Q4 2020 VIA Optronics AG Earnings Call
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Ladies and gentlemen, thank you for standing by and and.
And your chorus call operator, welcome and thank you for joining the via Optronics fourth quarter and full year 2020 financial results Conference call.
Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by question and answer session.
If you would like to ask a question you May press star followed by one on your Touchtone telephone price.
Press the Star key followed by zero for operator assistance.
I would now like to turn the conference over to Monica Gould Investor Relations for via Optronics. Please go ahead.
Thank you good afternoon, and welcome to the <unk> fourth quarter and full year, 2020 financial results Conference call and Monica Gould Investor Relations for VF Tronox, joining me on the call today will be yoga and Aigner P. S Chief Executive Officer, and Daniel Juergens, If he was chief financial officer today.
This call is being webcast live and will be archived on the Investor Relations section of our website and.
And via Dash, Optronics Dot Com, where our earnings press release is currently available.
Certain matters, we will be discussing today, including the business outlook and financial projections for the first quarter and full year 'twenty 'twenty. One are forward looking statements such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in our forward looking statements.
These risks and uncertainties are discussed in our documents filed with the SEC, including our registration statement and prospectus and with that I'd like to turn the call over to Juergen.
Yeah.
Yes. Thanks, Good morning, Hey, good morning, everyone and thank you for joining us today.
And you provided.
Our fourth quarter and full year 2010 day results.
And we'll then discuss.
And.
And the.
Quarter.
Before I turn the call over to Daniel.
Ooh Ooh fourth quarter depending.
On extra performance and our outlook.
From the first quarter on 'twenty one day.
Turning to a brief summary on financial results total revenue in Q4 and between 53% who use a 44 million driven by continued growth and all of this play.
Solutions and systems and increased 12% sequentially on sell through.
And three EBITDA was flat.
The prior year periods and the loss of one one and two.
And we're four years into 'twenty.
And it's top line growth of 11% and expanded gross margins by 800 and Facebook.
Notably during the fourth quarter, we continued to diversify our revenue I think we'll use all the savings from the automotive and industrial and and thoughts and.
And see an opportunity in both sectors as the total number of states with features that you're providing cameras and the use of classes at the same level, and then be close and sort of agricultural and construction equipment and steady increases.
And the balance sheet behind these elements is becoming increasingly more complex.
And our expertise is well suited to meet these challenges and.
And then start to address this with a great new technology development.
Of course on.
And so on the customers have been early adopters of our products and performance. She however, more recently electric vehicle manufacturers are becoming nearly as aggressive and implementing new features which position ourselves very well competitively as a result, with a non display solutions and suspended the fourth quarter revenue from auto optimal schools.
And 7% year over year and accounted for 27 percentage of the total revenue growth.
The new from our industrial customers Rose 23 percentage year over year and accounted for 44% of revenue mix and consumer revenue at a total of 9%.
Within the automotive segment and the other listeners.
Right and range of customers, including many of the worlds largest Oems and especially EV companies.
<unk> design wins and shipments.
From the portfolio the strongest price for our portfolio comes from electric and GPS.
This includes luxury vehicles trucks, and vans, mainly for plastics and the displays as well as all sorts of camera applications of Exelon fueled simple.
As our mix of revenue from auto and industrial end market and.
Increases, we expect a positive impact to our gross margin as margins in the sector has a higher than corporate average.
With this shift we also gained greater revenue visibility and at some product lifecycle as low as five to seven years and.
Sure.
Total has positive impact on our backlog providing visibility beyond 2024.
Capitalized on the strong growth and you have seen this buckets and Cusco index.
It has a competitive advantages will further increase our spending in R&D and SG&A.
And the investments already in Q4, we expect that our operating expenses as a percentage of total revenue we remain elevated as he will continue to pull and investments in 2020 one to take advantage of the opportunities to engage and new projects with new customers at a faster rate than previously expected.
Given the length of design production and sockets and the industries, we do not expect total investments to impact on near term revenue.
Other from you to increase revenue over the next three to five years.
Now I'd like to turn to some of the progress and key achievements that we've made during the fourth quarter.
We are now working with several equivalents, leading electric vehicle manufacturers and you continue to expand and upon our strong position on this space.
