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spk09: Good day and thank you for standing by. Welcome to the Maneric Preliminary Full Year 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 11 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1, 1 again. Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Tom Dinges, Vice President of Investor Relations. Sir, please go ahead.
spk05: Thank you, Operator. Welcome, everyone, to Moneric's Preliminary Full Year 2022 Results Conference Call. Prior to this call, we released our preliminary full year 2022 results, which are available for download on the investor relations section of Moneric.com. Before we begin today's formal presentation and remarks, I must remind you that this presentation and oral statements regarding the subjects of this presentation include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. All statements other than statements of historical or current facts contained in this presentation, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and assumptions that are difficult to predict or are beyond our control, and actual results may differ materially from those expected or implied as forward-looking statements. The forward-looking statements included in this presentation are made only as of the day hereof. Neither we nor any other person undertakes any obligation to update any forward-looking statement to reflect events or circumstances after the date of this presentation or otherwise. This presentation may include certain financial measures not presented in accordance with IFRS. Such financial measures are not measures of financial performance in accordance with IFRS and may exclude items that are significant in understanding and assessing our financial results. Therefore, these measures should be considered in isolation or as an alternative to loss for the period or other measures of profitability, liquidity, or performance under IFRS. We have not completed preparation of our financial statements for the year ended December 31st, 2022. The information presented herein is preliminary in nature and is subject to change, including as a result of any normal adjustments resulting from completion of procedures in relation to the financial statements for the financial year 2022. There can be no assurance that the final results for these periods will not differ from these preliminary results, and any such differences could be material. Financial results for the financial year 2022 will be included in our annual report on Form 20F to be filed with the Securities Exchange Commission. With that out of the way, we have a great agenda for you today. After some brief opening remarks, we will provide an update on our operations, discuss our preliminary full-year 2022 financial results, and provide a bit more color on our outlook for 2023. Following the formal presentation, we will take questions from analysts. We anticipate this call will last no more than one hour. On the call today are Mineric's co-CEOs, Bulent Altan, and Mustafa Veziraglu, and Mineric's CFO, Stefan Berndt von Bulow. With that, it is my pleasure to turn the call over to Bulent for his opening remarks.
spk09: Bulent?
spk05: Thank you, Tom.
spk02: Mineric reported solid preliminary results for 2022 as we prepare for significantly higher production levels later this year, next year, and thereafter. Our order momentum and funnel of new opportunities remains strong. We can say it has possibly even accelerated as some constellation operators, both commercial and government, have moved past the design and development stage and are actively selecting suppliers to formally launch their constellations over the coming years. We reported another strong increase in order backlog in terms of optical communications terminals from 36 at the end of 2021 to 256 at the end of 2022 and 348 as of today. Additionally, our cash-in from customer contracts increased significantly from 3.9 million euros in 2021 to 18.3 million euros in 2022. Already in 2023, as of today, cash in from customer contracts has already exceeded the full previous year's amount with 18.8 million euros. We also remain disciplined in our investment strategy to support the future growth of the business, and our prop line of opportunities remains the highest in our history. Over the past two years, we invested significantly into preparing the company for serial production, And as such, the company does not need to make substantial investments in capability and capacity to meet our near-term delivery commitments. We are now focused on continuing to improve our operational excellence, and the improvements we have implemented over the past year in our product design have allowed us to now have the machine capacity in place in order to fulfill our medium-term goal of producing 2,000 terminals per year. I'm extremely proud of our team's success putting in place this capability serving the wider Constellation community. A reminder to many of you on the call who may not be familiar with MINERC. Our vision is to eliminate the barriers of connectivity to ensure the unrestricted flow of information and close the digital divide. We're not only a space company or an aerospace company. We are a critical communication systems company with products that are produced at scale to serve many end markets, including government and commercial customers. Before I turn it over to Mustafa, I want to welcome him to our earnings call as my partner in the co-CEO role, which he assumed in January. He's a very seasoned corporate executive, and I couldn't ask for a better partner to work with as Mineri shifts into its next phase of growth. Now, let me turn it over to Mustafa so he can discuss our strategy that supports Minerics' vision, as well as provide an update on our operations and product development activities. Mustafa?
