Q3 2021 VIA Optronics AG Earnings Call
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Ladies and gentlemen, thank you for standing by I'm Stuart Your chorus call operator, welcome and thank you for joining the via Optronics third quarter 2021 earnings call.
Today's recorded presentation, all participants will be in a listen only.
Presentation will be followed by a question and answer session.
If you'd like to ask a question you May press star followed by one on your Touchtone telephone press. The Star key followed by zero for operator assistance I would now like to turn the conference over to Lindsey salaries. Please go ahead.
Good morning.
And welcome to the <unk> third quarter 2021 financial results Conference call I'm, Lindsay Savarese Investor Relations for <unk> joining.
Joining me on the call today will be Organised, Eric <unk>, Chief Executive Officer, and Dr. Marcus Peters UBS Chief Financial Officer.
Today's call is being webcast lives.
<unk> and will be archived on the Investor Relations section of <unk> website at via Dash, Optronics Dot Com, where the Companys earnings press release is currently available.
Certain matters, we will be discussing today, including the business outlook and financial projections for the fourth quarter and full year 2021.
We're looking statements such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. These.
These risks and uncertainties are discussed in the Companys documents filed with the SEC.
<unk> <unk> annual report on form 20-F.
<unk>, which was filed on April 29 to 2021.
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.
Good morning, everyone, everyone and thank you for joining US today first I will provide a brief overview overall third quarter, it's going to be 21 results.
I will reflect on the accomplishments that we have made during our first year as a public company provide an update on some key achievements at multiple awards in the quarter.
And some commentary on those strategic initiatives looking forwards.
Our goal is to provide as much transparency to the investment community as possible. Marquis will then review our third quarter financial performance in more detail and provide our outlook for the fourth quarter of 2021 of the full year.
And welcome to the third quarter revenue of $49 4 million increased 13, 3% year over year driven by growth in our display solutions segment or <unk>.
EBITDA in the third quarter of positive $1 1 million decreased from positive $3 5 million in the third quarter of 2020.
Looking back.
This past year, we have made significant progress on executing on all the strategic plan that we laid out during the IPO process, notably we have no reported full quarters of double digit year over year revenue growth since becoming a public company in September 2020.
We continued to diversify.
File in brokered revenue base and increase our sales in the automotive and industrial end markets.
We completed the highly strategic acquisition of Germany is a profitable automotive specialty company earlier this year.
This transaction expanded our engagement in the concept phase of the <unk>.
And it has increased our value proposition to our customers as we now have the complete interactive display design competence, including the processing software part in house.
You have made a number of improvements to the organization to support our future growth plans and notably we have increased our R&D talent.
Both organically and Inorganically through our recent acquisition of Germany is.
We staffed more than initially planned during the last month because of the necessity for existing projects.
With these investments we are now pushing into active display in sensor systems offering ahead.
Furthermore earlier.
This year, we initiated a research and innovation team that is focused on developing all materials and process.
And develop new technologies.
This team works together with the R&D team of Sigma since our most recent investment to live up to develop a variety of new functions and features for touch sensors in touch.
Modules, some of which we will show during the CES show in January 2021, sorry.
Sorry, 'twenty two in Las Vegas.
As anticipated we have expanded our production facilities.
Which I will touch on in a moment.
We have also strengthened our sales organization to capitalize on the growth.
Earlier. This ahead of US. This has resulted in increased cooperation with our existing customer base with the full scope of our capabilities now displayed already back with increased directional of existing and new customers and we expect further traction after see yes.
We have already mentioned a strategic camera design.
Sign win with the U S you'd make a well we supply or cameras for the car and can generally report a strong increase in camera design in activities as well.
As we have started to ramp up new countries coming out projects this year.
Design wins have been stable all of them. Yet however, we are moving more to.
These larger projects with longer life cycles and higher value.
As many of you know this has been an exciting year for the EV market with many new companies, becoming public in 2021 S. EV companies build out the supply chain infrastructure you are focused on increasing our share in this market.
Yeah. Please.
Pleased with the traction that we have had with this.
From counting already.
Three major U S Mi make us one of your key U K EV maker in Chinese EV makers as our customers more recently, we have expanded our presence in the overall EV infrastructure market by providing display touch.
Touch solutions for EV charging stations.
Overall I'm pleased with the positive momentum, we are seeing and with our execution against our strategic initiatives.
Turning to some of the dynamics in the third quarter I'd like to address the global component shortage and specifically.
The impact on the L b.
We have been able to successfully manage the impacts of the global supply disruptions, maintaining a double digit revenue growth and continue our CRO sparse trust.
Trust during the last few days, we saw once more disruption, which has caused us to set our guidance for this year.
To a more conservative 15%.
Revenue growth compared to 2020, plus we are still working on increasing that number as we speak.
We also will ever seeing an increase in some of our component in transportation costs, driven by the shortages and we have impacts caused by power shutdowns in China. We are working with our customers on a case by case basis to minimize the potential.
Impacts on margins.
As announced on September 22nd our new production facility in Germany to successfully ramped up to its capacity.
And we are shipping since several of these Williams has plans to all U E U.
U S E V customer.
