Basler AG
XETRA:BSL
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Basler AG
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I welcome you very warmly to our today's Q1 earnings call. And I am happy to present you today good numbers and also a positive outlook for the remainder of the year. We have, as you might realize, a fresh format here via a Webex conference. I hope that the sound is clear, that you can see me and also the presentation. And there is an operator in the background. So if you have questions, you can put it in the chat or we have also the format that by the end of the presentation, we have the opportunity to have a conversation via Webex, so that you can raise your questions also verbally, and we will unmute you everybody after the initial presentation. So the -- before we start the presentation, just a quick reminder or disclaimer here regarding the outlook information and then I'm coming already to the content of the presentation. It's pretty much of what you are used to. I will, in the beginning of the call, will -- we'll do an executive summary. This will be followed then by a deep dive into the financials. We have a quick information on the share in the third part here. And then last but not least, in outlook for the remainder of the year. Starting with the executive summary and with the market environment and the business performance that we have shown over the course of the first quarter. The market itself turned around. If we compare it to the last 2 years, actually, the German industry for vision components grew by 5% in billings and 15% in bookings for the first 3 months of this year. So positive numbers and this -- we haven't seen this market environment for quite some time. And we can also reveal that in the numbers, you can see that over the course of Q3 -- things or the situation improved. So January was still weak and then February and March and especially March tend to be better. So we see overall a high-growth momentum in semicon and electronics and logistics applications. General automation is still relatively weak. We have a strong momentum in Asia, coming back later to this point. And also our industry and we, as Basler are suffering from the global shortage of semiconductor components, which means that by end of last year it started already. But it really accelerated over the course of Q1 that the ship shortage led to very long lead times on our supply side. And therefore, we are also in the situation to handle and master this situation or this shortage, but I come to this in a bit. So how is our performance in this environment? Bookings up by 27%, billings up by 25%. And so clearly better than the German industry that -- where multiple Germany companies are giving their numbers too, and we are included in the numbers that we can see above. So clear outperformance of the industry. We are happy to give you these numbers or to report these numbers today. Earnings after tax even much higher growth, 66% growth compared to Q1 last year due to this high sales, but also due to increasing gross margins and operational leverage of the organization. Even having the shortage of semiconductor components, we were able to ramp up production in terms of units by over 40% compared to Q1 last year. So this also here, I'm very happy to -- that we can demonstrate even under these circumstances, such a ramp-up in production.On the product side, we continuously invest heavily on the R&D side, spitting out products month by month. Just some highlights. These are not all new product introductions of the first quarter. But on the boost side, we launched new products with high-resolution and high-speed and [ built ] CoaXPress interface, which you see on the upper right. So a camera that typically goes into higher end applications in the semiconductor electronics industry, for example.On the more, let's say, innovation and [ future music side ], we launched recently on the embedded world, DIGITAL, the new embedded processing kits. This is what you see in the middle. But we also launched or announced a cooperation with Amazon Web Services. And the idea behind this cooperation is that we, in the long run, connect imaging devices on edge, image devices with the cloud and here, Amazon Web Service is one of the leading cloud providers, especially in the IoT scenery, offering tool sets to do IoT designs. And we are working together with them in order to offer our customers an end-to-end solution from edge-to-cloud in terms of IoT vision devices. In addition to this, on our journey towards a full range provider, we also expanded next our camera range. We expanded also our companion products. So we added more lenses, more lighting, more cables, and we added also and improved our tool sets on the web to configure a bundled solution. On the organization side, no big changes in the first quarter, but you can see 12 additional full-time equivalents. In total, we were 825 full-time equivalents by end of the quarter. What is worth to mention, we started the second quarter with a new organizational design. So we had a reorganization ongoing the last 6 months in order to better adapt our organization to the strategy to become a full range