Q4 2020 Veoneer Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 earnings release conference call at this time. All participants are in a listen-only off if you require operator assistance at any time.
During this conversation. We will have a question answer session. If you wish to ask a question, please press * 1 month. I must advise you that this conference is being recorded today Wednesday the 3rd of February 2021. I would now like to have the conference over to mister speaker today Thomas Johnson, please. Go ahead.
Yes, thank you very much and welcome everybody to our food quarter 2020 earnings conference call and webcast presentation. So here in Stockholm. We have our chairman president and CEO Ian Carlson or current Chief Financial Officer department and our incoming Chief Financial Officer rate card, as well as myself too much Communications and I are home during the call today Ian will comment on our current business highlights and provide an update on our strategic reviews launches and Technology module after that walk you through our financial results wage efficiency programs while Ray will provide some commentary on the 2021 Outlook and the update we have done to our 2023 midterm targets. We will then remain on the line and a session and it's always it's light and earnings release are available through a link on the homepage of our website if we turn the page.
we have
Statements which is an integrated part of this presentation and includes security that will follow you today during the presentation. We will reference some non-gaap and the reconciliations of the figures are disclosed in our quarterly, press release and the 10K that will be filed with the SEC. We intend to close the call at 3 p.m. So I had to limit yourself to a maximum of two questions so we can get as many requests in as possible with that. I will turn the call over to our CEO John. So John, please take over. Thank you very much Thomas and welcome to all of you on this call from my side as well. Now looking on to the business highlight for fourth quarter and turning the page.
During the fourth quarter. We saw an unfortunate Resurgence of the COVID-19 pandemic and we continue to put health and safety over associate first reinforced the measures that you put in place in the beginning of the pandemic.
Even throughout this uncertain volatile Market, we had a strong execution in 2020 over technology and customer launches also despite disruptions in supply of electronic components.
These disruptions may continue for some time. You two are strong launch. Organic sales growth for the fourth quarter was 17% overall and 31% off active safety providing a strong outperformance as compared to the underlying Global light vehicle production or Market adjustment Initiative Program has been instrumental to be moving our operating and cash flow performance year-over-year and thereby helping to mitigate the effects created by COVID-19 as a result. We ended 2020 with a cash balance of 758 million US dollars.
Our order intake of approximately 530 million dollars increased by approximately 10% in 2020 compared to 2019 and that it's just spite the volatile Market condition this in combination with the completion of our strategic initiative has resulted in a strong audible of approximately fourteen billion dollars off at the end of 2020 reflecting on the Strategic initiatives. The separation of celebrity has provided we are near with market-leading driving policy software package to our internally developed perception software stack. These have become the important enablers for view near and Qualcomm to come together and finalize an agreement to collaborate with the delay bro next Generation scalable collaborative and autonomous driving Solutions on the driver brand. So overall a successful year for real dead.
Despite Market volatility and an ongoing and then turning the page.
This side we have a few comments on the arrival brand driver is developing the next generation of its software stack to be an open flexible and scalable solution, which will allow with Automotive manufacturers and Automotive suppliers to based on a robust software platform Taylor and customized solutions to their specific needs on them individual product development strategies this software stack consists of a fifth-generation perception snack, which is built on almost two decades of development of vision-based perception Clause. If you in the radiation will provide high-resolution using 8 megapixel cameras allowing for higher framerates and providing a wider field-of-view of hundred and twenty-five compared to today's solution.
The driver software stack will provide full and cap rating features. And on top of this will enable innovative solutions for determining free space walk along with challenging restricted and road work senora. It's we are pleased with a customer activities with both traditional and potential tier one suppliers hath mein optimistic to be able to announce under driver software stack business award during 2021.
Now looking on the or underlying Market development by turning the page.
The global light vehicle production rebound continued in the fourth quarter of 2020 from the truck in the second quarter with a sequential increase of approximately 14% from wage, which was 5% better than expected at the beginning of the quarter looking ahead into 2021. The light vehicle production is is expected wage increase approximately 14% from 2020 coming back to around eighty one and half million Vehicles. However, based on all customer call logs and short-term forecasts. We believe some customer interruptions and production downtime due to the semiconductor shortage issues or not fully reflected in the latest IHS forecast. Thought you were the first quarter of 2021 and also perhaps into the second quarter.
We should also keep in mind sequential decline in the first quarter is larger due to the seasonality effect of the Chinese New Year in the first quarter.