This will be followed by a production to an extent.
As of March coming year will be integrate the equipment, which is currently used in China into that line.
From that point in time onwards, all production for the U S E B make it will be in Germany.
On top of that we are planning the new production line for our new European High volume customer you announced that assignment.
Last year and expect production ramp up in 2023.
Further we incorporated a new entity in the Philippines, IPO chronic Philippines, Inc. To provide customized platform camera solutions from design and development process and testing and quality control the camera design and development team reported.
The latest two via Optronics, Jim BH would be integrated into this new entity.
Coming back to the business Award we received from the British EV.
The EBITDA company I like to say that this is the third <unk> customer will be up will be provided most of the cameras in the UK on top we are providing this.
Touch solutions for this customer as well.
In this case, we guess camera solution would be applied as front and rear view and E mirror cameras and different car models instead of mass production of over 2 million units.
Planned through 2020 through.
20 to 25 is planned to begin in 2022.
Thank you.
Looking ahead I'd like to spend a few moments talking about our key initiatives.
We are focused on off for further executing on our strategy of driving our sales in the auto and industrial end markets by leveraging on our LCD optical bonding sensor and camera capabilities across the board.
What could deliver system solutions the.
The macro.
Economic background remains uncertain and challenging therefore, we are undergoing production improvements to cost down in order to improve our margins. Whilst we are working with customers for price adjustments will drive profitability, even with the uncertainties.
You will continue to evaluate M&A opportunities focused on electronic system design. However, as we have all capabilities now in the house. The focus is on integrating the new team members and overcome capacity shortages by outsourcing capacities when EBIT.
Last not least elective.
To mention that we continue to execute our strategy with the goal of moving towards the 500 million annual revenue target within five years under the assumption.
That's the core market constraints will be resolved.
We are pleased with the execution, we have made so far and look forward to updating you on our progress.
Next quarter.
With this I will now turn the call over to Marcos to present, our third quarter financial results and fourth quarter and full year 2021 outlook in more detail Marcus.
Thank you Hilton and good morning, everyone. This is mark mosquitoes CFO of your Optronics.
I am very pleased to review Obs third quarter results.
I'll start by reviewing our financial and operating performance for the third quarter, and then provide our outlook for the fourth quarter and full year 2021.
Total revenue in the third quarter of 2021 was 49.
Point 4 million euros.
33% from $43 6 million euros in the third quarter of 2020.
Total display solution revenue grew 17, 3% year over year to 40 42.1 million euros.
In the third quarter.
Driven by strong demand in automotive and industrial market.
This led solutions revenue represented approximately 85% of total revenue in the third quarter compared to 82% in Q3 of 2020.
We continue to execute on our strategy to increase our revenue in automotive and industrial applications.
Within our display solution segment revenue from our automotive customers grew 137% year over here in the third quarter and accounted for 42.
2% of revenue compared to 21% of revenue in the third quarter 2020.
Our revenue related.
So the industrial revenue related to the industrial and specialized applications and market grew 11% year over year and accounted for 41% of revenue compared.
43% of the revenue in the third quarter of 2020.
Our customers are.
I'm sorry, our consumer revenue declined two 7%, 17% of revenue from 36% of revenue in the third quarter of 2020.
Total sensor technologies.
Energy revenue was $7 3 million in the third quarter of 2021 down five 2% from seven 7 million.
In Q3 of last year.
The technology revenue represented approximately 15% of total revenue compared to 18% in Q.
<unk> 2000 trend.
Sensor technology revenue was down slightly mostly due due to supply chain disruptions.
Total company gross profit margin for the third quarter of 2021 was 13, 8% compared to.
44, 4% in the third quarter of 2020.
Our display solutions gross profit margin was 11, 6% in Q3 of 2021 compared to 14, 2% in Q3 of 2020.
The logistics costs, which are.
Q3.
The decline was primarily due to higher component and logistic costs, which we are working on to mitigate.
Our sensor technology gross profit margin was 26%.
2021, compared to 16 point, 69%.
The third quarter of the previous year.
The increased cross profit margin was again driven by enhanced utilization of our existing production capabilities.
Turning to expenses.
Total operating expenses in Q3 were $7 1 million or <unk>.
Percent of total revenue, which compares to $4 7 million or 11% of the total revenue in the third quarter of 2020.
This increase was driven primarily by further strengthening of our R&D and corporate corporate capabilities to support our growth plans.
<unk> press really in the automotive market.
In line with our expectations research and development expenses were one 5 million or 3% of total revenue in Q3, 2021, which compares to <unk> 4 million or four 9% of total revenue.
As for the third quarter of 2020.
EBITDA in the third quarter of 2021 turned positive at $1 1 million.
Compared to a positive three 5 million.
In the third quarter of 2020.
The EBITDA for <unk>.
But by revenue growth certain price increases.
And onetime effects.
We recorded a net loss in the third quarter of <unk> 5 million Euro, which compares to a net income of $1 5 million in the third quarter of 2020.
Based on a weighted average share count.
A 4.53 million shares in the third quarter of 2021.
This translated this translates to a basic and diluted net loss of <unk>, one nine euros per share in the third quarter of 2021.
