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spk05: Ladies and gentlemen, thank you for standing by. I am Emma, your course call operator. Welcome and thank you for joining the Via Optronics fourth quarter and full year 2020 financial results conference call. Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch tone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Monica Gould, Investor Relations for vOptronics. Please go ahead.
spk00: Thank you. Good afternoon. Welcome to vOptronics' fourth quarter and full year 2020 Financial Results Conference call. I'm Monica Gould, Investor Relations for vOptronics. Joining me on the call today will be Juergen Eichner, VIA's Chief Executive Officer, and Daniel Juergens, VIA's Chief Financial Officer. Today's call is being webcast live and will be archived on the investor relations section of our website at via-optronics.com, where our earnings press release is currently available. Certain matters we will be discussing today, including the business outlook and financial projections for the first 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 our documents filed with the SEC, including our registration statement and prospectus. And with that, I'd like to turn the call over to Juergen.
spk02: Juergen Ortega- Yeah, thank you, Monica. Good morning, everyone, and thank you for joining us today. First, I will provide a brief overview of our fourth quarter and full year 2020 results. I will then discuss our key achievements and notable awards in the quarter before I turn the call over to Daniel Nergens, our CFO, who will review fourth quarter 2020 financial performance and our outlook for the first quarter of 2021 and the full year. Turning first to a brief summary of our financial results. driven by continued growth in our display solution segment and increased 4% eventually of a strong Q3. EBITDA was flat with the prior year period at a loss of €1.1 million. For the full year 2020, we delivered top-line growth of 11% and expanded our cost margins by 800 base points. Notably, during the fourth quarter, we continued to diversify our revenue and increase our sales in the automotive and industrial end markets. We see a large opportunity in both sectors as the total number of displays with features that we are providing, cameras and the use of glass as a design element in vehicles as well as agricultural and construction equipment steadily increases. The technology behind these elements is becoming increasingly more complex. and our expertise is well suited to meet these challenges. As a start, we address this with a great new technology development for rocketized laptops. Consumer customers have typically been early adopters of our products and technology. However, more recently, electric VAT manufacturers are becoming nearly as aggressive in implementing new features, which position us very well competitively. As a result, within our display solution segment in the four and accounted for 27% of the total revenue. Revenue from our industrial customers rose 23% year-over-year and accounted for 44% of revenue, leaving consumer revenue at a total of 29%. Within the automotive segment, we are working with a wide range of customers, including many of the world's largest OEMs and especially EV companies. Our product design wins and shipments cover our complete portfolio. The strongest drive for our portfolio comes from electrical vehicles. This includes luxury vehicles, trucks, and vans, mainly for cluster and center displays, as well as all sorts of camera applications like surround fuel, etc. As our mix of revenue from auto and industrial end markets increases, we expect a positive impact to our gross margin, as margins in these sectors are higher than our corporate average. With this shift, we also gain greater revenue visibility, as some product life cycles are as long as five to seven years. This shift also has positive impact on our backlog, providing visibility beyond 2024. To capitalize on the strong growth, further increase our spending in R&D and SG&A. We pulled in investments already in Q4. We expect that our operating expenses as a percentage of total revenue will remain elevated as we will continue to pull in investments in 2021 to take advantage of the opportunity to engage in new projects with new customers at a faster rate than previously expected. Given the length of design production cycles in the industries, we do not expect our investments to impact our near-term revenue, but rather need to increase revenue over the next three to five years. Now I'd like to turn to some of the progress and key achievements that we made during the fourth quarter. We are now working with several of the world's leading electrical vehicle manufacturers, and we continue to expand upon our strong position in this space. We are in production with two Chinese EV car manufacturers and will be shipping prototypes on several different projects to them this year. With respect to progress that we have made with a leading US-based EV company that we discussed on our Q3 call, we have already shipped hundreds of prototypes. These prototypes have been very well accepted and we, along with our customer, are driving our R&D teams to finalize qualification for mass production. The production ramp-up is anticipated mid-2021. The construction of the new manufacturing facility that we are building in support of this project is virtually complete and we are working on finishing the interior before ramp-up production. As we have discussed previously, the facility will have a capacity of 10,000 units per month once complete. During Q4, we finalized the automated production lines in our existing German facility, therefore increasing our production capacity another 50,000 pieces per month to a total of 60,000 units per month. This upgrade will not only lower our production costs, it is also an important step on our path to produce parts in China and Germany with the same processes and equipment, thus being able to share production capacity if needed. Having a geographical diverse manufacturing strategy will also help us overcome tariffs and sourcing issues and provide additional flexibility. During the fourth quarter, we initiated a research innovation team within VIA that is exclusively focused on developing new technologies and securing our technology leadership. This team is completely decoupled from any project to concentrate on technologies to expand VIA's market position with new technology developments. This includes advanced proprietary bonding and support materials, as well as free-form glass designs to enable displays, with touchscreen technology to be constructed in complex shapes, as well as complete interactive display systems. With respect to our strategic collaboration with Corning, we are expanding our cooperation by investing in joint development projects for new glass display and