spk06: Thank you, Glenn, for your kind words, and I'm excited to be part of the team. Minerics' strategy for realizing the vision of eliminating barriers of connectivity is focused on making what has previously been a market of one-off, highly tailored solutions into a scalable volume production market through serial production, the high reliability and simplicity, greater affordability, and increased standardization of our products for both government and commercial markets. Our products enable our customers to deploy solutions addressing the communications challenges they face in space, in air, on the seas, and on the ground. Since joining Mineric in August of last year, my focus has been on three main areas, production readiness, continuous process improvement, and streamlining our product development process. Let me give you a bit more detail on each one of these three areas and how I believe they set us up for success over the both near and long term. As you may have recently read from one of our key customers, Northrop Grumman, they announced that their SDA satellite design featuring our Condor Mark III terminals has passed the vigorous critical design review process. With that critical step behind us, the Mineric team has been working diligently preparing for the first serial production shipments to key customers, including Northrop Grumman, starting in the second half of this year. We've made great strides to ensure we're ready to handle this key milestone in the company and the industry's development by already building pre-serial production, verifying our assumptions about pack times involved in different manufacturing and assembly steps, ensuring that our data systems are ready for the demanding requirements of complex aerospace systems production documentation. In addition, the company has secured the supply chain to support the current and any additional near-term orders. As we continue to prepare for serial production at scale, we've made many process improvements over the near term. One key process improvement that has significantly unlocked the production capability was the insourcing of our telescope production. The telescope is one of the most critical subcomponents of our Common Mark III terminals. These were previously outsourced, a process that took weeks and sometimes months to get enough qualified components to complete a build. By insourcing the production and focusing on process improvement, we were able to reduce this process from from weeks to minutes. This has freed up additional resources and allows us to meet our medium-term 2,000 unit production targets based on the installed physical capability. As we mature and move the Condor Mark III into serial production, we're leveraging the technology into future product development. The focus of our product development engineering team is on utilizing fundamental building blocks such as using common components, the communications optical head, electronic control assemblies, and software, with an eye towards reusing these building blocks to accelerate development of future generations of both condor and hot terminals. This should also improve our manufacturability of these next-generation products, as well as removing potential barriers such as single-source critical components, which in the past have negatively impacted our industry's ability to manufacture at scale. In summary, can tell you that we're well prepared for the opportunity ahead and i believe we have the right team with the right products to capitalize on this exciting opportunity in front of us with that let me turn it over to stefan to walk you through our results in more detail stefan thank you mustafa let's turn to our preliminary results for the full year 2022 first let's turn
spk10: The two key business metrics we introduced at the analyst day in April of last year that we believe will continue to best demonstrate the momentum we are seeing at the business. First, cash-in from customer contracts. This is a key forward-looking predictor of revenue as the cash is only received as we match contractual milestones. There is typically a lag between when cash-in received from customer contracts and when the shipments are made. This varies depending on the contract terms. As a reminder, these are contractual payments received when certain milestones are met, but fully delivery and acceptance has not been reached. In essence, this is free revenue cash receipts, and we believe a very significant indicator of the future revenue of the company. As Bülent referenced before, cash-entrant customer contracts was 18.3 million euros in 2022, compared to 3.9 million euros in 2021. Year to date, our cash in from customer contracts is 18.8 million euros, which is already more than we reported for all of the last year, demonstrating our execution for our customers. Second, optical communication terminal backlog Units at year end was 256 units, up from 40 units at the end of 2021. As of today, our terminal backlog is 348 units. As a reminder, our