Q1 2021 VIA Optronics AG Earnings Call
Ladies and gentlemen, thank you for standing by I Am and then your chorus call operator, welcome and thank you for joining via Optronics first quarter 2021 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.
I'd like to ask a question you May press star followed by one on your Touchstone telephone.
Press the Star key followed by zero for operator assistance.
I would now like to turn the conference over to cash Stifel and Investor Relations. Please go ahead.
Thank you good morning, and welcome to via Optronics first quarter 2021 financial results Conference call.
I'm Kathleen Taylor Investor Relations for via Optronics.
Joining me on the call today will be yoga, and Eichner via Chief Executive Officer, and Daniel Juergen.
And <unk> Chief Financial Officer.
Today's call is being webcast live and will be archived on the Investor Relations section of via website via Dash Optronics Dotcom, where the company's earnings press release is currently available.
Certainly matter and she will be discussing today, including the business outlook and financial projections for the second quarter and full year 'twenty 'twenty. One are forward looking statements and.
Such statements are subject to the risks and uncertainties that could cause actual results to differ materially from those contained and the forward looking statements.
These risks and uncertainties are discussed and our documents filed with the F filed with the SEC, including our form 20-F, which was filed with the SEC on April 29.
Please note that any forward looking statements that are made on this call are based on assumptions as of today and the company undertakes no obligation to update these statements as a result of new information or future events.
And with that I'd like to turn the call over to Juergen.
Yeah. Good book, Good morning, everyone and welcome.
Welcome and thank you for joining us today I'll first of all I would like to provide a brief overview of all first quarter 2021 results I will then discuss our key achievements and notable awards and the quarter before two and over the course of Danielle.
Our CFO, who will review, our first quarter 'twenty to 'twenty, one and financial performance and more detail and provide our outlook for the second quarter of 2021 and the full year.
As we discussed last quarter, we have been focused although from.
And growing our footprint and revenue and the automotive sector and translating into new designs and during this quarter and extending our visibility and backlog for the following years.
On top of the automotive business, we could convert more design wins and the revenue and as a result via pleased to report that we achieved our first quarter revenue of 41.
And 3 million, representing a year over year accruals or <unk> 67.
Seven per cent.
Following our plan and we continued to diversify our revenue and increased sales from the automotive and industrial and welcome.
And you do see a large opportunity in both sectors as the total number of displays with features that you're providing judy and cameras and the use of best as a design and they live and steadily increasing.
As we noted on our prior earnings calls, we increased our spending and critical areas of R&D and accelerated hiring to take advantage of the opportunity to engage into new projects with existing and new customers. Despite the current labor market and you have been able to secure critical talent at a much faster rate than initially planned.
These employees are being much with and you decided you know, but you and juice that we have with all of your customers simultaneously, yeah aggressively ramping up production to meet the increased demand from our customers, particularly in the and Neil.
And our automotive clients.
Many of these highest go to support our new manufacturing facility in Germany, which we anticipate will be completed next quarter.
As you know, there's a global shortage and the semiconductors.
Markets and other critical components, the combination of higher input costs, which could not be immediately offset and passed onto our customers and our increased hiring at a dampening effect on our EBITDA for the current quarter as a result, EBITDA remained flat compared to the prior year.
You do it at 1.3 million Euro.
And we consider this impact to be short term in nature, and we are hopeful that the component shortage will use over the next few quarters additional lead to minimize the financial impact you have taken initiatives to past corresponding cost increases to our customers.
Now I'd like to do and to some of our key achievements and the walk from the first quarter.
Total unit shipments, which include display sensors and cameras rose 35% over the prior year period.
We had another design win with a U S electric.
Via the manufacturer force surround view camera system, we had multiple design wins and the industrial and consumer sector, including four watts and the commercial segment alone. The commercial segment, coupled notebooks and tablets used for outdoor outdoor applications like in the military fleet.
Our partnership with Corning continues to proceed well we reached all our milestones last year and it looks like we will overachieve, all space and expectations that she is growth.
Overall, the corporation and has led to rapid adoption of the cold foam technology, bringing us into a leadership position as of today, we have five design wins for hold from technology, including one you decided and we secured a good first quarter with the Chinese automaker Ford will display and what you will force.