touch functionalities, hoping to be able to do joint physical road shows this year. During the fourth quarter, we received a number of new awards demonstrating our success. I would like to highlight a few in more detail. Starting in the automotive sector, we received a new award from a very well-known German sports car manufacturer to develop a first prototype for a future interior camera. With this win, we believe that we are very well positioned to receive the final award for mass production. We have also received several more awards in namely in the US, UK and EU. We look forward to updating you on these projects as we begin to ramp up production. In the industrial sector, we received a new project from a large existing US-based customer. This is particularly important as it includes new touch technology that we are currently developing together with a partner for ruggedized laptops. In summary, it has been an exciting year and I'm pleased with the progress to the hard work of our team and the strengths of our proprietary technology. I would also like to thank our partners and our customers for their support this year. Looking ahead, we will continue to execute on our strategy of increasing our sales in the auto and industrial end markets, leveraging our sensor and camera capabilities to deliver system solutions, while expanding the number and size of our projects within our existing customer base. We will also continue opportunities that would complement our current technology portfolio or add capacity. We are excited seeing more and more opportunities ahead of us and believe that our expanding pipeline and greater visibility positions us well for continued growth in 2021 and beyond. With that, I will now turn the call over to Daniel to discuss our financial results and outlook in more detail. Daniel?
spk01: Thank you, Juergen, and good day, everyone. I am Daniel Juergens, CFO of VIA Optronics. I'll start by reviewing our financial and operating performance for the fourth quarter and full year of 2020, and then provide our outlook for the first quarter and full year 2021. Total revenue in the fourth quarter of 2020 was 44.1 million euro, an increase of 22.5% from the fourth quarter of 2019, which was driven by increased sales in our display solutions segment. Total display solutions revenue was 37.9 million euro in the fourth quarter of 2020, up 27.6% from the fourth quarter of 2019. The increase was driven mainly by increased sales from our automotive customers. Display Solutions represented approximately 86% of total revenue in the fourth quarter, compared to 83% in Q4 of 2019. Within our Display Solutions segment, revenue from our automotive customers grew 77% year over year in the fourth quarter, and accounted for 27% of revenue compared to 18% in the fourth quarter of 2019. Revenue related to the industrial specialized applications and market grew 23% year over year in the fourth quarter and accounted for 44% of revenue compared to 43% of revenue in the fourth quarter of 2019. Revenue related to our consumer end market declined 6% year over year in the fourth quarter and represented 29% of revenue compared to 38% of revenue in the fourth quarter of 2019. The lower share of revenue associated with the consumer end market was due to our focus on expanding our auto and industrial business. Total sensor technology revenue was 6.2 million euro in the fourth quarter of 2020, essentially flat with Q4 of last year. Sensor technology represented approximately 13% of total revenue compared to 70% in Q4 of 2019. Turning to our cross-profit margin, Total company gross profit margin for the fourth quarter of 2020 was 16.6%, up nearly 10 percentage points from the fourth quarter of 2019. This increase was driven by improved margins in the display solutions business. Our sensor technology gross profit margin decreased to 24.2% in the fourth quarter of 2020 from 27% in the fourth quarter of the prior year due to an increased ratio of third-party material being used and additional license fee or newly licensed IP we are using. Our display solutions gross profit margin increased to 15.3% from 2.7% in Q4 of last year, driven by the higher mix of revenue from customers in auto and industrial end markets that I noted earlier. Turning to expenses. Total operating expenses excluded offset from other operating income in Q4 were €12.2 million or 27.7% of total revenues, which compares to €5.6 million or 15.6% of the total revenue in the fourth quarter of 2019. This increase was driven preliminary by higher R&D expenses and IPO-related expenses. Research and development expenses were €1.7 million or 3.9% of total revenue in Q4 2020, which compares to €1.3 million or 3.6% of the total revenue in the fourth quarter of 2019. As you may be aware, our R&D expenses also increased sequentially from a very low €0.4 million or 1% of revenues in Q3 2020. As Jürgen mentioned, the increase in R&D expenses sequentially and year over year was driven by increased investments to support our customers' design and production plans over the next few years. Looking ahead, we expect continued investments in R&D expenses. EBITDA in the fourth quarter of 2020 was negative €1.2 million, compared to negative €1.1 million in the fourth quarter of 2019. We recorded a net loss in the fourth quarter of 2020 of €4.1 million, which compares to net income of €1.54 million in the third quarter of 2020. Based on a weighted average share count of 4.52 million shares in the fourth quarter of 2020, this translates to basic and diluted net loss of €0.92 per share in the fourth quarter of 2020 and compares to net earnings of €0.47 per share in Q3 2020. Now turning to the balance sheet, we ended the fourth quarter with cash and cash equivalents of €81 million and total debt of €22.2 million. For the first quarter of 2021, we expect total revenue of €36 million to €38 million. For full year 21, we expect revenue growth of at least 20% compared to 2020. The projections take into account the fact that uncertainties remain due to the ongoing COVID-19 situation as well, at the global semiconductor shortage which may affect our customers and potentially impact our revenues. Finally, I'd like to briefly discuss our full year 2020 results. Total revenue in 2020 increased 11% to €152.7 million from €137.2 million in 2019 driven by a 12% increase in our display solutions revenue and a 7% increase in sensor technologies revenue. Gross profit margin for the full year increased by N percentage points to 15.3% up from 7.3% in 2019. And for the full year, we turned profitable on an EBITDA basis with EBITDA of €6.2 million in 2020 compared to an EBITDA loss of €4.5 million in 2019. Overall, we are pleased with our financial results and are focused on the growth opportunities ahead of us, particularly in the auto and industrial markets. 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?
