voxeljet AG Reports Financial Results for the First Quarter Ended March 31, 2019
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voxeljet AG Reports Financial Results for the First Quarter Ended March 31, 2019

FRIEDBERG, Germany — (BUSINESS WIRE) — May 16, 2019 — 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, 2019.

Highlights - First Quarter 2019(1)

(1)Certain comparative figures for the 3-month period ended March 31, 2018 were restated for immaterial errors. For further information, see Note 9 of the Q3-2018 condensed consolidated interim financial statements.

Dr. Ingo Ederer, Chief Executive Officer of voxeljet, commented, “We had a strong first quarter with results that confirm why we are so excited about our potential to establish a new manufacturing standard. Just recently, we installed the first print engine into VJET X: This print engine is the heart of our new additive mass manufacturing solution and I firmly believe one of the most advanced piece of technology in the whole additive manufacturing industry. The shifts we have made to our business and our deeper focus on the three core areas of innovation, integration and speed are igniting the next phase of growth and profitability for voxeljet.”

First Quarter 2019 Results

Revenues for the first quarter of 2019 increased by 10.2% to kEUR 5,565 compared to kEUR 5,052 in the first quarter of 2018.

Revenues from our Systems segment, which focuses on the development, production and sale of 3D printers, increased 75.6% to kEUR 2,415 in the first quarter of 2019 from kEUR 1,375 in last year’s first quarter. The Company delivered two new and one used and refurbished 3D printer in the first quarter of 2019, compared to two used and refurbished printers delivered in last year’s first quarter. Systems revenues also include all Systems-related revenues from consumables, spare parts and maintenance. The increase of revenues from our Systems segment was mainly due to higher revenues from Systems-related revenues, while revenue from the sale of 3D printers slightly increased. The increase of Systems-related revenues reflects the higher installed base of 3D printers in the market and the associated growth in aftersales activities. Systems revenues represented 43.4% of total revenues in the first quarter of 2019 compared to 27.2% in last year’s first quarter.

Revenues from our Services segment, which focuses on the printing of on-demand parts for our customers, decreased 14.3% to kEUR 3,150 in the first quarter of 2019 from kEUR 3,677 in the comparative period of 2018. This was mainly due to lower revenue contributions from our German operation. We received a lower number of orders mainly reflecting a lower demand from the automotive industry. This was partially offset by increased revenue contributions from our subsidiary voxeljet America Inc. (“voxeljet America”). The increase in revenue at our American service center was mainly attributable to a volume contract which we entered into during the second quarter of 2018.

Cost of sales was kEUR 3,652 for the first quarter of 2019 compared to kEUR 2,919 for the first quarter of 2018.

Gross profit and gross profit margin were kEUR 1,913 and 34.4%, respectively, in the first quarter of 2019 compared to kEUR 2,133 and 42.2%, respectively in the first quarter of 2018.

Gross profit for our Systems segment increased to kEUR 829 in the first quarter of 2019 from kEUR 381 in the first quarter of 2018. Gross profit margin for this segment increased to 34.3% in the first quarter of 2019 compared to 27.7% in the first quarter of 2018. This was mainly due to higher gross profit margin contributions from Systems-related revenues resulting from a more favorable ratio of revenues to fixed costs compared to last year’s first quarter.

Gross profit for our Services segment significantly decreased to kEUR 1,084 in the first quarter of 2019 compared to kEUR 1,752 in the first quarter of 2018. The gross profit margin for this segment decreased to 34.4% in the first quarter of 2019 from 47.6% in the first quarter of 2018. This was mainly related to lower gross profit margin from the German service center as a result of lower utilization. Our subsidiary voxeljet America also contributed lower gross profit margin due to higher depreciation expense, as we added additional 3D printers to our American service center during the third quarter of 2018, including one VX4000 system.

Selling expenses remained nearly unchanged at kEUR 1,676 for the first quarter of 2019 compared to kEUR 1,736 in the first quarter of 2018, despite an increase in revenues. We incurred higher shipping and packaging expenses, which vary from quarter to quarter depending on quantity and types of products, as well as the destinations where those goods are being delivered.

Administrative expenses were kEUR 1,439 for the first quarter of 2019 compared to kEUR 1,232 in the first quarter of 2018. This was mainly due to an increase in headcount resulting in higher personnel expenses as part of management’s remediation efforts on the material weakness identified in the prior year. In addition, we incurred higher consulting fees as part of our project to expand our Enterprise Resource Planning (“ERP”) system. We have hired additional employees in the IT-Team for the management of SAP ERP system related tasks.

