Johan Pesch - Director, IR and Business Development Ingo Ederer - CEO Rudi Franz - COO and CFO

Ken Wong - Citi Group Rob Stone - Cowen and Company

Greetings, and welcome to voxeljet's First Quarter 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, voxeljet's Director of Investor Relations and Business Development. Thank you Mr. Pesch. 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 first quarter financial result for the period ended March 31, 2017. 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. I just came back from RAPID Show in Pittsburgh this year and I'm really excited about the development in our industry. We saw more exhibitors and more researchers than ever and had a great attendance at [indiscernible]. Before we start, I would 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, geared towards 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 start with the formal part of the presentation. I will begin with an overview of the first quarter results. Rudi will then provide a more in-depth view of our financials and our outlook for the second quarter of 2017. Following his comments, we will be happy to take your questions. Our first quarter was in line with our expectations and build upon the key strategic and operational initiatives we have undertaken to continue to drive improvement in our business. Most importantly, we have made tremendous progress against many of our strategic growth initiatives and organizational initiatives that will provide a path for continued success. These efforts have continued as we enter 2017 and I'm excited to also discuss these actions already completed in the first quarter that will serve to further strengthen our business model and market position. We continue to strongly execute on our strategy of 2020 and are excited about the growing number of opportunities around the world. We are driving towards the bigger better more focused voxeljet group. Over the last six months we have taken action on all our strategic priority. Our priority objective has been and continues to be to return voxeljet’s sustainable above market growth. Let's turn to Slide 5 of the presentation and begin with the highlight for the first quarter 2017. Revenue for the quarter was €4.5 million, which represents a 7% decrease compared to last year's first quarter. Revenues from our system segment, which includes revenues from selling 3D printers, consumables, and spare parts as well as maintenance, decreased 39% to €1.7 million in the first quarter of 2017 from €2.8 million in last year's first quarter. We delivered two new printers in this year's first quarter, compared to three new printers in last year's first quarter. The number of printers we sell is still relatively small which means each sale has a significant impact. This explains a high volatility in revenues in this business segment. As we progress and sell more units, this segment will become more predictable. Also it is important to understand that with every additional system we sell, we generate long-term after sale opportunities. For example there are mature use in operational maintenance contracts and spare parts as of now we have a system backlog of roughly €5.3 million this compares to a backlog of €3.8 million at the end of last year with 3% and increase of almost 40%. Revenues from our Services segment, which focuses on the printing of on-demand parts for our customers, increased 36% to €2.8 million in the first quarter of 2017 from €2.1 million for the same quarter last year. This was mainly due to a higher revenue contribution from our German and U.S. operations. The increase is also attributable to the revenue contribution from our Chinese operation which was established during the second quarter of 2016. I would like to highlight while we were able to grow services revenues quite significantly, we also managed to achieve much better gross margin of 43%. We almost doubled our absolute gross profit in this segment this is great achievement and in line with our long-term target. Slide 6, summarizes the results I want to highlight two points. First looking at the breakdown by geography revenues in the U.S. significantly increased by more than 2000 basis points in the first quarter of 2017. Compared to last year's period this was offset by a decline in EMEA, as well as Asia. Please keep in mind this is to large extent driven by printer sales in the respective regions and therefore quite volatile. Going forward our global footprint will surely increase ability by balancing revenue streams providing opportunities for growth and ultimately help us attain sustainable success. Our primary focus in 2017 is to further strengthen our sales and marketing program to continue our growth path. Consequently looking at the composition of our operating expenditures, this translates into an increase in selling expenses of 587 basis points to 31% of sales. We've made and continue to make investments in our sales organization with a focus on sales management, sales and marketing automation tools, and sales training. We hired nine additional colleagues in our enhanced sales management team, key to sales excellence as they are on point to coach and mentor our front line sales team, especially in our subsidiaries. To give you some more details, our sales team are now investing more time in developing key account plans. They will be going wide and deep among our existing and future customer base. Through colleague referrals, use of webinars and onsite visits, we’re developing relationships with key decision-makers. We will continue to leverage marketing automation tools and data analytics to drive improved productivity. One example here to focus on driving further increased quoting activity. Regarding administrative expenses, our spending is mainly driven by public listing requirements like fee for auditors and lawyer. In addition to that, we continue to invest in our IT infrastructure. Going forward, this will help us to automate processes to look at our cost structure very differently and automatically save cost. Regarding research and development, we saw an increase of 621 basis points, or 33% of the sales. To meet the priority of outperforming the market, we continue our program of investment in innovative, higher knowledge content materials and technologies. Other operating expenses are largely related to changes in evaluation of intercompany loans granted to our subsidiaries in the U.K. and the U.S. Turning to Slide 7, I would like to update you on the status of our facilities and progress we have made. In Germany, we are currently moving our systems team into our new and increased production facility. As mentioned in previous calls, this is a state-of-the-art facility which is already equipped for the demands of future machine generation. This is really exciting as it prepares us well for future growth. I’m pleased with our continued progress in services. Our operational execution was strong as we recovered nicely, and we expect this trend to continue. To take a specific example, the order industry is doing comparatively well. Nearly, all major OEMs and their suppliers are now in project for modernizing and upsizing their capacities. We expect the whole industry will be increasing its investment in the coming years. This is to a large extend, trigged by the emphasis on reducing food consumption for live bidding. This means that there is a growing demand for pieces with complex geometries, large quantities ideally suited for voxeljet 3D printing technology. In US, we met a steady increase in demand with installing additional 3D printing equipment. We are pleased with the progress we're making. The opportunities truly are exciting. In the U.K., our team is in the final stages of preparing its move to the new facility. With this, we will further diversify our revenue generation potential by adding new Phenolic Direct sand printing systems. Although we have negotiated preferable rental terms for the new facility which will optimize our cost structure. China is ramping up nicely. Please keep in mind we are at the moment operating out of an intermediary facility. The plans for the new facility are finalized, and we expect construction to begin later this month. Like with our other subsidiaries, we start from to benefit from our local presence as we see a steady increase in this flow. This also applies for our operations in India. Slide 8 illustrates our increased footprint in Germany. Turning to Slide 9, and the market update. You have seen this slide in previous calls, and I'm showing it again as it nicely illustrates the opportunities we have in front of us. This time, I would like to focus on China and India. The process of technology catch-up is evident in many emerging countries, and is a key driver of our growth in the segments we are operating in. China, for example is already amongst the largest consumer and producers of machine tools. We expect China to maintain its need as domestic demand expands and attraction as a production base for export to the rest of the world continues to increase. We expect to benefit from this trend by our local presence and already seeing first results. The next year will be really exciting as we continue to leverage our key competitive advantages highlighted on Slide 10 and strongly execute on vision to 2020 summarized on Slide 11. With that I would like now to turn the call over to Rudi.