current terminal backlog is heavily weighted towards government-funded contracts, including programs with the FDA. We continue to see a strong and steady pipeline of opportunities spanning both Condor and Hawk products, as well as across government and commercial opportunities. Let's look at a few other figures. Revenue was 4.4 million euros in 2022 and was driven by terminal shipment to multiple customers, as well as service revenue. Our current contractual committed optical communication terminal backlog primarily consisting of Condom Mark III products, mostly foresees scheduled shipment in the second half of 2023 and throughout 2024. Cost of materials increased by more than 45% compared to a year ago, as we continue to ramp up our production ahead of major delivery milestones over the next six to 18 months, including in this increase was a 5.6 million euro write-down for components related to prior generation condo products. Our drive to product excellence through rigorous testing involves assembling many units for internal use. The production of these units has contributed to the increased cost of materials. Personal costs increased 60% compared to the year-ago level as we continue to add talent and capabilities to our team. Part of the increase is related to higher stock compensation costs, which increased by 4 million euros to 6 million euros year over year. Currently, our total headcount is similar to what we reported at the half year at just over 300 employees. Looking ahead, we are taking a disciplined approach to adding headcount and other operating expenses. We feel comfortable with the overall investment in engineering, and we expect to add to our operations headcount to support our higher level of production. We believe the growth rate in personal expenses over the near term should decelerate to a more moderate level. Overall, the company reports an operating loss of 73.8 million euros. The operating loss for 2022 was higher than 2021 for a number of reasons, including a previously mentioned higher personnel costs as we increased headcount and incurred higher stock compensation expenses. Also, we incurred higher insurance, legal and consulting fees of 8.5 million euros related to our dual listing an extraordinary write-off of 9 million euros, including 7.5 million euros related to component inventories for our Condor Mark I and Mark II terminals, as well as additional 1.5 million euros write-off of own work capitalized. Now let's turn to a few key balance sheet figures and discuss our current credit agreement and capital rates. Our cash balance at end of 2021 was more than 10 million euros compared to 48 million euros in 2021. This does not include the approximately 11 million euros that were in transit at the year end for cash and from customer contracts. Our cash balance today is 63.9 million euros inclusive of the recent debt and equity rate net of prepayment of our previous line of credit along with fees, expenses incurred as a part of the capital raise. We remain in market-leading mode, and as a pre-break-even company, we expect our cash balance to decrease from today's level through year-end before stabilizing in 2024. With our recent capital raise, we believe we have a strong balance sheet, and we are very well positioned to capitalize on the opportunities ahead of us. Inventories were 13.3 million euros, up from 8.4 million euros at the end of last year, as we continue to invest in component inventory ahead of the expected ramp in terminal production in the second half of the year. We also took a charge of 1.9 million euros against existing inventory of our Mark I and Mark II condo terminals reflecting our expectation of degrees demand for this product. Property, plant and equipment at the year end 2022 was 22.3 million euros compared to approximately 16.7 million euros at the year end 2021. We invested 10.2 million euros in property, plant and equipment in 2022 as compared to 7.6 million in 2021. Earlier this week, we announced our new funding that in total brought approximately 80 million euros to Moneric. We are thrilled to welcome a fund managed by and affiliated of our US-based global investment manager as our new credit provider and new shareholder of Moneric. This transaction provides us with the long-term capital we need to support our future growth. We used a portion of the funding to repay our existing line of credit and intend to use the rest to support our business plan. The summary details of the new credit agreement were provided to you earlier this week when the agreement was announced, but I want to highlight just a few key points here before I turn to the guidance for 2023. First, we undertook an extensive and exhaustive process using highly experienced outside advisors looking at a number of options to provide us with the capital needed to support our business plan. The agreement provides us with the capital and the flexibility to fund our growth and objectives over the near to mid-term with the reduced illusion for existing shareholders