voxeljet AG Reports Financial Results for the First Quarter Ended March 31, 2018

Thursday, May 17, 2018 4:15 pm EDT

Dateline:

FRIEDBERG, Germany

Public Company Information:

NYSE:
VJET
US92912L1070

FRIEDBERG, Germany--(BUSINESS WIRE)--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 first quarter ended March 31, 2018.

Highlights - First Quarter 2018

  • Total revenues for the first quarter increased 11.5% to kEUR 5,052 from kEUR 4,530
  • Gross profit margin improved to 44.9% from 34.9%
  • Systems revenues decreased 18.8% to kEUR 1,375 from kEUR 1,693
  • Services revenues increased 29.6% to kEUR 3,677 from kEUR 2,837
  • Reaffirm full year 2018 guidance

Dr. Ingo Ederer, Chief Executive Officer of voxeljet, commented, “2018 is off to an excellent start with the best quarter in both Services revenue and gross profit in our company’s history. We see these metrics as leading indicators of the ongoing strength of our industrial 3D printing technology. Our goal of becoming a critical supply chain partner and solutions provider is gaining traction. As downstream processes become more automated, we are very confident this will in medium term translate into significantly improved Systems revenue.”

First Quarter 2018 Results

Revenues for the first quarter of 2018 increased by 11.5% to kEUR 5,052 compared to kEUR 4,530 in the first quarter of 2017.

Revenues from our Systems segment, which focuses on the development, production and sale of 3D printers, decreased 18.8% to kEUR 1,375 in the first quarter of 2018 from kEUR 1,693 in last year’s first quarter. This was mainly due to lower revenues based on the mix of printer sales during the quarter. The Company delivered two used and refurbished 3D printers in the first quarter of 2018, compared to two new printers delivered in last year’s first quarter. Systems revenues also include all revenues from consumables, spare parts and maintenance, which almost remained on the same level compared to the last year’s same period. Systems revenues represented 27.2% of total revenues in the first quarter of 2018 compared to 37.4% in last year’s first quarter.

Revenues from our Services segment, which focuses on the printing of on-demand parts for our customers, increased 29.6% to kEUR 3,677 in the first quarter of 2018 from kEUR 2,837 in the comparative period of 2017. This was due to higher revenue contributions mainly from our subsidiary voxeljet America Inc. (“voxeljet America”). The increase in revenue at our American service center resulted from a growing market penetration in the North American sales region which is accompanied by a larger customer base.

Cost of sales was kEUR 2,785 for the first quarter of 2018 compared to kEUR 2,949 for the first quarter of 2017.

Gross profit and gross profit margin were kEUR 2,267 and 44.9%, respectively, in the first quarter of 2018 compared to kEUR 1,581 and 34.9% in the first quarter of 2017.

Gross profit for our Systems segment increased to kEUR 429 in the first quarter of 2018 from kEUR 353 in the first quarter of 2017. The improvement was mainly related to the reduction in the reserve for slow-moving inventory with a positive impact of kEUR 226 compared to a release amounting to kEUR 60 in the comparative period. The release was mainly due to the increase in order backlog and higher sales forecast. Gross profit margin for this segment increased to 31.2% in the first quarter of 2018 compared to 20.9% in the first quarter of 2017.

Gross profit for our Services segment significantly increased to kEUR 1,838 in the first quarter of 2018 compared to kEUR 1,228 in the first quarter of 2017. This is mainly due to the increase in revenues. The gross profit margin for this segment increased to 50.0% in the first quarter of 2018 from 43.3% in the first quarter of 2017. This was mainly related to stronger gross profit margin contributions from our subsidiary voxeljet America. voxeljet UK still provided negative gross profit contributions, but improved significantly. This was partially offset by weaker gross profit margin from voxeljet China. The improvement regarding voxeljet America and voxeljet UK resulted from a higher utilization of these service centers. Gross profit margin from the German operation remained almost unchanged.

Selling expenses were kEUR 1,736 for the first quarter of 2018 compared to kEUR 1,385 in the first quarter of 2017. The increase is mainly due to higher personnel expenses resulting from higher headcount especially regarding the German operation as well as our subsidiary voxeljet America compared to the last year’s first quarter.

Administrative expenses were kEUR 1,232 for the first quarter of 2018 compared to kEUR 1,194 in the first quarter of 2017 and therefore almost unchanged.