Thank you, Ingo and good morning to everyone. I would like to begin by providing financial details and adding some additional context to our slides before discussing our outlook for the rest of 2017. When we issued our 2017 financial guidance back in January we noted that roughly 40% of our full year earnings would likely be generated in the first-half of 2017. Our first quarter came in an expected and we anticipate significantly improved performance as we progress to 2017. Turning to Slide 12, our total revenues slightly decreased 7% to €4.5 million in the first quarter compared to €4.9 million in the last year’s first quarter. Gross profit and gross margin in the quarter were €1.6 million and approximately 35% compared to €1.3 million and 27% in last year’s first quarter. The next slide shows our segment reporting for the quarter. On Slide 13, revenues from our Systems segment which includes revenues from selling 3D printers, consumables and spare parts as well as maintenance decreased 39% to €1.7 million for the first quarter of 2017 from €2.8 million in last year's first quarter. We sold two new printers in the first quarter of 2017 compared to three new printers in last year's same period. Systems revenues represented 37% of total revenues compared to 57% in last year's first quarter. Gross profit and gross margin for our Systems segment in the quarter was €0.4 million and 21% compared to €0.7 million and 25% in last year's same period 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 continue to invest and improve systems implement back track and inventory and supply chain management and continue to improve our communication coordination in our engineering manufacturing team. Cost absorption in our factories will continue to improve and it will lead to more positive margin outcome and product sales in the year’s progress. Our goal is simple deliver solution to serve our customers problems On Slide 14, Services revenues increased 36% to €2.8 million compared to €2.1 in last year's first quarter this was mainly due to higher revenue contribution from our German and U.S. operation also China is renting up nicely and is starting to contribute. Gross profit for our Services segment increased to €1.2 million in the first quarter of 2017 from €0.6 million in the first quarter of 2016. The gross profit margin for this segment increased to 43% compared to 31% in last year’s same period. This mainly due to higher utilization rates in the first quarter of 2017. As stated in previous calls utilization keep realizing better gross margin. I would like to highlight that we almost doubled voxeljet's gross profit in this segment. Looking now to the rest of the income statement on Slide 15. SG&A expenses were €2.6 million in the first quarter of 2017, this compares to €2.3 million in last year’s first quarter. The increase was mainly due to higher personal expenses related to an increase in headcount of nine compared to the first quarter of 2016. We continue to monitor our operating expenditures carefully. Research and development expenses were €1.5 million compared to €1.3 million in last year’s first quarter. As Ingo highlighted we continue to invest in core R&D in Germany to maintain our position as a technology leader in 3D printing. Operating loss was €2.4 million in the first quarter of 2017 compared to an operating loss of €3.1 million in the comparative period in 2016. Net loss for the quarter was roughly €2.4 million or €0.65 per share compared to a net loss of €3.1 million or €0.84 per share in the prior year’s quarter. On ADS basis net loss was €0.13 per ADS compared to net loss of €0.17 per ADS in the first quarter of 2016. Slide 16, shows selected balance sheet items. At March 31, 2017, the company had cash, cash equivalents and short-term investments in bond funds of roughly €19 million. Total debt at March 31, 2017 was €6.6 million. Weighted average shares outstanding for the quarter were 3.72 million, which equates to 806 million ADSs. We continue to see opportunities to improve working capital performance, cash flow and our cash conversion likely in 2017. I remain comfortable with our cash balance and overall liquidity position. We believe that our balance sheet with an equity ratio of roughly 80% positions us well for the long-term. Moving now on to Slide 17 and our revenue guidance for the quarter and full year. For the second quarter of 2017 we expect revenues in the range €5.5 million to €6.5 million. Full year 2017 revenues remains unchanged and is expected to be between €26 million and €28 million the gross margin is about 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 between €3 million to €4 million. EBITDA is expected to be neutral to positive in 2017. CapEx spending for 2017 should be in the range of €8 million to €9 million which primarily consist of ongoing investments in our global subsidiaries. This concludes my remarks. And with that, we will now open the call up for your questions. Operator?