It remains to be seen if these volumes could be made up during the second half of 2021 since underlying customer demand remains relatively strong.
No, looking on or order intake and order book on the next slide.
Our order intake during 20/20 of approximately 530 million dollars which equated to approximately 2.6 billion of lifetime sales was well above or current market share wage restraint control systems and activating although this order intake in 2020 is lower than our expectation at the beginning of the year. It reflects the software wage war thing environment, which evolved during 2020 due to the COVID-19 pandemic.
Mention that active safety or drain take included more than 50% of system Awards in 2020.
Looking now to the audiobook of fourteen billion at year end of 2020 the main reduction from the previous year of approximately ninety billion was related to the brake system divestitures June 2020 the remaining difference of approximately a billion dollar related to the net effect of lower underlining like underlying light vehicle production wage scales and lifetime sales related to the order intake in 2020 along with program changes from when the business was originally sourced.
Program changes generally include adjustments to volume content the vehicle take trades currency as well as other program timings.
Subsequent to the release over 20 20 audible in mid-January. We have since received notice from an autonomous vehicle customer that they have chosen a different path for their light or or technology.
Some are audible of approximately 14 billion is not impacted by this decision since or volume assumptions were already lowered in our previously announced order intake update for 2020 looking ahead into 2021. We expect order intake to be second-half waited and increase from the levels achieved in 2020.
Now look into some of our new technology Launches on the next page.
We have captured captured on this slide or main technology launches during twenty Twenty-One these product launches illustrates or continuous flow of product improvements and achievements across polio and despite the challenges for our cross-functional development teams, and the constraints that the COVID-19 pandemic has placed Epona or teams have done an excellent job and continue to manage the overall customer timelines.
Now looking on customer Launches on the next slide we can see that 2021 is another important year for a company where these projects launched is for expected to contribute to our strong organic growth in 2021. Twenty twenty-two and Beyond as Illustrated on the slide, we have our table 15 customer launches in terms of sales for 2021 where three of these launches or delays from 20 20 in aggregate these top 15 vehicle mod platform launched is during 2021 represents more than three hundred million dollar of average annual sales be the average content the vehicle approximately $175 the content range on the top 15 in 2021 is slightly increased from last year to a range of approximately, huh? Yep.
dollars to more than
$1,000 per vehicle. I will now turn it over to Matt's for his country on the financial results, please. Go ahead. Thank you. You're looking out to the next slide Thursday. We are pleased to have rebounded with a very strong organic sales growth during the fourth quarter of 17% which represents a group over Market of 15 percentage points down stairs for the fourth quarter of 455 million were slightly better than our internal expectations at the beginning of the quarter this strong sales performance as well as are all going Market adjustment which continues to show an improvement or underlying cost structure resulted in an operating loss of $77 million also slightly better than our internal expectations.
What's Chromecast position or 758 million at the end of the fourth quarter was also better than expected you to continue strong performance with working capital and capital expenditure despite the COVID-19 impact or Industrial company continues to be in the middle of a tremendous investment. To support the ramp-up organic sales growth, which is expected to remain very strong over the upcoming years, which is supported by a strong order book in this environment. We continue to look for opportunities to reduce our Capital expenditures without compromising future launches during the fourth quarter Capital expenditures was twenty 1 million or twenty four million lower as compared to last year. So overall a very good faith and continued progress to improve our cost structure and balance sheet as we continue preparations for an upcoming. Organic sales growth looking further into the details for the fog.
on the next slide
for the fourth quarter remained essentially flat that compared to the same code the last year which includes the $87 million related to the DMV SE Asia that that's terrific off. They'll Galaxy the increase of sixty five million or 17% was mainly driven by active safety with a Thirty-One organic sales growth, which was primarily driven by new program launched off the or the actual Galax sales group of eight million or 4% was two times the ldp increase for the quarter in addition the net currency translation. In fact was twenty 1 million or 5% while we had the paint window nine million related to break control used to used sales during the quarter.
The girls talk is decline or four million for the coast about his father. He was due to the brake system divestiture effect of thirty million. This negative effect was more than offset by the lavish organic same school where we experienced certain launch code.
Or do you need a net cost over $108 increased by five million during the quarter compared to 2019 the twenty million of above-normal engineer reimbursement in fifty-nine p and under additional costs related to the solution separation of 11 million where most of that by lower underlying or the internet including the benefit from the brake system that estrogen Laughlin operating cash flow of - 77 million for the quarter was twenty-seven million better than last year mainly due to a thirty-five million change in networking looking out for sequential performance on the next slide.
