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Yes. Thank you very much for attending today's conference call regarding our 9 months results. A warm welcome to everybody. First of all, I would like to introduce who's participating in this call today. Besides Dennis Schaefer and me, I also have -- we also have Dr. Axel Schulz in the line, who's our CSO and will add some comments on our revenue development and the sales activities that we had in the first 9 months, and he will use that opportunity. He will take that opportunity as well to introduce himself later in the presentation. So first of all, as always, I would like to provide a quick overview and a short overview of what happened in the first 9 months of this year. First of all, our year-on-year revenues slightly decreased by 3.6%. We are now slightly below EUR 50 million. Last year, we already past EUR 50 million. After 9 months, total operating revenues increased by 15.5%, yes, to nearly EUR 60 million. That's in preparation for the revenues that we see for the fourth quarter. The new order intake in value increased by almost 13% so we're on a good way to further develop our top line. And yes, the current adjusted order intake in value terms also increased by 14.8%. So I think this goes in the right direction. The profitability of our business improved by around 10%. Yes, we are still negative but compared to last year, it's already an improvement. Personnel cost ratio decreased, and we're on a good way in our cost structure as well. The prospects and leads developed very positively. We've got a new record of more than EUR 400 million in prospects and leads, yes. That's almost 30% more than last year. Dr. Schulz will add some comments on that later on, but I just want to mention this is on a new record level and supports us in our growth plans. Thanks to the advanced technology, I think SLM Solutions is well positioned to participate in the near- and long-term growth opportunities that we see, yes. There are clear indications that more and more customers start industrial production with additive manufacturing machines and with our multi-laser technology and the other improvements that we introduced, the SLM 800 and the fully automated solutions around the SLM 800. We are well positioned. And if I take into account the squared machine, we call it SLM 600. This will probably not be the brand name of the product but I still call it SLM 600. The squared machine will also open new opportunities to participate in that market. Again, Dr. Schulz will add some further comments on that in the presentation as well, but I think it's worth mentioning it's in the overview already. I now hand over to Dennis Schaefer, who will guide us through the share price development, shareholder structure and some other topics.
Thank you very much, Uwe Bögershausen. Also a warm welcome from my side. Thank you very much for the interest, the audience. Share price development, we see, as for the last year is a very high volatility in our share price often linked to market movements or market developments. As already pointed out by Uwe Bögershausen, we are absolutely convinced that SLM can lead the ongoing shift into serious production of functional parts with additive manufacturing technologies. This will, sooner or later, also be reflected in our share price.Shareholder structure, very stable without real changes since presentation of H1 numbers. That's for now for me. I'll come back later and I'm now very happy to hand over to Dr. Axel Schulz, Chief Sales Officer and member of the executive board.
Thank you very much. Please let me take the opportunity to introduce myself. My name is Axel Schulz. I am 53 years old, and I've studied mechanical and process engineering at the Technical University of Braunschweig. This was followed by a number of professional responsibilities in the areas of process engineering, marketing, machinery and plant engineering. Between 2015 and '18, I had the position of CEO at the engineering company, Putzmeister in Southern Germany. Prior to this, I was Executive Vice President at Lap Laser applications. I have experience in marketing, business development as well as in aftersales service. In February 2018, I joined the executive board of SLM Solutions with the responsibility of sales, marketing, business development, key account management, service and 3D metal powder.Now let me comment, Page #6 concerning the sales prospects. The sales potential business is now on a record level with EUR 422 million. This will gain further momentum driven by large industrial companies starting to more heavily adopt 3D printing in its industrial production processes. We are now well prepared with production-oriented machine portfolio. We already see the momentum starting when looking at the growth rate of 22% between Q1 2018 and Q3 2018 after only 10% growth between Q1 and Q3 in 2017. The most important lever is a change into solution-based approach, including software consulting and consumables. Now we are coming to the financial highlights. Please, Mr. Schaefer
Thank you very much, Dr. Schulz. We'll come back to you later. Now finally getting to some numbers, financial highlights. A quick look on order intake. When looking at the 9-months numbers, adjusted by frame agreements signed in 2017, we see 2 obvious facts: first one, order intake in the reporting period increased by 7 machines or EUR 4.7 million, which corresponds to a growth of 12.9%; second fact, current order intake based on the 7th of November this year even increased by 14.8% to EUR 43.9 million in total. Now there is a third fact I would like to draw your attention on, and that is the growth rate in between the quarters. When we look at the quarters -- at the second and third quarter 2018, we see that we are picking up speed again. After a decrease in 2016 and 21% growth between second and third quarter 2017, we now see 26% growth between the second and third quarter in 2018. Also worth to mention, as we are very proud of that, is that the development on order intake of multi-laser machines is very positive. Why is that important for SLM? Because multi-laser systems is one of the USPs of SLM Solutions. The multi-laser systems we offer, offer high productivity combined with the high quality of parts produced to our customers. As stated before, we feel very well positioned to participate in the further growth opportunities of this