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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings. Welcome to the voxeljet AG First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
I'll now turn the conference over to your host, Mr. Johannes Pesch. You may begin.
Thank you, operator, and good morning, everyone. With me today are Dr. Ingo Ederer, voxeljet's Chief Executive Officer and Rudolf Franz, voxeljet's Chief Financial Officer. On Wednesday, after the market close, voxeljet issued a press release announcing its first quarter financial results for the period ended March 31, 2023. 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, including expectations and results from our current order backlog. 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, including the risks and uncertainties caused by the current COVID-19 pandemic and resulting uncertainty in the global economy.
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, Johannes. Good morning, everyone. Thank you for joining us on our earnings call today. We are happy with the start of the new business year in our on-demand printing segment services, demand continues to be extremely robust, both in Europe and in the U.S.. This high demand is driven by large production orders, which is very exciting. For example, a supplier to a leading U.S. based excavation company recently placed another large order with voxeljet for printed [indiscernible] pattern. These patterns are used to cast large titanium components that are mounted on space rockets. Historically, high on-demand printing revenue has led to higher systems revenue as customers upgrade from buying parts to operating their own 3D printer. So this makes us very optimistic for the rest of the year and beyond.
Let's turn to Slide 4 and a brief history of our company. On the left side, you can see the first prototype that we built around 1996 and the related patents. On the right side, you see our largest 3D printer, VX4000. Our booth reached back to the year 1995 with the first successful dosing of UV resins. In the context of a hidden project, initial 3D printing tests were performed at the Technical University of Munich. I co-founded the company on May 5, 1999, as a spinoff from the university with a clear vision in mind to establish new manufacturing standards. Today, we provide our customers a strategic competitive advantage by upgrading the existing production methods to additive manufacturing solutions.
Let's turn to Slide 5, where we describe our technology. In the additive manufacturing market, there are likely more than 10 different technologies, each with a specialized field of application. We use a technology called binder-jetting. Binder-jetting is especially suited for high-volume manufacturing because of its potential to scale. With our VJET X technology, we are pushing new boundaries.
On Slide 6, you can find a high-level overview of our company and recent key developments. In October 2022, we completed the sale-leaseback transaction of our headquarters in Germany, with the gross proceeds of approximately EUR26.5 million, we cleaned up the balance sheet and repaid our financial liabilities. In December 2022, we completed the revenue recognition of all five VJET X units at BMW, the printers, which are integrated into a fully automated casting line are in full operation at the Bavarian facility.
Our production line produces several hundred complex engine components per day. These components are used to make the cars more efficient by improving the temperature management, because the components are 3D printed, you can attain conformer shapes and can get closer to the heat and dissipate it more quickly. VJET X uses a new inorganic binding systems for maximum environmental compatibility when casting the 3D printed core.
Turning to Slide 7, where we explain our two business segments. In the Services segment, we operate our own 3D printers in three facilities around the world to offer affordable on-demand access to our technology. Our business model is very user friendly as customers only need to send in the 3D data, and we will print parts for them. That is a great and easy way for our customers to understand new business opportunities in 3D printing.
Customers come from various industries, including automotive, aerospace, general engineering, as well as art and architecture. As mentioned earlier in U.S., one of our largest on-demand printing clients is a supplier to a leading space exploration company. In our Systems segment, we manufacture and sell industrial grade, high-speed, large-format 3D printing systems geared towards mass production of complex models, molds and direct parts. Systems revenue also includes recurring revenue from the sale of consumables, maintenance contracts, upgrades and other aftersales activities. This recurring portion of revenue is growing as the installed base of our 3D printed expand.
Let's turn to Slide 8 and an illustration of the wide range of applications of our technology. Slide 9 shows an art piece we recently printed for the BMW Art Club in Warsaw, Poland. And it always amazes me to see the ideas clients come up with and to be able to make such ideas into reality with our binder-jetting technology.
Slide 10 shows our global sales network and production footprint. As you can see, we have reached an established position in all major markets in Europe, U.S.A. as well as Asia. Since March 2022, we have stopped our activities in Russia and Belarus until further notice.
