Johan Pesch - Manager, Investor Relations and Business Development Ingo Ederer - Chief Executive Officer Rudi Franz - Chief Operating Officer and Chief Financial Officer

Ken Wong - Citi Investment Research Rob Stone - Cowen and Company, LLC

Greetings, and welcome to the voxeljet Fourth Quarter and Full Year 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief 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, Mr. Johan Pesch, Director, Investor Relations and Business Development. Thank your. You may begin.

Thank you, operator, and good morning, everyone. With me today are Dr. Ingo Ederer, voxeljet’s Chief Executive Officer; and Rudi Franz, voxeljet’s Chief Financial Officer. Yesterday after the market closed, voxeljet issued a press release announcing its fourth quarter and full year financial result for the period ended December 31, 2016. 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. 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 Securities and Exchange Commission. With that, I would now like to turn the call over to Ingo, Chief Executive Officer of voxeljet.

Thank you, Johan. And good morning everyone. I want to thank everybody for joining us today. Before we start, I'd like to remind those who might be new to our company about voxeljet’s core business model shown on Slide 4. In our Systems segment, we manufacture and sell industrial grade high speed, large formats 3D printing systems due to our mass production of complex models and modes. In our Services segment, we operate these systems and facilities around the world to offer affordable on-demand access to our technology. This proprietary technology is reshaping the way things are made and is truly disruptive to the traditional methods of manufacturing. Let's now start with the formal part of the presentation. I'll begin with an overview of the fourth quarter results, then I'll offer a review of our significant accomplishments in 2016 which has positioned the company’s relative strength and our top line growth and to offer our customer expanded services this year and beyond. Then I'll spend a few minutes on key initiatives for 2017. Rudi will then provide a more in-depth view of our financials and our outlook for the first quarter of 2017. Following his comments, we'll be happy to take your questions. We concluded a challenging but nonetheless successful transition year 2016. By expanding our global reach and by further improving our internal processes, we have successfully laid the foundation for future comfortable growth. We are proud to say our US operation reached a significant milestone and becoming profitable in the last quarter of 2016. In doing so, it would serve as the benchmark for our operations in the UK, India, and China. We continue to strongly execute on our strategy to [indiscernible] and are excited about the growing number of opportunities around the world. Let's turn to Slide 5 of the presentation and begin with the highlight for the fourth quarter 2016. Revenue for the quarter was €6.3 million, which represents a 24% decrease compared to last year’s fourth quarter. I'll explain that for this decrease in a minute. Revenues from our business segment, which includes revenues from selling 3D printers, consumables, and spare parts as well as maintenance, decreased 20% to €3.9 million in the fourth quarter of 2016 from €4.9 million in last year’s fourth quarter. We delivered six new printers in this year’s fourth quarter, compared to six new and three refurbished printers in last year’s fourth quarter. Please keep in mind last year's fourth quarter was really outstanding in terms of system's revenue. As of now, we have a system's backlog of roughly €5 million. Revenues from our Services segment, which focuses on the printing of on-demand parts for our customers, decreased 31%, to €2.3 million in the fourth quarter of 2016 from €3.4 million for the same quarter last year. This was mainly due to the lower revenue contribution from our subsidiary, voxeljet UK which was restructured in fourth quarter of 2015. The revenue contribution of voxeljet UK in the fourth quarter of 2016 was €0.2 million compared to €1.3 million in the last year's fourth quarter. On Slide 6, revenues for the full year 2016 decreased 7% to €22.3 million from €24.1 million in 2015. If we bake this down, we can see a steady growth of system revenues of 18% in 2016 compared to last year same period. Regarding services, as our on-demand business line however we saw our revenues decline by 29%, part of the fluctuation can be achieved due to the on-demand nature of this business line but the main driver for this particular decline is the contribution or lack thereof of our UK operation. Slide 7, summarizes the impact on total revenues of the UK restructuring. As we can see voxeljet UK contributed €4.7 million in fiscal 2015, this was reduced to €0.8 million in 2016. If you took the UK out of the equation, we experienced our yearly growth rate of 11%.The drop in revenues in the UK of approximately €3.9 million compared to last year is primarily due to the discontinued labor intensive cost processing activities. It is important to note that this restructuring helped us achieve a significant increase in services gross margin to 40% for full year 2016 compared to 24% in last year's period. Slide 8, summarizes the results. I want to highlight two points. First, looking at breakdown by geography, revenues in US and Asia increased by 540 and 1040 basis points in 2016 compared to last year period respectively. This was offset by a decline in EMEA as a result of the reasons mentioned earlier; our operation in US reached profitability in the last quarter of 2016, which is a great achievement. Going forward, our global footprint has further increased ability by balancing revenue streams, provide new opportunities for growth, and ultimately help us attain a sustainable success. Second to meet the priority of us outperforming the market, we continue our program of investment in innovative new materials and technology. That program is both well thought out and highly focused, and we have taken further actions that align our research and development portfolio for future growth opportunity. We have increased our R&D spending by 271 basis points to 25% of sale. To put this into perspective, at the end of the fourth quarter, we employed 56 people in our R&D department as compared to 43 in last year's same quarter. This represents a growth