Research and development (“R&D”) expenses increased to kEUR 1,597 in the first quarter of 2018 from kEUR 1,497 in the first quarter of 2017. The increase of kEUR 100 was mainly due to higher personnel expenses related to a slight increase in headcount.

Other operating expenses in the first quarter of 2018 were kEUR 358 compared to kEUR 190 in the prior year period. This was mainly due to higher losses from foreign currency transaction for the first quarter of 2018 compared to the first quarter of 2017.

The losses from foreign currency transactions were primarily driven by the valuation of the intercompany loans granted by the parent company to our US and UK subsidiaries.

Other operating income was kEUR 402 for the first quarter of 2018 compared to kEUR 297 in the first quarter of 2017. The increase was mainly due to higher gains from foreign currency transactions.

Operating loss was kEUR 2,254 in the first quarter of 2018, compared to an operating loss of kEUR 2,388 in the comparative period in 2017. The slight improvement was primarily related to a significant increase in gross profit partially offset by higher operating expenses within the functions Sales and research and development, compared to the first quarter of 2017.

Financial result was positive kEUR 678 in the first quarter of 2018, compared to a financial result of negative kEUR 43 in the comparative period in 2017. The significant increase was mainly related to the revaluation of derivative financial instruments resulting in a finance income of kEUR 941 partially offset by interest expense for long term debt of kEUR 232.

Net loss for the first quarter of 2018 was kEUR 1,582 or EUR 0.42 per share, as compared to net loss of kEUR 2,431, or EUR 0.65 per share, in the first quarter of 2017.

Based on a conversion rate of five American Depositary Shares (“ADSs”) per ordinary share, net loss was at EUR 0.08 per ADS for the first quarter of 2018, compared to a net loss of EUR 0.13 per ADS for the first quarter of 2017. 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.

Business Outlook

Our revenue guidance for the second quarter of 2018 is in the range of kEUR 5,250 to kEUR 7,250.

We reaffirm our guidance for the full year ended December 31, 2018

  • Full year revenue is expected to be in the range of kEUR 28,000 and kEUR 30,000
  • Gross margin 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 11,000 and kEUR 12,000 and R&D expenses projected to be approximately kEUR 5,000 to kEUR 6,000. Depreciation and amortization expense is expected to be between kEUR 3,750 and kEUR 4,000.
  • Adjusted EBITDA is expected to be neutral-to-positive in 2018. 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 (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 5,500 to kEUR 6,500, which primarily includes ongoing investments in our global subsidiaries.

Our total backlog of 3D printer orders at March 31, 2018 was kEUR 4,899, which represents eight 3D printers. This compares to a backlog of kEUR 2,770 representing four 3D printers, at December 31, 2017. 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 March 31, 2018, we had cash and cash equivalents of kEUR 3,140 and held kEUR 17,688 of investments in bond funds, which are included in current financial assets on our consolidated statements of financial position.

Webcast and Conference Call Details

The Company will host a conference call and webcast to review the results for the first quarter on Friday, May 18, 2018 at 8:30 a.m. Eastern Time. Participants from voxeljet will include its Chief Executive Officer, Dr. Ingo Ederer, and its Chief Financial Officer, Rudolf Franz, who will provide a general business update and respond to investor questions.

Interested parties may access the live audio broadcast by dialing 1-877-705-6003 in the United States/Canada, or 1-201-493-6725 for international, Conference Title “voxeljet AG First Quarter 2018 Financial Results Conference Call”. Investors are requested to access the call at least five minutes before the scheduled start time in order to complete a brief registration. An audio replay will be available approximately two hours after the completion of the call at 1-844-512-2921 or 1-412-317-6671, Replay Conference ID number 13679191. The recording will be available for replay through May 25, 2018.

A live webcast of the call will also be available on the investor relations section of the Company’s website. Please go to the website https://event.webcasts.com/starthere.jsp?ei=1191083&tp_key=35bcb63183 at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. A replay will also be available as a webcast on the investor relations section of the Company’s website.