Research and development (“R&D”) expenses increased to kEUR 1,705 in the first quarter of 2019 from kEUR 1,597 in the first quarter of 2018. The increase of kEUR 108 was mainly due to higher personnel expenses as a result of a slight increase in headcount.

Other operating expenses in the first quarter of 2019 were kEUR 13 compared to kEUR 358 in the prior year period. This was mainly due to lower losses from foreign currency transaction for the first quarter of 2019 compared to the first quarter of 2018.

Other operating income was kEUR 978 for the first quarter of 2019 compared to kEUR 402 in the first quarter of 2018. The increase was mainly due to higher gains from foreign currency transactions.

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

Operating loss was kEUR 1,942 in the first quarter of 2019, compared to an operating loss of kEUR 2,388 in the comparative period in 2018. The improvement was primarily related to a significant increase of other operating income partially offset by a lower gross profit.

Financial result was negative kEUR 858 in the first quarter of 2019, compared to a financial result of positive kEUR 678 in the comparative period in 2018. The significant decrease was mainly driven by the revaluation of the derivative financial instruments in connection with the European Investment Bank loan.

Net loss for the first quarter of 2019 was kEUR 2,788 or EUR 0.57 per share, as compared to net loss of kEUR 1,716, or EUR 0.46 per share, in the first quarter of 2018.

Based on a conversion rate of five American Depositary Shares (“ADSs”) per ordinary share, net loss was at EUR 0.11 per ADS for the first quarter of 2019, compared to a net loss of EUR 0.09 per ADS for the first quarter of 2018. 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 2019 is expected to be in the range of kEUR 5,000 to kEUR 5,250.

We reaffirm our guidance for the full year ending December 31, 2019:

Our total backlog of 3D printer orders at March 31, 2019 was kEUR 3,422, which represents six 3D printers. This compares to a backlog of kEUR 3,392 representing six 3D printers, at December 31, 2018. 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, 2019, we had cash and cash equivalents of kEUR 8,482 and held kEUR 8,924 of investments in bond funds and kEUR 1,253 in one note receivable, 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 17, 2019 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 2019 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 13690018. The recording will be available for replay through May 24, 2019.

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=1241565&tp_key=90fb6173de 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. We are unable to reasonably estimate the potential full-year financial impact of foreign currency translation because of volatility in foreign exchange rates. Therefore, we are unable to provide a reconciliation our forward-looking guidance for non-GAAP Adjusted EBITDA without unreasonable effort as certain information necessary to calculate such measure on an IFRS basis is unavailable, dependent on future events outside of our control and cannot be predicted without unreasonable efforts by the Company.

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 1.1235 to EUR 1.00, the noon buying rate of the Federal Reserve Bank of New York for the euro on March 31, 2019.

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,’’ ‘‘projects,’’ ‘‘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.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

     
Notes 3/31/2019 12/31/2018 (1)
(€ in thousands)
unaudited
Current assets 36,519 37,936
Cash and cash equivalents 7 8,482 7,402
Financial assets 7 10,177 12,905
Trade receivables, net 4,857 6,030
Inventories 4 11,156 10,064
Income tax receivables 37 13
Other assets 1,810 1,522
 
Non-current assets 35,371 31,416
Financial assets 7 1,632 2,234
Intangible assets 1,404 1,420
Property, plant and equipment, net 2, 5 32,255 27,675
Investments in joint venture 32 33
Other assets 48 54
   
Total assets 71,890 69,352
     
Notes 3/31/2019 12/31/2018 (1)
 
Current liabilities 6,732 6,302
Trade payables 7 2,507 2,945
Contract liabilities 7 1,027 817
Financial liabilities 2, 7 1,377 850
Other liabilities and provisions 6 1,821 1,690
 
Non-current liabilities 20,780 16,575
Deferred tax liabilities 63 76
Financial liabilities 2, 7 20,539 16,321
Other liabilities and provisions 6 178 178
 
Equity 44,378 46,475
Subscribed capital 4,836 4,836
Capital reserves 87,572 86,803
Accumulated deficit (49,184) (46,400)
Accumulated other comprehensive income 907 1,201
Equity attributable to the owners of the company 44,131 46,440
Non-controlling interest 247 35
Total equity and liabilities 71,890 69,352

See accompanying notes to unaudited condensed consolidated interim financial statements.

