Via Optronics AG (VIAO) 2021 Q2 法說會逐字稿

Ladies and gentlemen, welcome, and thank you for joining the VIA Optronics Second Quarter 2021 Financial Results Conference Call. (Operator Instructions). I would now like to turn the conference over to Mrs. Savarese from Investor Relations. Please go ahead.

Good morning, and welcome to the VIA Optronics Second Quarter 2021 Financial Results Conference Call. I'm Lindsay Savarese, Investor Relations for VIA Optronics. Joining me on the call today will be Jürgen Eichner, VIA's Chief Executive Officer; and Dr. Markus Peters, VIA's Chief Financial Officer. Today's call is being webcast live and will be archived on the Investor Relations section of VIA's website at via-optronics.com, where the company's earnings press release is currently available.

Certain matters we will be discussing today, including the business outlook and financial projections for the third quarter and full year 2021, are forward-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 risks and uncertainties are discussed in the company's documents filed with the SEC, including VIA's annual report on Form 20-F, which was filed on April 29, 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 Jürgen.

Yes. Thank you, Lindsay. Good morning, everyone, and thank you for joining us today. First I will provide a brief overview of our second quarter 2021 results. I will then discuss our recent acquisition of Germaneers, followed by our key achievements and notable awards in the quarter before I turn the call over to Markus, who will review our second quarter financial performance in more detail and provide our outlook for the third quarter of 2021 and the full year.

Turning into the second quarter, revenue of EUR 43.7 million increased 11.5% year-over-year, driven by growth in our Display Solutions segment. Our EBITDA in the second quarter of negative EUR 1.7 million decreased from positive EUR 2.6 million in the second quarter.

I'd like to provide a few words on the global component shortages. We have been able to successfully manage the impacts of the global supply disruptions and continue on our growth path. Our second quarter revenue was slightly affected by the solid shortages. While these shortages have been impacted many companies globally, we still expect a record -- to record about 20% revenue growth in 2021 compared to 2020. There's an increase in some of our components and transportation costs driven by the shortage; however, we are working with our customers on a case-by-case basis to resolve potential impacts on margins.

I am pleased to report that we solved the issues we had with our equipment supplier for the new German facility without affecting our revenue by using additional production capacity in our China facility. During the second quarter, we have already completed the site acceptance test in Nuremberg for the new facility and are now ramping up production for a large U.S.-based EV manufacturer. Consistent with our strategy of extending our leading position in interactive display systems, especially for the automotive market, we acquired Germaneers during the second quarter.

Germaneers is a high-tech engineering company, focused on automotive system integration and user interfaces. The company provides solutions for a range of well-known high-end original equipment manufacturers. Through this transaction, we are strengthening our customer engagement in the early concept phase of the auto design process. Together with Germaneers, we can design and deliver compelling ecologically-advanced cockpit solutions, including, but not limited to, sophisticated user interfaces with brilliant optical and sensing performance in cameras for interior and all types of ADAS and driver assistance functions, like surround view, mirror replacement and driver monitoring. We already had a strong working relationship with the company for over 2 years and are thrilled to welcome the entire Germaneers team on board.

We also made a financial investment in SigmaSense, a global leader in touch controller technology. With this investment, we have expanded our collaboration to develop new touch solutions for automotive applications, industrial displays and consumer electronics. We believe that we will be able to produce new and exciting touch and sensing solutions by combining our metal mesh touch sensors with SigmaSense touch controller.

We continue to receive project awards that have further increased our presence in the automotive, industrial and consumer markets. In addition, we are now expanding our presence in the overall EV infrastructure market by providing display touch solutions for charging stations. Our backlog in pipeline continues to be much stronger with much better visibility into the upcoming years, and we believe this trend will continue. Looking ahead, we will further execute on our strategy of driving our sales in the auto and industrial markets, leveraging our LCD, optical bonding sensor and camera capabilities to deliver system solutions while expanding the number and size of our projects within our existing customer base. We are constantly benchmarking and evaluating existing and new M&A opportunities focused on electronic system design to further increase our R&D capacities.

As announced in July, Daniel Jürgens has transitioned the CFO role to Dr. Markus Peters. I'm grateful to Daniel for all the work that he has done for year, especially during the transition from a privately held company to the public markets. I wish him all the best in his future endeavors. I would like to welcome Markus to the VIA team bringing lots of experience, especially in public markets.

With this, I'd like to hand over to him to present our financial results and outlook in more detail. Markus, please go ahead.

Okay. Thank you, Jürgen, and good morning. I'm very pleased to review VIA's second quarter results on my first earnings call as CFO of the company. We would like to thank everyone for their support during my transition over the last 2 months. I'm excited to serve on the Board of VIA and help the company execute on the large opportunities ahead of us. We provide cutting-edge technology solutions to large and growing markets and serve some of the largest and most innovative companies in their respective industries. I look forward to having the company execute on these opportunities and help the business to achieve long-term profitable growth. I'll start by reviewing our financial and operating performance for the second quarter and then provide our outlook for the third quarter and the full year 2021.

