Voxeljet AG: What Investors Need to Know About Its Fourth-Quarter 2013 Earnings and 2014 Guidance

Shares of voxeljet AG (NYSE: VJET  ) fell nearly 10% in after-hours trading on Thursday after the commercial and industrial-focused 3-D printing company released fourth-quarter 2013 earnings after the market closed, which considerably missed estimates. Voxeljet reported a loss of 0.17 euros, or $0.23, per American depository share, whereas analysts expected a profit of 0.01 euros per share.

Voxeljet reversed course in Friday's trading, closing up 2%, at $26.25 per ADS. A possible explanation is that investors had a chance to better digest the earnings report, and were somewhat calmed by information shared during the earnings call on Friday.

Here's what investors should know. 

Q4 results: revenue up, EPS down
While voxeljet missed on the bottom line, the company exceeded the consensus on the top line. Revenue increased 78%, to 3.69 million euros, or $5.1 million, while analysts had expected 3.4 million euros, or $4.7 million. (Voxeljet reports in euros; I've converted the euros to U.S. dollars using the exchange rate on Dec. 31, 2013.)

The revenue growth was primarily driven by increased printer sales, as voxeljet sold three 3-D printers in the quarter vs. one in the prior-year's quarter. Revenue in the systems segment, which includes printers, consumables, and maintenance, increased more than 160%, to 2.46 million euros, or $3.4 million, representing 67% of total revenue. While three printer sales is certainly an improvement over last year's sale of one printer, voxeljet had expected to book sales of at least four printers this quarter. The company had a backlog of seven printers at the end of the third quarter, and had stated in its third-quarter earnings release that it expected to ship four of them in the fourth quarter.

Sales in the services segment, which provides on-demand parts printing, rose more than 7%, to 1.24 million euros, or $1.7 million. Though demand has reportedly been strong, the company's been capacity constrained at its German service center all year, which has limited this segment's growth. Voxeljet is beefing up capacity by expanding the size of this service center. Additionally, it's leased a 50,000 sq. ft. building located near Detroit, where it will print parts for automotive and other industrial customers. This service center is expected to start operating in the third quarter.

Gross profit margin was 41.3% in the fourth quarter, slightly up from 39.9% in the fourth quarter of 2012. This increase was due to a considerable increase in gross profit margin in the systems segment (48.2%, up from 25.3%) less the decrease in gross profit margin in the services segment (27.5%, down from 51.8%). Voxeljet attributed the big decrease in gross margin on the service end to higher headcount as it staffed up for growth, and personnel expenses related to its Long Term Cash Incentive Plan, which it initiated in 2013.

Expenses were up considerably across the board due primarily to an increased headcount, the LTCIP, and costs associated with the company's October IPO. Increased expenses are to be expected given that voxeljet is a newly public company and in the early stages of its expansion. That said, investors need to keep a watchful eye on voxeljet's spending.

In December, the company spent $13.7 million, or about 20% of the money it raised in its IPO, buying its German headquarters and service center. Given how much voxeljet was paying for leasing this building, it appears to have significantly overpaid for the property. We don't, however, know the entire story. It's conceivable the property owner (if not connected to the company's management) played hardball with voxeljet, knowing the company had a boatload of cash from its IPO, which forced the company to buy the property.

Positively, voxeljet beefed up R&D expenditures 127%, to 1.28 million euros, or nearly $1.8 million in the quarter. This represents 35% of its revenue, which is big spending for R&D.

As stated in my opening, voxeljet reported a loss 0.17 euros, or $0.23, per ADS, which was significantly worse than both its results in the prior-year's period, as well as the consensus estimate. The loss was due to sizable increases in spending across several categories. Voxeljet lost 0.02 euros, or $0.027, per ordinary share in the year-ago period, which would translate to a loss of 0.004 euros, or $0.005 per American depository shares (one ordinary share = five ADS), if ADS had existed last year. However, investors need to realize that there were only 2.0 million ordinary shares outstanding in the year-ago period vs. slightly more than 3.0 million last quarter.

Full-year 2013 results
Revenue for 2013 increased 34%, to 11.69 million euros, or $16.1 million. This rise was driven by an 83% jump in systems sales to 6.34 million euros, or $8.7 million. Voxeljet sold nine 3-D printers in 2013 vs. six (excluding four test machines) in 2012. Additionally, the printers sold in 2013 were generally larger and more expensive.

Service segment revenue edged up 2%, to 5.35 million, or $7.4 million. As previously discussed, this segment was capacity constrained all year, and voxeljet is currently boosting capacity.

Voxeljet posted a loss of 0.24 euros, or $0.33, per ADS in 2013, as compared to a profit of 0.02 euros, or $0.03, per ADS in 2012. However, there were 12% more shares in 2013 than in 2012.

Guidance for 2014
Voxeljet expects revenue to grow more than 50% in 2014, to 18.0 million euros, or $24.7 million. The company doesn't provide earnings guidance, which isn't unusual for a newly public company. Fellow 3-D printing company ExOne, which went public in Feb. 2013, doesn't provide earnings guidance, either.

As of March 15, the company had a backlog of seven 3-D printers worth 4.1 million euros, or $5.6 million. It expects all these printers to ship prior to the end of 2014. Yes, this guidance does leave investors hanging a bit, as it would be nice to know how many of these printers the company expects to book in the first quarter, or at least the first half of the year. That said, the company is small and selling pricey systems; therefore, it's to be expected that quarterly sales will be "lumpy" for a while.

The Foolish takeaway
Given voxeljet's small size and relatively few 3-D printers on the market, it's too early to tell how successfully it will compete in the sector. It's too soon to tell whether voxeljet's potential competitive advantages -- related to the size, speed, and configuration of its 3-D printers -- will come to fruition. Potential investors should consider waiting at least a quarter or two to see whether the company's promise of growth seems to be on track.

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