of 30%. Moving to Slide 9 and 10, I'd like to give you an operations update and summarize the progress we have made in the last year and highlight a number of critical, strategic initiatives we prioritize for the next year. In our Systems segment, we focused on streamlining our operations to reduce cost of sales. This includes supply chain and manufacturing equipment. This is a continuous process and not a one-time activity. We are highly committed to identifying cost savings potential in each and every platform as the number of printers we manufacture is jointly expect to benefit from increasing economies of scale. In Services, we focus on improving return of workflow and overall execution fee. For example, we are currently developing as a fee based production planning and automation tool. This will help us further track the progress of each printing shop and also have the potential to further automate the production. As I said in previous calls, automation and enhanced data analytics options are key. These initiatives have the potential to significantly improve productivity and facilitate the move of 3D printing into mass manufacturing. Regarding R&D, our strategy is twofold. First, we continue to research new and advanced materials and components with the higher knowledge content, new functionalities and improved performance. Example, TRR, our high performance printer have new materials related our high speed sintering, ceramics and inorganics execution. These efforts are aimed at securing our role as technology leader and how to find a best 3D printing in the long term. Second, we developed and partially redesign existing processes and component to reduce cost and to further increase stability. In doing so, the incorporated feedback we gather from our customers. These efforts are aimed at expanding our addressable market and increase our market share in the short term. With regard to sales, we remained focus on our growth strategy which includes expanding our sales team around the world by investing in sales leadership, additional sales representative and training. In addition to that we focus on educating our channel partners to ensure full global coverage. In addition to that we keep improving that efficiency and effectiveness of our taste in food and use of softer tool. I am really excited about the new options we have thanks to the successful introduction of our global cloud based CRM solution. This system is now live, each member of our sales team in Germany, US, UK, India and China are working on this centralized platform. We have now able to track the progress of every sales opportunity in the real time all around the world. We can immediately see what activity is at each point of sale and now are able to make quicker and more informed decision. This is particularly helpful as we are increasingly dealing with larger multinational corporations. To give you some idea, we are right now working on a larger number of specific system sales opportunity and pursue and even bigger number of format -- We are really happy with the foundation we have been putting in place in 2016 especially in terms of hiring talented sales colleague in our subsidiary. And we will be continuing to enhance that infrastructure but basically are now in execution mode. Turning to Slide 10. I'd like to update you on the status of our facilities and the progress we have made. In Germany, we will be moving into a new and increased systems production facility. This is the state-of-the-art facility including a new team room for our printer production department allowing for flexible manufacturing concept and is already fit for the demand of future machine generation. This is really exciting and the progress and development for future growth. In US, we met a steady increased in demand with installing additional 3D printing equipment. As mentioned earlier, David Tait is doing a great job; this operation really serves as the benchmark for our other facilities around the globe. In the UK, we plan to relocate to a larger facility in 2017. With this move we will further diversify our revenue generation potential and add new Phenolic Direct sand printing systems there. In China, we finalized the planning for our new facility and expect construction to begin in the second quarter of 2017. We start to benefit from our local presence as we lead the steady increase in deal show. This also applies for our operations in India. Slide 11 and 12 illustrate our increased footprint in Germany. Moving through Slide 13 to 15, we are aligning our buyer power against four specific market segment and we are making good progress. As you can see the potential is huge but we are mindful of the new term dynamic, we remain focus on the long term and align big picture. We are driving fundamental change in these industries and we've just started. As stated in previous calls, we are trailing the heart of the transformation zone and we will continue to find our way through this transition period. Turning to Slide 16, the aerospace industry is a very interesting extension for us. The global aerospace sector likely to experience stronger growth in 2017 following multiple years of positive but subdued rate of growth. Aircraft production levels are resuming growth in 2017 driven by strong demand for next generation aircraft and growing passenger traffic especially in the Asia-Pacific and the Middle East region. Relatively low commodity prices including food, oil further support this trend. So we estimate total global demand for new aircraft production over the next 20 years could develop of 30,000 aircraft. Our customers in the aerospace and aerospace related industries are now in the final stages of validating our technology for serial production. This is really exciting news and highlight that we are following the right path. In this industry, we have reached inflection point as we are able to create high value ideal solutions which are unique to our customers. When I look out to the next year, we have a lot to be excited about. Now it is more important than ever for us to stay true to our own values and strategic focus summarized on Slide 17 and to leverage our competitive advantages highlighted on Slide 18. There always be room to improve but I am proud of the way we are managing our business today and I am bullish on our opportunity to extend our leadership position for tomorrow. With that I'd like now to turn the call over to Rudi. Rudi?

