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spk01: Hello everyone and welcome to the Viya Optronics AGQ1-22 earnings call. My name is Charlie and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I'll now hand the call over to your host, Lisa Fortuna with Investor Relations to begin. Lisa, please go ahead.
spk00: Thank you and welcome. Joining me today are Juergen Eichner, Founder and Chief Executive Officer, and Dr. Marcus Peters, Chief Financial Officer. I'd like 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 via Uptronics Form 20S for a description of certain business risks, some of which may be outside of the control of the company that may cause actual results to materially differ from those expressed in our forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise. Our earnings release for the first quarter of 2022 is posted on the company's website at buyoptronics.com. With that, let me now turn the call over to Juergen for his opening remarks.
spk04: Thank you, Lisa. Good morning, good afternoon, and thank you for all of you for joining us today. We are excited to briefly discuss our financials for the full year 2021, which can also be found on our form 20F, highlight our Q1-22 results, and most importantly, share our outlook for Q2 and the full year 2020. To begin, I'd like to take a few minutes to provide an overview of VIA's key achievements over the last year and our go-forward business strategy. In 2021, we had many exciting business developments. We acquired and began the integration of Germanius, a high-tech company focusing on automotive system integration and user interfaces for well-known high-end original equipment manufacturers, OEMs. This is the continuation of a successful partnership which has allowed us to provide advanced cockpit solutions with our display and touch components including new developments in functionality overall. We formed a strategic partnership also with SigmaSense to develop new touch sensing solutions, this being part of our offering. The partnership allows us to apply new innovations across industries from the consumer market to the high-tech automotive and industrial markets. Finally, we incorporated a new entity via Optronics in the Philippines for the design and development of camera solutions. As a reminder, via Philippines was incorporated to facilitate the integration of a camera design and development team that was previously part of integrated microelectronics IMI. Thus far in the fiscal 2020, we have also had some notable achievements. In February, we announced that we received the 2021 Award for the Best Technology Innovations Value Strategy for Germany from Capital Finance International. This award acknowledges our commitment to developing innovative and cutting-edge solutions for applications that require sunlight-readable, robust and optically superior interactive system solutions. In May, we announced the expansion of our staff and capabilities in Nuremberg. VIA has added a new production site adjacent to our headquarters and started ramping up MS production in the automotive production line, which has already achieved record shipments of over 31,000 units as of May 31, 2020. This growth not only demonstrates our flexibility and diligence, but also our innovative capacity as we set our sights on our potential growth ahead. Finally, this past month, we announced plans for a new production site in the Philippines. We expect that site will increase operational efficiencies and help increase margins while also mitigating the impacts of ongoing geopolitical pressures, cost increases and restrictions in China. Although we have not been able to implement all the desired measures to negate the increased supply chain costs during the first quarter, We have agreements in place with customers starting in July, which will allow us to adjust prices and stabilize margins in the second half of the year. Despite this, we are proud of how our team has performed amidst the ongoing semiconductor shortages, shipping challenges, and continued COVID-19 lockdowns in China. Despite these headwinds, demand for our display systems and solutions remains robust. Forecasted demand Expressed on a compounded annual growth rate or CAGR basis from 2020 to 2025 for automotive, consumer and industrial are 16.4%, 5.9% and 16.2% respectively. More than ever, work from home drove higher usage of PCs, laptops and tablets. In addition, we consistently saw a greater need for connectivity in cars, more autonomous systems and shared mobility over the past year. Our customers are increasingly aware and sensitive to the technical and optical challenges that come with the new user interfaces combined out of displays and touchscreens in terms of light, shock and extreme temperatures. Our solutions stand up against the challenges of today across multiple end markets in which superior functionality and durability is a critical differentiating factor. Before I hand the call to Markus, I'd like to provide an update on the supply chain, specifically the global component shortage and its impact on Viya. While we have continued to successfully navigate these challenges compared to the broader market, there have been cost increases affecting our business as a result of the component shortage and shutdowns in China, the Russia-Ukraine conflict, and material price increase due to freight rates. We continue to work with our customers on a case-by-case basis to mitigate the impact on our business. In summary, we are pleased by the process that we have made and the results we have achieved in the first quarter of 2022. And this should support continued momentum and growth in the fiscal year 2020 and beyond. However, during this year, we will focus on reinstalling and growing our margins. This is the first priority. With that said, I'd now like to turn over the call to Markus for a short overview of the full year 2021 financials and a detailed review of our first quarter 2022 performance. Markus?