Turning to Slide 11. On the left side, we have summarized our USPs. We differentiate ourselves from our competitors by build size, material diversity and speed. This leads to a complete set of industrial 3D printers to address the challenges and needs that are most important to our customers. Each model can be used with multiple material sets. On the right side of the slide, you can see our portfolio of 3D printers and the corresponding build volume. Layer times may vary with platform and process and can go as fast as four seconds with VJET X.
Let's start with the formal part of the presentation. I will begin with an overview of the results for the first quarter. Rudi will then provide a more in-depth view of our financials for the first quarter 2023 and our outlook for the rest of the year. Following his comments, we will be happy to take your questions.
Turning to Slide 13. Total revenue for the first quarter of this year increased 30% to EUR6.0 million from $4.6 million in the first quarter last year, that's a great result. In Services, our on-demand 3D printing segment, we saw another robust quarter with continuous high demand for our products. Revenue from our German and Chinese service centers was slightly below the very successful first quarter in the previous year, reflected by a decrease of 11% year-over-year for this segment.
In Systems revenue, revenue increased 123% as we sold one unit of our largest printers in the first quarter of 2023 compared to one smaller system in the first quarter 2022. The recurring portion of revenue is also growing as the installed base our 3D printers expands. This includes the sale of consumables, maintenance, contracts, upgrades and other after sales activities. Gross profit in the Systems segment was in quadrupled and gross margin almost doubled from 17.3% in the first quarter of 2022 to 33.5% in the first quarter of this year.
Gross profit margin in the Services segment decreased to 30% from 41.7% in the first quarter 2023. This was mainly related to lower gross profit from our German and the Chinese service center. We continue to see challenges when it comes to lead times for certain electrical components for our printers and we are working hard with our suppliers on this topic.
Slide 14 breaks down order backlog by quarter, revenue by geography and operating expenses by category. And looking at revenue by geographic region, we target an even distribution across the three regions on the -- to hedge against risk from local events. Order backlog for 3D printers increased 62% from EUR5.7 million at the end of the first quarter last year to EUR9.2 million at the end of this year's first quarter.
Turning to Slide 15. I'm very excited to share a schematic of our massive new 3D printer VX9000 BFP with you together with GE Renewable Energy we are developing the world's largest binder-jet 3D printer for the production of critical components for the next generation of wind turbine called Haliade-X. As you can see from the slide, we are aiming for a build area of more than [60] (ph) square meters, that’s more than seven times the build area of our currently larger system VX4000.
Why did GE choose voxeljet? For 20 years we have been developing the largest and fastest, standard jetting printers in the industry, and we have built a comprehensive IP portfolio. With the extra-large build area of the new 3D printer, the number of individual parts can be significantly reduced. In addition, the mode for casting can be optimized in terms of functionality and material consumption. This optimization makes it possible, completely new capping designs that can enhance the efficiency of the turbine. Also it streamlines logistics, the 3D printer can be operated close to the location where the mold will be cast, optimizing what could be otherwise be very complex logistics like long and complicated world transportation.
What exactly is our part in this project? We will handle the design, mechanical development and creation of the prototypes as well as commercialization of the new printers. GE will supply it to [indiscernible] and the digital blueprints of the parts to be printed by the machine. [indiscernible] will do the research and development on incorporating new printing concepts and experimentations. So how big could this market opportunity become? According to research from McKinsey, the global installed offshore wind capacity is expected to reach 630 gigawatts by 2050, up from 40 gigawatts in 2020. And with upside potential of 1000 gigawatt in a 1.5 degree celsius pathway scenario.
International Energy Agency has projected that global offshore wind capacity will increase 15 fold by 2040, becoming a $1 trillion industry. Thanks to failing cost, supported government policies and technological progress like those behind the Haliade-X offshore wind turbines. In U.S. the White House has taken decisive action to jump start the American offshore wind industry, including a $9.8 billion in new investments in 2022, more than tripled to previous years. While advancing the first large scale projects and new manufacturing and port activity along the East Coast, the Biden administration has also supported development of the entire supply chain that stretches across other regions from steel production in Alabama, Kentucky and West Virginia to shipbuilding in Texas, Louisiana and Mississippi and beyond. So we are very excited about this project.