Thank you, Ingo. Good morning, everyone. I'll now take you through the financials. Turning to Slide 19, our total revenues decreased 24% to €6.3 million in the fourth quarter compared to €8.3 million in last year’s fourth quarter. As Ingo mentioned earlier, the decrease in revenues is primarily related to the restructuring of our facility for voxeljet UK. Gross profit and gross margin in the quarter was €1.3 million and approximately 20% compared to €1.7 million and 20% in last year’s fourth quarter. 2016 figures include an allowance for slow moving inventory of €0.9 million which was recognized within cost of sale in the fourth quarter of 2016. There was no comparable allowance in the fourth quarter of 2016 excluding this allowance our gross profit in March would have been €2.2 million and 35%. The next slide shows our segment reporting for the quarter. On Slide 20, revenues from our Systems segment which includes revenues from selling 3D printers, consumables and spare part as well as maintenance decreased 20% to €3.9 for the fourth quarter of 2016 from €4.9 million in last year's fourth quarter. We sold six new printers in this year's fourth quarter compared to six new and three refurbished printers in last year's same period. Systems revenues represented 63% of total revenues compared to 59% in last year's fourth quarter. Gross profit and gross margin for our Systems segment in the quarter was €0.4 million and 10% compared to €2 million and 41% in last year's same period. As mentioned previously, this decrease is mainly due to an allowance for slow moving inventory of €0.95 million which was recognized within cost of sale in our systems segment in the fourth quarter of 2016. There was no comparable allowance in 2015 excluding this allowance our gross profit at March would have been €1.3 million and 34%. As utilization picks up we expect gross margins from the systems segment to be in the range of 40% to 45% consistent with the outlook we have given in the past. On Slide 21, Services revenues decreased 31% to €2.3 million compared to €3.4 in last year's fourth quarter. The decrease is mainly due to lower service revenue contribution of voxeljet UK accounting to €1 million to €0.2 million. Last year's fourth quarter was particularly strong in services revenue but weak on margin. In line with giving effect to a successful restructuring of voxeljet UK, our services gross profit increased to 37.4% in the fourth quarter of 2016 from negative 10% in last year's same quarter. In addition to that, utilization of our US operation is constantly picking up. As mentioned in previous calls, utilization is key to earnings, better gross margin. Looking now to the rest of the income statement on Slide 22. SG&A expenses were €2.8 million in the fourth quarter of 2016, this compares to €3.1 million in last year’s fourth quarter. We monitor our operating expenditures carefully and start to see first results from streamlining our corporate structure and adjusting cost in line with the situation. Research and development expenses were €1.8 million compared to €0.8 million in last year’s fourth quarter. I think we highlighted we continue to invest in core R&D in Germany with the number of active projects in various stages of development to strengthen our leading position in technology. We've increased our R&D headcount by 30% compared to last year's period. Operating loss was €2.9 million in the fourth quarter of 2016 compared to an operating loss of €2.3 million in the comparative period in 2015. Research and development expenses increased significantly. This was partly offset by decline in selling expenses as well as other operating expenses. Net loss for the quarter was roughly €2.96 million or €0.80 per share compared to a net loss of €2.4 million or €0.65 per share in the prior year quarter. On ADS basis net loss was €0.16 per ADS compared to net loss of €0.13 per ADS in the fourth quarter of 2015. We have provided the same presentation for the full year period ended December 31, 2016 on Slide 23 to 26. Slide 27 shows selected balance sheet items. At December 31, 2016 the company had cash and cash equivalents and short-term investments in bond funds of roughly €20 million. Total debt at December 31, 2016 was approximately €6.1 million. Weighted average shares outstanding for the quarter were 3.72 million, which equates to 18.6 million ADSs. We believe that our balance sheet positions us well for the long-term. Moving now on to Slide 28 and our revenue guidance for the quarter and full-year, for the first quarter of 2017, we expect revenues in the range of €4.25 million to €4.75 million. Full year 2017 revenue is expected to be between €26 million and €28 million with gross margins above 40%. SG&A spending is expected to be in the range of €9.25 million to €10.25 million, and R&D spending to be approximately €4.75 million to €5.75 million. Depreciation and amortization expenses are expected to be between €3 million and €4 million. CapEx for 2017 should be in the range of €8 million to €9 million, which primarily consist of ongoing investments in our global subsidiary EBITDA is expected to be neutral to positive in 2017. We expect to release our financial results for the first quarter of 2017, after the closing of the financial markets on Thursday, May 11, 2017, and host a conference call and webcast to review the results for the quarter on Friday, May 12, 2017 at 8:30 AM Eastern Time. This concludes my remarks. And with that, we will now open the call up for questions. Operator?