provider. So this new organization should be a much better fit and also should facilitate our future strategy and to speed up the process to transform from a camera company to a full range provider. The good numbers and our strategic initiatives also triggered a hiring program that started, let's say, already in Q1. So we will see over the course of this year, more hires. At the moment, we have approximately 50 to 60 hires in search. And most likely, we will add some more people on this list, and we need to see how fast we can hire those people and what impact this has. But we come to this later also in the outlook. Just some other side notes here. For this new organization and also the headquarter buildings, we are expanding. I mentioned this also in the annual report call 3 months ago -- 6 weeks ago, actually, but we are in the midst of expanding our building. You see it on the upper right here in the presentation. We will add another 300 to 350 office space or office capacity for 300 to 350 additional employees. The move-in is planned for late summer next year. But we are not only working on these, let's say, hardware architectures in terms of buildings. We also work on a lot of digitization projects internally. And one of the biggest one is the new ERP architecture. So we started mid of last year already to implement S/4HANA. This project is ongoing. It's running with full throttle and we expect to go live beginning of next year. So this project is and will keep us also busy on top of all the operational work that we have at the moment on hand -- at hand. And last but not least, maybe just also some no time side notes here. This week, actually, we got second time in a row an award, Best Managed Companies, the Axia award that makes let's say, us as a management team, proud. But this is a price that is not only a management price, it applies for the overall corporation and it's a team effort and we are very proud to have received such award. Yes. To put this in a nutshell in the executive summary, the business is running very good. We make progress in our strategic journey from a camera company, mainly focused on factory automation towards becoming a computer vision full range provider. So we add step-by-step every month, every day, we add a piece to this puzzle in order to achieve our goal. This year, definitely the factory automation. If we look at it from a market perspective, the factory automation markets are pulling the most. We also see logistics kicking in, but the -- especially the electronics and semiconductor up cycle will mean for us that from a [ proportional ] perspective, factory automation will be very strong this year. However, we made progress, and we are also confident in making further progress in the medical area and the logistics area and also in other newer sectors that we address.Yes. Coming to the second section, the financials and starting with our bookings and billings. So to the top line information here, what you see are the bookings and billings development over the last 5 quarters, it's relatively easy and clear to see that we had -- I mean, last year, we had also a front-loading year, but over the course of the year and late summer season, the market weakened, and we had our lowest point in Q3 last year in bookings and billings. And from there, you can see that we had quite a ride. The market picked up again in Q4 and picked up earlier and stronger than what we had expected originally. And the bookings are jumping, let's say, here from quarter-to-quarter from EUR 36 million to EUR 53 million to then EUR 67 million in Q1. So highest bookings we ever had as a company in bookings in a quarter. And billings are following with EUR 55 million billings in the first quarter. So also very high billings. But what you can also see here, Q4 and Q1, we had in both quarters, a positive book-to-bill ratio. You might be aware that in normal times, the turnaround from bookings-to-billings are very fast because our standard lead times are only 2 to 4 weeks. At the moment, the lead times are longer. They are more in the range of 6 to 8 weeks due to the component shortages. And what you can see and realize here is that we -- the backlog increased over the course also of Q1 so that we are entering Q2 with quite a significant backlog in our books.The revenue from a regional perspective here, the revenue distribution, it was Asia centric or heavy, and it's even getting more Asia heavy. 