Slide 16 highlights recent improvements in the performance of our binder-jetting technology, we
have shown a similar slide in the last earnings presentation and now added estimates for the new printer that we are developing in collaboration with GE. For this project, we plan to build what we believe to be the largest binder-jet print-head ever made. It is planned to be around seven meters in length and cover the whole printing area in a single path. It is absolutely massive and we calculated if you can achieve the development goals, it would print more than 2500 liters per hour.
On the next two slides, you can see two examples of how our clients TEI and Sharrow Marine are using our technology for series production. Turning to Slide 17. TEI is using the world's largest 3D sand printer purchases VX4000 to produce cores for the series production of large-format, weight saving structural components for the Cadillac Celestiq. They just added another system in the first quarter and now own three VX4000 printers. Using 3D printing, the novel underbody structure consists of only six large precision sand cast aluminum parts. Each of the six castings reduces the number of parts by 30 to 40 components compared to a typical sand construction.
On Slide 18, you can see the Sharrow propeller. You have heard me talk about this very exciting project in earlier presentations. Slide 19 summarizes our value proposition, our commitment to technology leadership is stronger than ever. It can be seen by how we have advanced our research and development strategy over the last few years. We have now started to capitalize on these investments, we believe we are well on our way towards profitable growth.
With that, I would now like to turn the call over to Rudi.
Rudolf Franz
Thank you, Ingo. Good morning, everyone. We're happy with the results for the quarter and how about the business is developing. I will now take you through the financials for the first quarter. After that, we are happy to take your questions.
Turning to Slide 21. First quarter 2023 revenues increased almost 30% to EUR6 million in the first quarter this year as compared to EUR4.6 million in the same period last year. Gross profit margin in the quarter slightly decreased to 32% from 34% in the first quarter last year.
Let's break this down. In Systems gross profit margin from the sale of 3D printers increased because of a different product mix, we sold one unit of our large system and larger systems typically generate higher gross margin. In Services, Germany and China contributed lower gross margins as compared to the first quarter of the previous year.
In the next slide, we show our segment reporting for the quarter. On Slide 22 revenues from System segment, which includes revenues from selling 3D printers, consumables and spare parts as well as maintenance increased 122.8% to EUR3.2 million for the first quarter [indiscernible] from EUR1.4 million for the first quarter last year. We sold one large new printer this quarter compared to one small new printer in the first quarter of 2022. We are also encouraged to see the recurring revenue portion growing at the store base as our printers expands. Consumable business especially can generate high gross profit.
On Slide 23, Services revenue decreased 11% to EUR2.9 million in the first quarter 2023 compared to EUR3.2 million in the same quarter last year. Services gross profit margin decreased to 30% in the first quarter of 2023 from 42% in the same quarter 2020.
Looking now to the rest of the financial highlights in Slide 24. Selling expense increased to $1.9 million in the first quarter of 2023. The majority of our selling expenses are personal expenses and distribution expenses such as freight and commissions for sales agents. This compares to EUR1.6 million in the first quarter of 2022. Administrative expenses decreased to EUR1.5 million as compared to EUR1.7 million in the first quarter of 2022. Keep in mind, we typically spent more than EUR1 million in auditing fees per year and EUR0.5 million in legal fees. Research and development expenses increased to EUR1.6 million in the first quarter compared to EUR1.4 million in the same quarter of 2022. These expenses are usually driven by individual projects, especially through the consumption of material, as well as demand of external service that may vary significant from quarter-to-quarter.
Operating loss was EUR2.8 million in the first quarter of 2023, compared to an operating loss of EUR1.1 million in the comparative period in 2022. This increase in loss was mainly due to the one-off impact in the first quarter 2022 from the reclassification of foreign currency translation, reserve in connection with the wind down of [indiscernible]. We received approximately EUR0.5 million in research and development expense, reimbursement and grants this quarter, up from EUR0.1 million in the same quarter last year. As a result, net loss for the quarter was EUR3.2 million or EUR0.34 per ADS compared to a net loss of EUR0.8 million or EUR0.10 in the prior year's same quarter.