growing market. The additive manufacturing industry is quickly moving away from single-machine orders for prototyping or research purposes into multi-machine orders to further drive industrialization. And for this, high productivity, high quality of parts as well as stability and repeatability of the process are the key factors. That it was SLM stands for, and we can reassure you that SLM is working to be at the forefront of this market development.Sales figures 9 months 2018. As with previous years, not a new picture. We see that a high portion of revenues is coming from our SLM 280, 1 machine more compared to the same reporting period last year. The SLM 280 is a very mature system, often used by customers which want to produce functional parts in a serial production environment.Consolidated revenues by segments. We can continue to say that we still see further growth potential in our After Sales business and continue to further unlock this potential, with different initiatives like sending out consultancy and advisory teams, further developing our e-learning solutions, selling more metal powder, getting more machines under service, et cetera. Dr. Schulz will also come back partially on that topic later.Quarterly revenues. As stated since the beginning of the year and as most of you know from previous years, also 2018 is expected to be very much back-end loaded again.Good news on the EBITDA, positive news on our activities on the cost structure. We were able to bring our personnel cost ratio down and to overall improve our EBITDA by around 10%. Cost of materials ratio increased to 50% compared to 46.8% last year, mainly related to building up stocks in preparation of a strong fourth quarter.Yes, the audience we know the working capital is on a high level but reflects what we stated earlier. We are preparing for a strong year-end run but we're building up stocks.Now thank you very much for listening. I will hand over to Dr. Schulz again to speak about some strategic aspects of the business.
Thank you, Mr. Schaefer. Our strategy is currently under review. We will rethink strategy and develop actions to participate in market opportunities even better than in the past. Our ideas on first actions are: we will expand the sales and aftersales capabilities on a global basis tailored to ensure that SLM can meet the requirements for the industrial use of additive manufacturing. We have good progress on development of application and advisory teams, focusing on further support for our customers to step into additive manufacturing and for ramp-up of serial production. It is our intention to be a proactive development partner to guide our customers on their 3D printing journey. We currently refine our machines, including full-scale software updates, to ensure SLM's market leadership. Hardware technology is now combined with market-leading software usability. Now we're focused on formnext exhibition next week. The focus is on showing our customers how to be successful in additive manufacturing with SLM Solutions as their partner. We also show our new softwares as well as an updated SLM 280. Now I will continue with our management outlook in 2018. The revenues are expected of around EUR 90 million to EUR 100 million, highly depending on [ next ] quarter. We also expect a positive single-digit EBITDA margin. And with a look to our multiple leads on new customers and multi-machine orders, we now build up the momentum for further growth.
Yes, let me add some words on the longer-term outlook. The long-term vision of EUR 500 million with a positive EBITDA margin of around 20% is confirmed, but the strategy to achieve that is under review. The focus remains on long-term frame contracts and collaboration agreements, yes. That's from our perspective a vital part of replacing the revenue potential that came from other customers in the past, yes. We are replacing that with long-term frame agreements. And overall, we are looking for a tight and close long-term relationship with our customers. The product mix will include more production-oriented machines, in other words, multi-laser tools and fully automated solutions for producing parts. The foundation of our company, the technological leadership and the overall perception is still very positive. Despite the recent forecast revisions, we are absolutely convinced that SLM Solutions is well positioned to capture significant growth opportunities both in the near term and more important in the long term. Building on the company's advanced technology, the multi-laser technology, with the capability of producing high-quality, functional parts in serial production. That's increasingly important and that allows us to achieve further growth. I personally am convinced that SLM can, on this basis, lead this industry. From a technological perspective, we are already the leading part, and this will be reflected in our development for the future as well. We are building on our technological leadership and strong relationships to our customers. The frame agreements, as already said, are a vital part. Looking backwards, I have to admit that it might take a little bit longer than initially expected in 2016 to replace former revenue potential and to get these frame contracts up and running. But this is still a vital part of our strategy, and it's still the right direction we lead the company to. So that's, from our perspective, the longer-term view, the longer-term view is confirmed. Before we now start the Q&A session, let me add some personal words. We've had another announcement last week and this was with regards to my contract. We announced that I will not renew my contract after the 13th of June. The reason for that are very personal reasons and has nothing to do with the company as such. I remain a shareholder so I still believe -- I strongly believe in the company and in our position and the technology, yes. With the management team that we have set up in the last few months, we are well prepared for future growth. So even if I have personal reasons for that decision, yes, I strongly believe in the company as such and strongly support that company. I know that the last 2 years have been very challenging, yes, but nevertheless, the foundation is clear, the growth opportunities are there, and this forms the foundation of the company and this is still very intact.So thank you very much for your attention. We now start the Q&A session.