56% in the Asian region, the largest market by far here in Asia is China. This makes approximately 30% points out of the 56% or 30% of the overall revenue realized is in China alone. And we have 75 -- 27% in EMEA and 17% in the Americas. Just a quick side note. We have some U.S. customers that order -- that have order admin centers and logistics centers in Europe. So there is some distortion between Americas and EMEA. So you could also shift maybe 5% points from EMEA to Americas if you look at it from a customer perspective and not from the shipping [ adverts ] perspective. Yes. In total, I mentioned already EUR 54.6 million in total. So quite a significant revenue for our company. From a gross profit perspective, also good news here, the development of the last 5 quarters as well. The gross margin even increased to 54.6%. So you can see that it's the highest gross profit we have since 5 quarters. The reasons behind that are mainly the economies of scale in production due to the higher output. And we have had also some tailwind on the currency side, especially with the Chinese RMB, so that I would say that this is not a trend that goes further up. It's more that we believe we can stabilize the margin here in between 52% to 54% roughly, the gross margin. In absolute terms, the gross profit, EUR 29.8 million, so almost EUR 30 million and EUR 9 million higher than previous quarter of Q4, so this is quite a jump. And we have seen earlier that we are realizing this with more or less similar organization, only 12 more full-time equivalent employees. And this also then as you can imagine is generating quite some profits and realizing operational leverage. And that we can see on this page here, the next page, our earnings before tax and the earnings before tax margin.So earnings before tax, EUR 9.9 million in the first quarter alone and a jump to 18% earnings before tax. So the high operational leverage that you can see because we are selling standard products. All the customers, so the hundreds and thousands of customers where we have design and projects. Their business is picking up, and our business is picking up with their business. And we are simply able to deliver to that. Yes. As a summary here that profit and loss KPIs, just running quickly through it, order entry, 27% plus, with EUR 67.3 million. Sales EUR 54.6 million, so 25% up. Gross profit, we talked also about this is 2% up to 54.6%. The gross profit margin and then the profit parameters, so the EBITDA, EBIT and EBT are in the range of 55% to 57% up. So here, you can see the high leverage operational leverage. Earnings before tax, EUR 9.9 million and net income, EUR 7.8 million, even 66% up. Especially lower tax rate due to the higher revenue portion in the Asian region that typically have a little lower tax rate than in the western world. So coming to the cash flow perspective. Here also, again, the last 5 quarters. As you can see, if you compare Q1 last year to Q1 this year, we are higher in the free cash flow. So EUR 1 million to minus EUR 1.9 million. What you can realize is Q1, and this is a normal season, it's typically a weak quarter for our cash flow development. The reason behind that is that our operational cash flow, typically in the Q1, when the revenue picks up from Q4 to Q1, the accounts receivables go up and the operational cash flow is negatively impacted by that. Typically, 1 to 2 quarters later, the effect turns around, and this is also the pattern you could see -- you can see here for 2020 and what you can expect also for 2021. So even though our accounts receivables went up by approximately EUR 10 million, in Q1, we were able to realize EUR 4.7 million in operational cash flow. We had a relatively normal investing cash flow of EUR 3.6 million, negative. And the differential here is EUR 1 million with free cash flow of the first quarter.Also putting the things together in the grid. On the left-hand side, our cash flow development first 3 months last year, first 3 months this year. This year, we started with EUR 47.9 million in cash. And then we have the different cash flow parameters operating, investment and the difference free cash flow and a financing cash flow of minus EUR 1.9 million, which brings us then by end of the quarter to EUR 47 million in cash. So no big change here in the cash on hand in the first quarter and also no big change -- this is what you can see on the right-hand side on the net cash position. Still in the range of EUR 22 million to EUR 23 million. So very solid net cash position. Yes. The share development on the next slide here. Just a quick plan at the share development of the first quarter. Things are pretty dynamic at this point in time. But also here, we are happy with the operating performance that we demonstrated that we were able to increase the share price since the beginning of the year from EUR 72 million to EUR 98.2 million. So we crossed the 100 mark over the course of April, and we also crossed the EUR 1 billion, which we were also stopped and celebrated a bit, but then we again continued, obviously, to do our job. But this makes us also proud, looking back and reflect the last 4 years in which we were able to increase the market cap of the company 5x. And we are also thankful for all the investors that, yes, were part of this story over the course of the time and trusted in our company. But we should not stand still. So we are working hard in order to create or, let's say, to shape the future of the company in the near-term and the longer-term future and coming then to the last section, the outlook of Basler for the remainder of the year and then also midterm. So for the remainder of the year or the coming months, we expect a market environment where we have already seen that in April, things continued in a strong manner, also all indicators that we see customers and the PMIs give us a positive outlook at this point in time. For the coming months, we expect that the order