Turning to the balance sheet, we ended the third.
Supportive of its cash and cash equivalents of 50, 50, sorry, $54 8 million and total debt of $31 9 million.
Now I would like to share our outlook for the fourth quarter and the full year 2021.
For the first for the for the fourth quarter.
Core expects total revenue of $40 million to $45 million Euro for.
For the full year 2021, we still expect our revenue growth of about 15% compared to 2020.
The company is working on mitigating the unexpected impact of shortages in <unk>.
The equipment of the industrial and consumer markets.
These projections will depend on the development.
Of global component shortages as well as constrained global shipping capacity.
Which which may also influence the demand of these products.
Our outlook also reflects.
Flex continued uncertainty related to the ongoing impact of COVID-19.
Overall, we are focused on the many opportunities ahead of us, particularly in the automotive and industrial markets.
This concludes my remarks, I will now turn the call back to the operator to open the.
The line for questions. Thank you very much.
Operator.
Thank you ladies and gentlemen at this time, we'll begin the question and answer session anyone who wishes to ask a question May Press star followed by one on their Touchtone telephone.
If you wish to remove yourself from the question queue. You May press star followed by two.
If you're using.
Weaker equipment today, please lift the handset before making your selections.
Anyone who has a question press star followed by one at this time.
One moment for the first question please.
The first question is from the line of Anthony Stoss from Craig.
Hallum. Please go ahead.
Good morning European markets.
Related to the component shortages can you, perhaps give us more detail on where those are is it on the cold chain side of the business or is it another side and you mentioned youre moving to mitigate that can you maybe.
Help us understand the mitigation cost.
Using split as a follow up for markets. Maybe you can help us understand where you think operating expenses will be for the December quarter.
Yeah, we'll do cuts through the shortages.
It's basically the main thing is coming from one of our suppliers providing coating for class they have reduced the capacity.
And then.
During during the tuning the shortages.
And they have been able to build it up again and they are right now actually trying to overcome that but they have achieved it. So we still hope that this will work out.
It's this is why we still hope that we can improve.
But of course, there's no guarantee.
That's the main driver for this current.
Short term impact and for the path taken part of the question maybe buckets yeah.
The cost structure, we are seeing right now will be somehow the same you will have some.
Some improvements in our outsourcing costs, which we are not a core in the same magnitude in Q4.
And the operating expenses will be of course net of a one time effect.
Okay, and then maybe as a follow up youre going to.
Again on the cold form glass.
Out of the business can you update us on the sales funnel.
What kind of the amount of design wins, you would expect I know, it's a longer sales cycle I'm, just curious to hear more about how that's going.
The on the cold forming in general in automotive not only called for me up right now.
Lots of discussion that would be just recently.
I think just in the last two weeks, we had two new requests from two new customers for very large projects.
Well I shouldn't say new customers, it's basically old customers.
Yeah, right now I'm working on quotes so that traction is overall.
Any good.
And.
The the.
Yeah.
Religion behalf, it's getting better and better and more people starting dose now a lot more people are talking to us.
So that's that's overall a very nice development.
Maybe coming back one more time to this.
Sure.
Pretty pristine and so it just back not to make clear that we have all everything at all.
Getting the bits and pieces and coming to a tool to build as we wish.
The other thing I'd like to mention is that's the mitigating the impact of the shortages.
Shortage, both customers and internally.
But it's.
You cannot really do that.
S. As quick as you want so we hope that we can.
Hopefully it finalized.
All of that is if they are not any more changes we will not reject additional turnover.
May recall over the rest of the year and also not in the future it would be actually pushing for that actually ever push it yes, yes.
Okay, and then and then Youre going just unclear your comment about <unk>.
Moving equipment are you moving.
The cold form equipment out of China into.
Your German facility.
I believe you said in March.
Okay got it correctly, yes. So we are currently over producing in both in both sites just to be sure that we have a buffer for that for that period.
Shipment is planned to arrive in I think end of February and then will be integrated into March and then we brought in full.
Did it from probably April this is the current plan.
Is there another coating suppliers or to estimate questions that that you can contact instead of having a single source.
Can you reach out to other coating suppliers of the glass.
No unfortunate not this is this is a consumer project.
And.
And it does at the coating supplier will set by our customer.
So we have asked them that's too but it is and they are working on that as well because for them. It's also in a.
Not so nice impact.
Maybe.
Maybe it works out but this is to you so.
I.
We would hope the same thing, but it's not yet confirmed.
Okay. Thank you appreciate it.
Thank you.
As a reminder, if you'd like to ask a question. Please press star followed by one on your Touchtone telephone.
Okay.
There are no further questions at this time and I would like to hand back to Juergen Eisner for closing comments. Please go ahead.
Well, thank you and thanks, everybody for joining the call today.
As said before we are excited about the menu. We're also puts you in that is ahead of us and are focused on the key initiatives that I am aligned and discussed.
In my prepared remarks.
Hello.
Updating you on the process on the progress next quarter and hope to hear you. All again early next year, thanks very much.
Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone thank you for joining.
And have a pleasant day goodbye.
Bye bye.
Hi, everyone.
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