[Operator Instructions] We've received the first question, it comes from Thomas Effler, ODDO BHF.
A couple of questions, if I may. First, regarding your strategy, what you mentioned, Mr. Schulz, that you reviewed the strategy. Does it mean, for example, that you're kind of thinking about also to close or kind of divest the software or the powder business or focusing more on the machine and solution business? The second question regarding the framework contracts. Can you give a little more flavor and color what really happened in China with one of your main framework clients? In the press release, it sounded that it's on hold and probably at risk, the contract. And thirdly, regarding your outlook, the guidance. You're saying single-digit EBITDA margins compared to the double digit. Can we assume that it's more kind of in the middle range of single-digit or probably you can explain more where you expect the margins to get to.
Yes, thank you very much for your questions. We will split the answers. Dr. Schulz will add some comments on the strategy review and the software business. But I would like to start with the powder business because that's the easiest topic to answer. As I said in the previous calls, yes, we are changing our strategy a little bit on the powder side. The point is I explained that at an earlier stage already, in 2016, there has been a scarcity of high-quality powder. And therefore we decided to follow a 2-step approach. In the first step, we wanted to produce standard aluminum powder and -- in order to meet the demand that we are seeing. And in the second step, we wanted to refine the existing alloys and design new powders tailored to the industry and tailored to the needs of the SLM process. The second step is still our strategy, and from my understanding, the most interesting part of that story. But in the meantime, the producers of standard materials have increased capacity significantly. So there are more vendors for high-quality powders, not just aluminum, but aluminum was the most [ scarce ] powder that we have seen in 2016, yes. So even for aluminum, there are high-quality vendors. And therefore we decided not to set up an atomizer for standard material but to enter further collaborations with companies like [indiscernible] in order to tailor alloys to the SLM process and the needs of our customer. So it's not -- I wouldn't say that we stopped the -- or completely changed our powder strategy, but it's a refinement of that strategy. Regarding framework, the framework agreements, I would like to add some comments as well. No, the contracts are not at risk but it's, as I said beginning of 2018 already, these are mainly Chinese customers and these are newcomers to the industry. And therefore, yes, we are using 2018 to satisfy those customers and to lead them to adopting additive manufacturing. This is a huge effort, yes, and it is not comparable to other client relationships, yes. That's clear. It will take some time to get them to additive manufacturing and to familiarize them with additive manufacturing, yes. We're on a good way. The customers are committed to these frame agreements, yes. But obviously, we sometimes have to face problems that we don't face with experienced Western European customers. The EBITDA margin, well, we don't -- at this time, we don't comment too much on the EBITDA margin, yes. It will be single-digit, yes. And if you assume something at the lower end, then you're on the conservative side of the estimations. So Mr. Schulz will add some comments on the strategy review.
Yes, yes. Yes, the main idea behind our new strategy is to come from machine supplier into solution provider. That means that we would like to bring more focus on integration competence at the customer side instead of only being a supplier for machines. And therefore, we are starting now to ramp up a key account management team and to start up consultancy products to bring the consulting philosophy better on the market, to say that we are -- would like to offer the customer the whole competence or complete process instead of a single machine. And therefore, we know that the market will move from single-machine market into mass production. And therefore, we would like to lead this progress in the market to help the customer to enter mass production with our machinery.
Does that also include that you're kind of offering kind of services by yourself? Or is it mainly that the client, you are setting up the system and helping them and then the client is producing the parts?