And production of the two Chinese EV car manufacturers and will be shipping prototypes and several different projects to them. This year.
With respect to progress that we have made with a leading U S based and unique company that we discussed on our Q3 call and have already shipped hundreds of prototypes. These prototypes has been very well accepted and we along with our customers and driving our R&D teams to five and a nice qualification from less production.
<unk> and ramp up with anticipated mid 2021.
The construction of the new manufacturing facility that we have.
And in support of construction is virtually complete and.
We are working on finishing the interior before ramp up production.
And as we have discussed previously the facility would have a capacity of 10000 units per month once complete.
During Q4, and finalize the automated production lines and our existing German facility, therefore, increasing our production capacity of over 60000 pieces per volume to a total of six 2000 units per month.
Update was on August the low production costs and is also an important step on our path to produce path and China, and Germany with the same processes and the system, that's being able to share production and capacity if needed.
I think it's geographically diverse and infections to achieve will also help us.
Overcome terrorism and issues and provides additional flexibility.
During the fourth quarter, we initiated and research and innovation team within the media that is exclusively focused on developing new technologies and securing our technology leadership. This team is completely decoupled from any profit to concentrate on technologies to expand the <unk> market position with new technology developments.
This includes advanced proprietary bonding and support materials as well as fees from glass designs to displace with touch screen technology to be constructed and complex shapes as relative compete index. This display systems.
With respect to our strategic collaboration with Corning.
Pending corporation by investing and joint development projects from new glass display and touch function and that use hoping to be able to to ensure an exquisite and road shows this year.
During the fourth quarter and received a number of awards demonstrating our success and we would like to highlight a few and more detail.
Starting in the automotive sector.
We received a new award from our learnings on long journeys pumping et cetera to develop the first prototype for future into a camera with this and we believe that we are very well positioned to receive the final award from Us production.
We have also received considerable award from the automotive sector from large customers located across the globe, mainly and the U S UK and EU.
We look forward to updating you on these projects as we begin to ramp up production.
And the industrial sector and received a new project from a large existing U S. Based customer. This is particularly important as it includes new cash technology that we are currently developing together with our partner for Ruggedized laptops.
In summary.
It has been and exciting year and I'm pleased with the progress that we made and particular with our execution and the outlook for this end market on <unk>.
Success is a testament to the highest growth of our team and the strength of our proprietary technology I would also like to thank our offers and our customers for their support this year.
Looking ahead, we will continue to execute on on our strategy of increasing our sales and the auto and industrial and buckets, leveraging our sensor and camera capabilities to the legal system solutions, while expanding the number and size of our projects within our existing customer base.
And also continued.
And to evaluate M&A opportunities that would complement our current technology portfolio or add capacity, you're excited to see more and more opportunities ahead of us and believe that our expanding pipeline and greater visibility decision will.
Continued growth in 2021 and beyond.
With that I will now and turn the call over to Daniel to discuss our financial results and outlook in more detail than you.
Thank you Juergen and good day, everyone I am Daniel <unk> CFO of fly Optronics I'd.
Start by reviewing our financial and operating performance for the fourth quarter and full year of 2020, and then provide our outlook for the first quarter and full year 2021.
Total revenue and the fourth quarter of 2020 was $44 1 million.
And increase of 22, 5% from the fourth quarter of 2019, which was driven by increased sales and our display solutions segment.
Total display solutions revenue was $37 9 million Euro and the fourth quarter of 2020 up 27, 6% from the fourth quarter of 2019.
The increase was driven mainly by increased sales from our automotive customers and display solutions represented approximately 86% on total revenue and the fourth quarter compared to 83% and Q4 of 2019.
Within our display solutions segment revenue from our automotive customers grew 77% year over year and the fourth quarter.
Accounted for 27% of revenue compared to 18% and the fourth quarter of 2019.
Revenue related to the industrial specialized applications and market grew 23% year over year, and the fourth quarter and accounted for 44% of revenue compared to 43% of revenue in the fourth quarter of 2019.
Revenue related to our consumer and market declined 6% year over year, and the fourth quarter and represented 29% of revenue compared to 38% of revenue and the fourth quarter of 2019.
And the lower share of revenue associated with the consumer and market was due to our focus on expanding our auto and industrial business.
