Bear Takes Aim at Voxeljet; a Fool Fires Back

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After yesterday's horrible day for 3-D printing stocks, the bleeding didn't stop today. Earlier today, Citron Research published a bearish report on Voxeljet (NYSE: VJET  ) , sending shares down over 32% on the session. In the past two days, Voxeljet's stock has tumbled well over 40%, officially putting into question the viability of this emerging 3-D printing player.

Other 3-D printing companies sold off again today in sympathy. ExOne (NASDAQ: XONE  ) closed down nearly 9%, 3D Systems sold off nearly 8%, and Stratasys pulled back 4%. As a result, this bearish report may present a buying opportunity for long-term-focused 3-D printing investors.

Breaking down the bearishness
Citron took aim at what it believes to be glaring issues with the quality of Voxeljet's earnings. First is that the company sold only three printers during its third quarter, which represented an increase of 50% unit growth (one printer) from the year prior. If we've learned anything from ExOne's earnings, it's that industrial printers that can cost upwards of $1 million have extremely long and difficult sales cycles. You shouldn't expect Voxeljet's sales cycle and pace to behave any differently, especially since it's an earlier-stage growth company than ExOne.

Citron also took issue that one of Voxeljet's printer sales involved a loan, meaning the company hasn't actually received some of the cash related to a specific printer sale despite recognizing the revenue on its earnings report. Buried within its quarterly SEC filing, the company acknowledged that a loan was granted to a customer in connection to a 3-D printer sale in the amount of 678,000 euros, or about $915,000. During the quarter, Voxeljet recorded 1.8 million euros in printer sales, meaning this loan represented about 37% of the company's printer revenues. Considering one of Voxeljet's 3-D printers can cost north than $1 million, I'm having a hard time finding fault with customers who want financing terms.

In addition, Citron didn't like that Voxeljet recognized revenue of 868,000 euros in connection to the consideration of two printer sales during the quarter, which Citron classified as more loans and no money in the bank. Because Voxeljet doesn't go into extensive detail about the matter, I've reached out to the company for further clarification. However, it's worth noting that for Voxeljet to recognize this revenue in compliance of generally accepted accounting principles, or GAAP, the company is awfully confident that these sales are a done deal.

Finally, Citron seems to believe that every printer sold during the quarter was sold at a discount to list prices because the deal related to the two printers and the 868,000 euros in recognized revenue acknowledged that it did include a discount. I may be going out on a limb here, but maybe a company in Voxeljet's emerging position doesn't necessarily have pricing power. After all, the company has sold only a handful of printers during its entire lifetime, which may make prospective customers a little gun-shy toward buying a million-dollar 3-D printer from a potentially unproven vendor. At the end of the day, it's far better to make the sale than to make nothing at all, considering the company has a very limited installed base to begin with. Oh, and this didn't stop Voxeljet from improving its 3-D printer segment's gross profit margin by 5.6% year over year to 38.8%.

What Citron didn't mention
The reason Voxeljet became a public company in the first place was to grow its operations and become a much larger player in the industrial 3-D printing space. By doing so, the company raised about $65 million, of which $40 million will be put toward expanding its on-demand parts service center in Europe, and establishing two new on-demand service centers in Asia and North America. From the remainder, $10 million will be put toward research and development and sales and marketing initiatives. Contrary to Citron's belief, Voxeljet is a real business with real long-term goals.

Whether you're a Voxeljet investor, or an investor in other 3-D printing stocks, I wouldn't put too much weight behind Citron's assertions and the short-term damage it caused. Over the long term, the market will likely come to terms that Voxeljet is a real business that can achieve its goals. In fact, Citron may have given prospective 3-D printing investors with a long-term mind-set an opportunity to get invested for a better price.

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Read/Post Comments (10) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 20, 2013, at 7:17 PM, Npard23 wrote:

    If you are going to invest in 3D printing, buy SSYS or DDD because they are the best of breed company (wait for a further dip though). I don't understand why Motley Fool is trying to defend a company with very little sales that are paid mostly by loans. VJET makes Twitter look like a value stock.

  • Report this Comment On November 20, 2013, at 8:04 PM, TMFTopDown wrote:

    @Npard23 -- I agree with you that DDD and SSYS are the best of breed and the most diversified. In fact, I already own DDD. My intention with this article was to give more context behind Citron's report and why it shouldn't carry so much weight.

