VIA optronics AG

Q4 2022 Earnings Conference Call


spk01: Hello everyone and welcome to the Viroptronics fourth quarter 2022 financial results conference call and thank you for standing by. My name is Daisy and I'll be coordinating your call today. If you would like to ask a question please press star followed by one on your telephone keypad. I would now like to hand your hand over to your host Samuel Cohen with Alpha IR Group to begin so Samuel please go ahead.
spk04: 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 the optronics form 20F for 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 will cross the wire shortly for the preliminary unaudited fourth quarter and full year results of 2022 and will be shortly posted on the company's website at Please note that since these are preliminary unaudited results, the company did not provide segment level detail this quarter. Final audited group financial statements will be made available within the required 20F filing period. With that, let me now turn the call over to Juergen for a few opening remarks.
spk02: Yeah, thank you, Sam. Good morning, and thank you all for joining us today. In today's call, we will cover our fourth quarter and full year 2022, as well as share our outlook for 2023. Total revenue for the fourth quarter was $54.9 million, an increase of 18.6% from $46.3 million in the fourth quarter of 2021. Total revenue for the full year 2022 in 2022 was 218.5 million, an increase of 20.9% from 180.8 million in 2021. The top-line growth exceeded our expectations and was driven by continuous strength in our display solutions segment. We were pleased with our fourth quarter results, capping an important year in which our team has demonstrated resolve in overcoming challenges presented by the broader microelectronic and macroeconomic environment, including supply chain efficiencies and ongoing effects of the COVID-19 pandemic, which impacted our operational results in 2021 and 2022. As I step back and look at the full year, we made significant strides to resolve such impacts by cost-down activities and sales price adjustments. Even though the measures did not cover the whole year as they phased in during the course of 2022, we can already show significantly improved results in 2022. Furthermore, we did consolidate and strengthen the organization, expanding our Nuremberg facility and completing our production ramp-up while implementing cost savings measures to expand margins. Further improvements will phase in in 2023 like production efficiency measures, shared service services, shared service, savings, and others. A big contributor will be the production in Nuremberg, running now smoothly, showing that we can produce even higher quantities compared to what we planned. The production line was enhanced to enable significantly higher throughput. Additionally, we continue to separate ourselves from competitors by further pushing our display and sensor technology as well as the camera portfolio. This enables us to fulfill the the specifications of our automotive and industrial customers, which are ever-changing and advancing. And we remain in an optimal position to exceed their unique requirements. The growing demand for sunlight-readable in- and outdoor displays, as well as sensors and cameras, has resulted in increased order volume for the cutting-edge technology solutions. We are excited about our healthy pipeline of projects with Fortune 400 companies. Additionally, we are exploring opportunities to extend our solution for car interiors with interactive display and touch functionality with industrial partners. We believe that will drive considerable growth in the future and look forward for sharing additional details later this year as it fits the demand and the requirement of the changing automotive supply chain. Turning to our cost savings initiatives, our shared service center in the Philippines will allow us to consolidate our administrative and global services, which will drive synergies and reduce operating expenses. And we recently kicked off our first shared services activities in the Philippines. We believe that this combination will allow us to redistribute resources and free up capital to improve business critical functions and focus on growth opportunities in each of the three end markets. Looking ahead to 2023, It appears that elevated freight costs are beginning to ease and our measures mitigate the impacts going forward. In 2023, we anticipate the further realization of the previously announced performance improvements and continuously focus on higher value projects that will support merchants. Going forward, we believe that these initiatives will continue to help improve our merchant profile and position the company for long-term sustainability and profitability. Despite a challenging macroeconomic environment, there are strong structural entailments in the end markets in which we operate, and we remain well positioned to capture the expanding applications and use cases for our products. The increased adoption of electronic vehicles and sophistication of applications in these vehicles support our long-term growth forecasts, and we continue to believe that we provide a critically differentiated offering to auto and industrial OEMs. With that said, I'd now like to turn the call over to Markus for a review of our fourth quarter and full year 2022 performance and the full year outlook. Markus?