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

     
Three months ended March 31,
Notes 2019 2018 (1) (2)
(€ in thousands except share and share data)
Revenues 9, 10 5,565 5,052
Cost of sales (3,652) (2,919)
Gross profit 9 1,913 2,133
Selling expenses (1,676) (1,736)
Administrative expenses (1,439) (1,232)
Research and development expenses (1,705) (1,597)
Other operating expenses (13) (358)
Other operating income 978 402
Operating loss (1,942) (2,388)
Finance expense 8 (917) (268)
Finance income 8 59 946
Financial result 8 (858) 678
Loss before income taxes (2,800) (1,710)
Income taxes 12 (6)
Net loss (2,788) (1,716)
 
Debt investment at FVOCI - net change in fair value 106 (15)
Foreign currency translation differences (400) (64)
Other comprehensive income (294) (79)
Total comprehensive loss (3,082) (1,795)
 
Loss attributable to:
Owners of the Company (2,784) (1,710)
Non-controlling interests (4) (6)
(2,788) (1,716)
 
Total comprehensive loss attributable to:
Owners of the Company (3,078) (1,789)
Non-controlling interests (4) (6)
(3,082) (1,795)
 
Weighted average number of ordinary shares outstanding 4,836,000 3,720,000
Loss per share - basic/ diluted (EUR) (0.58) (0.46)

See accompanying notes to unaudited condensed consolidated interim financial statements.

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

(2)Certain comparative figures for the 3-month period ended March 31, 2018 were restated for immaterial errors. For further information, see Note 9 of the Q3-2018 condensed consolidated interim financial statements.

CONDENSED 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 December 31, 2017 (2) 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 (2) 3,720 76,227 (37,643) 1,380 43,684 71 43,755
Loss for the period -- -- (1,710) -- (1,710) (6) (1,716)
Net changes in fair value of debt investments at FVOCI -- -- -- (15) (15) -- (15)
Foreign currency translations -- -- -- (64) (64) -- (64)
Equity-settled share-based payment -- 129 -- -- 129 -- 129
Balance at March 31, 2018 (2) 3,720 76,356 (39,353) 1,301 42,024 65 42,089
             
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, 2018 (1) 4,836 86,803 (46,400) 1,201 46,440 35 46,475
Loss for the period -- -- (2,784) -- (2,784) (4) (2,788)
Net changes in fair value of debt investments at FVOCI -- -- -- 106 106 -- 106
Foreign currency translations -- -- -- (400) (400) -- (400)
Equity-settled share-based payment -- 165 -- -- 165 -- 165
Share-based payment transaction with the non-controlling shareholder of a subsidiary -- 604 -- -- 604 216 820
Balance at March 31, 2019 4,836 87,572 (49,184) 907 44,131 247 44,378

See accompanying notes to unaudited condensed consolidated interim financial statements.

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

(2)Certain comparative figures for the 3-month period ended March 31, 2018 were restated for immaterial errors. For further information, see Note 9 of the Q3-2018 condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

   
Three months ended March 31,
2019 2018 (1) (2)
(€ in thousands)
Cash Flow from operating activities
 
Loss for the period (2,788) (1,716)
 
Depreciation and amortization 1,050 841
Foreign currency exchange differences on loans to subsidiaries (769) (61)
Share-based compensation expense 165 129
Change in impairment of trade receivables (28) 10
Non-cash interest expense on long-term debt 205 189
Change in fair value of derivative equity forward 602 (941)
Change in inventory allowance (9) (226)
Other -- 9
 
Change in working capital (265) 1,578
Trade and other receivables, inventories and current assets 61 (901)
Trade payables (586) (260)
Other liabilities, contract liabilities and provisions 284 2,739
Income tax payable/receivables (24) --
Net cash used in operating activities (1,837) (188)
 
Cash Flow from investing activities
 
Payments to acquire property, plant and equipment and intangible assets (173) (234)
Proceeds from disposal of financial assets 4,081 2,526
Payments to acquire financial assets (1,235) (6,170)
Proceeds from disposal of property, plant and equipment 22 --
Net cash from (used in) investing activities 2,695 (3,878)
 