Total revenue in the second quarter of 2021 was EUR 43.7 million, up 11.5% from EUR 39.2 million in the second quarter of 2020. However, as Jürgen mentioned, our revenue was slightly impacted by the global semi shortage, which resulted in a shift of our customers' demand to future quarters.

Total Display Solutions revenues was EUR 37.4 million in the second quarter of 2021, up 14.7% from EUR 32.6 million in the second quarter of 2020. Growth was driven by increasing demand, especially in the automotive market, but also in the industrial sector. Display Solutions revenue represented approximately 86% of total revenue in the second quarter compared to 83% in Q2 of 2020. Within our Display Solutions segment, revenue from automotive customers grew 217% year-over-year in the second quarter and accounted for 35% of revenue compared to 13% in the second quarter of 2020. Revenue related to the industrial and specialized applications end markets grew 7% year-over-year and accounted for 45% of revenue compared to 49% of the revenue in the second quarter of 2020. Revenue related to our consumer end market represented 20% of revenue compared to 39% of revenue in the second quarter of 2020.

Total Sensor Technology revenue was EUR 6.3 million in the second quarter of 2021, down 4.5% from EUR 6.6 million in Q2 of last year. Sensor Technology revenue represented approximately [40%] of total revenue compared to 17% in Q2 of 2020. Total company gross profit margin for the second quarter of 2021 was 14% compared to a 13.3% in the second quarter of 2020 and was driven by higher sales of our Display Solutions business and better margins in our Sensor Technology business. Our Display Solutions gross profit margin was 10.7% in Q2 2021 compared to 11% in Q2 2020. Our Sensor Technology gross profit margin was 33.3% in the second quarter of 2021 compared to 25.8% in the second quarter of the previous year. The increased gross profit margin was primarily driven by enhanced utilization of our existing production capacities.

Now turning to expenses. Total operating expenses in Q2 were EUR 9.1 million or 21% of total revenue, which compares to EUR 4.3 million or 11% of total revenues in the second quarter of 2020. This increase was driven primarily by further strengthening our corporate and R&D capacity as well as public company-related expenses. We have increased our headcount as we prepare for further growth, especially in the complex environment of the automotive industry, and are continuing to further enhance our organization to meet these growth opportunities.

In addition, as noted in our earnings press release for Q2, we have reallocated some personnel costs from general and administrative expenses to selling and R&D expenses. This had no material impact from prior period results. In line with our expectations, research and development expenses were EUR 2 million or 4.6% of total revenue in Q2 2021, which compares to EUR 0.5 million or 1.3% of total revenue in the second quarter of 2020. Looking ahead, we expect continued investment in R&D as we have termed on a case-by-case basis to support the development of more complex customer solutions.

EBITDA in the second quarter of 2021 was negative EUR 1.7 million compared to positive EUR 2.6 million in the second quarter of 2020. We recorded a net loss in the second quarter of 2021 of EUR 3.9 million compared to net income of EUR 0.2 million in the second quarter of 2020. Based on a weighted average share count of 4.53 million shares in the second quarter of 2021, this translates to basic and diluted net loss of EUR 0.91 per share in the second quarter of 2021.

Turning to the balance sheet. We ended the second quarter with cash and cash equivalent of EUR 59.4 million and total debt of EUR 26 million.

Now I would like to share our outlook for the third quarter and full year of 2021. For the third quarter, we expect total revenue of EUR 45 million to EUR 50 million. For the full year 2021, we expect revenue growth of about 20% compared to 2020. These projections reflect continued uncertainty related to the ongoing impact from COVID-19 as well as potential -- and as well as potential component and (inaudible), which manifests our customers and possibly our -- possibly impact our revenue. Overall, we are focused on the many opportunities ahead of us, particularly in the auto and industrial markets, which may also require further investments in our R&D organization and production capabilities. This concludes my remarks. I will now turn the call back to the operator to open up the line for questions. Thank you very much. Operator?

(Operator Instructions) The first question is from the line of Andrew Buscaglia from Berenberg.

Can we start out with just sort of what you're seeing with -- in terms of -- on the revenue side with the component shortages. Can you -- are you able to quantify what revenue might have been in the quarter? And how much are you really embedding in that 2021 guide? Is there a risk that, that could get worse from here?

Yes, maybe giving you some -- yes, sorry. So for that part, we had only, as you can see, (inaudible) impact, and it was mainly driven by delivery issues, so components that they haven't received. So some of the parts have been shipped into the third quarter. We have overall discussed with the customer. We're talking mainly about consumer here, and we seem to be overall okay in the year. So this is why we still hold the guidance. It's not something, at least at the moment, where we are too concerned. However, we have to look at it. So far that's from my side. Hope that helps.

Okay. And the U.S. electric vehicle manufacturer production, I believe you said was on track for Q3. Can you talk any -- think about any related issues with that?