[Operator Instructions]. Our first question comes from the line of Ken Wong with Citi Group. Please proceed with your question.

In terms of just the printer business, it’s little later this quarter then I guess we were expecting can you just maybe touch on kind of what happened there and as we think about the full year guidance, is printer mix going to be close to 60% like we saw last year or how should we modeling that.

Ken, thank you for this question. As I lined out in my presentation, the printer sale is always a bit volatile since we are not completely controlling whether printer is sold in the quarter or may be sold in the next quarter. Basically we are fine with the printer business as it develops so it could have had happened that we would have the option to recognize another printer in the third quarter which slipped over the second quarter. So this is one of the affects I can refer to and I would say the outlook based on the backlog we have is extremely positive. So when you ask about the contribution from the printer sales, we still see in the range of 60% to 40% in services. You should expect a different percentage for the quarters of this year.

And then second the German services - while the German business overall was very strong, as we look to kind of second quarter and beyond, is that an area where we can continue to see a good amount of improvement?

What we currently see is that the demand for our product is extremely well accepted. The demand is there. We continue operating on an extremely high level here in Germany and I don't see reasons why this should surprisingly stop. So I think we have a good outlook for the year and usually we have maybe a slowing down in the summer and then much better fourth quarter, so expect something good from this year.

And then the last thing from me, in terms of your high speed sintering system you guys obviously showed of some printed samples at RAPID and you guys may potentially start to talk a little more on that. Are you guys working with any customers on application sets for that particular product at this moment?

Yes. We already have installed systems out which are in a kind of pre-alpha phase and we’re exchanging information, yes absolutely.

Thank you. Our next question comes from the line of Rob Stone with Cowen and Company. Please proceed with your question.

I wanted to follow up on the systems outlook as well in terms of how you're thinking about sort of preplanning for a stronger systems business in the subsequent quarters. I know in the past, you've, for example, pre-position some inventory so that you are able to ship faster. Can you comment for example, on what the lead time is by which you would need to receive an order in order to get it built, shipped, and recognized this year?

Thank you for the question, Bob. We currently have approximately €9 million of work in progress which positions us pretty good for shipping on relative short no time, I would say within a quarter, we easily can ship weeks of 1,000, and install it if we’re going to receive the order. Overall, the build time for printers still is - let's say 4 to 5 months, and then you’ll always have question whether if it go to Asia its [indiscernible] about et cetera. With a current of work in progress, with the forecast which we have, I feel quite comfortable with whatever the guidance as we have indicated.

I also wanted to follow-up a little bit on the services business. You already covered Germany. Can you say what it is that's driving the significant improvement in the U.S.? I mean I guess part of it is just the natural evolution of having had the U.S. operation in place long enough to build the business. But can you give us a sense of sectors or applications, which of your platforms is driving the service to your strength in U.S.?

We have there a relatively good installed base in PMMA and demand for PMMA is extremely good. This is, let's say, within our expectations since we know that there is a strong demand in USA for investment comp prejudice and this is mainly driven by aerospace and other space industries. And I think we can contribute here with unique properties of our products. And with that, we got more experience, and the customer is getting more experience. So the demand grows which we are really proud to see that and it means that we can now fulfill what we have thought about. And we've preferred markets.