Net sales or 455 million increased by eighty four million sequins that compared to the third quarter primarily due to the new program launches the sequential organic same. 81 million included 31 million ozs and forty 1 million activated. The reminder of the increase was related to other break is used sales of $9 off the girls supposed to sequential increase of 18 million was mostly due to the organic sales growth the audience Left Coast sequential decrease of sixty million from the previous month was primarily due to the seasonality impact of engineer reimbursement during the fourth quarter while Catholics and Jews remained relatively the same level as the previous quarter off the cash flow decrease sequentially by 78 million primarily primarily due to the negative swing in net working capital from from previous quarter. Looking out our full-year rebirth
on the next slide
or pay for the full year twenty-twenty decline 529 million as compared to the 2019 which includes the $292 million related to the DMV es Asia Jaja the organic sales declined 254 million or 16% Well, we estimate the COVID-19 impact on oil organic sales declined was two hundred and fifty million in addition the full year net currency translation impact was seventeen million or 1% as compared to 2019 the gross profit decline of Hudson 29 million for the full year versus five. You was largely due to the brake system that after effect or forty two million along with volume product mix impact caused by the COVID-19 a damaged the net current impact on gross. Margin what three million during twenty twenties, or they need internet or 407 million decreased by hundred and fifty five million during twenty.
They are compared to 2019 used to lower growth cost higher engineer reimbursement and the net combined effect of the brake system by vegetables and additional security costs juice joint venture separation in addition STNA improved 24 million year-over-year while other income amputation of intangibles improved 43 million cup related to the DMV sa Shut by Wester a recovery from missing you and IP licenses sold to Volvo cars are operating cash flow - 192 he's improved hundred and thirty-three million for the full year due to the combined operating loss and Equity method improvements and positive changes in net working capital.
Lost Lake Catholic improved by hundred and twenty two million due to low investment in the brake system segment facility expansion and engineering-related it looking out for em, I I program on the next slide as we mentioned earlier the results of our Market adjustment initiative continues to have a significant positive impact on financial results that by Mister gave him the negative Financial effects from COVID-19 pandemic for the quarter and for the full year looking out our 2021 Outlook at Mid some targets update it now turn it over to erase. Thank you. And hello, everyone look, you know to the next slide. We have our initial outlook for 2021 as well as an update to our mid-term targets.
our sales
The 2021 shows that are exceptional organic sales grow from the fourth quarter is expected to continue throughout 20-21. Our current full year 2021 indication is for next month increased more than 30% as compared to the previous year where the organic sales growth is expected to exceed 25% along with a currency Tailwind of approximately 5 a.m. We also expect the organic sales growth for the safety to be approximately 45% in 2021.
As a result of a market adjustment initiatives program has strong organic sales growth. We expect RG&E net to be in the range of 110 to 120 million per quarter during a twenty one and our operating loss is expected to improve in Twenty-One as compared to twenty twenty.
Capital expenditures are expected to be approximately 100 million and twenty Twenty-One and we estimate our cash balance to exceed four hundred million at year-end twenty Twenty-One thousand for twenty Twenty-One. We expect our operating loss and cash flow performance to improve sequentially during the year as we expect the operating leverage on our ganic sales growth to improve during a second half of 2021.
Now looking Beyond 20 21 based on our strong order book and current planning assumptions. We expect our net sales to be approximately 2.5 billion in 2023. Also, we expect to arrive to a sustainable operating profit and positive free cash flow during 2023. So overall a continued positive momentum in our Outlook and clubs and targets, especially in this uncertain and mixed macro-environment. They'll turn it back to you. Thank you Ray if we turn the page wage final slide on the formal presentation and comments for today. But before we open up for Q&A, I would like to extend a sincere thank you to the entire on your team for their dedication and strong execution with continued short focus on quality health and safety or team remain focused on launching new technologies.
In customer program during extremely difficult conditions in twenty-twenty a big. Thank you to everyone. I will now turn it back to our operator on and open up for Q&A. Thank you. Ladies and gentlemen, we will now begin with the question answer session as a reminder. If you wish to ask a question, please press star and one on your telephone invade for your name to be announced. Please don't buy my vehicle pilot, and this will only take a few moments. If you wish to cancel your request, please press the Husky. Once again. If you wish to ask a question
and the first
This question comes from the line of the VG Marcus from would see who please ask your question. Your line is now open.
