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spk00: 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 Optronics Form 20F 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 the 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 preliminary second quarter 2022 results is posted on the company's website at via-optronics.com. With that, let me now turn the call over to Jurgen for his opening remarks.
spk03: Yeah, thank you, Lisa. Good morning and afternoon. Thank you all for joining us today. So once more, we are proud of how our team has performed during the quarter amidst ongoing component shortages and shipping challenges. We grew the top-line revenue by 10% with 15.5% growth in our display solution segment driven by stronger demand across all end markets and the ongoing production ramp-up at the facility in Nuremberg. Further, we continue to see a greater need for connectivity in cars, more autonomous systems and shared mobility. The accelerated transition to a carbon-neutral economy is creating a strong tailwind for EV and hydrogen markets, and we expect increasing adoption of more advanced infotainment panels as well as cluster and mirror replacement screens by electric vehicle, hydrogen cars, and additional car producers. Our capabilities, such as applying leading-edge cold form technology for cover lenses, stands up to the accelerating needs of automakers to provide superior durability and functionality inside their vehicles. Additionally, cold form technology does not only provide technological advantages, but also uses a lot of less energy compared to hot form for production. Therefore, we are improving our green footprint. On top of that, our technology achieves higher contrast and brightness without extra energy for LCD backlight. This again benefits the green footprint, resulting in much higher competitiveness compared to others. We remain encouraged by the strengths of our growing project pipeline as we continue to focus on higher value projects that will support merchants. Additionally, we continue to execute on our strategy with a target of 500 million in the annual revenue by 2026. We already maintain a backlog of approximately 250 million for that year, which supports this prediction. We continue to implement our previously announced actions to improve profitability and cash flow with various cost savings and performance improvement projects expected to take effect during the second half of the year. These actions include both internal activities, such as improving production efficiencies and streamlining resources, as well as measures related to customer pricing and supplier agreements to improve the company's profitability and cash flow. Most of our sales prices have already been adjusted and freight costs continue to be offloaded. We remain on track to become net profit neutral at the end of the year on a run rate basis. Furthermore, as indicated before, based on our very low use of energy in our production, we are not as impacted by energy costs compared to most others in the industry. This quarter, we announced plans for a new production location in the Philippines to support our growth strategy as we diversify our production base and improve cost efficiency. We can leverage VIA Electronics in the Philippines, which we incorporated in September of last year, to build a new, more cost-effective site that can produce current VR products in conjunction with the Chinese production site in Suzhou. This site helps VR Optronics to expand our production capabilities and capacity in Asia and exemplifies the significant growth in demand for our solutions. Furthermore, we announced a new production line in Thailand due to the increase in camera demand that we see in the future. Similar to this place, cars will be equipped with up to 10 cameras per car We continue to expect that camera revenues will become a very visible revenue stream in the future. In summary, we are pleased by the process we have made during the second quarter of 2022, with effects becoming visible during the remainder of this year and beyond, supporting continued momentum and growth. With that said, I'd like to turn now the call over to Markus for a review of our second quarter 2022 performance in full-year outlook. Markus.