Cash Flow from financing activities
 
Repayment of bank overdrafts and lines of credit -- (58)
Repayment of sale and leaseback obligation -- (118)
Repayment of lease liabilities (2018: Repayment of finance lease obligations) (77) (12)
Repayment of long-term debt (250) (197)
Proceeds from issuance of long-term debt 500 40
Net cash from (used in) financing activities 173 (345)
 
Net increase (decrease) in cash and cash equivalents 1,031 (4,411)
 
Cash and cash equivalents at beginning of period 7,402 7,569
Changes to cash and cash equivalents due to foreign exchanges rates 49 (18)
Cash and cash equivalents at end of period 8,482 3,140
 
Supplemental Cash Flow Information
Interest paid 66 47
Interest received 43 1

See accompanying notes to unaudited condensed consolidated interim financial statements.

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

(2)Certain comparative figures for the 3-month period ended March 31, 2018 were restated for immaterial errors. For further information, see Note 9 of the Q3-2018 condensed consolidated interim financial statements.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Preparation of financial statements

Our condensed 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 condensed 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, 2019.

   
Standard Effective date Descriptions
Others 01/2020 Amendments References to the Conceptual Framework in IFRS Standards 3
IFRS 3 01/2020 Amendment Definition of a business
IAS 1, IAS 8 01/2020 Amendment, Amendment Definition of material
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 conclusively determined what impact the new standards, amendments or interpretations will have on its financial statements, but does not expect a significant impact.

The condensed consolidated interim financial statements as of and for the three months ended March 31, 2019 and 2018 were authorized for issue by the Management Board on May 16, 2019.

2. Summary of significant accounting policies

Except as described below, the accounting policies applied in these condensed 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, 2018, which can be found in its Annual Report on Form 20-F that was filed with the U.S. Securities and Exchange Commission on March 28, 2019. 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, 2019.

The Group has initially adopted IFRS 16 Leases from January 1, 2019. A number of other new standards are effective from January 1, 2019 but these do not have a material effect on the Company’s consolidated financial statements.

IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.

The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings as of January 1, 2019. Accordingly, the comparative information presented for 2018 has not been restated and is therefore presented as previously reported, under IAS 17 and related interpretations. The details of changes in accounting are disclosed below.

Definition of a lease

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applies IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after January 1, 2019.

At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices.

The Company as a lessee

The Company leases assets, including properties, production equipment and vehicles. As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases. These leases are on-balance sheet.

However, the Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low-value assets (e.g. tools) as well as short-term leases (leases with less than 12 months of lease term). The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The Company presents right-of-use assets in “property, plant and equipment”, in the same line item as it presents underlying assets of the same nature that it owns. The carrying amounts of right-of-use assets are as below:

       
Property, plant and equipment
  Property   Production equipment   Others   Total
(€ in thousands)
Balance at January 1, 2019 3,134 112 280 3,526
Balance at March 31, 2019 4,759 104 277 5,140

The Company presents lease liabilities within “financial liabilities” in the condensed consolidated statements of financial position.

Leases under IFRS 16

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at an amount equal to the lease liability, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company’s incremental borrowing rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in the future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonable certain not to be exercised.

The Company has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

Transition

Previously, the Company classified property plant and equipment leases as operating leases under IAS 17. These include manufacturing facilities. The leases typically run for a period of three to ten years. Some leases include an option to renew the lease for an additional three to five years after the end of the non-cancelable period.

At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rates for similar assets as of January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

The Company leases a small number of items of production equipment. These leases were classified as finance leases under IAS 17. For these finance leases, the carrying amount of the right-of-use asset and the lease liability at January 1, 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

The Company as a lessor

The Company leases out a small number of 3D printers. Those leases have been classified as operating leases.

The accounting policies applicable to the Company as a lessor are not different from those under IAS 17.

The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.

Impacts on financial statements

Impacts on transition

On transition to IFRS 16, the Company recognized additional right-of-use assets, including property, plant and equipment and additional lease liabilities. The impact on transition is summarized below.

 
    Impact on adopting IFRS 16 at January 1, 2019
(€ in thousands)
Right-of-use assets presented in property plant and equipment 3,526
Lease liabilities as presented in financial liabilities 3,526

When measuring lease liabilities for leases that were classified as operating lease, the Company discounted lease payments using its incremental borrowing rates as of January 1, 2019. The weighted-average rate applied is 4.55%.