Non-IFRS Measure

The Company uses Adjusted EBITDA as a supplemental financial measure of its financial performance. Adjusted EBITDA is defined as net income (loss), as calculated under IFRS accounting principles, interest (income) expense, provision (benefit) for income taxes, depreciation and amortization, and excluding other (income) expense resulting from foreign exchange gains or losses on the intercompany loans granted to the subsidiaries. Management believes Adjusted EBITDA to be an important financial measure because it excludes the effects of fluctuating foreign exchange gains or losses on the intercompany loans granted to its subsidiaries which are difficult to forecast for future periods. Management regularly uses both IFRS and non-IFRS results and expectations internally to assess its overall performance of the business, making operating decisions, and forecasting and planning for future periods. Management believes that Adjusted EBITDA is a useful financial measure to the Company’s investors as it helps investors better understand and evaluate the projections our management board provides. The Company’s calculation of Adjusted EBITDA may not be comparable to similarly titled financial measures reported by other peer companies. Adjusted EBITDA should not be considered as a substitute to financial measures prepared in accordance with IFRS.

Exchange rate

This press release contains translations of certain U.S. dollar amounts into euros at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from U.S. dollars to euros in this press release were made at a rate of USD 1.2321 to EUR 1.00, the noon buying rate of the Federal Reserve Bank of New York for the euro on March 31, 2018.

About voxeljet

voxeljet is a leading provider of high-speed, large-format 3D printers and on-demand parts services to industrial and commercial customers. The Company’s 3D printers employ a powder binding, additive manufacturing technology to produce parts using various material sets, which consist of particulate materials and proprietary chemical binding agents. The Company provides its 3D printers and on-demand parts services to industrial and commercial customers serving the automotive, aerospace, film and entertainment, art and architecture, engineering and consumer product end markets. For more information, visit http://www.voxeljet.de/en/.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements concerning our business, operations and financial performance. Any statements that are not of historical facts may be deemed to be forward-looking statements. You can identify these forward-looking statements by words such as ‘‘believes,’’ ‘‘estimates,’’ ‘‘anticipates,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘could,’’ ‘‘might,’’ ‘‘will,’’ ‘‘should,’’ ‘‘aims,’’ or other similar expressions that convey uncertainty of future events or outcomes. Forward-looking statements include statements regarding our intentions, beliefs, assumptions, projections, outlook, analyses or current expectations concerning, among other things, our results of operations, financial condition, business outlook, the industry in which we operate and the trends that may affect the industry or us. Although we believe that we have a reasonable basis for each forward-looking statement contained in this press release, we caution you that forward-looking statements are not guarantees of future performance. All of our forward-looking statements are subject to known and unknown risks, uncertainties and other factors that are in some cases beyond our control and that may cause our actual results to differ materially from our expectations, including those risks identified under the caption “Risk Factors” in the Company’s Annual Report on Form 20-F and in other reports the Company files with the U.S. Securities and Exchange Commission, as well as the risk that our revenues may fall short of the guidance we have provided in this press release. Except as required by law, the Company undertakes no obligation to publicly update any forward-looking statements for any reason after the date of this press release whether as a result of new information, future events or otherwise.

         
voxeljet AG
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 
Notes 3/31/2018 12/31/2017
(€ in thousands)
unaudited
Current assets 38,347 37,774
Cash and cash equivalents 6 3,140 7,569
Financial assets 2, 6 17,688 14,044
Trade receivables 2 4,802 5,093
Inventories 3 11,309 9,539
Income tax receivables 3 3
Other assets 1,405 1,526
 
Non-current assets 29,360 29,257
Financial assets 2, 6 1,298 357
Intangible assets 1,183 1,111
Property, plant and equipment 4 26,792 27,698
Investments in joint venture 36 39
Other assets 51 52
   
Total assets 67,707   67,031  
 
Notes 3/31/2018 12/31/2017
 
Current liabilities 8,957 6,576
Deferred income 2 69 271
Trade payables 2 2,841 3,059
Contract liabilities 2 2,969 --
Financial liabilities 2, 6 1,054 1,162
Other liabilities and provisions 5 2,024 2,084
 
Non-current liabilities 16,527 16,537
Deferred income 2 -- 18
Deferred tax liabilities 72 66
Financial liabilities 2, 6 16,365 16,413
Other liabilities and provisions 5 90 40
 
Equity 42,223 43,918
Subscribed capital 3,720 3,720
Capital reserves 76,356 76,227
Accumulated deficit 2 (39,219 ) (37,480 )
Accumulated other comprehensive income 1,301 1,380
Equity attributable to the owners of the company 42,158 43,847
Non controlling interest 65   71  
Total equity and liabilities 67,707   67,031  
 

See accompanying notes to unaudited consolidated interim financial statements.