spk05: Ladies and gentlemen, at this time we will 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 are using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes to the line of Anthony Stolz with Craig Callum. Please go ahead.
spk04: Good morning, guys. Thanks for taking my question. I have several. Maybe I'll start with you, Juergen. Can you give us a little bit more detail on the North American EV maker that now you expect volume production in the middle of 2021? My recollection was you were supposed to start this current quarter in Q1. Can you give us any more detail on what's happened? I know you've been sending hundreds of prototypes for quite some time. Love to hear kind of more on that. And then also, Juergen, if you wouldn't mind, if you have it handy, if you have the total design win, what the expected value is or backlog, that would be helpful. And then after that, I've got to follow up for Daniel.
spk02: So you're completely right. I was planning a little bit earlier. The problem that we had, or not we, but the EV maker is that some parts were not ready in time. So they had to delay it slightly, which basically maybe helps us to do part of the production in China for the ramp up and part of the production in Germany later on and move over completely. So we will be able to ramp up in Germany earlier, maybe even with the full quantity, but that's still in discussion. So it's not us, it's other parts of the car which have not been available or are not yet completely qualified. And with regards to the overall volume, the overall volume didn't really change. So we're talking about several hundred thousands over at least a five-year period.
spk04: Okay, maybe on the, I guess, that's great color. That's good to hear on the North American EV maker. It's just related to component shortages, not something with you. What I was driving at is total backlog for all your customers today. You know, if you've got design wins that you think are coming in the next three to five years, what's the expected value or backlog of all, you know, company-wide design wins?
spk02: Well, I would hand that over to Daniel, but I'm sure that we are okay to pitch that number. This is really – Daniel, what do you think? Okay.
spk01: So the current backlog we have for the current year is around 90 million. And the backlog we have for the next year, no, I don't have the full backlog amount on hand here. But we can discuss that in another call.
spk04: Okay. I don't know if you have handy, like a rolling total of number design wins either, if that's just so we can see how it's snowballing. If you have that handy as well.
spk02: Yeah, we'll provide. We try to provide more data, but we are currently in the process of preparing how we will show that in the future. Also, for the indicated report, it's right now already very good. So that's something that we will prepare as well, but we haven't done that for today.
spk04: Okay, that's fine. And then, Daniel, related to the OPEX, can you – quantify or qualify that 4.7 million other OPEX category? And then if you wouldn't mind, you know, I know you're investing and that's evident in the R&D, but can you give us, you know, a ballpark as to what your total OPEX is looking like for the March quarter as we get a sense for, you know, the run rate for this year?
spk01: Yeah. Majorly, in the other operating expenses, it's nearly everything related to negative currency effects due to the translation of the proceeds of the IPO. That's a major part of it. And the other question was around R&D expenses, right?
spk05: No, just if you could give some sense.
spk04: If you can give us a sense of what you expect the March quarter total OPEX to be.
spk01: For this quarter, I would say it will be nearly the same as in the fourth quarter. There are no major changes. um what we are increasing um and this will you will see also for the for the rest of the year we will increase and we have to increase the r d expenses and um this will also uh yeah this is this this will be the major um part of of of cost increase all the other costs will be um nearly the same um as of today or as of uh in the last quarter This will not change too much. Also, you know, we ramp up the new production in the new production facility here in Germany. But most of that is related to cost of sales. Okay. I think, yeah, this is the best guess I have. Summarizing, for the upcoming quarters or for the current quarters, we will mainly see an increase in R&D expenses because there are so many RFQs in the house and we have to handle that. And also, we invest in new technology, which is partially not related to any customer, but which should safeguard our innovation capacity.