spk06: Thanks, Jürgen, and hello to everyone. I will start by reviewing our financial and operating performance for the full year 2021. Then I will outline our first quarter 2022 results and our outlook for the second quarter and full year 2022. For the full year 2021, we drove very strong top-line results as total revenue increased by 18.5% to €180.8 million compared to €152.6 million in 2020. Revenue from the display solution segment of €154.7 million increased by 21.7% compared to 2020, driven by strong demand from EV manufacturers that generally require both larger and a higher number of displays than other automotive manufacturers. Revenues from the sensor technologies segment of €26.1 million increased by 2.4% compared to 2020, mainly due to higher sales to certain automotive and industrial customers. Total gross margin was 11.3% in 2021 compared to 15.3% in 2020, reflecting, among other, some of the supply chain challenges that Jürgen just mentioned. Moving to the first quarter of this year, total revenue of 52.7 million euros in the first quarter 2022 increased 27.6% from €41.3 million in the first quarter of 2021, driven by growth in both the display solutions and sensor technology segment. Display solutions revenue of €46.8 million in the first quarter increased by 31.5% from €35.6 million in the first quarter of 2021, driven primarily by growth in automotive revenue and industrial sales. Sensa Technologies' revenue of €5.9 million in the first quarter increased by 3.5% from €5.7 million in the first quarter of 2021. Revenue from the automotive end market grew 74% in the first quarter of 2022 and accounted for 39% of display solutions revenue. Revenue related to the industrial and specialized applications end market increased 24% in the first quarter of 2022 and accounted also for 39% of display solutions revenue compared to 41% of revenue in the first quarter of 2021. Revenue related to the consumer end market accounted for 22% of displays in solutions revenue in the first quarter of 2022 compared to 30% of revenue in the first quarter of 2021. Gross profit margin decreased to 7.4% in the first quarter from 11.4% in the first quarter of 2021. As Jürgen mentioned earlier, we are working diligently with our customers to mitigate inflationary impacts to our business. Dispair Solutions' gross profit margin of 5.8% decreased in the first quarter of 2022 from 9.8% in the first quarter of 2021 due to sales mix and the increase in the price of certain raw materials, logistic costs, overhead and labor costs, as well as lower margins on sales orders. Sensor Technologies' gross profit margin of 20.3 percent in the first quarter of 2022 decreased slightly from 21.1 percent in the first quarter of 2021, primarily driven by product mix. Research and development expenses increased in the first quarter of 2022 to 1.5 million euros from 1 million euros in the first quarter of 2021 due to the addition of R&D capabilities, which are to a large extent related to the acquisition of Germany's. Selling expenses increased to 1.3 million in the first quarter 2022 from 1.2 million in the first quarter of 2021 due to higher sales volumes. and administrative expenses of 5.4 million euros increased in the first quarter 2021 from 4.7 million in the first quarter 2021 due to, among other, increased headcount to support the company's growth plans and consulting expenses. Operating loss was 3.1 million euros in the first quarter 2022 compared to operating income of €0.7 million in the first quarter 2021. Net loss was €3.7 million or €0.83 per basic in diluted share in the first quarter 2022, compared to net income of €0.2 million or €0.04 per basic in diluted share in the first quarter of 2021. EBITDA loss was 1 million euros in the first quarter 2022 compared to EBITDA of 2.5 million in the first quarter of 2021. Display Solutions EBITDA loss was 0.3 million in the first quarter 2022 compared to EBITDA of 0.5 million in the first quarter of 2021. Sensor Technologies EBITDA was 0.2 million in the first quarter of 2022 compared to 1.1 million in the first quarter of 2021. Other segments EBITDA loss was 1.9 million compared to 0.9 million in the first quarter of 2021. We finished the quarter with cash and cash equivalents of 47.1 million euros, which supports our strong runway which supports the strong runway for us to achieve our strategic objectives. Looking ahead to 2022, I would like to share our outlook. For the second quarter, we expect total revenue of 40 to 45 million euros. This forecast incorporates the impact of COVID-19-related shutdowns in Shanghai and Suzhou, which are expected to cause delays which are expected to cause delays and logistic issues also during the second quarter. For the full year 2022, we expect revenue growth of approximately 5 to 10% compared to 2021. This forecast is based on intentional portfolio adjustments, the slowdown in the consumer market, component shortages, especially in the camera business, and uncertainty in the automotive industry. Our outlook also reflects continued uncertainty related to the ongoing impact of COVID-19. Overall, we remain focused on the many growth prospects ahead of us, particularly in the auto and industrial markets, which we will prioritize due to the potentially higher margin and strong growth outlook. With that financial overview, I would like now to turn the call back to Jürgen for a few closing comments.