And for high end EV.
Excellent.
All are called from design wins, having food, especially travel and shapes as well as multiple displays and behind the copper clause followed the overall trend of integrating dashboard and electronics behind one useful class instead of individual displaced from the pulpit.
We have a strong track record and the EV market was nearly 10 EBIT customers.
But some customers we have decided with multiple models.
Yes.
And Europe as well as in Asia and in the U S.
We believe our strategic shift to focus on the automotive bucket, especially E vehicles and the industrial market has proved to be very successful so far and we'll continue pursuing these opportunities and will push for higher system level of what's with all of that increased investment and R&D capacity via low position to take advantage of and encouraged by.
And just a credit growth and the market, which is predicted to grow 50% to 70% and units.
In summary, we are reiterating it.
Our full year guidance for at least 20% year over year revenue growth do you believe that the overall market opportunity represents a need from higher potential looking ahead, we will continue to execute on our strategy of increasing sales and auto and industrial markets, leveraging all of sensor and camera and capabilities to deliver system solutions.
And while expanding the number and size of our projects with them.
And customer base.
We'll also evaluate M&A opportunities that would complement our current technology portfolio and capacity. We continue to believe that the quality of our growing pipeline combined with a good visibility from increased auto and industrial projects positions us well for continued growth from 'twenty to 'twenty, one and beyond.
With that I will now too and over to Daniel to discuss our financial results and outlook in more detail Daniel.
Thank you and Jurgen and good morning, everyone.
And then your juergens CFO of fly Optronics.
And that's by reviewing our financial and operations.
Assortments for the first quarter, and then provide our outlook for the second quarter and full year 2021.
As expected Q1 showed a slightly lower revenue as Q4 is every year, reflecting the seasonality of the consumer business. However, total revenue and the first quarter of 2021 was $41 3 million up 67% from $25 7 million and.
The first quarter of 2020.
Which was driven by increased sales cross business, even considering the impact of COVID-19. During Q1 last year. This will still remain a significant growth.
Total display solutions revenues was $35 6 million in the first quarter of 'twenty one.
Up 71, 2% from 28 million the first quarter of 2020.
Growth was driven by increasing demand and all end markets markets, particularly in consumer display solutions revenue represented approximately 86% of total revenues and the first quarter compared to 81% and Q1 of 2020.
Within our display solutions segments revenue from our automotive customers grew 131% year over year, and the first quarter and accounted for 29% of revenues compared to 21% from the first quarter 2020.
Revenue related to the industrial and specialized applications and market grew 15% year over year and accounted for 41 per cent of revenue compared to 61 per cent of the revenue and the first quarter of 2020.
Revenue related to our consumer and market increased 188 per cent year over year and represented 30% of revenue compared to 17% of revenue and the first quarter of 2020.
Total central technology revenue was $5 7 million and the first quarter of 2021.
<unk> 16, 3% from $12 9 million and Q1 of lost share.
Central technology revenue represented approximately 14%.
Total revenue compared to 19% and Q1 of 2020.
Total company gross profit margin for the first quarter of 2021 was 11, 4% to.
And to 17, 1% and the first quarter of 2020.
Our display solutions gross profit margin was nine 8% and Q1 2021 compared to 19, 2% and Q1 2020, the decrease and our gross margin was driven by increased hiring for our new plant in Germany, and that's why I'm, so sudden and dissipated.
And production and mix shifted.
With lower margin product and the quarter.
Strong growth and our consumer and markets and just strategic decision, we made last year to reduce licensing our technology to protect our strong market position.
Although things are technology gross margin was 21, one percentage from the first quarter of 2021 compared to eight 2% and the first quarter.
Prior year.
Increased gross profit margin was due to increased revenue.
2021, compared to Q1 2020, while fixed costs remained flat year over year.
Turning to expenses total operating expenses, excluding offset from other operating income and Q1 were $9 5 million or 23 per cent of total revenue, which compares to $5 4 million or 21 per cent of the total revenue and the first quarter of 2020.
The increase was driven price luminary.
By increased spending and the research and development and our General administration expenses for the quarter, we have increased our G&A spend as we prepare for further growth.
Especially in the even more complex environment of the automotive industry.