 
         
voxeljet AG
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
 
Three months ended March 31,
Notes 2018 2017
 
Revenues 2, 8, 9 5,052 4,530
Cost of sales (2,785 ) (2,949 )
Gross profit 2, 8 2,267   1,581  
Selling expenses (1,736 ) (1,385 )
Administrative expenses (1,232 ) (1,194 )
Research and development expenses (1,597 ) (1,497 )
Other operating expenses (358 ) (190 )
Other operating income 402 297
Operating loss (2,254 ) (2,388 )
Finance expense (268 ) (47 )
Finance income 946 4
Financial result 678 (43 )
Loss before income taxes (1,576 ) (2,431 )
Income taxes (6 )  
Net loss (1,582 ) (2,431 )
 
Other comprehensive income (79 ) 15  
Total comprehensive loss (1,661 ) (2,416 )
 
Loss attributable to:
Owners of the Company (1,576 ) (2,429 )
Non-controlling interests (6 ) (2 )
(1,582 ) (2,431 )
 
Total comprehensive loss attributable to:
Owners of the Company (1,655 ) (2,414 )
Non-controlling interests (6 ) (2 )
(1,661 ) (2,416 )
 
Weighted average number of ordinary shares outstanding 3,720,000 3,720,000
Loss per share - basic/ diluted (EUR) (0.42 ) (0.65 )
 

See accompanying notes to unaudited consolidated interim financial statements.

 
                 
voxeljet AG
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
 

Attributable to the owners of the company

Accumulated
other
Subscribed Capital Accumulated comprehensive Non-controlling
(€ in thousands) capital reserves deficit gain (loss) Total interests Total equity
Balance at January 1, 2017 3,720 75,827 (28,971 ) 873 51,449 87 51,536
Loss for the period (2,429 )

(2,429

)

(2

) (2,431 )
Foreign currency translations 15 15

15

Balance at March 31, 2017 3,720 75,827 (31,400 ) 888 49,035 85 49,120
 
 
 

Attributable to the owners of the company

Accumulated
other
Subscribed Capital Accumulated comprehensive Non-controlling
(€ in thousands) capital reserves deficit gain (loss) Total interests Total equity
Balance at December 31, 2017 3,720 76,227 (37,480 ) 1,380 43,847 71 43,918
Adjustment on initial application of IFRS 15 -- -- (100 ) -- (100 ) -- (100 )
Adjustment on initial application of IFRS 9 -- -- (63 ) -- (63 ) -- (63 )
Adjusted balance at January 1, 2018 3,720 76,227 (37,643 ) 1,380 43,684 71 43,755
Loss for the period -- -- (1,576 ) -- (1,576 ) (6 ) (1,582 )
Net changes in fair value of available for sale financial assets -- -- -- (15 ) (15 ) -- (15 )
Foreign currency translations -- -- -- (64 ) (64 ) -- (64 )
Equity-settled share-based payment -- 129 -- -- 129 -- 129
Balance at March 31, 2018 3,720 76,356 (39,219 ) 1,301 42,158 65 42,223
 

See accompanying notes to unaudited consolidated interim financial statements.

 
       
voxeljet AG
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Three months ended March 31,
2018 2017
(€ in thousands)
Cash Flow from operating activities
 
Loss for the period (1,582 ) (2,431 )
 
Depreciation and amortization 841 684
Foreign currency exchange differences on loans to subsidiaries (61 ) 1
Equity-settled share-based payment 129 --
Impairment losses on trade receivables 10 60
Change in investment in joint venture 3 --
Change in fair value of the Performance Participation Interest 189 --
Change in fair value of derivative equity forward (941 ) --
Change in inventory allowance (226 ) (60 )
Deferred income taxes 6 --
 
Change in working capital 1,444 144
Trade and other receivables, inventories and current assets (1,035 ) (726 )
Trade payables (260 ) 322
Other liabilities, contract liabilities, provisions and deferred income 2,739 548
Total (188 ) (1,602 )
 
Cash Flow from investing activities
 
Payments to acquire property, plant and equipment and intangible assets (234 ) (687 )
Proceeds from disposal of financial assets 2,526 922
Payments to acquire financial assets (6,170 ) --
Total (3,878 ) 235
 
Cash Flow from financing activities
 
Repayment of bank overdrafts and lines of credit (58 ) (39 )
Repayment of sale and leaseback obligation (118 ) (100 )
Repayment of finance lease obligation (12 ) (10 )
Repayment of long-term debt (197 ) --
Proceeds from long-term debt issuance 40 594
Total (345 ) 445
 
Net increase (decrease) in cash and cash equivalents (4,411 ) (922 )
 
Cash and cash equivalents at beginning of period 7,569 7,849
Changes to cash and cash equivalents due to foreign exchanges rates (18 ) 14
Cash and cash equivalents at end of period 3,140 6,941
 
Supplemental Cash Flow Information
Interest paid 47 47
Interest received 1 2
 

See accompanying notes to unaudited consolidated interim financial statements.