as was one of the objectives with the financing. Second, the credit agreement as a multi-year agreement at a competitive rate of interest given the stage we are as a company with no restriction on early repayment. Finally, The additional equity funding provided in conjunction with the credit agreement added more liquidity to our balance sheet in the near term and fund needed working capital requirements to support the needs of our customers. Now, let me walk you through our guidance 2023. We released our guidance for the performance indicator for 2023 in an ad hoc release on Tuesday, and I want to reiterate what we disclosed. We expect cash-in from customer contracts to increase significantly for the full year 2023. Specifically, in the first half of the year, our cash-in has been and will continue to be based on milestone payments and customer deposits. In the second half of this year, we expect cash-in from customer contracts to be a bit more balanced in terms of deposit and milestone payment relative to delivery related receipts in comparison to prior periods as customer milestone payments will be continued with receipts from terminal shipments. So as we see our shipment starts to ramp, cash-in from customer contracts will be more much more closely correlated to shipments going forward. As noted earlier, we have had a great start to the year in terms of cash-in from customer contracts with year-to-date cash-in already above last year's full-year level and see a strong pipeline of cash-in based on secured orders and potential opportunities through year-end. We expect continued growth in our optical communication terminal backlog by the end of this year, as we expect our year-end 2023 optical communication terminal backlog to increase significantly compared to 2022 levels. As a reminder, the backlog is net of shipments, and we have a substantial ramp in shipments projected for the second half of the year. To this year end backlog, we will be function of our ability to capitalize on a number of opportunities that could close by year end, and our term remains well positioned to capture these. These opportunities across both the government and commercial sector, as well as spanning all our product lines. As a reminder, We defined a significant increase as a year-over-year increase of 30% or more. With that, operator, would you please provide the instructions for the questions and answer session?
spk09: Operator. Yes, thank you. As a reminder, to ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Stand by as we compile the Q&A roster. One moment, please, for our first question. Our first question will come from Greg Conrad of Jefferies. Your line is open. Good morning, or good afternoon.
spk03: Sorry about that. Start. Sorry. At this point, I mean, you mentioned a substantial ramp in production. in the second half of the year, how much is kind of locked in at this point versus the potential to book and ship still in this year, and any way to kind of level set expectations around shipments for 2023?
spk02: Just for us to reiterate the question to make sure that you understood it right, your question is around how much is locked in this year for shipments to the customers versus our current backlog, so how much of it you have to ship. I would say, I don't want to give any numbers we haven't given to the market yet, but I would say that our shipments concentrate right now in our backlog quite a bit between the two years, 2023 and 2024, almost equally. Let's leave it at that to show how many units we'll be shipping this year and then definitely refill to build our backlog and then add on top.
spk03: That math is pretty easy to do, so I appreciate that. And then you mentioned some acceleration and constellation operators, you know, reaching kind of the design stage or getting past the design stage. Is there any way to level set maybe, you know, the near-term opportunity set or how many terminals you're in active discussion for?
spk02: Absolutely. I think I think orders from our customers are coming towards minor are very often preceded by customers reaching out to to system houses that build a bigger system, such as satellite network systems, routing architectures and whatnot. If you look at the current market movements by constellation operators, On both sides of the Atlantic, you'll see that there have been recent movements in acquiring launches and satellites by some big players, and we exactly expect those people to come out and do the optical communications decision next. We expect people who have selected their satellites or their launchers or at least made significant filings to come out in the next half year or so and do their optical comms decision.
spk03: And then maybe just last one for me. I mean, a lot of the conversation is more on the satellite side. I mean, what are you seeing in terms of divergence between Condor and Hawk and kind of any update on discussions around Hawk and, you know, when we could see maybe some more substantial orders for that system?