We are continuing and so that's a.
Our strengths and our organization to meet these growth opportunities.
Our expectations and research and development expenses were $1 million or $2 four per cent of total revenue in Q1, 2021, which compares to 600000 or two three per cent of total revenue and the first quarter of 2020.
Looking ahead.
We expect continue.
Investments in R&D, SB opportunistically tenants to support the development of more complex it solutions.
EBITDA in the first quarter of 2021 was $1 3 million essentially flat with $1 3 million and the first quarter of 2020.
We recorded a net loss and the first quarter of 2021 of $1 1 million, which compares to net loss of $4 1 million and the fourth quarter of 2020 based on the weighted average share count of four four and five 3 million shares from the first quarter of 2021 and this translates to base and dilutive.
Net loss of <unk>, two for euro per share and the first of all of 2021 compared to a net loss of <unk> nine to share.
And Q4 of 2020.
Turning to the balance sheet and.
And at the first quarter with cash and cash and equivalents of $74 4 million and total debt of $26 8 million.
Turning to our outlook for the second quarter of 'twenty 'twenty. One we expect total revenue of 44 million to 46 million.
For full year 2021, we continue to expect revenue kudos of at least 20 per cent compared to 2020.
These projections reflect continued uncertainty related to the ongoing and pixel tea as well as increased cost raw materials and components part constraints.
May affect or their.
Customer and potentially impact our revenues.
Overall, we are pleased with our strong start to the year as demonstrated by the cyclic and Scott.
Growth and revenue we are focused on the large market opportunity ahead of us.
Particularly in the auto and industrial markets, which also require further investments in R&D and production.
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 and anyone who wishes to ask a question May press star followed by one on their Touchtone telephone.
If you wish you and move yourself from the question queue. You May press star followed by two.
If you are using speaker equipment today, please lift the handset before making your selection and the one.
And who has a question and my press Star followed by one at this time 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 I have several questions you're going for starters the plant now being scheduled to.
Open and Q3, I think that was versus Q2. So maybe one quarter. Later, maybe you can update us first off on the status with your North American EV maker, if you commenced volume shipments or if its still at the prototype level.
And then for Daniel.
Can you help us understand a little bit better the gross margin and I understand you're hiring more people related to the plant opening in Q3.
What do you expect gross margin to be for the June quarter, and any thoughts and aware of gross margin should maybe exit calendar 2021 and then I had a couple of follow ups after that.
Yeah, Let me live and start with the was the Q3, So day said I'm a delay and all are true red and that's just basically is caused by and the equipment manufacturer that we have however, you have a we have.
We can overcome that by producing more units in China. So it doesn't affect your overall and you want to be but it delays the start of production in Germany.
So business wise, it's it's not most people will not impact your overall revenue however, EBITDA.
Helane the production here and.
And that's basically Dubai and indicated that Q3.
Could you say.
And.
Yeah. So.
And then.
And I'll.
A follow up.
And so.
Thanks for the question. It's a good question. If you look on the on the development of the gross margin.
Hi.
You know in and and Q.
Q1, this year we had.
Some and some impact on the margin coming from.
Several items and one is that we.
And have been reduced one time revenues from.
Reimbursement of and our it costs.
We had.
The change and the revenue mix. This is the biggest impact on and on the on the gross margin.
And and we have.
Lola licensing revenues than we had and the in the previous year and 2020.
This has and strategic reasons and we wanted to protect our IP and dealt.
With <unk>, we are and.
Reducing our very high margin licensing revenues, but this is a strategic decision I think it.
It is very helpful and the.
Even if it's cost us some more.
And points currently and last but not least what was impacting.
The current quarter was.
The increase and material costs from Q.
Due to the shortage, there's a shortage.
Of course, and in semiconductor and things like that but also and all other areas everything is getting much more expensive S and.
And before and we have.
You are always not and.
And the precision to fully shift and all those costs and to the customers that quickly and this.
During the second and third quarter.
And last but not least the flight cost increased increased significantly.
Also to the us and what the customers and the shortage of materials.
We have been C and higher alpha to rates.
And also has been affecting our gross margin coming to the question.
Oh, it's Q2 I'm looking.