 

voxeljet AG

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1. Preparation of financial statements

Our consolidated interim financial statements include the accounts of voxeljet AG, which is listed on the New York Stock Exchange, and its wholly-owned subsidiaries voxeljet America Inc., voxeljet UK Ltd. and voxeljet India Pvt. Ltd., as well as voxeljet China Co. Ltd., which are collectively referred to herein as the ‘Group’ or the ‘Company.’

Our consolidated interim financial statements were prepared in compliance with all applicable measurement and presentation rules contained in International Financial Reporting Standards (‘IFRS’) as set forth by the International Accounting Standards Board (‘IASB’) and Interpretations of the IFRS Interpretations Committee (‘IFRIC’). The designation IFRS also includes all valid International Accounting Standards (‘IAS’); and the designation IFRIC also includes all valid interpretations of the Standing Interpretations Committee (‘SIC’). Specifically, these financial statements were prepared in accordance with the disclosure requirements and the measurement principles for interim financial reporting purposes specified by IAS 34.

The IASB issued a number of new IFRS standards which are required to be adopted in annual periods beginning after January 1, 2018.

   
Standard   Effective date   Descriptions
IFRS 9 01/2019 Amendments Prepayment Features with Negative Compensation
IFRS 16 01/2019 Leases
IAS 19 01/2019 Amendments Plan Amendment, Curtailment or Settlement
IAS 28 01/2019 Amendments Long-term Interests in Associates and Joint Ventures
IFRIC 23 01/2019 Uncertainty over Income Tax Treatments
Improvements to IFRS (2015-2017) 01/2019 IFRS 3, IFRS 11, IAS 12, IAS 23
Others 01/2020 Amendments References to the Conceptual Framework in IFRS Standards
IFRS 17 01/2021 Insurance Contracts
IFRS 10, IAS 28 indefinite Amendment Sale or Contribution of Assets between Investor and its Associate or Joint Venture
 

The Company has not yet determined what impact the new standards, amendments or interpretations will have on its financial statements.

The interim financial statements as of and for the three months ended March 31, 2018 and 2017 were authorized for issue by the Management Board on May 17, 2018.

2. Summary of significant accounting policies

Except as described below, the accounting policies applied in these consolidated interim financial statements are the same as those applied in the Company’s consolidated financial statements as of and for the year ended December 31, 2017, which can be found in its Annual Report on Form 20-F that was filed with the U.S. Securities and Exchange Commission. The changes in accounting policies are also expected to be reflected in the Company’s consolidated financial statements as of and for the year ending December 31, 2018.

The Group has initially adopted IFRS 15, Revenue from Contracts with Customers, and IFRS 9, Financial Instruments, on January 1, 2018. A number of other new standards are effective from January 1, 2018 but these do not have a material effect on the Company’s consolidated financial statements.

  • The adoption of IFRS 15 resulted in minor impacts related to the revenue recognition regarding the revenue streams from maintenance as well as extended warranty contracts. Those impacts include immaterial timing differences for revenue recognition related to these types of contracts with customers. The new guidance is not expected to have a material impact to net income (loss) on an ongoing basis.
  • The adoption of IFRS 9 resulted in a minor increase in impairment losses recognized on trade receivables.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaced IAS 18, Revenue, IAS 11, Construction Contracts, and related interpretations. The Group has adopted IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognized at the date of initial application (i.e. January 1, 2018). Accordingly, the information presented for 2017 has not been restated – i.e. it is presented, as previously reported, under IAS 18, IAS 11 and related interpretations.

The following table summarizes the impact, net of tax, of transition to IFRS 15 on retained earnings as of January 1, 2018.

     
Impact at January 1, 2018      

Impact on adopting
IFRS 15 at January 1,
2018

(€ in thousands)
Retained earnings (100)
 
Recognition of revenues from maintenance and extended warranty contracts (100)
 

The following table summarizes the impacts of adopting IFRS 15 on the Company’s consolidated interim consolidated statement of financial position as of March 31, 2018 and its consolidated interim statement of comprehensive loss for the three months then ended for each of the line items affected.