[Operator Instructions] Our first question is coming from Ken Wong of Citi Investment Research. Please proceed with your question.

Hey, guys. Ingo you mentioned aerospace earlier as sort of an added inflection point in terms of a vertical you are looking at. Any sense for what kind of contribution as a percent of sales you are getting from that sector? And as we look ahead I guess where do you think that could go?

Okay. Thank you Kenneth for this question. It is the case that we have several printers working in that industry with various customers. They are as said in the final stages of validating these processes for the purpose of production, and for this, they definitely need more printers. It is roughly or it's hard for us to say exactly what this ends up, but I guess we will see the first research from this process probably beginning of next year. And usually we would say with each of those customers we have opportunities for multiple machine sales.

Got it. So, it sound like this -- we shouldn't expect to see anything flow through in 2017 but perhaps 2018 we may start to get a couple of systems or two and services uptick?

Absolutely.

Got it. And then my follow up question in terms of just the -- you guys saw another decline in the German operations. Is that something we should expect to reverse sooner or is that more of a back half type of a problem that could get resolved?

In 2017, we expect a growth again back more or less to the level we've seen in the business year 2015, and the current quarter already shows a good recoverable number.

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

Hi, guys. I wanted to ask if you could provide a little more color on the inventory write-down, what that was for and are these systems that you might eventually recapture some benefit or do you sort of have to mark them down to a lower price to get them to move?

Thank you, Bob for this question. Discussion was from -- I am sure you can imagine was driven a lot by our auditor. From a business point of view, we wouldn't have written this off. They are -- we as you know -- we produce large formal printers. We have pretty long delivery time. So we don't -- from a business point of view, we wouldn't have done the write-off, we just worked according to IFS [ph] standard. And we see a pretty good recovery -- a pretty good change to get this write off back, meaning we can see it in gross margin and gross profit in the next quarter.

Okay. My second question is talking about the pipeline a little bit. Ingo you mentioned that there is good activity in terms of active discussions and additional sales leads. The backlog on the other hand is relatively small starting the year. So do you have a sense of how this may be shaping up in terms of near term versus medium term opportunities and how does that translate into the potential shape of the year to get to your unchanged guidance. Does that imply heavily second half or Q4 weighted outlook?

Yes. I can confirm that we are working on a very large pipeline, larger than ever. This is a good thing. I think the opportunities are there. It takes time for us to develop the customers to a final contract. This is shown in the backlog, but I am confident that we are doing the business as lined out with our previous calls, and currently there is a definitely a pull minded situation and we will see probably a pickup in the numbers in the next quarter.

Okay. And my last question is for Rudi on operating expenses. The fourth quarter showed a fairly significant sequential uptick in expenses and I am wondering you mentioned the increase in headcount so I guess that probably is going to continue. Were there some sort of one-time items catch up at the end of the year so that we might expect to see the total expenses in the first quarter be down from the fourth quarter level or any color you can provide that will be helpful.

Overall SG&A in line with what we have plan there. I have no one time effects in mind. What for sure was in other operating expenses, we had one-time effect which was quite significant but overall SG&A was in line, R&D was as discussed little higher than the previous quarter or comparable quarter, Q4 2015. But there were no one-time effects. So we currently -- we are quite comfortable where we are and as Ingo said we are adding where needed, but overall the big growth has been made and on SG&A we remain on that level.

At this time, I'd like to turn the floor back over to management for any additional or closing comments.

2016 was a transformational year for voxeljet as we successfully laid the foundation for future growth. We have been deliberate in putting in place the organizational structure and capability to realize a longer-term potential. These are the right decisions for the business long term, but to be frank the trade-off has been lower profitability in the short run. This is particularly are true during periods of relatively low sales volume such as last year. That being said, the interim strength of our business model remains in the place. We are clearly trending in the right direction and encouraged by the accomplishments we have achieved in all aspects of our business and look forward to start reaping the rewards in 2017. Thank you very much and have a good weekend.

Thank you very much. Have a good weekend.

Ladies and gentlemen, thank you for your participation. Today's conference has concluded. You may disconnect your lines at this time. And have a wonderful day.