spk00: Thank you, Jürgen, and good morning, good afternoon to everyone. I will start by reviewing our financial and operating performance for the first quarter and the full year 2022. Then I'll outline our outlook for the first quarter and full year 2023. For the fourth quarter, total revenue of €54.9 million increased by 8.6% from €46.3 million in the fourth quarter of 2021, driven by further growth in our display solution segment, supported by strength in the automotive end markets. Sensor technologies revenue decreased compared to the fourth quarter of 2021 due to lower demand in the consumer and market. Cross-profit margins increased to 16.6% from 13.7% in the fourth quarter of 2021 due to our actual product mix, favorable FX effects, and customer-related one-time effects. In this play, solutions' cross-profit margin increased compared to the fourth quarter of 2021, despite margin pressure linked to increases in material costs, inflation, logistic expenses, as well as an overall competitive environment. Sensor technologies' cross-profit margin decreased due to lower post-pandemic demand and consequently lower utilization. These research and development expenses increased compared to the fourth quarter of 2021. Selling, general and administrative expenses decreased compared to the fourth quarter of 2021. Due to further improvements in the administrative cost structure in favor of one-time effects, the fixed costs could be held overall stable. Operating loss was €4.4 million in the fourth quarter 2022 compared to an operating loss of €7.7 million in the fourth quarter of 2021. Loss after taxes from continuing operations attributable to V-Hauptronics AG shareholders was €6 million or €1.31 per share the fourth quarter of 2022 compared to a lot after taxes from continuing operations attributable to the electronics ag shareholders of 8 million euros for 1 euro 77 per share in the respective quarter of 2021. if the art loss was 2.7 million euros in the fourth quarter 2022 compared to an EBITDA loss of 6.1 billion euros in the fourth quarter of 2021. Display Solutions EBITDA increased compared to the fourth quarter of 2021, driven by operational performance and non-recurring events. Sensor technologies EBITDA decreased slightly compared to the fourth quarter of 2021 and other segments EBITDA decreased compared to the fourth quarter of 2021. Turning to the full year financial performance, total revenue of €215 million increased by 20.9% from €180.8 million compared to 2021. The increase was mainly driven by strong performance in the disability solutions segment supported by increased demand for our solutions, especially within the automotive and market, as well as favorable foreign exchange effects. Sensor technologies revenue decreased compared to 2021 due to lower demand, especially in the third and fourth quarter of 2022. in the consumer end market after a record turnover in the prior year. Cross-profit margin was 10.3% down from 11.3% in 2021. Our annual results were impacted by a fixed effect resulting from a stronger US dollar compared with the Euro over the year. Display Solutions' cross-profit margin slightly increased compared to 2021. despite ongoing margin pressure in a highly competitive environment. Sensor technology's cross-profit margin decreased compared to 2021 due to the lower post-pandemic demand and consequently lower utilization. Research and development expenses in 2022 increased due to the support of the company's future strategy to expand into integrated display solutions. Moreover, Germany's GmbH was fully integrated into a 2022 result. Selling expenses and general and administrative expenses decreased in 2022 compared to 2021 due to improved cost discipline in the administrative function and one-time effects. Overall, the fixed cost structure could be held stable despite an increased revenue. Operating loss was 6.7 million euros compared to an operating loss of 9.5 million euros in 2021. Loss after taxes from continuing operations attributable to ViaTronics AG shareholders was 9.9 million euros or 2.17 euros per share in 2022 compared to a loss after taxes from continuing operations attributable to ViaTronics AG shareholders of €11.8 million or €2.59 per share in 2021. Total EBITDA loss was €0.2 million in 2022 compared to an EBITDA loss of €3.4 million in 2021. Display Solutions EBITDA increased compared to 2001, driven by improved operational performance and non-recurring effects. Sensor technologies and other segments EBITDA are decreased compared to 2021. For the first quarter of 2023, we expect total revenue in the range of about 40 to 45 million euros. For the full year 2023, the company expects revenue to be around 2022 levels As we experience increased volatility in consumer demand, the company is increasingly focusing on profit over revenue growth and will adjust its portfolio accordingly. We will focus on the most promising car models and applications and at the same time intensify its diversification into industrial applications. Additionally, we will continue to focus on networking capital management. We plan to continue growing our revenue over the upcoming years, but it will most likely not to be linear. This is due to increased volatility in customer demand, new project starting dates, and sharpening our margin profile. We finished the fourth quarter with cash and cash equivalents as well as other short-term deposits, of 52.4 million euros, which will support our strategic growth initiatives. With that financial overview, I'd like to turn now the call back to Jürgen for a few closing comments. Jürgen.
spk02: Thank you, Markus. As you heard, we went through quite challenging two years in the past and are now back on track. We prioritize profit over growth, drive efficiency, and are expanding our portfolio with car interior solutions on top of our interactive display and sensor solutions. For example, complete dashboards including our product portfolio. With this said, we maintain our 500 million revenue target in 2026 and feel confident about our prospects to improve profitability in 2023. Our financial discipline remains strong and we have a solid base from which we can deliver strong growth and shareholder value in the years to come. 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. As a reminder, if anyone would like to register a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you are unmuted locally. So that's star followed by one on your telephone keypad to register a question. We have a question registered from Anthony Stoss from Craig Hallam. Anthony, please go ahead. Your line is open.
spk03: Thank you. Good morning, Juergen and Marcus. Just for housekeeping, when can we expect a full income statement with each of the lines rather than the abbreviated one put out late today?
spk00: Fair question. As soon as our auditors sign off the PCAOB account. So I expect later in April.
spk03: I'm sorry. Later today, did you say, Marcus?
spk00: I would expect this with the publication of the F-20 later in April.
spk03: Okay. Got it. And then you're again.
spk00: We have the numbers, but you're not allowed to publish it.