         

Amounts without

03/31/2018       As reported   Adjustments   adoption of IFRS 15
(€ in thousands)
Total assets 67,707 15 67,722
 

Current assets

38,347 15 38,362
Trade receivables 4,802 15 4,817
 
Total equity and liabilities 67,707 59 67,766
 

Current liabilities

8,957 59 9,016
Deferred income 69 752 821
Contract liabilities 2,969 (2,969 ) --
Other liabilities and provisions 2,024 2,276 4,300
 
 

Amounts without

03/31/2018       As reported   Adjustments   adoption of IFRS 15
(€ in thousands)
Revenue 5,052 (44 ) 5,008
Impairment loss on trade receivables (53 ) 53 --
Operating loss (2,254 ) 9 (2,245 )
Loss before income taxes (1,576 ) 9 (1,567 )
Net loss (1,582 ) 9 (1,573 )
Total comprehensive loss (1,661 ) 9 (1,652 )
 

The details of the new accounting policies and the nature of the changes to previous accounting policies in relation to the Group’s revenue streams in relation to the Maintenance and extended warranty contracts are set out below.

After the initial one year of statutory warranty period, the Company offers its customers extended warranty and optional maintenance contracts. Extended warranty and maintenance contracts are generally provided for a period of twelve months and automatically extended for another twelve months if not cancelled on a timely basis. Before the adoption of IFRS 15 extended warranty and maintenance service revenue has been recognized on a straight-line basis over the contractual term.

Under IFRS 15, the Company recognizes revenue based on input factors like the number of service visits or the provision of certain goods, in particular printheads under the maintenance and warranty contracts. Therefore the expected number of service visits and goods to be provided under a contract have been estimated by the Company’s service department based on historical experience. This leads to minor timing differences for revenue recognition related to these types of contracts with customers throughout the contract term.

IFRS 9 Financial Instruments

IFRS 9 sets out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39, Financial Instruments.

The Company has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as of January 1, 2018. Accordingly, the information presented for 2017 does not reflect the requirements of IFRS 9 but rather those of IAS 39.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below.

Classification and measurement of financial assets and financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.

Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

  • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
  • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to record subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

Under IFRS 9, our investments in bond funds will be classified as fair value through other comprehensive income (FVTOCI). As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI. Unlike IAS 39, the accumulated fair value reserve related to these investments will never be reclassified to profit or loss.

Under IAS 39 as well as upon adoption of IFRS 9, our derivative financial instruments have been designated as at FVTPL.

Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, FVOCI and contract assets. Under IFRS 9, credit losses are recognized earlier than under IAS 39.

The Company’s financial assets at amortized cost consist of trade receivables and cash and cash equivalents. For cash and cash equivalents the adoption of IFRS 9 did not have any impact regarding impairment.

Under IFRS 9, loss allowances are measured on either of the following bases:

  • 12-months ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; or
  • lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

The Company considers a financial asset to be in default when:

  • the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or
  • the financial asset is more than 90 days past due.

The Company considers an investment to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Company limits its exposure to credit risk by investing only in bond funds which are fully guaranteed by the financial institutions and therefore represents short term credit rating of A-3 based on Standard & Poor’s or P-2 based on Moody’s.

Trade receivables

The Company measures loss allowances for trade receivables at an amount equal to lifetime ECLs. ECLs are a probability-weighted estimate of credit losses. The Company calculates the ECL based on the risk scoring its customers’ according to an external rating agency. Following the risk score of each customer, the trade receivables are clustered into different grades. For each grade, the ECL is calculated after deducting from trade receivables a loss allowance based on actual credit loss experience. In addition the Company uses qualitative assessment of the trade receivables, where default has incurred.

The Group considers an equity security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Group limits its exposure to credit risk by investing only in bond funds which are fully guaranteed by the financial institutions and therefore represents.

Presentation of impairment

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets and presented within other operating expenses.

Impairment losses on financial assets classified as FVTPL and FCOCI are presented within the finance expense and other comprehensive income, respectively.

The following table presents the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company’s financial assets and financial liabilities as of January 1, 2018.