We will help them to produce its own parts. I mean there, we will maybe -- we will offer some of our service capacities to help them to have a shorter ramp-up phase. We will not produce for the customer any parts.
And does that mean that you're also hiring more people and kind of shifting internally or...
Yes, that is necessary.
Okay. So we can assume more people, personnel costs then go up probably in '19?
Yes, the new hires will be moderate and we will also shift some internal capacities to that topic, yes. It will be a mix.
And then probably the service part for sales for -- to also increase because you will give -- offer more service?
Yes, yes, of course. Yes, sales force and service force will increase by either by capacity and also by quality. This is because we need to offer an internal ramp-up to qualify our service people and service people for the market.
Okay. And probably a final question regarding the kind of working capital. You mentioned it's quite high right now. What is the current cash position? Do we assume that you have enough financing for the next 12 months to finance the change of strategy and the service expansion?
Yes, of course. That's covered by our cash position. We are working on the working capital and the working capital intensity. And the additional sales in the fourth quarter will show that the working capital position is going downward and as planned, yes. And we invested in inventories for the fourth quarter, yes. That's a fact, yes, but this ratio will come down at the beginning of next year.
Okay. And then just a final one, if I may. You mentioned the SLM 600. Probably you can give -- say some words about that, Mr. Schulz, the new product.
Yes, well, I will add some words because I just introduced that. You might remember our press release a couple of months ago where we introduced the new machine concept for the future, the squared build plate with a size of 600 by 600 millimeters, and the height will be the same of the SLM 800. And please excuse me, I'm still using that SLM 600 name, yes. This will probably not be the official name of the product, yes. But this will be a huge machine with more than 4 lasers, yes, up to 12 lasers and a new concept of melting the material, a new melting strategy. And this will lead to a much higher productivity of our systems and a breakthrough in terms of productivity and part costs. But if I may add, we are very well on progress with development and the machine will be introduced to the market in November of 2019 under [indiscernible]. Everything we've said a couple of months ago in that press release is on track.
At the moment, there are no further questions. [Operator Instructions] We've received another question, it comes from Uwe Schupp of Deutsche Bank.
Two or 3 questions, please, from my side. First of all, do you still expect the Chinese order that now got delayed, potentially canceled, do you still expect it to be shipped next year? In other words, if you talk to the customer, how keen is he really to still continue? Or do you see a viable risk that indeed, you may have to look for another customer for the already produced SLM 800s? Secondly, could you give us an update on the 3 other Chinese contracts you signed last year? Maybe go through them one by one, whatever you -- if you had to assess the risk, any potential risk from these orders to a similar extent? Or is it rather likely that these -- will it be indeed revenued next year and then 2020? And then lastly, also coming back to a question Thomas indirectly asked. Have you already entered negotiations with banks regarding a potential breach of covenants, which I guess, it could be happening in Q4?
Yes, thank you for your question. First of all, the Chinese order is delayed and not canceled, yes. That's important to understand. They've done a significant prepayment, yes, and therefore, I'm convinced -- well, I'm not just convinced, I know that they have to produce the parts they wanted to use our machines for, yes. And therefore, it plays the vital role in their strategy. And yes, in other words, yes, I'm convinced the orders will come in beginning of 2019. It's a vital part for them. It's a vital part of the strategy and the build part is really necessary for them. With the other Chinese customers, I'm also convinced that they will fulfill their contract. It might take a little bit longer, yes, as I think this is more than obvious by today. It might take a little bit longer, yes. We need more training and more consulting for them, yes. We have to make sure that they are using the machine in the right way. And if that's the case, then the orders -- the call-offs will come in. And yes, that's our part, as I said, beginning of 2018 already, yes. It takes some time and we need to convince these customers and satisfy these customers, then we will have a great success, and a good position in the fast-growing Chinese market. Regarding talks with our banks, well, we're in a regular exchange with our banks and I don't see any problem there.
Very helpful. So when you look in your schedule into next week for the formnext, I obviously assume it's very busy. But is it also -- do you foresee any potential new frame contracts in Q4? Because my understanding is so far, we haven't seen anything in year-to-date basis.
