Preliminary Q3 2022 VIA Optronics AG Earnings Call

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Thank you for your patience, everyone does EIA Optronics Q3, 'twenty two earnings call will begin shortly during the presentation. You will have the opportunity to ask a question by pressing star followed by one of your telephone keypad.

Yeah.

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Yeah.

Welcome to V I, a optronics preliminary third quarter 2022 earnings conference call and webcast.

This time all participant lines are in a listen only mode. Today's of you participating on the conference call there will be an opportunity for your questions at the end of today's prepared comments. Please note. This conference is being recorded and audio replay of the conference call will be available on the company's website within a few hours. After this call.

Now I'd like to turn the Kool aid that disarm Cohen with Alpha IR Investor Relations.

Thank you and welcome joining me today are Juergen, Eichner, founder and Chief Executive Officer, and Dr. Marcus Peters Chief Financial Officer.

To remind everyone that statements made during this conference call relating to the company's expected future performance future business prospects or future events or plans may include forward looking statements as defined under the private Securities Litigation Reform Act of 1995.

Participants are directed to be Optronics form 20-F for a description of certain business risks some of which may be outside the control of the company that may cause actual results to materially differ from those expressed in the forward looking statements.

Yes.

Presley disclaim any duty to provide updates to our forward looking statements whether as a result of new information future events or otherwise our earnings released the preliminary third quarter of 2022 results is posted on the company's website or via Optronics dotcom.

Let me now turn the call over to Juergen for a few opening remarks.

Thank you Sam good morning, and thank you all for joining us today.

We are delighted to report record quarterly revenue, which exemplifies the strong demand we are seeing across all of our end markets. We grew top line revenue by 27, 3%.

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39, 2% growth in all of the disparate solutions segments driven by growth in the automotive market softness in the industrial area.

The third quarter, we benefited from increased production output.

Headquarters and increased demand and order volume for the automotive and industrial end market.

We continue to expect increased adoption of our innovative and cutting edge displays as both automotive and industrial vehicles two months.

A more robust.

Unless you do cool weather resistant displays camera and sensing is interior visited optical solutions.

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Our capabilities, which allow us to provide customers with technology with unique specifications and the high amount of in house production content, avoiding going through suppliers separate from its competitors and allow us to address the accelerated accelerating needs of.

Customers today.

Brian It's Todd on sort of how our teams executed in the third quarter delivering positive EBITDA, despite ongoing global supply chain challenges.

Elevated freight costs, which were a headwind in previous quarters are now using in behalf began to see the benefits of the previously announced performance improvement projects in our profitability and cash flows.

The cost savings and pricing initiatives, we have implemented start being reflected in our results. This quarter as we continue to look for in a hurry negotiated with customers and suppliers.

Also we see softer demand from the additional truck Oems in Q4 going forward. We believe that these activities will continue to help improve our margin profile and position the company for long term sustainable profitability.

This quarter, we announced the appointment of <unk> as Chief Marketing Officer CMO.

Roland has been actively creating a successful go to market strategy and promoting the new and innovative technologies.

Our customers and partners.

Conjunction with the appointment of frozen Oncall Quaker CMO.

Company has brought the marketing organization the project management team the team from research and innovation and the strategic sourcing team to get that under our roof.

Okay.

Colleagues leadership this new alignment will create a more efficient marketing and sales organization and reduce our operating expenses going forward.

S. We announced previously we plan to establish a new camera production line in Thailand.

As the desire to drive that operating assistance as well as autonomous driving functions grows so must visit list <unk> solution of camera images. This new equipment will allow visa to use bad dye instead of how census, increasing the precision and cost effectiveness of our solutions additions.

Additionally, I'll cover production in Thailand opens the door for us to market our other solutions in the regions.

We are in decision with Oems interested in the new functions that we provide with our touch screens and the overall dashboard integration.

We remain encouraged by the strength of our growing project pipeline as we continue to focus on higher value projects that will support margins. Additionally, we continue to execute our strategy with the target of $500 million in annual revenue by 2026, we currently maintain awarded business of approximately 250.

Which supports this forecast.