 
    January 1, 2019
(€ in thousands)
Operating lease commitment at December 31, 2018, as disclosed in the Group's consolidated financial statements 2,584
Discounted using the incremental borrowing rate at January 1, 2019 1,973
Finance lease liability recognized as at December 31, 2018 105
Recognition exemption for leases with less than 12 months of lease term at transition (84)
Extension options reasonably certain to be exercised   1,532
Lease liabilities recognized at January 1, 2019 3,526

Impacts for the period

As a result of initially applying IFRS 16, in relation to the leases that were previously classified as operating leases, the Company recognized kEUR 5,140 of right-of-use assets and kEUR 4,348 of lease liabilities as of March 31, 2019.

Also in relation to those leases under IFRS 16, the Company has recognized depreciation and interest costs, instead of operating lease expenses. During the three-months ended March 31, 2019, the Company recognized kEUR 155 of depreciation expenses and kEUR 43 of interest expense from these leases.

3. Share based payment arrangements

On April 7, 2017, voxeljet AG established a share option plan that entitles key management personnel and senior employees of voxeljet AG and its subsidiaries to purchase shares of the parent company.

Total options available under the share option plan are 372,000. 279,000 options (75%, Tranche 1) were granted on April 7, 2017. 93,000 options (25%, Tranche 2) were granted on April 12, 2018.

The vesting conditions include a service condition (the options vest after a period of four years of continued service from the respective grant date) and a market condition (the options may only be exercised if the share price exceeds the exercise price over a period of 90 consecutive days by at least 20% in the period between the grant date and the respective exercise time frame) of which both conditions must be met.

The fair value of the employee share option plan has been measured for Tranches 1 and 2 using a Monte Carlo simulation. The market condition has been incorporated into the fair value at grant date.

The inputs used in the measurement of the fair value at grant date are as follows:

   
Tranche 1 Tranche 2
Parameter
Share price at grant date USD 13.80 USD 16.15
Exercise price USD 13.90 USD 16.15
Expected volatility 55.00% 58.40%
Expected dividends -- --
Risk-free interest rate 2.49% 2.85%
Fair value at grant date USD 8.00 USD 9.74

The respective expected volatility has been based on an evaluation of the historical volatility of the Company’s share price as at the grant date. As at March 31, 2019 no options are exercisable and 353,400 options are outstanding. The weighted-average contractual life of the options at March 31, 2019 amounts to 8.3 years (March 31, 2018: 9.0 years).

The expenses recognized in the profit and loss statement in relation to the share-based payment arrangements amounted to kEUR 165 in the three months ended March 31, 2019 (three months ended March 31, 2018: kEUR 129).

On March 1, 2019, voxeljet China moved into a new facility. The minority shareholder of voxeljet China has increased its shareholding in the entity from 4.175% to 30% through an in-kind capital contribution of a lease contract on the new facility. The lease term under IFRS 16 of the contract is six years, including a rent-free period during the first three years. The transaction is accounted for as a share-based payment transaction under IFRS 2 and resulted in an increase of non-controlling interest of kEUR 216 and capital reserves of kEUR 604. The Company also recorded a right-of-use asset and the corresponding lease liability on the commencement date of the lease.

4. Inventories

   
3/31/2019 12/31/2018
(€ in thousands)
Raw materials and merchandise 4,218 4,628
Work in progress 6,938 5,436
Total 11,156 10,064

5. Property, plant and equipment, net

   
3/31/2019 12/31/2018 (1)
(€ in thousands)
Land, buildings and leasehold improvements 21,772 17,085
Plant and machinery (2018: includes assets under finance lease) 8,713 9,072
Other facilities, factory and office equipment 1,742 1,502
Assets under construction and prepayments made 28 16
Total 32,255 27,675
Thereof pledged assets of Property, Plant and Equipment 7,015 6,691
Leased assets included in Property, Plant and Equipment: 189 357
Printers leased to customers under operating lease 189 208
Other factory equipment -- 149

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

6. Other liabilities and provisions

   
3/31/2019 12/31/2018
(€ in thousands)
Liabilities from VAT 97 24
Employee bonus 382 413
Accruals for vacation and overtime 398 210
Accruals for licenses 40 69
Liabilities from payroll 314 298
Accruals for commissions 37 47
Accruals for compensation of Supervisory board 225 180
Accrual for warranty 184 240
Others 322 387
Total 1,999 1,868

7. 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. In addition, for the current year the fair value disclosure of lease liabilities is not required.