Yes, we can. So basically, we are now ramping up in this quarter. The overall issues with the equipment have been resolved. We talked about some delay and some reduction in quantities there. They have been coming from components shortages, not because of the component shortage as such, but some other supply problems they have. But now I think, overall, everything is okay. And we -- if everything works according to plan, we should be beginning of the fourth quarter already at a peak capacity or the maximum capacity that we've planned per month. Again, it would be -- this is how it looks like today. And with this, once we are up and running, we'll then [stop] the production in China and just continue to produce in Germany.

Okay. And maybe one last one, and I'll pass it on. The R&D and G&A in the quarter was a bit higher than I was expecting, I guess. How much is that related to Germaneers? Is there more of a onetime in nature expense in there that goes away? And should we expect those to get back to like more normalized levels next quarter?

Perhaps I can bring some color on this issue. I mean, with Germaneers, we acquired an engineering company. Basically, we acquired the intelligence and the talent they have. And the increase (inaudible) related to Germaneers (inaudible) the run rate, onetime and really increasing our capacities.

Markus, you were very hard to understand. I'm not sure -- Andrew, did you get that?

It was a little bit hard to understand. If you could repeat that, that would be helpful.

Yes, sure. I will surely repeat it. So with Germaneers, we bought engineering talent. The additional costs that we have in R&D is about EUR 0.5 million related from Germaneers, and this is on a steady run rate. So this is not a onetime effect. There's going to be an increase in our R&D costs and R&D capabilities for the future ongoing.

Okay.

Okay. Now it's better with the line?

Yes, much better. That's better. Yes.

The next question is from the line of Anthony Stoss from Craig-Hallum. Please, go ahead.

How much revenue did you book from the acquisition in the quarter?

I think, Markus, that's a question for you.

(inaudible) the numbers. Hold on 1 second, please. In the quarter, EUR 0.5 million or so of revenue? Yes.

I'm sorry, I couldn't quite understand that.

Okay. So external revenue is below EUR 0.5 million. So external revenues for the acquisition is less than EUR 0.5 million.

okay. Got that.

We bought talent. We didn't buy a turnover.

Okay. And then maybe, Jürgen, if you wouldn't mind commenting on the fact that you had negative EBITDA instead of, I think you guys were expecting positive. What were the biggest impacts that were related or that allowed you to be negative?

Yes. Let me -- so I think let me hand over to Markus to answer that just upfront and maybe a little bit more color on Germaneers once -- we have them in the group. We already -- we have basically been under contract to work on internal projects already. So they keep only a limited amount of external revenue related to prototypes and concept samples for the local OEMs in Bavaria. So they are mainly good in our R&D projects, just to give a little bit more color on that as well. For the revenue and EBITDA development, maybe Markus, you can say something about the...

This is something about the -- we have increased costs, especially for adding talent in our organization. This means we are holding, and we have listing expenses that were not in the [last] quarter of last year because we were not listed. And especially, we added R&D and talent and capacities, not only Germaneers, we also added talent here in our organization by hiring talent and by having expenses for external consultants to support us in ramping up production.

Okay. And then my last question. Jürgen, you have your own metal mesh technologies, yet you partnered with SigmaSense for the controller. Did you not have your own internal controller? Or why did you end up partnering with these guys to have access to their controllers?

Well, so we -- so we always -- so controllers are basically semiconductors, and we use controllers from Atmel, from Microchip, from many other companies, including (inaudible), depending on the case. So -- but we have watched the controller development in general, and what we see with the SigmaSense controller technology over this one, that we can basically cover all applications at the end of the day with one controller, if everything works out as we envisage it right now. So this was one of the reasons to take a share in SigmaSense, to be able to follow, also as an investor to follow all the developments very closely.

And to combine that with our metal mesh technology, it's an additional advantage because you know we have a very lower sensitivity. So we have already a very good sensitivity, but with the SigmaSense controller, it's actually even better, and we can avoid switching mode in some touch applications and we want to combine this as well, but I'm not sure how much I could go into detail. We can also combine the sensor with high resistivity touch sensors, which have other advantages. So there is a wide open amount of number of applications that we are targeting.

Okay. And then maybe if I can just sneak in one more. So we've -- a lot of discussion over the last year related to your North American EV for the cold form. Can you help us understand maybe other automakers? How many design wins you have for some of these higher-value cold form systems?

I think -- I am not sure. I think, last time, I mentioned already that we have about 5 cold form opportunities that we are producing. We have one already since nearly 2 years in production. We are ramping up 2 more this year, I think, also in China. And we'll ramp up. We have actually more than 5. We have already 6 of these. Not to that extent, as you know, that particular one is covering the depth of the vehicle, (inaudible) of the vehicle, so the complete dashboard. Usually, we have 2 displays behind the glass, with the cluster and with the center information display.

There are no more questions at this time. I hand back to Mr. Eichner for closing comments. Please go ahead.

First of all, thank you, everybody, for joining us on the call today. We look forward to updating you on our progress next quarter. And overall, I think we would give you a few more updates in between the next earnings call as well. So we hope to be in touch with you in between as well. Thank you, everyone, and Bye-bye.

Bye-bye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.