And from today's perspective, Q2 is and getting a little better, but not coming back to the to the to the ratio where you have seen and and Q4 for example.
But we hope that with the change and our revenue mix during the during the rest of the year, what we plan, we will get back to them.
And the highest gross margin that we have seen in Q4 2024 zone, but as we've said in the earnings call for the full year 2020, we would guess.
And on the on the earnings and on the.
Gross margin.
And the call of the second quarter.
Does it answer your question.
Yep Yep. That's that's helpful. Thank you and then just circling back Youre getting to my question your comment about having some equipment technical issues, maybe for the plant and Germany is that.
Have you produced.
With your relationship with Corning anything on the cold form side, yet and and maybe help us understand the nature of the technical issues and how easy they are to be ironed out and whether or not this holds back you know some of the design wins, you're hoping to have related to cold form.
No it doesn't hold up and he decided once we have and called from them I mean, I don't know whether you have mentioned that before but I think via the only company and the world has and cold foam products already in production and mass production.
So that's that doesn't impact us.
The technical difficulties are more related to yet to bring the equipment over from China.
The Chinese manufacturer has actually has to adjusted to the European standard. So they had some well let's see.
Say difficulties to the trusts with and you have to do right now some rewiring and things like that so it's it's it's not I mean I'm not so happy about that because he wanted to ramp up earlier, but luckily it doesn't impact us.
And in and our overall capacity, nor does it impact us and any any any aveo and took swift requiring new projects or something.
Okay that sounds good and then my last question related to your comments in your prepared remarks talking about.
With the North American EV maker, and new surround camera system win can you give us a sense of when you might start producing for that and.
Is it for one socket or multiple sockets and the vehicles.
So this one is for it so it's it's.
So we got this wrong true up basically for cameras.
Right.
And this is for one vehicle and right now.
And we at heart and soul.
So this is weeks back.
And so.
According to the customer they want to and stopped production and of the year, which sounds a bit early to me.
But we will be happy if we if that works out. So it's it's it's very short besides liking.
It will be good.
If it works out because here, but I'm not planning for it.
Got it perfect. Thanks, guys best of luck.
And maybe one one book and also to the semiconductor shortage. If you would have asked me a few months ago I would have said, we have something and Brexit.
And so right now we have been infected with mainly with cost increases and it takes just a while to basically and negotiated with the customer and true tool to the trust the price so.
And business by you and this is what Daniel said it takes a little ones.
Not that the customers don't want pitch of course, nobody wants higher cost, but its not at their books and into a trust.
Thank you.
Mhm.
The next question comes from the line of Andrew Buscaglia with Bahrenburg. Please go ahead.
Okay.
Hey, guys. Thanks for taking my question.
Thank you.
And talk about a little bit more about.
Something like customer wins.
How many how many of these are new relative to last quarter. I believe you said and you'd be there's 10 customers tend to 10 customers. You have you have went down and numerous models.
But can you kind of update us what's changed versus last quarter like you know and maybe you can and order of magnitude. What you know what what are the size of these new wins and they are they big projects are small and medium anything you can any color you can give us would be great.
Okay.
So all of them all of these wins are hum.
I would say significant camera opportunities, there's usually a little bit less but nobody can talk about called from and it's usually a significant design win if you look over the last so in average I would say and since last year. You can see an average you have one design win with a quarter roughly and.
And in this market. This is what we see doesn't say that it has to be one per quarter, but this is what we couldnt be seeing assistance and rates. Most most important is for me that.
These design wins.
And also with new customers and they have more projects and business and incubation projects for us. So it's a design win yes, but it's always an incubation and bloodshed buddha's customer to get more and more.
More business for example, the one in China. This is right and the old Yeah and.
And the high and car.
If that is successful then we will get the mid range as well the midrange and significant higher and.
Quantity.
So these are all for us, it's they're nice projects, but they also don't openness.
Yeah.
Okay.
And for and for the most part.
And would expect production and these to begin before year end.
And that on.
And to be honest from this one.
The reason one income.
And from <unk>.
I think its next year.
And I need to check that but I think its next year and think about that.
The and I think they've got yeah.
Yeah go ahead, sorry, and I'll go ahead sorry.
That'd be the other one that I mentioned, so it's starting to be high and growing into the mid <unk> and this will follow shortly after and so that's.