spk02: Thanks Jürgen and good morning and good afternoon to everybody. I'll start by reviewing our financial and operating performance for the second quarter of 2022. Then I will outline the outlook for the third quarter in full year 2022. For the second quarter, total revenue of 48.1 million, increased 10% from 43.7 million euros in the second quarter of 2021, driven by further growth in the display solutions segment. Display solutions revenue of 43.2 million euros increased by 15.5% from 37.4 million euros in the second quarter of 2021, driven primarily by stronger demand in end markets and ongoing production ramp-up in Nuremberg. Sensor technology's revenue of 4.9 million euros decreased by 21.8% from 6.3 million euros in the second quarter of 2021 due to lower demand, partially as a consequence of market saturation. Revenue from the automotive end market increased 54% in the second quarter 2022 and accounted for 46% of display solutions revenue, especially due to higher volumes in the EV market segment. Revenue related to the industrial and specialized applications end market decreased 22% in the second quarter 2022, yet still accounted for 30% of display solutions revenue. Revenue related to the consumer end market increased 37% in the second quarter 2022 and accounted for 24% of display solutions revenue due to stronger demand partially caused by the termination of lockdown restrictions in China. Gross profit margin decreased to 8.5% from 14% in the second quarter of 2021. Display Solutions' cross-profit margin of 6.5% decreased from 10.7% in the second quarter of 2021 due to higher logistic costs throughout the value chain and margin pressure. Sensor Technologies' cross-profit margin of 31.8% decreased slightly from 34.4% in the second quarter of 2021 driven by a decline in demand and consequently lower utilization of the production facility in Japan. We continue to work on stabilizing the current situation with our team in Japan. Research on development expenses decreased to 1.7 million from 2 million in the second quarter of 2021 as we shifted towards utilizing more internal R&D services. Selling expenses remained stable at 1.2 million euros. General and administrative expenses of 6.5 million euros increased from 4.9 million euros in the second quarter of 2021. Operating loss was 1.2 million in the second quarter 2022 compared to operating loss of 3.1 million in the second quarter 2021. Net loss was 1.4 million euros or 31 euro cents per basic and diluted share. compared to net loss of 4 million euros or 88 euro cents per basic and diluted share in the second quarter of 2021. EBITDA loss was 0.1 million euros in the second quarter of 2022 compared to EBITDA loss of 1.9 million euros in the second quarter of 2021. Display Solutions EBITDA loss was 0.3 million euros compared to EBITDA of €0.9 million in the second quarter of 2021. Sensor Technologies EBTR was €0.3 million compared to €1.6 million in the second quarter of 2021. Other segments EBTR loss was €0.1 million compared to an EBTR loss of €4.4 million in the second quarter of 2021. The second quarter of 2021 results were positively impacted by SXK. We finished the second quarter with cash-in-cash equivalents of 53.3 million euros, up from 47.1 million at the end of the first quarter of 2022, which was driven by improvements in working capital management, which enhances our runway to fund our growth initiatives. For the third quarter of 2022, we expect total revenue in the range of 44 to 49 million euros. For the full year 2022, we continue to expect revenue growth for approximately 5 to 10 percent compared to 2021, taking into account all economic uncertainties. In closing, we are on track to achieve long-term consistent growth. We remain focused on our growth perspectives, especially in the automotive and industrial markets, and are committed to implement further initiatives to improve the company's profitability. With that financial overview, I'd like now to turn the call back over to Jürgen for a few closing comments. Jürgen.
spk03: Thank you, Markus. As you can hear, we are very happy with what we achieved during the second quarter toward improving our pricing and decreasing our cost to get back to profitability. As indicated, we feel positive that we will be net profit neutral on a run rate basis by the end of the year with the expectation of further progress over the next two quarters. The expansion plans in the Philippines will further improve our cost base and make us more competitive in Asia and more independent of geopolitical impact. Our technology and products are green and fit to the expanding applications in the target markets. We remain highly confident that display, touch, and camera quantities will continue to grow at a moderate pace for the foreseeable future. In conclusion, we are proud of VIA's recent accomplishments on cost reductions and are excited about the prospects for the remainder of the year and beyond. Looking at all the insecurities and sentiments in the world, we are happy to see not only stable market conditions for our product, On top of that, we see growing demands giving us a solid base for our business, resulting in our belief that we are well-positioned to drive strong growth and 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'll now turn the call over to the operator for Q&A.
spk01: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question today comes from Andrew Griscalia from Berenberg. Your line is open. Please go ahead.
spk05: Good morning. Hi, Andrew. Hello, Andrew. Good morning. Just hoping you can provide a little more color around your guidance of 5% to 10%. You know, the Q3 guide implies a year-over-year dip in revenues at the midpoint and then some improvement probably in Q4. But I guess what gives you that confidence to maintain the guide? What are you seeing in the backlog? And can you just talk about visibility at this point?
spk02: About the turnover guidance? We have some visibility for Q3, so we hope we can achieve these numbers. And of course, all comments are subject to the uncertainties of the market, but we think that it's more probable than not probable that we achieve the turnover in the given guidance for the total year.
spk05: Maybe in that same topic, just the impact of supply chain If you could talk about what you're seeing in terms of supply chain challenges affecting the top line, how the quarter progressed and kind of what you're seeing to date.