All right guys say on the March and re-order here just a couple of questions just running on the software side that how you see how long engagements being with OEM for the conversations going. How do you see the design pipeline their design will pipeline there things? We are having a very strong faith. Also having in mind we signed the agreement only a week ago or so. We have had discussions already in the fall with the OEM as well as with other system integration. Williams. We we are having discussions with around the 10 OEM stand a little less than a handful of tier ones and the show is very good interest in our products. They are excited to see a demonstration of our products together that we expect to be able to show them during first half of all twenty-one.
So other follow-up, I know you talked about twenty Twenty-One going 30% year-on-year. Just wondering I should look at your design win and backlog and coming back and let me have you seen a change in how EMS Auto oems, you know, are they pulling boarding house? Has there been a change in the market in the landscape off on the website? Thanks. It has been a little bit of a change one big example of that is of course Qualcomm coming into a dust or the corporation with Survivor and Beyond near that's an example of how the semiconductor tech companies are coming in here. You see also almost on a weekly basis or other start-up companies are coming in with our technology. Do you see into this space? So we see it says changing and Dynamics but we are looking optimistic. We have a very strong position as being a system integrator as an integral.
Maybe Decades of experience to work with the tech companies and we have a strong portfolio in our core technology. And if you look to our audible here as seen on this slide here 95% of the Fourteen billion dollar corresponds to our core product and besides that of course, we are very interested to take on board further integration corporations with the suppliers also, no indication of the more than higher order intake and 21 than in 2020. That is of course also, excluding any opportunities coming from driver, so that is not included in that indication.
Okay, thank you. Thank you. And the next question comes from the line of David Kelly from Jefferies. Please ask your question your line is now open.
Hey everyone, this is Gavin Kennedy on for David Kelly my first question 45% active safety growth in 21. Pretty robust. Just wondering if you could comment on a the underlining underlying drivers there. Perhaps cameras Radars use anything driving that number.
Yeah, it's primarily the products that you saw here. You can see from the sliding from the technology page that we are having here. It's coming from essentially all products. But primarily, of course the active safety. You said driving this is strong role in our core development.
Got it. And then I noticed in the press release you mentioned revisiting the light our strategy and then I think just during the call you mentioned maybe a customer going a different direction. Could you comment on your light bulbs our strategy overall and how the market might be shifting there when you look on the light or when you're here. We we refer to in the release that was an order. We took in the 2017 and 2018 to a certain customer having a certain technology in mind and we have been working with that since then along that lines. We have seen volumes decreasing over time and autonomous vehicles and expectations have been pushed out in times and volume has decreased which is also then accounted into when we announced the audible. So the fact that we got noticed here that the customer has picked another cord technology is not affecting or older book that was communicated of the 14 billion, but we are seeing a big shift. Yep.
In light or Technologies overall overtime or strategy as I mentioned before is to be a strong integrator. We provide of course experience in cyber security. We provide auto automotive great experience. We can provide functional safety to start up companies that have a tech know how but not real life or into the automotive environment.
Got it. Thanks for taking my questions. Thank you. And the next question comes on the line of Victoria gear from Morgan Stanley. Please ask your question you like wage afternoon. Yes to questions for me, please. The first one arrives a launch cost if I look at the $65 million or organic Revenue growth that you had in the quarter page eighteen million underlying Improvement on the line. I guess that's kind of feels like you probably had arranged to leverage that I didn't you would be expecting then obviously a lot of other moving Parts on the life. Could you talk about what launch costs you had in in the in the fourth quarter and how we should also think about that for 2021 when you have very strong top-line growth expectations. Also took the last one the second one also then coming back to the lidar you could you talk I noticed you didn't have your side of you or the intake By REM and by technology. Yep.
You have remaining of the artifact now.
Please thanks. This is Martha can start with the first question when it comes to that breaks. And and I mean, all right, we always disappointed when it comes to the leverage given to organic. So we had however we had some items that are or more kind of of the trees in the in the fourth quarter when it comes to premium Freight house that was totally drained by the issue with with the components a shortage of components meaning to be able to deliver. We have utilized premium rates to logic sense and the normal wage effectively also note that kind of uncommon in the beginning of the program is that we had some yield issues as well when it comes to to production. So all-in-all I'm looking at the full court. I would estimate around six million in terms of costs that that on all kind of repeating and that would give you a kind of a wage.