And probably you also and next year.
Okay. So you got your your 2021 guidance is.
Is it and contingent upon these.
Reaching production yet.
No no and although they have not been included in and and the 2021 guidance.
Guidance, yet to that extent.
Okay got it.
Can you talk about you know is there you know in terms of you guys touched on M&A.
Yeah, that's that's an area you'd like to.
Allocate some capital to cause that.
And it changed versus last quarter in terms of Europe, you're I'll, let there or you know now that the pandemic.
And you know we're kind of relieving.
No. The only thing which has changed is that we wanted to close this quarter and.
And I'm, sorry last quarter and now we are closing at this quarter. So you will hear.
About it and the next earnings call via a very very close to closing.
Okay, and and can you comment on that kind of and the nature of the.
Of this or that.
This.
Potential acquisition is it small.
Large or anything you can indicate.
It's it's it's it's a smaller ex decision, it's basically and.
Yeah, we're looking more into two basically how should I say that.
Half of our systems.
Systems integration and company.
So S S and the products that yeah, that'd be operating in the displays the cameras and so on and so forth. They have to index would be automotive electronics and system. So you have to have some interfaces and you have to provide self to give to provide user interfaces and.
Also upfront you might be.
Must be required to integrate.
Part of what you have lots and lots of final product and part of what you have in the car suggested and the car.
So and this is this is the kind of company.
And that's firing and it's it's it's a well established company, especially here in and just sort of drill and the needle from.
Hum and make us there.
And they give you and <unk>.
Ideas.
Okay.
And lastly, I just wanted to clarify.
Yeah with the you know the large EV U S. D V project a project that.
But we thought we would have commenced by now but it sounds like that's more Q3, that's more on that EV maker.
It was a bit confused about the nature of the delays that is at the EV maker that is.
Kind of day.
And things or is it more on your end.
And I don't know what I'm doing.
Okay.
The net.
Good day, working days and the EV maker, because the and I don't know issue.
And the news you probably know that I'm.
There were some sales and some other parts of the car.
Ready.
The day, they've been missing parts, so they actually delayed a little bit.
And the multiples you are seeing right now is really.
It's really true.
It's and integration part of steel still supposed to be equivalent.
So it would be overall.
And and.
You also see you.
A lot and not a lot of changes and indeed, we have seen a lot of changes and development process.
We still see changes going on and actually to be honest via already broken and the next design with them already.
So this is supposed to get fully and production, but you're already broken and the next generation and.
We've been asked to provides already samples and demos for two other.
Lines that they have so this is actually pretty proudly about progressing it absorbs a lot a lot of people and manpower.
And this is maybe the content.
Yeah continuously hiring them faster and faster than expected Luckily right now.
B, we get people it was and look I don't know why it was a lot harder than last year.
And as you'll see easier and food.
No way.
Okay and interesting yeah. So.
And presumably this is all temporary yeah. The the delays are temporary and it seems like.
You know that the long term outlook with this.
This customer is still very strong and and nothing's changed in fact, if anything it's things are changing for the better.
Long term.
No. It's it's it's all good and it's actually what's happening right now the big getting bigger.
Beginning with discussions about new models and I'll be.
Talking about the model and so we know what models and the avia providing.
Providing them samples.
And I mentioned in and initially.
Did you see a lot of a lot of demand and older. So this is also related to that.
It's it's a it's the end of the day.
And you would you and it becomes.
Bigger and bigger and actually to be honest also very exciting right now because it's.
It's it's a different kind of I mean, OLED and looked at common and in the car.
And this is something which.
And I think from from my point of view, if you're if I've seen and samples.
Rupees.
I would say breathtaking experience, which is fun to sit and bad calls and assembly.
Interesting very cool.
Okay. Thanks very much.
Yeah.
At this time there are no further questions I hand back to yoga and the ice enough T L for closing comments.
That's all from my side, the only thing left to do is to basically thank you joining us for the call today and we look forward to update you and all purpose and hope that we have few without somebody next door and then Paul but we can also and <unk> and finally, if you have more details or FX.
And have executed that emanate from project with and talking to vote again, thanks, everyone and looking forward to talk to you again.
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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