    Last quarter about 37% of VJET's systems revenue (not total revenue) came from the loan. In total, the loan accounted for 20% of VJET's revenue for the quarter. Also, as the SEC quarterly filing clearly states, the company currently has a total of two loans outstanding on its books, totaling 928 euros. In other words, the company doesn't generate revenues "mostly by loans," as you assert.

    As I mentioned in the article, these printers can cost upwards of $1 million, so I'm having a hard time seeing why this in it of itself is a problem.

    Finally, the company is now armed with $65 million in cash so investors should expect it to grow its operations meaningfully over the next few years.

    Thanks for commenting!

    Steve Heller

  • Report this Comment On November 20, 2013, at 8:05 PM, TMFTopDown wrote:

    *totaling 928,000 Euros.

  • Report this Comment On November 21, 2013, at 7:27 AM, remmdawg wrote:

    VJET is a legitimate company with great growth potential and it may reach that potential. The company isn't the problem, the stock price is. The stock is priced at levels which assume VJET will reach that potential even though there is little proof that this will happen. Unlike major players, VJET just doesn't have a proven track record. So I'm going to stay out of VJET at this time. SSYS, DDD and XONE seem to be less speculative investments. They all have proven revenue growth and trade at non-stratospheric price/sales levels. Of this trio, XONE seems to be the most speculative since it is still not profitable. But this should change in the near future.

  • Report this Comment On November 21, 2013, at 5:11 PM, highflyer330 wrote:

    I'm afraid that I'm a VJET believer. VJET holds patents that some of the other 3D companies pay to use! VJET holds the licenses. So thus I do not think that qualifies VJET as a new entrant. VJET still needs to prove their worth thru numbers, now that they are being traded publicly, which I'm sure will happen.

  • Report this Comment On November 21, 2013, at 7:22 PM, hussaa2 wrote:

    If all this is true. This article started with "This is not a company. It's s hobby" What about the number of employees that this company claims to have - Total 89. What do these 89 people do in this company? Sit around read your articles?

    Time will tell. I am a buyer of the stock in low 30's

  • Report this Comment On November 21, 2013, at 10:45 PM, Drester wrote:

    Very good analysis. I can tell you are smart money.

  • Report this Comment On November 22, 2013, at 6:32 AM, Gorch wrote:

    In my believe the Citron article was successfully addressing short selling since VJET's share prices had been skyrocketing in very short time. The future will tell whether VJET will stay in the business and/or will be able to drive its expansion. 3D had been questioned overvalued in the past too. I think shares of companies in new industries tend to be emotion driven at first. Solar had not been any different in early years. Compare the change to EVs the car industry is facing right now. Staying invested or not, the prospect of 3D printing is intact and we see how far it goes. The Citron article definitely drove downward speculation. Any insider trading measurable?

  • Report this Comment On November 24, 2013, at 7:03 AM, Kully wrote:

    I bought VJET shares when they were trading around the $40 mark and then invested heavily just before the awful tumble. Ouch! But as a procurement specialist who looks at supply networks and issues, this company has some real growth prospects. By next year, I expect the stock price to surpass the peak it achieved this year. Why? Well, this is a German company in a growing German economy in a sector, engineering, which is Germany's traditional forte, who supplies to the growing German car manufacturing and industrial sector. It offers a unique product for industry unlike the smaller printers of 3D Systems and Stratys. Yes its bound to have teething problems as its only just accessed the cash from the IPO.

    The savings for industry by adopting 3D printing are enormous. Fewer cost issues relating to contract management, over-production, unreliable supply chains, quality defects, limited supply partners, less control, concept to production all in-house. I believe that this is truly revolutionary. Don't let the ups and downs get you down - just have a cup of tea and help yourself to the biscuit tin. The only way is up and don't just sell in a panic because this is a long-term winning horse.

  • Report this Comment On November 24, 2013, at 3:16 PM, MotherCourage wrote:

    Kully is so right! VJET has the absolute textbook pedigree of a small German firm that is solid, stable, and well thought out. This is the German specialty--exceedingly high tech with excruciating attention to detail. And they are deadly accurate with marketing and expansion. Kully, my dear, I bought low and then again in the 60s so I feel your pain. But I am so relaxed about this. One thing in this world I have faith in is the power of these small German companies. They are a real powerhouse. So, Let's sit back and watch the fun.

    (Or does someone out there know of another country that can beat China in annual exports? Italy? Ireland? France or Greece? Brazil?)

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