You're looking at the gross profit level of around 20% which I think is good kind of starting point where we are moving into twenty Twenty-One. And and where we will see improvement with the rep the volume going forward. Okay. And so that's six million for the fourth quarter. Probably some of that comes down or range. Yeah not having these high freight costs, but still a little bit I guess on the outside as you have as you have project ramp-ups. There's there's still a bit of a headwind there for 21.
Yeah to some extent. Yes, but not to the same degree as we saw in the food court great. That's hooked up. Well, thanks.
Regarding the light or the book that the activities that we have been working on has been on this autonomous drive and we have commented on that one. So the activities we had not working on have been related to these orders on the current project that is now mentioned in the release and besides that we have ongoing discussions with the authors or start-up companies tech companies in the light or that or looking promising, but they are not in the
Okay. Thank you.
Thank you. And before we take our next question, may I remind you if you ask a question, could you please mute your webcast? Otherwise, we will have a feedback many. Thanks for your understanding and the next question comes from the line of every calling from s e b please ask your question. Your line is now open.
Thank you. I have three questions. The first one on the topic site is for 21 around a hundred million, which is down by more than more than a hundred million from from the peak in nineteen. What's the the Delta? I mean, what did you do back then that you won't invest in in 2021. Then what kind of sales level does a hundred million in annual cap back support a bit longer term. And then the second question is on just a reflection on why you see the need for a completely separate brand on on with arriver and the third question is on the order book and correct me if I'm wrong, but I'm guessing that Volvo really Daimler are pretty big pieces of that order book and they were all at least talked about going in other directions with other supplier is over the last twelve months. Is that a big concern for you as we try to look at growth Beyond twenty-three?
This is real sick the the first question around the capital expenditure.
I think when you look at the the hundred billion outlook for 20 21, you know, we're starting to gravitate towards, you know, the midterm Target that we are longer-term Target that we've always talking about a capital expenditures in the call of the mid single-digits, maybe five six percent of sales. So we're not quite there yet in in twenty Twenty-One, but we're certainly headed. In fact that this is a the right level to to support the at least the medium-term sales Target that we have out there now for twenty twenty-three of around two and half years. So I think we believe this is the right level now, you know, could that change in the future based on the the order intake? Yeah, it could but I think for the time being we think this is about Thursday.
Like the next question was around arrival. Yeah, I can take a driver driver is a separate organization inside the year and it's important that it's a separate from the other type of business in the software development. They will arrive or will cooperate and work very integrated with Qualcomm and a product coming out of the stack. The perception is and policy stack in combination with the Snapdragon right platform will be sold to other tier ones and therefore ought to be able to sell to tear once it's also very important to point out that this is not view near in all the details. This is a separate organization to be able to other tier ones and that's why we are marketing this as the reibers separated from the view near brand on the audiobook. You are very right in that Daimler birth.
There's all very big customer of ours and they will be for a long period of time important to point out. This is a strong audible can now we can all know and read about his engagement with the Nvidia cetera in the beginning here. But we have ongoing development projects with the Daimler with Volvo that is about to launch still not in the production. So we of course treating them as very important customers for the future and who knows how this is going to develop over the next time. In addition to that. We have also other very important customers and very important leads that we are working with across the globe not only here in Europe, but also in North America and in fact in China Japan and a reservation, so we we are treating them of course as important customers and also will work with them in the future. We hope
Okay, thank you and follow up on the last ones if you look on your tendering right now, is it a bit of a different mix then in terms of what are we em that you're you potentially could Land New Age business or or is that similar to the last couple of years?
It's a bit of a different mix that is not the case. It may be somewhat of a different customer mix a little bit that is changing due to the reasons. We have talked about and phone number. So we are working on a somewhat different area there. If you look on the product side, it's not of any big difference yet. We expect that also wage increase with the Qualcomm and the driver collaboration here to also include bigger pieces of software parts and the software stacks.
Thanks. Thank you. And the next question comes from the line of Bella. Please ask your question your line is now open.
Thank you. I have two questions the first one regarding your 2023 Outlook. Can you just help us to understand the bridge that you expect for becoming a cash positive on on the cash flow and also having positive during that year? What kind of gross margins do you expect? What kind of absolute Thursday night and are in the levels. Do you possibly know when you talk about it?