                 
Carrying amount Fair Value
Assets at Liabilities Total
FVTPL FVOCI amortized at amortized carrying
3/31/2019     cost cost amount Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Non-current assets
Derivative financial instruments 1,627 -- -- -- 1,627 -- 1,627 -- 1,627
Equity securities -- 5 -- -- 5 -- -- 5 5
 
Current assets
Bond funds -- 8,924 -- -- 8,924 8,924 -- -- 8,924
Note receivable -- 1,253 -- -- 1,253 1,253 -- -- 1,253
 
Financial assets not measured at fair value
Current assets
Cash and cash equivalents -- -- 8,482 -- 8,482 8,482 -- 8,482
Trade and other receivables -- -- 4,857 -- 4,857 -- -- -- --
 
Financial liabilities not measured at fair value
Non-current liabilities
Long-term debt -- -- -- 16,652 16,652 -- 15,641 -- 15,641
 
Current liabilities
Long-term debt -- -- -- 916 916 -- 908 -- 908
Trade payables -- -- -- 2,507 2,507 -- -- -- --
                 
Carrying amount Fair Value
Assets at Liabilities Total
FVTPL FVOCI amortized at amortized carrying
12/31/2018     cost cost amount Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Non-current assets
Derivative financial instruments 2,229 -- -- -- 2,229 -- 2,229 -- 2,229
Equity securities -- 5 -- -- 5 -- -- 5 5
 
Current assets
Bond funds -- 12,905 -- -- 12,905 12,905 -- -- 12,905
 
Financial assets not measured at fair value
Current assets
Cash and cash equivalents -- -- 7,402 -- 7,402 7,402 -- 7,402
Trade and other receivables -- -- 6,030 -- 6,030 -- -- -- --
 
Financial liabilities not measured at fair value
Non-current liabilities
Long-term debt -- -- -- 16,250 16,250 -- 15,231 -- 15,231
Finance lease obligation -- -- -- 71 71 -- 69 -- 69
 
Current liabilities
Long-term debt -- -- -- 816 816 -- 809 -- 809
Finance lease obligation -- -- -- 34 34 -- 34 -- 34
Trade payables -- -- -- 2,945 2,945 -- -- -- --

The fair value of the Company’s investments in the bond funds and note receivable 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.

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.

8. Financial result

   
Quarter Ended March 31,
2019 2018 (1)
(€ in thousands)
Interest expense (917) (268)
Interest expense on lease liability (2018: Finance lease obligations) (43) (36)
Long-term debt (242) (232)
Expense from revaluation of derivative financial instruments (602) --
Other (30) --
Interest income 59 946
Payout of bond funds 54 5
Income from revaluation of derivative financial instruments -- 941
Other   5 --
Financial result   (858) 678

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

9. 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,
2019 2018 (1) (2)
(€ in thousands)
SYSTEMS SERVICES SYSTEMS SERVICES
Revenues 2,415 3,150 1,375 3,677
 
Gross profit 829 1,084 381 1,752
Gross profit in % 34.3 % 34.4 % 27.7 % 47.6 %

(1)The Company has initially applied IFRS 16 as of January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying IFRS 16 is recognized in retained earnings at the date of initial application. For further information, see Note 2 of the condensed consolidated interim financial statements.

(2)Certain comparative figures for the 3-month period ended March 31, 2018 were restated for immaterial errors. For further information, see Note 9 of the Q3-2018 condensed consolidated interim financial statements.

10. Revenues

       
Three months ended March 31,
SYSTEMS SERVICES
2019 2018 2019 2018
(€ in thousands)
Primary geographical markets
EMEA 928 712 1,822 2,420
Asia Pacific 613 551 218 216
Americas 874 112 1,110 1,041
2,415 1,375 3,150 3,677
 
Timing of revenue recognition
Products transferred at a point in time 2,193 1,267 3,150 3,677
Products and services transferred over time 222 108 -- --
Revenue from contracts with customers 2,415 1,375 3,150 3,677
   
Three months ended March 31,
2019 2018
(€ in thousands)
EMEA 2,750 3,132
Germany 1,351 1,517
France 373 589
Great Britain 450 274
Others 576 752
Asia Pacific 831 767
India 243 318
Others 588 449
Americas 1,984 1,153
United States 1,948 1,139
Others 36 14
Total 5,565 5,052

11. 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.


Contact:

Investors and Media
Johannes Pesch
Director Investor Relations and Business Development
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