spk04: Jürgen? Thank you, Markus. So as a summary, in conclusion, we are proud of WIA's recent accomplishments and are excited about the prospects for the remainder of the year and beyond. We are working hard to mitigate the impacts of supply chain pressures and we are adjusting our sales prices upward where possible to offset inflation and transportation costs, which should help us regain our historical margin profile and achieve our long-term margin targets. We also believe that we have at the moment reached probably the highest level of cost that we see in our supply chain and will probably improve from there in general. We are capitalizing on opportunities in the automotive industry through strategic partnerships with Corning and SigmaSense to enhance our cold form and sensor technologies and we are in a position to capture additional opportunities in the industrial market. Our backlog remains healthy with new projects continually entering in the pipeline and we continue to focus on higher value projects which will support margins. We have a strong balance sheet and a clean financial profile. We believe we are well positioned to drive strong growth in shareholder value over the next several years and we are looking forward to sharing the journey with all of you. Thank you for your continued support. That concludes our prepared remarks. And I now turn the call over to the operator for questions and answers.
spk01: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you're unmuted locally. As a reminder, star followed by one on your telephone keypad now. Our first question comes from Andrew Piscaglia of Berenberg. Andrew, your line is now open.
spk02: Hey, guys. Good morning.
spk04: Hello, Andrew.
spk02: So I'd like to start out with, you know, so you're entering 2022, you know, with seemingly some good momentum on your top line. Can you talk about, you know, so your guidance implies quite a slowdown as the year progresses. It's not surprising given the bottom market. But what are the puts and takes of how you get to that 5% to 10%? Are you being conservative or is this more concerns around, you know, these component shortages and being able to get product to customers as being the main issue?
spk04: Well, maybe, Markus, if you start and add something.
spk06: Yeah, it's a mixture of effects. We saw on the one hand side in the camera business, we see an issue with component shortages indeed, which may limit some turnover. Secondly, we expect intentional portfolio adjustments because with a focus on margin for one or the other customer, maybe he will shop for other choices. But when margin is priority, we cannot entertain all sales orders that we do not really enjoy on the balance sheet. These are the major points, probably, I think. And of course, we have the overall uncertainty in the automotive market, while we, with the focus on the EV makers, don't think we are that strongly hit.
spk04: Yeah, maybe just one comment from my side. As I indicated before, I think at the moment, looking at today, we have probably reached the highest level of potential cost in the supply chain, so it will go better from there. This was also why the discussions with customers took so long, because you don't know at the end of the day you will need to settle. the shortages are not over. We are, as Marco said, impacted in the camera business, especially. But that, as I said, from today, looking in the future, it looks much better. We had a few unexpected events really during the Q1 and Q2, but so far, I think we are okay. So it's a summary of things that we have to consider. But right now, we actually have settled with some of the customers already. We will impose the changes July 1st, and then we'll go from there.
spk02: And can you provide, within automotive, an update with one of your largest U.S. EV makers, um, your customer and, you know, in terms of that, like, wouldn't that, would that not provide you some strong visibility into the back half of the year that, um, you know, would apply maybe some conservatism on that guide?
spk04: Uh, yeah. So for, for this one, it's, it's, it's actually, um, so this month, um, we will, um, um, have all equipment installed. So in July, we will run full capacity. Actually, we run higher than full capacity because the demand increased. So from July onwards, that facility will be working as expected. Also, that was part of the reason why you see the result as it is. some delays in that area because the customer couldn't actually get also parts for their cars. So we had some slowdowns here. We actually have built, but the units have been in our facility waiting for being picked up. But from July onwards, it's all up to that level that we expected. We might have to work on some yield issues with the new equipment because at the end of the day, that needs some tuning over the next weeks. But from now on that should operate as we planned. And if everything works out as we have agreed with the customer, this should be stable for the next four to five years.
spk06: We see already today that from our automotive turnover, 26% in Q1 was with EV makers. Not only this one, but the majority of the turnover was with this one company. But in total, with all EV makers, we had 26% turnover for automotive business. And we won one more assignment last week from an EV maker in China.
spk04: This will be coming out as a separate release. So we'll hear about that soon.
spk02: Okay. Okay. And, you know, if I heard you correctly, you guys are implying, you know, the worst, we're kind of reaching peak in terms of all these costs and shortages and issues you're seeing. Would that imply you guys can hit a break-even number, you know, before we exit 2022? I need to dial up.