Total sensor technology revenue was $6 2 million Euro and the fourth quarter of 2020, essentially flat with Q4 of last year sensor technologies represented approximately 15% of total revenue compared to 70% and Q4 of 2019.
Turning to our gross profit margin total company gross profit margin for the fourth quarter of 2020 was 16, 6% up nearly 10 percentage points from the fourth quarter of 2019. This increase was driven by improved margins and cash solutions business.
Our sensor technology gross profit margin decreased to 24, 2% and the fourth quarter of 2020 from 27% and the fourth quarter of the prior year Q2, and increased ratio of third party material being used institutional and license fee on newly licensed IP, we are using.
Our display solutions gross profit margin increased to 15, 3% from two 7% and Q4 of last year, driven by the higher mix of revenue from customers and auto and industrial end markets.
Early on.
Turning to expenses total.
Total operating expenses excluded offset from other operating income in Q4 were $12 2 million or 27, 7% of total revenues, which compares to $5 6 million.
<unk>, 6% of the total revenue and the fourth quarter of 2019.
This increase was driven preliminary by higher R&D expenses and IPO related expenses.
Research and development expenses were $1 7 million or three 9% of total revenue in Q4 2020.
Which compares to $1 3 million euro or three 6% of the total revenue and the fourth quarter of 2019.
As you may be aware, our R&D expenses also increased sequentially from a very low 0.4 million euro or 1% of revenues and Q3 2020.
As you can you mentioned the increased in R&D expenses sequentially and year over year was driven by increased investments to support our customers design and production plans over the next few years.
Looking ahead, we expect continued investments in R&D expenses.
EBITDA in the fourth quarter of 2020 was negative $1 2 million.
<unk> to negative $1 1 million and the fourth quarter of 2019.
We recorded a net loss and the fourth quarter of 2020 of $4 1 million, which compares to net income of $1 four.
And 4 million Euro and the third quarter of 2020 based on a weighted average share count of 4.52 million shares and the fourth quarter of 2020. This translates to basic and diluted net loss.
Zero point 92 euro per share and the fourth quarter of 2020 and compares to net earnings of <unk> 47 Euro per share and Q3 2020.
Now turning to the balance sheet, we ended the fourth quarter with cash and cash equivalents of 81 million and total debt of $22 2 million.
For the first quarter of 2021, we expect total revenue of 36 million to $38 million Euro.
For full year 'twenty one.
We expect revenue growth of at least 20% compared to 2020.
Our projections take into account the effect that uncertainties remain due to the ongoing COVID-19 situation as well as the global semiconductor shortage, which may affect our customers and potentially impact our revenues.
Finally, I'd like to briefly discuss our full year 2020 results.
Total revenue and 2020 increased 11% to $152 7 million from $137 2.002 million 19, driven by a 12% increase and our display solutions revenue and a 7% increase in sensor technologies revenue.
Gross profit margin for the full year increased by 10 percentage points.
15, 3% up from seven 3% and 2019.
And for the full year, we turn profitable on an EBITDA basis with EBITDA of $6 2.002 million 20, compared to an EBITDA loss of $4 5 million Euro and 2019.
Overall, we are pleased with our financial results and our focus on the growth opportunities ahead of us, particularly and the altra and industrial markets.
This concludes my prepared remarks, I will now turn the call back to the operator to open up the line for questions. Thank you operator.
Ladies and gentlemen at this time, we will begin the question answer session anyone who wishes to ask a question you May press star followed by one on your Touchtone telephone.
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One moment for the first question please.
The first question comes from the line of Anthony Stoss with Craig Hallum. Please go ahead.
Good morning, guys. Thanks for taking my question I have several maybe I'll start with you you again can you give us a little bit more detail on the North America and EV maker that now you expect volume production and the middle of 2021.
My recollection was you were supposed to start this current quarter and Q1 can you give us any more detail on what's happened and I know you've been sending hundreds of prototypes for quite some time love to hear kind of more on that and then I'll see you again.
If you wouldn't mind, if you have it handy if you have the total design win what the expected VAT.
<unk> or backlog that would be helpful. And then after that Ive got a follow up for Daniel.
Well yeah.
Welcome to day right.
And I want host, Glenn and little bit earlier and department with net.
And he may make some parts were.
