of achieving our guidance. And we don't -- we don't want to be conservative or overoptimistic, we would try to be realistic and currently it looks very good to us and we execute our business model.

Okay, sounds good thanks guys.

Thank you.

Thank you.

Thank you. We've reached the end of our question-and-answer session; I like to turn the floor back over to the management for any further closing comments.

So, again, I'm very pleased with our progress and we’re off to a very good start in 2015. We have achieved a lot since our IPO 18 months ago, there is a great momentum in our business and we're well positioned to deliver on our results and be the leader in our technology for the long term. I believe we have the right people, the right foundation and the right structure, all of which gives me the confidence that we can take this Company to the next level. Thank you again for your participation in today's call and we look forward to speaking with you again in August when we report our results for the second quarter figures. Thank you.

Thank you too. Have a good day.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.