spk04: Yeah, actually, this is what we are trying to do. However, I cannot promise. I promised, I think, also that we'd be shortly showing you the margin targets that we have. So we are currently, the focus is that we have right now is basically getting back to the regular, to normal margin level. And it looks like, and that we can basically get to our target margins as we planned over time. So there were certain measures, cost up for some products to overcome the cost. On the other hand, we are bundling. So a lot of things we couldn't really do last year because of all the things happening. We are bundling right now in the supply chain. We are basically working with our suppliers. So we are driving costs down on the supply side, which seems to be surprisingly also successful. So we will have a cost up and a cost down on the supply side. And we will make some rearrangements in the company focusing several areas, which are right now basically at every production location in China, here in Germany, and in the future in Laguna, and centralize those. So this should also be an additional cost-saving exercise. So this year is really a year where we consolidate everything we have done in the last year, cut down costs, and after the consolidation we will basically follow the plan that we have. What I can say here that we will have also in beginning of August, I think I mentioned that before, we will have our new CMO on board and I will also communicate the changes that we will do with that a little bit later when he is on board and maybe have him also in the call because that will be a very important part of the organization.
spk02: Okay. Got it. Thank you.
spk01: Thank you, Andrew. As a reminder, if you wish to submit a question, please press star followed by one on your telephone keypad now. Our next question comes from Anthony Stoss of Craig Hallam. Anthony, your line is now open.
spk03: Thank you. Good morning, everybody. I wanted to focus in still on gross margins. You talked about July price increases. Can you outline what percentage of your revenues will see increases or what percentage of your products will see an increase in price? and what other steps can you take to improve gross margins um secondly you mentioned that you do expect gross margins to prove quite a bit in the second half of this year can you give us an expected range and then i had several follow-ups after that yeah this is what i uh so we will actually get another call about this a little bit later i was hoping that we are ready to show you this today already i can tell you that more than half of our of our
spk04: our revenue and projects will see a price increase, some of them a drastic price increase, and that should alone cover some of the margin loss that you have seen. And unfortunately, I cannot yet, maybe in one or two, maybe in July, I can give you more detailed numbers as I said, I was hoping to provide that today already, but the changes are still ongoing and the final settlements with the customers are hopefully ended during the month of July. On top of that, we have the savings in the supply chain side. I like to be conservative and don't set out or give numbers in a first, let's say, in a way that I see it at the moment very positive, but give us a bit more time to provide the guidance there.
spk03: Okay. And then on the June quarter revenue guide down quite a bit sequentially, Maybe take us through what divisions are down the most. Is your display division still holding up? And then really kind of the same question for your full 2022 guide of 5% to 10% growth. What kind of growth rate are you assuming for the display side of the business, and are you expecting any parts of your business to actually be down year over year?
spk04: Yeah, so the problem in Q2 was basically – It was all coming out of the lockdowns that we have seen in China. As you might know, the Shanghai airport was blocked and at the end of the day, every airport in China, the incoming goods have been blocked and the outgoing goods have been blocked. So everything has been delayed and that caused the biggest impact. Markus, please correct me if I'm wrong. He was absolutely right. And a little bit contributed was some delays that we had here in the production. As I said, the West Coast company, they had also supply chain issues. But that was not major. The major thing was really China.
spk06: And we had one customer here in Germany for the Nuremberg facility who is not taking the volumes he's supposed to take.
spk04: Oh, yes, that's true. That's another automotive customer where the volumes ramped down. And we are currently figuring out why that is the case because it's not really transparent, to be honest. So hopefully we can provide more information there. But that was also part of it, yes. It's true. I forgot that.
spk03: Okay, then just the second part of my question regarding full 2022 growth rates. Honing in on the display side of your business, that was always the biggest piece to the story of why you came public was the display side. If overall revs are going to be up 5% to 10%, what do you think display will be up?
spk04: I think this would be mainly related to display. There will be also camera. camera business, but the display touch area is still the one with the biggest growth rate. Actually, we expected more camera growth this year, but camera has seen the biggest supply chain problem at the moment. So that display segment, display touch, will be the biggest one for growth in any case.
spk03: Yes. Okay. And then my last question, you commented about EV maker in China, that pressure release forthcoming. Can you expand a little bit more on that, the size of the opportunity? Is it going to amount to any kind of revenues for this calendar year and just timing of that?
spk04: It will not be for this calendar year. It will be, I think, starting next year. The size is not as big as the West Coast version, but it's a luxury EV car in China. Okay.
spk03: All right. Thanks, guys. Appreciate it.
spk04: Yeah. Thank you.
spk01: Thank you, Anthony. As a final reminder, if you wish to submit a question, please press star followed by 1 on your telephone keypad now. At this time, we currently have no further questions. I'll hand back over to Jürgen Eichner for any closing remarks.
spk04: Yeah, well, from my side, what I can say is thank you for joining the call today. For us, we are excited about the future of VIA and truly believe that we are on our way to continuing the long-term growth. I hope that we basically overcome all the supply chain challenges this year. At least at the moment, I have a pretty good feeling about that. Hopefully, nothing else comes up which cannot be foreseen. In any case, thank you for joining and being with us and have a great day.
spk01: Thank you for joining today's call. You may now disconnect your lines.
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