spk02: Of course. I think the two markets are quite a bit different. So, if it's a satellite site, of course, we see these larger projects that are quite intertwined and the large block orders because there is a quite a tax time to be kept when launching a constellation between the first and the last one being launched to build up that network in the sky. In the air market or other mobility maritime ground-based markets, we see a different approach as one can deploy almost, I want to say, at leisure. Therefore, we have more of a push market from the miner's side of view rather than a pull market. We are engaged with multiple customers out there, and the modus operandi very often is an early shipment to the customer for them to do their integration tests, their hands-on trials, a certain amount of technical education of their team. And then very often we talk about larger orders than stood over multiple years, but they have a different type of indicator versus, of course, that big giant order coming in from a Constellation customer. That's what we're seeing today on the market. I think that that will continue for a while. And very often these early orders, these trial orders are, I want to say, competition sensitive for these customers who are doing an early adoption. So we don't communicate them as openly out there, and we can't really give guidance around what the customer is thinking around that order. But very often, there are some really large undertakings in their mind.
spk08: Thank you. Thank you. Thank you. And one moment, please, for our next question. Our next question will come from Scott Doshley of Credit Suisse.
spk09: Your line is open.
spk04: Hey, good afternoon. Stefan, I think you said the cash balance would stabilize in 2024. Are you saying you expect to be free cash flow break-even by 2024? Or otherwise, how do I interpret that stabilization commentary?
spk10: Yeah. So I would say we expect end of 2024 to be cash flow neutral there.
spk04: Got it. Okay. And then the credit agreement, can you say what the annual cash interest cost is on that?
spk10: So the interest rate is, I think we published it, it's 10 basis points above the software. And so you can calculate it on the 75 million dollar loan per year.
spk04: Got it. Okay. And then more for Bulan or Mustafa, I guess just kind of more of a market opportunity question. It seems like you've had some momentum with Hawk. I think kind of originally when you guys came out, something like Condor was going to be the bigger opportunity. But curious, kind of looking forward the next 30 years, which of those market opportunities looks bigger, the air-based market or the space market? Thank you.
spk02: I would, talking about the market opportunity, I think they still see Condor preceding Hawk for a year or two at least. It is an opportunity that is being pushed forward by U.S. government and commercial constellations alike, where the U.S. government has done a fantastic job, and now we also see the European government adopting this technology for their constellation and really trailblazing for the commercial constellations as well. We see that trend continuing at least for two years, but Hawk in itself has the opportunity, of course, to immediately surpass the Condor opportunity because there is no delay in acquisition from the decision-making to the purchasing to the deployment. There is no waiting around for a launch opportunity or the satellites being built. It can materialize a lot quicker, but I think that is still two years or so away.
spk04: Okay. And I'd be remiss if I didn't ask. I think it kind of gets to a question Greg asked, but just any kind of revenue guidance or bookmarking, give us at least a low end in terms of this year, how to think about revenue.
spk10: Yeah. So I keep it at that. Significant increase mean at least 30%. And regarding to the question before.
spk04: We're starting out from $4 million, though, so.
spk10: Yeah. So I'm coming to the second part to my answer. Okay. And the question was raised before about the shipment and the current order terminal backlog. As Bulent mentioned before, the shipment will be, split it maybe 2023, 2024, so then you can recalculate about approximately revenue.
spk02: I think our ASP out on the market is quite well, quite well, I think, formulated. I think combining the ASP and with our projection of events, I think one can do a quick calculation there.
spk04: Okay, fair enough. Thanks, guys. I appreciate it.
spk01: Thank you. Thank you. One moment.
spk09: Again, to ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for our next question.
spk01: One moment, please.
spk09: Our next question will come from Zafer Ruzgar of Pareto Securities. Your line is open.
spk07: Yes, gentlemen. Thank you for having me. A few questions from my side. The first one is on your financing and the net proceeds of $75 million. I think it's a bit more than originally expected. And what is the reason for this? Do you need more? than originally planned for the production ramp up. Because if I look into your cash in numbers, that looks quite strong. So the question is, do you have more capital need? And it also would be interesting to know for which period is this financing sufficient?