That set.

Now I'd like to turn the call over to Marcus for review of our third quarter 2022 performance and full year outlook amongst us.

Thank you, Joe and good morning, and good afternoon to everyone.

I will start by reviewing our financial and operating performance for the third quarter of 2020 tool.

Then I will outline our outlook for the fourth quarter and the full year 2022.

Well the first for the third quarter total revenue of 62 9 million increased by 27, 3% from $49 4 million euros.

Third quarter of 2021, driven by further growth in the display solutions segment.

Display solutions revenue of 58.6 million Euro increased by 39.2% from 42 1 million euros in the third quarter of 2021, driven primarily by growth in the automotive end market.

Sensor technologies revenue of $4 3 million euros decreased by 41, 1%.

$7 3 million euros in the third quarter of 2021 due to slower demand from the consumer end market after a record turnover in prior period.

We continue to strive to overachieve and meet the demands of those that require auto products and solutions.

Revenue from the automotive end market increased 46% in the third quarter of 2022 and accounted for 44% of display solutions revenue driven by strong demand for our solutions.

Revenue related to the industrial and specialized applications and market.

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Gross profit margin decreased to eight 6% from 13, 8% in the third quarter of 2021 display solutions gross profit margin of eight 9% decreased from 10, 9% in the third quarter of 2021.

Ongoing.

Margin pressure.

Material and labor cost increases and higher logistic costs.

Sensor technologies gross profit margin of 7% decreased from 26% in the third quarter of 2021.

Driven by a changed market conditions lower utilization.

Research and development expenses decreased slightly to $1 4 million from $1 5 million in the third quarter of 2021.

And is in line to support our long term strategy.

General and administrative expenses of 5 million euros decreased from $5 1 million in the third quarter of 2021.

Due to improvements in our cost structure.

Operating income was $2 1 million in the third quarter 2021, compared to operating income of 6 million Euro in the third quarter of 2021.

Net income was $1 2 million euros, or all point to 727 euros per basic and diluted share compared to net income of <unk>.

Oh point 1 million euros, or a point or two.

Euros per basic and diluted share for the third quarter of 2021.

EBITDA was $3 7 million in the third quarter 2022, compared to an EBITDA of $2 million in the third quarter of 2021.

And display solutions EBITDA loss was 2.4 million.

Compared to EBITDA of one 5 million in the third quarter of 2021, driven by operational performance as well as one time effects.

Since our technologists EBITDA loss was.

Okay.

Million euros compared to a positive $1 1 million in the third quarter of 2021.

Other segments EBITDA was $1 5 million compared to EBITDA loss of $4 million in the third quarter of 2021, driven by onetime effects.

We finished the third quarter with cash and cash equivalents of $54 3 million up from 53 3 million.

At the end of the second quarter.

This slight increase.

While expanding operations was supported by ongoing improvements in inventory and cash management.

For the fourth quarter of 2022, we expect total revenue in the range of 37% to 40 to 42 million euros for.

For the full year 2022.

Raising our revenue growth guidance to a range of approximately 10% to 13% compared to 2021.

Again this forecast is based and may be influenced by.

Our planned sales portfolio adjustments.

Our potential.

Slowdown in the consumer end market and our potential.

The component shortage the camera business.

Well as the overall economic uncertainty.

We had.

Very strong sales.

In the third quarter of 2022.

And we will continue to work hard to improve our profitability further and.

Further optimize our working capital and exercise financial discipline to meet our strategic goals.

With that financial overview I'd like now.

Now to turn the call back over to Europe for a few closing comments okay.

Yeah.

Thank you Mike.

We are very pleased with what we achieved during the third quarter in terms of improving our margins and returning to profitability and feel confident about our prospects for the remainder of the <unk>.

Despite the challenging macro invite microeconomic environment.

Strong structural tailwind in the market that we operate in and we remain well positioned to capture the expanding applications and use cases for our products.

Discipline remained strong and we have a solid base from which we can deliver strong growth and shareholder value in the years to come.

Thank you for your continued support that concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.

Yeah.

Thank you we will now start today's Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by <unk>.