spk03: Do you want to take this or everyone gives a comment? Well, yeah, I can say something to it. So we have some challenges in the supply chain, but not really. We could actually manage that well. So I don't expect any impact there in the remainder of the year. What we see is that some of the demands in the consumer market are actually going down, talking about revenues. So that will be a change, but it's, at the end of the day, the low margin products that we also wanted to basically reduce in our portfolio So that is basically a development, but it fits into our strategy.
spk02: And the bigger challenges we have with the logistic chains rather than with the supply chain in getting material, because if you have a strike in the Hamburg Harbor and the ship can't unload, that's of course a problem. And it's all about logistics. And if Shanghai port closes again, then you have to switch to planes if you get a plane. So that's a bigger challenge for us than the availability of raw materials. Yeah, okay. So bigger cost constraints. One of the biggest cost increases in the last quarter is logistic costs.
spk05: So even in light of all this, you know, obviously everyone's still being affected by this, but your EBITDA almost broke even this quarter. Markus, do you think going forward, it sounds like you're confident with some of the actions you've been taking that you'll hit break even? I mean, I know you had said to buy, I think exiting the year, but is there any more color you can provide into Q3, Q4?
spk02: Q3 or Q2 was strongly or was impacted. by some FX gains as you know from the IPO we collected a couple of dollars which we still keep in our accounts and since our balance sheet is in Euros with the current situation of strength of the US dollar we have of course currency gains which we have to recognize in the P&L so I'm certainly confident that some of the measures we are planning will take the first effect in Q3 and Q4, and they'll continue to accelerate in the next year.
spk03: Maybe we should mention as well, Andrew, so we are today, for the next five, seven days, basically in Rumba together with the whole management team, so we are planning for the upcoming year, and whatever we have seen so far looks okay. So it seems that we are on the good way. Okay.
spk05: All right. Thank you, guys.
spk01: Our next question comes from Anthony Stoss from Craig Hallam. Your line is open. Please go ahead.
spk04: Hi, guys. A couple questions for Marcus and a follow-up for Juergen. Marcus, can you give us more detail on the other operating income, $7.6 million? What is that? Why was it so big? And then just your view on Just operating expenses going forward, and again, I have a follow-up for Juergen after.
spk02: Yes, the operating income and expenses need to be seen as gross values, and they are in the overwhelming amount driven by FX effects. So if you take both, you probably have an approximation of the FX effects. Because as I explained before, we have huge amounts of U.S. dollars and with the strength of the U.S. dollar and preparing a balance sheet in euros, I'd rather just don't need to continue because it's easy math, then you have FX gains. And of course, we recognize this in the books. We don't hide it.
spk04: Do you expect your operating expenses to remain relatively flat or grow sequentially each quarter going forward?
spk02: The operating expenses... I would expect to be rather flat and grow with inflation. And of course, if you increase, if you double your production, you also will have some increase in operating expenses, but it will accelerate at a lower rate. That's our expectation.
spk04: Got it. And then to follow up for Juergen, part of the reason for the IPO was your expectation on growing gross margins towards 20%. You're sitting around 8% still. What can you do to really help improve gross margins going forward and really keep it solidly in double digits and work towards 20%?
spk03: Yeah, hello, Tony. So, again, since the IPO, a few things have changed, especially the price pressure in the automotive market, which basically was accelerated by the automotive OEMs during the COVID years, let's put it that way. What we are doing to get back on track in terms of margins is relatively simple. At the end of the day, we are removing, as indicated before, the low margin projects. So you will see, or maybe not this year, but in next year, you will see a reduction in the consumer low margin projects. We focus on the higher margin projects. And on top of that, we are coming up with added value projects where we have a higher margin. But this will come over time. Now, what you also see is that we are moving to lower, it sounds strange, but at the end of the day, we are moving to lower cost countries. So we're moving partly products from China into the Philippines where we have a different cost base. We want to escape the whatever 10 to 20% cost increase, salary increase or whatever you call it in China. Last year it was 20%. So this would give us another competitive edge compared to others which are still bound to mainland China and don't have other alternatives. So it's a combination of selecting the right projects. It's adding value in areas where we can probably talk more about during the next call. And it's also reducing costs. cost of production, not only by changing locations or using other locations, but also putting a lot of effort right now in production efficiency and automation.
spk04: Perfect. Thanks for the call. Best of luck, guys.
spk03: Thanks, Tony. Thanks.
spk01: At this time, there are no other questions in the queue. Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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