Yeah, I think that everybody would like to know all those numbers I think at this time, but I think a lot of these figures that you're talking about agnostic home. So really will come back to that at our CMD during the third quarter. I think that's probably the best opportunity for us to talk more about the 2023 granularity.
Okay, that's that's just a quick follow-up on that when you talk about becoming cash positive during a $23. Do you mean the full year 2023 or just around rate?
I mean if you're looking at the cash flow and starting from what we have accomplished during twenty-twenty and looking into twenty one just to give you the trajectory on that one. I'm looking at the different component going into twenty Twenty-One. We all here giving enough look when it comes to the Improvement of the air between 21 wheel slightly higher and Catholics Panthers, but not significantly higher looking in particular twenty Twenty-One. What is what is important to remember is that we have we have a great night net working capital for the time being we are mine is 97 million and of of twenty-twenty and the development of working capital during twenty-twenty has even been over and above our own expectations down even twenty Twenty-One. We are also assuming that we will see a little bit of a normalisation when it comes to working capital, which is the kind of the missing piece if you're looking at the different components meaning Thursday.
if you're done getting into
2022 the underlying cash flow looking at the The Avett level the Catholics level and the and the working capital is more kind of normalized we getting into twenty-five or so that is just to give some granularity when it comes to the capital development when it comes to sustainable the wording for 20 23. If we are to be precise, we already had a positive cash flow goes during the third quarter, but definitely not sustainable and and you what you will see is also some seasonality in the figures meaning that that's normally the fourth quarter is the best quoted you to engineer reimbursement, but what we're saying about twenty twenty-three is that we are aiming for reaching a positive cash flow. That is sustainable.
I need during the year though a great. Thank you. And the second question from the semi conservative if you could share some color on that, what's the situation right now that you seem and also you refer to to the fact that IHS might be too positive on on q1 Q2 production rates. What are you purchasing for?
We dealt with the last one. We don't have a number to give you any probably just stay out over the specific numbers on I just but we have seen during for calling a very tough situation on components not only on micro micro controllers and advanced ICS etcetera from from Chip manufacturers, but we have also seen sort of passive components here and there or team has been extremely good in mitigating the impact out of this and this is also seen in the outcome. We are coming out hired on the top line that we expected in the beginning of the quarter despite these shortages. These shortages will continue into twenty one. That's a clear pact and I think I'm following the news here and this morning and Sweden at least from from bombs coming out. This is mentioned in several locations that we see issues coming out of supply chain.
And we believe that we have so far been better than average better than many or most to mitigate the impact. We hope to be able to mitigate these impacts also going forward with what we have done in some occasions is that we have been flexible in redesigning in other available components into our design got them qualified and validated so that she can ship products with a slight different version of the component into the product and thereby need to get in the impact and we will continue to seek those activities, but it will probably confirm that is what we are saying.
Perfect. Thank you.
Thank you. And the next question comes from Emanuelle, please ask you a question. Your line is now open.
Hey Ted, is it on for a manual first question? Just wanted to go back to the the light are I realize that you know, this was not a big deal that's on the order of like curious as to if you could provide more color around the the OEM decision. Was it related to technology was it, you know choosing a different supplier invalid. I'm not in any sort of color on on the underlying drivers for why they they switched the program and then just a second question of faith.
Second question on the system orders, you know you provided the 55% number as a percentage of active safety. Can you repeat provide some context call that number that ended over time or the last few years?
Yeah, okay, I can start with the first one here on the technology side. I think this is an application that is very demanding and has been very demanding and has been very busy showing an including very specific items and specific requirements that has been very demanding over time. I think the product has been ongoing as we said it seems the business in two thousand and Seventeen and eighteen and at the end of the day with all the evolutions that is coming out and all the options taking into account also bigger picture on this whole project. I think the the customer here have come to a conclusion to pick another technology. I think the technology is such I'm not the guy to comment on or Partners technology and so forth. I'm still having this cooperation and we will still seek other opportunities out of that to get with probably other opportunities as well. But for this month
Can you send the customer picked another one you to the more specific requirements that was very demanding and I don't know the true or the the real underlying reason for it. I should stay out of those comments. But that is the fact that led to the decision. I don't know Ray if you have done any system regarding the system orders that if we go back and look at the the order intake that we thought we talked about over the last three years 2018 nineteen and twenty. We estimate that perhaps around two-thirds of the orders during that three-year period of time is of the system name that that's kind of what we're tracking, you know in our books right now related to that and and keep in mind during that period of time both and restraint control isn't active safety. Our our wins may have been above our current market share levels. So, you know, we feel pretty good about the mix of the the order book and the order intake and that it's the right right products around our core portfolio dead.