spk03: Got it. Okay. You're going to, on the comments in the press release that you're going to, you're guiding to flat revenue for 2023 to focus on more profitable business. Can you give us a sense of what your expectations are on gross margins, what you're willing to take? What do you think the full 2023 gross margin might look like?
spk02: So you can compare that to the 20th, I think. Yeah, so I cannot comment on the percentage of the gross margin in this year, but what I can tell you is, and I think we disclosed that before, that we basically eliminated or discontinued some of the low-margin consumer projects. That we are focusing on the higher-margin projects, of course. Then we have, at the end of the day, now working production, and we work on efficiency. This is all coming together. The final margin target remains what we have been communicating during the IPO. How that will increase over the next years, we will communicate on a call, in a follow-up call. But for now, I cannot comment on the margin for 2023. As you know, we are still under... We haven't completed the filing yet.
spk03: No, I understand the filing for the Q4. I'm just curious if you're focusing on, you're saying that the press release, you want to focus on higher profit margin deals or design wins. What's your goal on gross margins? I mean, what are you not willing to take business-wise and what are you willing to take business-wise from a gross margin perspective?
spk02: I think that's probably okay. Marcus?
spk00: That's a complex question. On the one hand, you need to balance your capacity, that your capacity is utilized because idle capacity is the boss you have. This could mean, of course, you take in some transactions with margins that may be at current level or lower level. However, to become a profitable organization, I think there's no doubt that we need more profitable, more higher margin deals, and we have internally a specific cut-off rate that is higher than the margins we have realized right now.
spk02: Maybe from an overall direction, so we basically push to get deals where we are margin-wise over 20%. Of course, we try to fill, this is what Marcus is saying, empty capacity, which will then come up as a mix with the new portfolio that we are planning. Maybe we can drive the margin even higher. But what you have seen in the last two years, and this is one of the reasons why we have not been performing as we all wished, was that the automotive industry used the last three years obviously to cut margins as much as they can on the on the supply chain so this is one of of the reasons why we have been affected now again this is why we drive for higher value applications and of course trying to maintain let's say for the new projects maintain a margin of at least 20. um keep Hoping that this is at the end of the day in three, four, five years from now, the average. Okay.
spk03: This is going to be for you anyways, Marcus, so maybe you can tack it on. Can you comment on how many 10% customers you had in the December quarter and what percentage of revenues was your biggest customer?
spk00: How many 10%?
spk03: And what percent of revenues was your single biggest customer?
spk00: The single biggest customer is a well-known computer producer. Our customer is in Singapore and in China. However, it's domiciled in the USA and has four digits. That's published. So that's the biggest customer, and we probably have something like a portfolio of five to ten customers over 10%. something between 5 and 10, I guess. But yes, we have to work on profiles. And it also depends how you manage the project. Sorry? right i'll just i'll jump back in the queue we could take this off offline this is over 10 percent on turnover sorry sorry sorry i said that's about five customers sorry i did a mistake i was wrong i spoke an error i just completely misunderstood you you mean you meant the biggest customers yeah what percent of revenues 20 30 your single biggest customer in the in the quarter biggest customer was there Sorry, I spoke in error. I misunderstood you. Could you rephrase your question, please? Sorry.
spk02: Yeah, I think what Tony wanted to say is how many customers do we have which have a revenue share of more than 10%?
spk00: That's about five. Sorry. Sorry, I was really on error here. Got it.
spk03: And then... Yeah, sorry. Sorry, I apologize. And then... Maybe, Juergen, maybe you could even just ballpark this. Your biggest auto customer, what percent of revenue were they?
spk02: Max, I'm not 100% sure, but they should be in the 20% range. Would that be okay to say? I'm not 100% sure.
spk00: About 10, I would say.
spk02: About 10? Still 10?
spk00: It's somewhere between 10 and 20.
spk02: Okay. I would have to look at that. Okay.
spk03: Got it. Well, we can take this offline, but I'll jump back to the queue for others to ask questions.
spk02: Tony? Yes. Hello. Just a question. Are you next week or in two weeks in the Bay Area?
spk03: No. No.
spk02: Okay, so I was hoping to meet.
spk03: We can chat on our call back here in a little while, but I'll just come back in case there's any other questions on the public call. Okay, I'm sorry.
spk01: We don't have any further questions registered. Tony, if you want to ask anything else.
spk03: No, I think I'm good for now. I'll follow up offline. Thank you. All right.
spk01: Thank you. In that case, I will now hand back to the management team for any closing remarks.
spk02: I think thank you. I think at the end of today, I think we tried to cover all the questions that you potentially have given overview over last year and outlook of next year. So the only thing remaining is that I thank you for the call today. As you have seen, we are excited about our future. We see new opportunities and we look forward to share these
spk01: updates with you as we accelerate on our growth paths have a great day thank you bye-bye thank you everyone for joining today's call you may now disconnect your lines and have a lovely day bye

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