spk04: Okay, just to clarify one last time, the 4.7 million euros in the December quarter, you said that was related to the IPO and the currency exchange. So you don't expect that to reoccur or to that level in March. You would expect... selling GNA and RD to be roughly the same.
spk01: Exactly. Exactly. I don't expect that there is too much changes on the currency end for now, for the upcoming weeks that we have for this quarter. So you are completely right.
spk04: So it should be somewhere around 5.5 to 6 million euros in OPEX for March. Exactly. Exactly. Okay. Perfect. Great. Well, thanks. Congrats on the continued progress, guys. Much appreciated. Thanks a lot.
spk05: The next question comes from Andrew Buscaglia with Barenburg. Please go ahead.
spk03: Hey, guys. Thanks for taking my question. Can you talk a little bit about You mentioned some awards in automotive. I was looking to see if you have some more details on that. I believe I heard a new award for a German sports car. Is that EV-related? Can you talk a little bit more about that specifically and maybe the magnitude of that award?
spk02: It's not EV-related. It's basically a joint development of some car manufacturers in southern Germany and we are talking about the new interior camera and if that camera will go to production we are talking about a very huge quantity as this will probably most likely be in every car so I think this is how far I can go at the moment we have been the only ones contracted in that area to work with them So as I said, if everything was successful, which we basically see as a given right now, then we should have a very good chance to get the complete volume.
spk03: So you said it's a huge quantity. This is a relatively big award versus previous awards I'm gathering.
spk02: Yes, it will be a very big award. As you can see, you basically can make some assumptions who the automakers are. And as I said, they will be in the majority of the eagles. So you have an easy idea what that would mean. I'm not sure if there will be a second source as well. That could be. But it's still very big.
spk03: OK. And when would you anticipate starting to see revenues from this, you know, in your income statement?
spk02: That will be, I think, a good question. This one I don't have. I think it's 2024, 2025. But I would need to check. This is a good question, Mark. I can check that a little bit later, but... That's what I have in mind. Okay.
spk03: And when you're talking about your guidance, you also mentioned two Chinese EV manufacturers, I believe. Those are new wins, correct? I imagine you have been trying to bid those, but you have greater confidence, or is that in the books now?
spk02: No, we have two Chinese ones. We already are in production. One since more than a year now.
spk03: Okay. And then I was curious on the industrial side, too. You were talking about a large U.S.-based customer. Can you talk about more like maybe what application that's in or what end markets?
spk02: know this customer will be coming for and again like the in order in order of magnitude is this a is this a meaningful award yeah so um first of all when we talk about in industrial in that area so we're talking about rocketized laptops and the rocket laptops are used by many many clients so they they sell to to the US military, for example, to inspection companies, to outdoor inspections. So it's really a wide application range for them. And I think they have, if I'm not completely wrong, the highest market share here in the US. And this is what basically follows our plans. We first of all try to implement things, our technologies, first in the consumer market, in the consumer laptops. The next step is the rocketized laptops. And from there, we diversify into other industrial applications. So rocketized laptops count to the industrial segment for us. And with regards of the revenue? I was going to have to check, but any of you have the number handy? The overall volume? Okay.
spk01: No. Sorry.
spk02: Okay.
spk03: Okay, maybe just one last one. You know, your guidance for – I understand your guidance for the full year. You know, you probably want to be conservative around these semi-shortages. But what about on profitability? Are you concerned around inflationary costs rising and then just generally maybe having to pay more for the components that you're using to meet expectations with your customers? How are you thinking about, I guess, more on the profitability side versus revenue this year?
spk01: This is a very good question. From the gross margin end, we are expecting it to be on a flat or maybe slightly increasing margin level. The costs for the whole year, we want to give guidance on the profitability and the cost by mid of the year. The reason for that is that we are currently faced to really heavily invest in R&D capacity and in all areas. everything related to that due to the fact that, as I said before, we have so many RFQs in the house and so many big RFQs who are really safeguarding our future. And we can't currently really say what will be needed and how the future will look like maybe in the second half of the year, about the spendings we have to take for our future.
spk03: Okay.
spk02: All right. I'll start back in queue. Thanks, guys. Yeah, maybe just for my side to answer your questions, I just checked. So the industrial laptop is in the range of $30 million overall revenue. And just to give you a number, that's what we have. Okay. Okay, thank you.
spk05: As a reminder, if anyone would wish to ask a question at this time, please press star followed by one on your telephone. There are no further questions at this time. I hand back to Juergen Eisner for closing comments.
spk02: Yeah, so thank you. Thanks, everybody, for joining us today, joining the call. We look forward to updating you on our progress next quarter. And as usual, if you have questions, let us know, and we try to answer whatever we can as fast as possible. Thanks, everyone. Bye-bye.
spk05: Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.
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