In investing costing, the market is proffered pretty good in the U.S. Our competitors did a great job in previous years our printers will really fulfill industrial needs in respect of operating cost, and participate quite nicely.

That actually leads exactly into my next question which is, how you're thinking about the competitive environment at least recognizing that other manufacturing has a bunch of different verticals by technology. But at least, as regards, the part of the markets do play in, how do you think about competition at the moment?

The competition is always, as I view as strengthening the position because it's in a race, and if you have nobody running with you, you don't have a need to run. So we see that positive. In general, I’d say in our sand business, we have one competitor outside you already know. And of course, the much bigger competition is coming from traditional methods. So we are still here developing the market together with our competitor. I think its enough opportunities for both and probably also for upcoming companies getting into the field. In the PMMA area, we are relatively alone on the additive side. I think we have here a unique position within the group of additive manufacturing suppliers. As Rudi already mentioned, the market was well confirmed by another technology where we give - I think a much better position to our clients. And of course, there are also traditional methods out which we are competing with. So in general, we’ll say the competitive landscape has not changed in the past years and also not now. We feel very comfortable on this, and we are also feel comfortable with the progress we’ve made with our new products. So I think we're well positioned.

And then I wanted to ask about seasonality in the [indiscernible] business. You talked about that traditional summer slowdown which I would expect to be the typical pattern for your European operations. But as you're growing quite strongly in the U.S. and starting to see a contribution from China, do you think that that more diversified geographic mix is likely to change the seasonal pattern?

Of course, yes. You are addressing the right point. For instance, the New Year in China which takes place in February has higher impact for them and so probably we don’t see there a slowdown in August. So this is of course, it's true. So we have a mix of different slowdown periods of our subsidiaries, and this probably will bend out.

So, not much of words in your mouth, but that suggests that may be less of a seasonal Q3 impact than you would've seen in prior years.

Well, for this year Rob, we feel the German operations is contributing the majority of sales. So let’s see. But with the further development of the company and the subsidiaries, it will flatten out.

[Operator Instructions] Our next question comes from the line of Troy Jensen with Piper Jaffray. Please proceed with your question.

This is actually [Nick Johnson] dialing for Troy. He is on a flight right now. I had a question as [indiscernible] that you guys held. And you have new high speed sintering machines. Can you update us on when the product will be introduced and generally available?

As we already announced, we will show this product initially on fall this year. We will present this as a announcement for our beta program, and it is very likely that it’s generally available in the first or second quarter 2018.

Next, the product will most likely have a different end-user versus what you guys have for your sand casting customers. So was curious about your go-to market strategy really to build out your sales force, to build out a channel partner program to sell it. Just curious about your go-to market strategy there.

The interesting point here is that, we see a certain demand for this particular product from one of our core segments which is the automotive industry. What is also may be of interest for you is that additive manufacturing in our auto OEM will be usually controlled by a group which controls all additive manufacturing. So it means we have a senior point of access. So this makes it relatively easy for an initial stage to step in with that product. But in the end, you're right. We need to diversity probably our sales channel a bit to get this product in the market.

Thank you for that color there. Last question is, what type of materials do you expect to be bellboy for the HSS product?

We will initially show it with polyamide, and it’s very likely that it will also come with a TPU based material. So it’s kind of a tough material. And we have other materials under research for the moment. The good thing is that relatively open platform, with the open technology means it’s very likely that we have, in short-term, other materials to come.

Thank you. Our next question comes from the line of [Howard Carswille], Private Investor. Please proceed with your question.

Gentlemen, could you shed a little light on the strategy in China and what your manufacturing capabilities are?

Thank you for this question. So we see there a strategic approach from our side by developing the market with our own service center so we developed the market with a presence in the Shanghai area, a strong service center with broader platform of machines. We have also a sales team there which covers some part of the country also for machine sales and of course we have partners outside of our company which were controlled for sales out of our subsidiary.

Thank you. Mr. Ederer there are no further questions at this time. I’ll turn the floor back to you for final remark.

Thank you. We entered 2017 with great momentum and a strong focus on executing on our strategy to 2020. This will help us to continue to achieve our goals and to generate sustainable long-term value to our shareholders. We rigorously leverage all our strength our global presence with a highly talented and motivated team our leadership in 3D printing technology and our in-depth market knowledge. The opportunities all around the world are vast and we are ready to take them. I would like to thank our investors for their continued interest and support and our employees for their dedication and commitment to delivering world-class products and service to our customers every day. Thank you very much and have a good weekend.

Thank you. Have a good weekend.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.