                 
Original New
Original classification New classification carrying amount carrying amount
01/01/2018       under IAS 39     under IFRS 9     under IAS 39     under IFRS 9
(€ in thousands)
Financial assets 27,063 27,000
 

Non-current assets

Equity securities Available-for-sale financial assets FVOCI 5 5
Derivative financial instruments A financial asset or financial liability at fair value through profit or loss Mandatorily at FVTPL 352 352

Current assets

Bond funds Available-for-sale financial assets FVOCI 14,044 14,044
Cash and cash equivalents Loans and receivables Amortized cost 7,569 7,569
Trade receivables Loans and receivables Amortized cost 5,093 5,030
 
Financial liabilities 20,416 20,416
 

Non-current liabilities

Long-term debt Financial liabilities measured at amortized cost Amortized cost 16,242 16,242
Finance lease obligation Financial liabilities measured at amortized cost Amortized cost 171 171

Current liabilities

Bank overdraft Financial liabilities measured at amortized cost Amortized cost 58 58
Long-term debt Financial liabilities measured at amortized cost Amortized cost 796 796
Finance lease obligation Financial liabilities measured at amortized cost Amortized cost 308 308
Trade payables Financial liabilities measured at amortized cost Amortized cost 2,841 2,841
 

Impact of the new impairment model

For assets in the scope of the IFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile. The Company has determined that the application of IFRS 9’s impairment requirements at January 1, 2018 results in an additional impairment allowance as follows.

     
 
(€ in thousands)
Loss allowance at December 31, 2017 under IAS 39 482
Additional impairment recognized at January 1, 2018 on:
Trade and other receivables as at December 31, 2017 62
Additional trade receivables recognized on adoption of IFRS 15 1
Loss allowance at January 1, 2018 under IFRS 9 545
 

The following tables provides information about the exposure to credit risk and ECLs for trade receivables as of January 1, 2018 and March 31, 2018. This was calculated after a specific assessment of the trade receivables and after recording a specific debt allowance.

 
January 1, 2018
  Equivalent to external        
credit rating Probability of Gross carrying Impairment loss Net carrying
Grades   (Standard & Poor’s)   default   amount   allowance   amount
  (€ in thousands)
Grades 1-4: Low risk BBB+ to AAA 0.2% 3,274 5 3,269
Grades 5-7: Fair risk B+ to BBB 1.3% 1,674 22 1,652
Grades 8-9: Substandard CCC- to B 7.0% 363 25 338
Grade 10: Doubtful C to CC 25.0% 14 3 11
Grade 11:   Loss   D   100.0%   8   8   0
                5,333   63   5,270
 
 
March 31, 2018
Equivalent to external
credit rating Probability of Gross carrying Impairment loss Net carrying
Grades   (Standard & Poor’s)   default   amount   allowance   amount
(€ in thousands)
Grades 1-4: Low risk BBB+ to AAA 0.2% 2,828 4 2,824
Grades 5-7: Fair risk B+ to BBB 1.3% 1,609 21 1,588
Grades 8-9: Substandard CCC- to B 7.0% 412 29 383
Grade 10: Doubtful C to CC 25.0% 9 2 7
Grade 11:   Loss   D   100.0%   59   59   0
                4,917   115   4,802
 

3. Inventories

                       
3/31/2018 12/31/2017
(€ in thousands)
Raw materials and merchandise 3,555 3,017
Work in progress 7,754 6,522
Total 11,309 9,539
 

4. Property, plant and equipment, net

       
3/31/2018 12/31/2017
(€ in thousands)
Land, buildings and leasehold improvements 17,284 17,415
Plant and machinery (includes assets under finance lease) 7,902 8,650
Other facilities, factory and office equipment 1,531 1,625
Assets under construction and prepayments made 75 8
Total 26,792 27,698
Thereof pledged assets of Property, Plant and Equipment 6,926 7,046
Leased assets included in Property, Plant and Equipment: 620 881
Printers 458 613
Printers leased to customers under operating lease 97
Other factory equipment 162 171
 

5. Other liabilities and provisions

                       
3/31/2018 12/31/2017
(€ in thousands)
Customer deposits -- 373
Liabilities from VAT 65 12
Employee bonus 310 303
Accruals for vacation and overtime 480 222
Accruals for licenses 111 140
Liabilities from payroll 250 236
Accruals for commissions 83 50
Accruals for compensation of Supervisory board 225 180
Accrual for warranty 295 286
Others 295 322
Total 2,114 2,124
 

The increase regarding customer deposits mainly relates to the sale of a VX4000 3D printer to a client in Southeast Asia.

6. Financial instruments

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.