spk10: So, thank you for the question. So, first of all, it's not only the 75 million. It's an additional capital increase with close to 10%, which adds 12.2 million euros. So, saying that, a portion of that was used to repay the existing loan. And for sure, with this transaction, there were also related some fees and expenditures. But still, the net proceeds are significant for the company, but we will use this for further ramp up the production, fulfill our contract, and this gives us also a headroom if there may be some delays or some other topics coming up, so we have enough headroom for the next
spk02: If I may add to Stefan's comments here, he's absolutely right. The headroom is, I think, an important one because also this year is a defining moment for many constellations and their supply chain. We want to be well armed with a good balance sheet to be able to materialize on these opportunities at hand. And they are coming big this year, I believe. And this really gives us the headroom to do so. And it also gives our customers a certain amount of, I want to say, peace of mind that they are working with a stable company and they have no concerns about ordering these really large orders from us. I think it is overall multiple tools combined in one. It really outfits us very well.
spk07: Okay, understood. Very clear. And then your cash-in of 90.8 million you mentioned. How many units does this correspond to? And if I'm right, these units will be also your shipments in the near-term future, right?
spk10: Just for clarity, you're referencing to the cash-in by customer this year or last year?
spk07: Yes, year-to-date 80.8 million for this year.
spk10: yeah so these are mostly related to uh prepayments and when we achieved milestones with the customer so the majority of the shipment will be in the second half of the year but still uh beginning of this year we shipped some engineering models already but this is with the cash in it's not 100 related to shipment it's more prepayment uh long lead items and for that okay and can you give us an idea about the
spk07: size of the units, the total volume of the shipments ahead based on this cash in
spk02: Absolutely. So what I would say is, of course, our backlog is from firm contracted orders. So with every unit out of our backlog, we are in some contract. And each one of those contracts are built around the milestone payments and upfront payments. So I would say when you're talking about the payments, the cash in payments, from customers this year, we're talking about prepayments against our complete current backlog. So knowing the backlog, what it is today, you can kind of calculate what that is. But I think it allows us to cash efficiently operate all of our contracts without going into a negative for too much supply chain ahead in our purchases.
spk07: Okay. Okay, fine. And then finally, a question regarding Constellation in Europe and Iris Square. This is progressing well now in Europe and we know from previous announcements that the EU wants to involve also startups in this program. Where do you see your opportunities here and do you think that your related business The optical terminals will be divided between multiple suppliers. Would be interesting to have your thoughts on this IRIS Square program.
spk02: Absolutely. I think we welcome definitely Europe taking a really bold approach there on building up a constellation for their own hard softgov needs as well as service needs for their governmental customer. As you have said, the European Commission has taken a hard stance that they want startup involvement. We really want to see that materialize. I think that is very important for the space industry of Europe so that the European Commission has realized that as well and has written that in as a criteria. And what we see is that optical comm plays a very big role in that constellation. There are other elements like quantum key distribution also, which are a big part of a constellation and its use of optical communications. And I can also remind you that we have recently announced that we are working in multiple programs with the German government on the quantum key distribution topic. All of that combined, And also, in addition, the fact that we are one of the very few viable optical communications businesses in Europe, in countries of the European Union, and our, I want to say, leading role already on this side, on the U.S. side of the Atlantic in governmental programs, I think we are very well situated to make use of this compilation for providing terminals. I'd say at least in the percentages of the startup involvement, if not more.
spk07: Okay, sounds good. Thank you very much. Thanks a lot.
spk01: Thank you. Thank you.
spk08: And pardon me, it looks like there may be a follow-up.
spk09: Hold on a moment. We are getting a follow-up from Zafer Ruzakar of Pareto Securities. Your line is open.
spk07: No, there's no follow-up question from my side. Should be a mistake, sorry.
spk09: No problem. Thank you, sir. Okay. There are no questions in the queue at this time, so I will turn the call back to Mr. Tom Dinges.
spk05: Thank you, Operator. For further information about our upcoming engagements with the investment community, please visit the investor relations section of Mineric.com. Thank you, everyone, who joined us today, and we thank you for your interest in Mineric. We will speak with all of you again when we release half-year 2023 financial results. Goodbye for now. Thank you.
spk09: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
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