Shares outstanding as of March 31, 2023 are 9.134,724. And on Slide 25, we show selected balance sheet items. As of March 31, 2023, the company had cash, cash equivalents and short term investments in bond funds of roughly EUR50 million. This includes restricted cash of approximately EUR3 million. Total financial debt as of March 31, 2023 was approximately $2.5 million.
Moving now on to Slide 26 and our financial guidance for full year 2023, which remains unchanged. Revenue for the second quarter of 2023 is expected to be in the range of EUR4.25 million and EUR5.75 million. And this concludes my remarks.
And with that, we'll now open the call up for your questions. Operator?
At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brian Kinstlinger from Alliance Global Partners. Please proceed with your question.
Great. Thanks for taking my questions. My first question is, Systems revenue was up 100% year-over-year, a little bit more in the first quarter. You talked about selling one printer, which is bigger than the one you sold in 2022 in the first quarter. So I know prices are different. But can you tell us roughly how much of the growth was from the higher price system versus more of the after sales pieces such as consumables.
The increase comes primarily from the sale of the system, so probably 80%. And the remaining portion [indiscernible] out of recurring revenue consumables based on maintenance.
Okay. So that suggest to me that the price of the large system was close to $2 million?
We do not disclose those numbers in detail. The average selling price of the system still is given in a range of EUR500,000 to EUR600,000. Have in mind that the smaller systems are EUR200,000, which starts with VX200 up to EUR1.65 million for VX4000. And I think within those ballpark numbers you can come to the right numbers.
It's helpful. Great. And then you said services revenue was down as a result of the lower contribution from the China and German facilities. I think you made similar comments in the last few quarters about this partially offsetting the growth there. So can you talk about the actual drivers behind the lower services demand at these facilities?
Well, I would say the business was really good. And the first quarter last year was extremely good. Let's say, this way. I would say the German facility is running at capacity, which is quite nice. We had some movement of revenue we needed to book in the next quarter. I think this explains it for Germany. China is relatively -- was relatively under pressure in the first quarter, we believe that it's becoming better during the rest of the year.
Right. Why is China under pressure? Is it still the effects of the lockdowns and opening up? I mean is it the customer [Multiple Speakers]
Exactly. But still suffering a little bit of the COVID situation, but this is now really released. So we believe that it's now growing much better for the remaining year.
And then can you comment on the mix of the 12 printers in your backlog? Are they generally the larger and higher priced systems? Is it EME split between the smaller and larger. Maybe just a little more detail there would be helpful. Thank you.
So we are focusing -- thank you for the question, Brian. We are focusing more on the larger printers, and that's how it is in this current backlog, it's more the larger printing.
So the environment generally is good for the larger printers. This is what we seek on a global scale, especially in the fan printing area, the request for production printer is really increasing.
Great. Last question I have is for your large Bavarian auto customer who's got five printers. I mean, they're not printing a large amount of -- a variety of their different parts, I don't think. So what has to happen for that customer take more printers, how far are we for other parts assuming they are successful with those five they've got.
So for this moment, we can name this company, BMW, so it's already released. So they are currently testing these printers or the technology for this combustion engine as you anticipate. Of course, they are thinking about different components of the electrical for electrical vehicles in the future. And you need to know that only a smaller portion of the production is made in-house. So they are also seeking with their suppliers for future production capabilities. And that's why we are, let's say, very curious about how the suppliers will approach us in future. We already had discussions with them. We believe that this is becoming closer and better for the near future.
Great. Thanks.
And we have reached the end of the question-and-answer session. I'll now turn the call back over to Dr. Ingo Ederer for closing remarks.
Thank you. So it was good seeing many of you at the Rapid Show a couple of weeks back in Chicago. Thank you for joining today's call, and we look forward to speaking with you again in our next earnings call, which we expect to take place in August with results for the second quarter 2023. Thank you very much, and have a good weekend.
Thank you very much. Good weekend to all.
And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.