Yes. Yes. We are still working on these frame agreements with more common Western names, yes. I'm not sure -- I don't think that we will finalize something on the formnext trade show, but we will have some further talks on the trade show. So that's also taking some more time than I initially expected. That's what I admit. But the negotiations and the talks are in a very good -- on a very good way, yes. And as you all know, the multi-laser technology leads to higher productivity of the machines. And therefore, this is a perfect solution for industrial and serial production, yes. And this is exactly what the frame contracts will cover.
The next question comes from Gerhard Orgonas of Berenberg.
Yes, maybe first question on Q4. So you were flat, slightly down in revenues in the first 3 quarters, and even to achieve the low end of your guidance, you need 30% growth on Q4. Could you maybe detail again why you're so confident that you will achieve that over EUR 40 million revenues in Q4?
Yes. We know that a lot of projects who should come in early quarters were delayed, and we are now in the final negotiation phase for these delayed projects. And we have now an addition of a lot of delayed projects from first 3 quarters in the fourth quarter. And then we have also the year-end business on top. And so that it leads to our confidence that we will have this order intake and revenue in Q4 this year.
How many of the machines that you want to ship in Q4 have you shipped by today?
Yes, sorry, we don't disclose. This is a quarterly report so we will come up with more detailed figures at the end of December, yes. But I ask for your understanding, in the course of the quarter, we don't disclose any figures, yes. We know that our competitors will probably also listen to this call.
Okay, no problem. Then maybe a question on the Chinese orders again. So you have 4 big ones: 1 was from June 2017 and at that time, the delivery was planned for June '17 to September 2018 for 10 times 500 machines. Are those machines -- is that completed? Or [ have there been ] delays of that one as well?
Yes, there are delays as well, but we expanded that contract to March 2019, yes. So that's a contract that is very well on track. And I can assure you, right at the beginning of the relationship, we also had some effort, yes, to train the customer and to make sure that everything works in a good direction, yes. We are now in the phase of talking about the next steps after that contract.
Okay. And then the last 2, the 2 big ones for the 280s, are they still in prototype phase? Or are they kind of regular call-offs at the moment? How do they look?
Yes, they are regular call-offs, but some call-offs are delayed as these customers -- it's always the same reason, yes. They also require additional training and additional support. They are -- both of them are setting up -- it's a mixture of both, yes. Both of them are setting up their own network of service centers all over China, yes. And at the same time, they deliver machines to larger industrial customers. And therefore, a lot of training and advice is needed for building parts on these machines, yes. But that's a very natural way. And I have to say compared to some other customers who took years to familiarize with the technology, I think it -- maybe it's not surprising that they need some time to familiarize with that technology as well, yes, and to get it up and running. Overall, we're on a very good track.
Okay. And then final question. Maybe it's a little bit too early for that, but last year, the beginning of the year, you gave us an indication of how much of the order backlog would fall into 2018 revenues. Of the current order backlog, do you have a visibility already what will be relevant for 2019?
No, we don't comment on that at this time as well, yes. I ask for your understanding again, this call is recorded and our competitors will listen to it as well.
The next question comes from Carlos Becke of Hauck & Aufhäuser.
Just one, not on the framework agreements this time. On the new strategy, revision of strategy, the expansion of the sales team and After Sales team, what kind of CapEx are we looking at here? And when should it start and when should we see a significant increase in personnel costs moving forward?
Yes, as I mentioned before, these are ideas and the strategy is still under review, and we are thinking and discussing about the new field or sales activities and sales channels. And up to now, we have no figure available for CapEx. But most will be OpEx, not CapEx.
Exactly.
Okay. So potentially, also the 20% EBITDA long-term vision is at risk since you have come to realize that there needs to be more personnel involved into the process? Or is...
Yes. No, I don't see that because as we said, this will be a mix of new hires and existing people who just changed the job. So we will shift capacities as well. So no, I don't see the long-term EBITDA target at risk.
Okay, okay. And if I may, a follow-up. These people that switch positions inside of SLM, where do they come from? Where is the capacity? [ Where -- well ] is the utilization very low?
Yes. No, that's too early to discuss it right now, yes. Please understand these strategies as under review and we will come up with further details at a later stage.
As there are no further questions at the moment, I would hand back to Uwe.
Yes, thank you very much for the questions, and thank you very much for attending the call. And I hope to see you at the formnext trade show next week, yes. You are invited, and if you want to take a look at the machines, yes, please come over. Most of you are in Frankfurt, yes, so you are invited. Thank you very much for listening to this call.