And so they have to delay it slightly.
Which is.
And basically.
So and help maybe helps us as well because as you know I think you mentioned that before and in order to deposits with production in China and for the.
And Bob and auto production and Germany later on and the move over completely so we will be able to ramp up and Germany earlier maybe.
With me.
On the full quantity, but thats still on this.
And so.
And it's other parts of the cloud, which has not been available and not yet complete and qualified.
And.
And with regards to the overall volume and the overall volume and getting it didn't really change that we're talking about several hundred thousands over at least.
And this period.
Okay, maybe on the I guess, that's great color Thats good to hear on the North America, and EV maker, it's just related to component shortages.
And that's something with you.
What I was driving at is total backlog for all your customers.
And if you've got design wins that you think are coming into the next three to five years, what's the expected value of our backlog of all companywide design wins.
Well ill hand, it back over to Daniel Schuller Whitney Okay on that.
And that number businesses.
This is Daniel to music.
So the current backlog.
We have.
Sure.
The current year is around $90 million.
And.
The backlog.
We have four.
For the next.
Yes, I don't have I have don't have.
The flow backlog amount on hand here.
But we can discuss that and another call.
Okay. I don't know if you have handy like a rolling total of number of design wins, either if that's just so we can see how it's snowballing if you have that.
And here as.
As well.
Yes, with more provides and we tried to provide multi.
But things will be occurring in the process and preparing Holland.
So the hit to EPS.
Also recall that for the industry.
Reported.
With me and to even more.
Right now or very good.
So that's something that we will put that as well, but I'd be happy with and net flow to day.
Okay, That's fine and then Daniel related to the Opex can you.
Quantify or qualify that $4 7 million other opex category and then if you wouldn't mind I know youre, youre investing and thats evident and the R&D, but can you give us.
All part as to what your total Opex is looking like for the March quarter as well.
Get a sense for the run rate for this year.
Okay.
And as major of the and the other operating expenses.
And nearly everything related to net.
Negative currency effects.
Due to the translation of the.
And of the proceeds of the <unk>.
<unk>.
Major part of it.
And the other question was around R&D expenses correct.
So if you could give us a sense.
If you could give us a sense of what you expect the March quarter total opex to be.
For this quarter.
I would say it will be nearly the same as in the fourth quarter.
No major no major changes.
What we are increasing.
And you will see also further for the rest of the year, we will increase and we have to increase R&D expenses.
And.
This will also.
This is this will be the major.
Part of cost increase all the other costs will be.
Nearly the same.
As of today or as of.
Last quarter.
<unk> not changed too much.
On.
Also you know we ramp up the new production and the new and.
And the new production facility here in Germany.
And this will but most of that is related to cost of sales.
So on.
I think this is.
This is the best or the best guess I have.
Summarizing.
For the for the upcoming.
Quarters of the current quarters.
Will mainly see and increase in R&D expenses, because there are so many rfps and the house and we have to handle that and also we invest in and.
And new technology, which is.
Partially not related to any customer, which should safeguard to our our innovations.
Capacity.
Okay, just just to clarify one last time.
The $4 7 million euros and the December quarter, you said that was related to the IPO and.
And the currency exchange. So you don't expect that to reoccur.
That level and March you would you would expect selling G&A and R&D to be roughly the same.
Exactly exactly.
I don't.
I don't expect that too.
And too much.
Changes on the on the currency and.
And now for the upcoming weeks net.
And for this quarter so you on.
And are completely right.
So it should be somewhere around five $5 million to $6 million euros, and Opex for March and that group.
Exactly okay.
Perfect great well, thanks, and congrats on the continued progress guys much appreciate it.
Thanks, a lot.
The next question comes from line of Andrew Buscaglia with Bahrenburg. Please go ahead.
Hey, guys. Thanks for taking my question.
Can you talk a little bit about.
You mentioned some award then and automotive.
I was looking to see if there you have some more details on that I believe I heard.
Our New award for and German Sports car is.
Is that a net <unk> related.
Thank you Yeah can you talk a little bit more about that specifically and maybe and the magnitude of that award.
Most importantly related expenses near term development.
And on.
From a volume.
And while manufacturers and suffered.
In Germany.
And we are talking about the new and material camera and.
With that camera.