                     
Carrying amount Fair Value
Other Total
FVTPL FVOCI At amortized cost financial carrying
3/31/2018       liabilities amount Level 1 Level 2 Level 3 Total
Financial assets measured at fair value

Non-current assets

Derivative financial instruments 1,293 -- -- -- 1,293 -- 1,293 -- 1,293
Equity securities -- 5 -- -- 5 -- -- 5 5
 

Current assets

Bond funds -- 17,688 -- 17,688 17,688 17,688
 
Financial assets not measured at fair value

Current assets

Cash and cash equivalents -- -- 3,140 -- 3,140 3,140 -- 3,140
Trade and other receivables -- -- 4,802 -- 4,802 -- -- -- --
 
Financial liabilities not measured at fair value

Non-current liabilities

Long-term debt -- -- -- 16,271 16,271 -- 15,199 -- 15,199
Finance lease obligation -- -- -- 94 94 -- 89 -- 89
 

Current liabilities

Bank overdraft -- -- --
Long-term debt -- -- -- 800 800 788 788
Finance lease obligation -- -- -- 254 254 255 255
Trade payables -- -- -- 2,841 2,841
 
                 
12/31/2017      

A
financial
asset or
financial
liability at
fair value
through
profit or
loss

 

Held-to-
maturity
investments

 

Available-for-sale
investments

 

Loans and
receivables

 

Financial
liabilities
measured
at
amortized
cost

  Fair Value   Level
Assets
 

Non-current assets

Equity securities -- -- 5 -- -- 5 Level 3
Derivative financial instruments 352 -- -- -- -- 352 Level 2

Current assets

Bond funds -- -- 14,044 -- -- 14,044 Level 1
Cash and cash equivalents -- -- -- 7,569 -- 7,569 Level 1
 
Liabilities
 

Non-current liabilities

Long-term debt -- -- -- -- 16,242 15,119 Level 2
Finance lease obligation -- -- -- -- 171 163 Level 2

Current liabilities

Bank overdraft -- -- -- -- 58 58
Long-term debt -- -- -- -- 796 787 Level 2
Finance lease obligation -- -- -- -- 308 310 Level 2
 

The fair value of the Company’s investments in the bond funds was determined based on the unit prices quoted by the fund management company.

The fair value of long-term debt was determined using discounted cash flow models based on the relevant forward interest rate yield curves. The fair value of finance lease obligations was determined using discounted cash flow models on market interest rates available to the Company for similar transactions at the relevant date.

Due to their short maturity and the current low level of interest rates, the carrying amounts of credit lines and bank overdrafts approximate fair value.

7. Financial result

       
Quarter Ended March 31,
2018 2017
(€ in thousands)

Interest expense

(268 ) (47 )
Finance lease obligations (36 ) (10 )
Long-term debt (232 ) (37 )

Interest income

946 4
Payout of bond funds 5 1
Income from revaluation of derivative financial instruments 941 --
Other       --   3  
Financial result       678     (43 )
 

8. Segment reporting

The following table summarizes segment reporting. The sum of the amounts of the two segments equals the total for the Group in each of the periods.

                     
Three months ended March 31,
2018 2017
(€ in thousands)
SYSTEMS SERVICES SYSTEMS SERVICES
Revenues 1,375 3,677 1,693 2,837
 
Gross profit 429 1,838 353 1,228
Gross profit in % 31.2 % 50.0 % 20.9 % 43.3 %
 

9. Revenues

                       
Three months ended March 31,
2018 2017
(€ in thousands)
EMEA 3,132 2,838
Germany 1,517 1,431
France 589 525
Others 1,026 882
Asia Pacific 767 279
India 318 39
Taiwan -- 16
Others 449 224
Americas 1,153 1,413
United States 1,139 1,252
Others 14 161
Total 5,052 4,530
 

10. Commitments, contingent assets and liabilities

In March 2018, ExOne GmbH, a subsidiary of ExOne, notified voxeljet of its intent not to pay its annual license fees under an existing intellectual property-related agreement and asserted its rights to claim damages pursuant to an alleged material breach of the agreement. At this time, the Company cannot reasonably estimate a contingency, if any, related to this matter.

11. Subsequent events

Stock option plan

In April 2018, the Supervisory Board approved to grant 93,000 stock options (remaining 25% of shares authorized in April 2017) to members of the management board as well as employees.

Contact:

Investors and Media
voxeljet AG
Johannes Pesch, +49 821 7483172
Mobile: +49 176 45398316
Director Investor Relations and Business Development
johannes.pesch@voxeljet.de