Cool. Thank you.
Thank you. And the next question comes from the line of pompous Unholy from hundreds bank, and please ask you a question. Your line is now.
Thank you requesting for me on on that safety the possibility maybe it's a comment on market shares and you know order and take and also maybe wage income solve market shares and say thank you for a second question is is maybe a bit too early, but I would be interested to hear what your view on the go-to-market strategy with with off this Mission vehicle identification software. I with with we arrived were being a separate part of the inner business and if if a new one would buy a fusion system that you needed would that be on the arrival and Snapdragon platform you would use or do you use the same software on another platform from what from another supplier or and how will be in ears off software on on a does and compared to the arrivals of how should we think of that?
So on the the market share office, I'm not exactly sure what the question was. But I think if we if we look at our what we've historically talked about in in 2018 our our market shares and and the restraint control as we're in the low twenties as a percentage and are active safety market share was maybe close down 10% something like that. So we haven't given our final market share figures for for 2020 yet. That will be coming out shortly in the upcoming weeks. But you know deadly based on what we seen in the order intake here in twenty-twenty where above those levels. So I think despite the order intake maybe being a little softer than we expected at the beginning of the year. But we all know that that was driven by the Provost situation and you know, we saw a significant the lower level of available orders during the year than what we expected at the beginning of the Year song.
And the second question is they go to market strategy for you near we will go to market with the combination of the Snapdragon right their platform to get with the driver software as an indicator. And so we will of course use that as a as an opportunity for you here to continue to pursue integration projects. Like we have done in the past then generation for now. It's based on a silence technology as you know, and that is what we will continue to use for that generation, but for the Next Generation generation 5 here at the 55 and older what we talked about is the presentation will of course go for the Qualcomm technology and the Snapdragon right platform. We offer priority sizing as an integrator also the cooperation between the driver and Qualcomm, of course, so we will definitely promote that solution being integrated dead.
Qualcomm
We'll go to other. Once and offer this solution. So at the end of the day, it's a customer decision. Will the customer decide to go with the arrival Qualcomm with the only reason integrate phone or another integrator that is a decision and if customer has other demands on you near as an integrator using a different technology as a part of Oriental job to get with our Radars and other components what their needs to be discussed how we are going to deal with that but you know how we think here. It's the customer deciding at the end of the day.
Fair enough. Thank you.
Thank you. And the next question comes from the line of full of C or B G. Please ask you a question. Your line is not.
Hi everyone. I it's all for maybe just a quick follow-up on the gross margin trajectory from here Max. You mentioned the 23% drop through that you would be happy with that. But it makes it a little difficult for us going into twenty. Twenty-One given that you know, you were barely break even so, how should we think about it? Is is there a way for you to indicate the gross margin level that you're happy with considering overall safe level of 1.5 billion or so which guidance to or is there any way you can you can help us with the absolute gross margin level for 20 21. Thank you.
No, I have would have kind of thing. If an absolute levels when it comes to the to the gross profit too into Twenty-One, but I think you think that the full quote I speak to the starting point. I mean, but you need to remember is that I mean we are ramping up now we have had many launches going on now. So third quarter into fourth quarter and into the sport package adding the ramp-up phase you don't get the the kind of optimal leverage and those profits. I mean it takes some time before you're getting that and now initially we have had other issues when I talked about the premium place but also on the yield side, so that's what I'm talking about the Six Million to be something to be adjusted for in order to get the more kind of normalized level from where we are right now. But from where we are right now, we will see improvements when it comes to both profit when we're ramping up volumes, even though we will probably have some volatility in between coaster stuff, but but I think that's Thursday.
The starting point and improving leverage into to the first quarter and then from that gradually improving through 2021.
Excellent. Thank you very much.
Thank you. And the next question comes from the line of Victoria gear for Morgan Stanley. Please ask your question. Your line is not open. Hi there just a couple of of more and Technical follow-ups just on the guidance and the operating loss to be better than the 2020 level. Is that on an underlying basis. So excluding Thursday the 30 Old million lost you still had in for the brakes business in 2020, or is it a headline number and also on the cash bone? So you're kind of guiding to talk about 350 million of cash burn, but with much work ethic. Yeah, I guess that that feels probably pretty comfortable. Would you really think of that four hundred million net cash at the end of the year of a floor or something else in terms of cash that we need to do to write their. Thanks.