And we'll go to production.
Of other very huge quantity at this will most likely <unk> and equity comp.
So I think business profile I came on board at the moment net and the only one on.
Contracted and that area.
And with them, so as I said $50 per day.
Other than one successful inventories.
Yes.
Basically you see.
That's a business right now and should have politically.
And people.
Sorry, you said.
It's a huge quantity.
And this is relatively Big award.
Versus previous award and gathering.
Yes, and looking and very applicable as you can see and basically tank and we'll take the EBITDA.
Can make some assumptions.
And the automakers la and <unk>.
And it's an incentive will be and the majority of that you can see it can move.
And what that would mean.
I'm not sure if that will be a second source as well that could be.
And it's done.
Terrific.
Okay and then.
And would you anticipate starting to see.
Revenues from this.
And your and your income statement.
And then.
And the us.
Quick question on this one.
As well and don't have.
I think it's 2020 four 'twenty five.
And.
I would need to check.
This business with a question Mark I can check that we hope and data.
And that's what I have in mind okay.
And what and you.
And when Youre talking about your guidance you also mentioned two Chinese EV and <unk> yet.
Chinese EV manufacturers I believe these are those those are new.
Those are new.
Windsor, correct, I imagine Youre and.
It had been trying to bid those but they.
Greater confidence or is that is that in the books now.
Not only have four two companies one thing already on and production volume.
And more than a year ago.
Okay.
And then you and I.
I was curious on the industrial side too.
<unk>.
And you were talking about a large U S based customer and can you talk about more like maybe what what application that then or what end market.
This customer will be coming forward and again like the and order and order of magnitude and what they mean.
A meaningful award.
And so.
First of all when we talk about and industrial and that area. So we talked on the whole bucket as laptops and the rocket as laptops are used by many and each line.
And so a database sales for.
Also in the U S military force bundled total existing companies with two outdoor inspections.
And.
And we need to right.
Right.
<unk> range for them.
And I think they have.
DJ volume.
And the highest market share in the U S. Now.
<unk>.
The it and this and will be and I think the protocol tens of a host of on try to implement things all take launches first and and.
On the consumer market and the consumer laptops and next steps.
Yes.
And from there and we diversify into other industrial industrial applications. So look at us laptops columns.
<unk> and the industrial segment.
On.
<unk>.
And over.
And over to resource of on.
The revenue and I have to check with Daniel Boone GAAP number handy.
The overall volume okay.
No sorry.
Okay.
Okay, and maybe just one last one on them.
And your guidance for.
I understand your guidance for the full year Youre your time.
Hi, I'm on it be conservative around these semi shortages.
But what about on on profitability.
Are you are you.
Are you concerned around inflationary costs rising and then and just generally maybe.
Having to yes.
Pay more for your the components that you are using.
To meet expectations with your customers. How are you thinking about I guess more on the profitability side versus revenue this year.
And so.
This is this is a very good question.
From from them from.
And from the gross margin.
And we are.
<unk>.
Expecting it to be flat or maybe slightly increase in March and level.
And about <unk>.
And the costs for the whole year, we want to give guidance on.
And on the profitability and that was on the cost.
Hi.
Mid of the year and reason for that is that we are currently in phase two really heavily invest in R&D capacity and and.
And Paul.
Paul.
Related to that due to the effect.
As I said before.
We have so many <unk> and the house and so on my needs.
And <unk>, who are really safeguarding our future.
And we.
We can't currently really say what will be needed and power.
The future will look like.
Maybe.
The second half of the year.
And the spending we have to take for our future.
Okay.
Alright ill step back in queue. Thanks, guys.
And maybe just from my side.
To answer your questions and just check so the industrial laptop.
$30 million overall revenue.
And.
On the <unk>.
And that's just a material number.
That's what the net new business that's helpful.
Okay. Thank you.
Mhm.
As a reminder, if anyone wishes to ask a question at this time. Please press star followed by one on your telephone.
There are no further questions at this time, I hand back to yoga and Eisner for closing comments.
Yes. Thank you thanks, everybody for joining us today, joining the call and look for.
Cohort to updating you on our progress next quarter and as usual and if you ask questions, let us know and we try to enter.
What other than Canada as fast as possible. Thanks, everyone Bye bye.
Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.
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