Our first question today is from Anthony Stoss from Craig Hallum. Your line is.

Good morning, guys.

Quite a few questions actually.

Maybe if you could youre going to take a look out into 2023.

Maybe comment about the number of design wins that you have that you think will go into production in 2023 versus what you had maybe a 2022.

Perhaps give us a guess as to revenue growth rates, but more importantly on the gross margin front again. This was always part of your plan to increase.

As part of the IPO what progress have you made is it purely.

Your cost side and what you are quoting your customers any help would be appreciated.

Revenue growth rate and gross margins for next year.

Many questions in one.

So with regard to next year in terms of projects and ramp ups of the big projects.

<unk> one more project.

The ramp up.

You are having a few smaller projects ramp up of one big one.

Anything in the next year.

With regards to cost and.

And and and and margins. So during the course of this year, we had a lot of discussions with customers about cost up and price up and how we can improve.

And how we can actually full cost for additional freight and so on to the customers. So they are all.

Let's say.

So in my opinion in good shape of course, nobody was happy about the cost increases but.

The understanding was that <unk> and <unk>.

Customers basically accepted it's not easy for everyone.

Also not as easy as for other components for us to increase the price throughout the board.

Without any.

Any any any arguments will be discussed in detail with every customer not all the discussions are over.

Some.

Going to be closed hopefully by the before the end of the year.

And.

For the next year I think we should be out of.

Of the group was the price adjustment and everything.

Now with regards to the margins I have to say that.

We are still following our initial targets.

The only thing the only thing which is a big thing which happened over during the course of the last two years that the customers actually used the COVID-19 pandemic.

Two to drive down.

The overall prices so the margins, even when the automotive market became tighter.

But this is the main reason for us to phase in and two pockets system designs to have more added value more content in the products that we deliver which should bring us back on track.

A lot of.

Reorganizations.

Our product portfolio and market approach.

The cost of sales of marketing.

In.

Also being done.

Together with rolling called Quake, New CMO and restructures in the sales force. So we will implement that and start to push for that in during the course of next.

Thanks, Tim.

So tied to margins from existing products.

Listing customers overall, whether it's in the automotive.

Or even maybe in the consumer markets.

Our plan against is to deliver more value to get up into March and so we still think that based on what we know today.

This is possible with what we have in house.

And we push on that tool that kind of product portfolio.

Firstly on the sales front.

Okay, just shifting back to kind of expectations and revenue for next year you commented about.

Our goal of $500 million in revenues in 2026.

Help us understand bridge the gap getting from where Youre at now what that looks like in 2023 'twenty four 'twenty five is it somewhat linear or is it spike up in 2025 loved to hear your thoughts on kind of the next couple of years revenue growth.

It's.

It's.

Let's say, if it's kind of difficult to answer because at the end of the day. If let's give you. One example, we are working on one project if that kicks in it would be a spike in 2025 2006, so it will be addressed to increase.

And there are others, which would be in between so it could be so we are planning for.

A soft growth over the next years similar to what you have seen maybe but.

But as soon as.

Those projects come in.

We will see a drastic address stick increase.

So.

Maybe most likely towards.

The upcoming year also the following year, but the year after.

So the years after.

Our successful with the acquisition of the state will be a strong growth.

Okay. Thank you.

Okay.

Just to reiterate if you would like to ask a question. Please press star followed by one on your telephone keypad.

If you would change your mind, Please press star followed by <unk>.

At this time, we have no further questions. So I'll hand, you back over to you and I can ask for closing remarks.

Yeah.

Yes, well as usual I'd like to thank everybody for participation in the call.

Again.

See it.

A quite a drastic change in the future in terms of the environment, but on the other hand, we see that our markets are drastically increasing.

Potential for our products is growing.

Growing every day I have to say and especially in the field of electronic costs.

Seeing two of them.

This growth opportunity, but not only there. So again, thank you for the call.

I'd like to hear you next time again.

Bye bye.

That concludes today's CIA up to our necks.

Teekay <unk> earnings call you May now disconnect your line.

Yeah.

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Okay.