I think that.
Second question when it comes to the cash balance and all twenty Twenty-One. I think again, it's it's important to remember that the the statement I made when it comes to networking topic that we have had a a great performance when it comes to working capital in twenty-twenty. But with the growth we will probably have some negative effects coming through in implanting one when when when it comes back up in capital, but but I mean that's more of a kind of a one-off when we're adjusting the working capital in terms of underlying development. We see a positive development in twenty one and number eighty-two twenty two, then once we have a just on the working capital site, I think that is a little bit more granularity when it comes to the cache re maybe on the yeah back to the operating a question. I think it's more of a headline number Victoria. I think when you look at it comparing or doing the bridge in 2021 versus 2020 we have to keep in mind we have a quota dead.
120 million of headwind related to above normal Engineering reimbursements in 2020 of around eighty million and then we have another 40 million are so dead related to the you know other income and then we should also remember that we have additional cost in the operating loss related to this annuity for the full year. I'm sorry a proximately half of year of that cost in the in the piano during twenty-twenty above the the operating income lights. So when you bundle those things. It's probably closer to a hundred and forty million of headwind, maybe even 1:50. So no to improve your over a year considering that headwind. I think we're pretty I'm pretty pleased with that.
Yep, great. No, that's really clear. Thanks.
Thank you. And the next question comes from Steve from Barclays. Please ask your question your line is not open.
Yes. Hi Tim. Thanks for taking my question in terms of ending cash balance, you're expecting it exceeds 1 million at the end of the 20 21. I take it that doesn't include include any cap. So just wanted to confirm that and then also as we think about getting your minimum or optimal cash balance probably should be the amount that kind of long-term and then as we think about, you know, raising Capital here or or cash balance is it should be used this opportunity in terms of the stabilization and markets to potentially erase capital in case or before the environment deteriorates. Are you confident that you won't need wage raised Catholic between now and 2023 even if the the market for periods?
Sorry to interrupt you. May I just remind you we have five minutes left before the end of the conference?
First of all, the more than five four hundred does not include any kind of additional funding. I mean, it's based on the cash we have on hand off that if if you are not looking at the kind of the cash flow. We are indicating for 21 and a further Improvement in terms of underlying cash flow in 2022. We have started the whole time and and what we all are or aiming for is to have the sufficient funding on hand when it comes to the business plan and the fall gets they have stated.
Okay, and then looking at twenty Twenty-One growth, it's there's some Divergence between active safety growth and restraint control. So just wondering what kind of your overall income at the margin of the page for $21. And then if there's any difference between active safety and restraint control growth moving forward.
Yeah, I think when you look at the margins between the different product lines, we really don't get into that differential between the different products. I think what we have to remember is RCM restraint control business is a much more mature market and it generally grows more in line with the the underlying like vehicle production. So, you know with us outgrowing that implies that we're taking market share loss is our order intake and our our backlog is suggested for for some years now. So and then of course, the the exceptional active safety growth is even well above the the addressable market. So I think that implies that we should we should be improving our market share slightly there as well. So
Okay. Thanks for taking our questions.
Thank you. This was the last question. Please continue.
All right, then I would like to thank everyone for your participation and today's call and your thoughtful and insightful questions. I hope it will be able to answer them to your satisfaction. But before we conclude today's call, I would like to extend a sincere thank you to UMass significant contributions to view near over the last couple of years. It has been a delight to be working with you first in order to live for three years. And now I'm in the year and I wish you of course all the best in your new role as a new CFO somewhere but also in generally in the future Max and am a big thank you for your contributions and for a lot of fun days together. So all the best to you now looking ahead beyond that or next quarterly earnings birth.
Tentatively plan for Thursday April 22nd this year, and we look forward to speaking with many of you during the first quarter before done and and of course in virtually wage about yeah. We also have mentioned in the release and tend to hold the Capital Market day during 3rd quarter. We will come out with more information about that later on this year and but still we speak again and take care everybody and put health and safety as the first priority. Thank you very much and goodbye for now.
Thank you. Ladies and gentlemen that does conclude our conference for today. Thank you for participating. You may all disconnect speakers, please standby.
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