entries from semicon electronics stay high, but we also expect that there will be kind of a cool down happening starting end of the second quarter. That is our normal seasonal effect. The business with other factory automation and medical customers, we see this now starting to get traction. However, we believe it's kind of a more gradual process over the course of the year that it will gradually start and further grow over the course of this year. And when maybe the semiconductor season is more getting a bit down in the second half of the year, the standard factory automation on the general factory automation is a more, let's say, linear trend, hopefully, and will further kick in, in the second half of the year. Logistic continues to grow on a relatively stable path. This is what we expect. We also expect the strongest market momentum in Asia this year. All in all, and we expect that Americas and European -- Europe will follow the Asian trends. And hopefully, we will see that in Q2, more business out of these regions will kick in pulled by the Asian markets and the Asian end markets. We also believe that the global shortage of semiconductors well further disrupt the supply chains, and we are working hard on day-by-day -- day-by-day to keep our production and high output. So far, we are able to do this. But the situation is definitely not easy. Lead times are brutally long, even for certain [ t parts ], lead times go up to 1 year. And this needs to be properly managed. And we don't expect that the situation will ease before the end of this year. So keeping these sound results in mind and also having the strong bookings in April, and the feedback from our customers -- positive feedback from our customers, we have raised our guidance a few days ago. Even though we brought out already a relatively aggressive guidance, we have raised this again. The current guidance for this year is our revenues in between EUR 205 million and EUR 225 million. The earnings before tax margin we see and depending on the revenue on the top line will then be between 13% to 15.5%. And on the revenue side, it's worth to mention this reveals the high dynamic that we see on the demand side, but it also considers the risk on the supply side. So this is also why you see a relatively wide range on the top line. The earnings before tax margin considers our hiring program that I mentioned in the beginning. So here is also a question mark how fast can we add more staff, more people to our organization in order to speed up our strategic process.Our midterm guidance remains untouched. But the jump we are hopefully making this year brings us much closer to our 2023 goal. So the goal is to grow the company to EUR 250 million. Maybe just a quick reminder. Last year, we had EUR 170 million. So -- and this -- we are, let's say, the performance of -- that we are currently seeing makes us pretty confident and makes us very positive about reaching this goal, but we definitely need to concentrate to ride the wave that we have in front of us as best as we can.With this midterm guidance and also the positive outlook, I would like to close the presentation and switch over to the Q&A session. So please operator, please Jurgen, you can open the -- or unmute the participants, and I'm happy to receive your questions.
So just a few -- just a comment from my side. There are no question here in the background. And everybody can talk now to the audience. The microphones are unmuted.
Perfect, thanks. Can you hear me?
Yes. Perfect.
So Robert-Jan van der Horst from Warburg. A couple of -- a couple of short questions. So one on the guidance. Just regarding that, the change of the guidance, was this really primarily motivated by a higher expected demand from your already very well developing semi industry? Or is it a growing confidence in the recovery, especially in factory automation, which you now see in the second half of the year? And so a follow-up question, how do you see that the chip shortage is then also a risk for your customers and therefore, for your customers' demand?And the second question is the kind of obvious one on the midterm target. So it looks that there is a decent chance that you will be 1 year early in reaching your top line goal. My question refers more to the EBT margin. So we had kind of some more challenging years before 2020. You still managed to have a decent margin now in a strong year. You have the prospects to reach up to an EBT margin of 15.5%. So the question is, what's the thinking behind this? It seems even over the cycle kind of conservative?
Yes. Yes. Thank you, Robert, for the questions. I will go through it one by one. So the first question, what is the main motivation behind the raise of the guidance? That is clearly driven by the demand from semicon electronics mainly and the combination of the strong Q1 plus the continuing orders in April that we were only able to see recently. And this makes us confident or made us more confident and made us to increase the guidance. We see first times that the other markets outside factory automation also would start to pick up, but this is pretty early. So this alone would not have, let's say, motivated us to increase the guidance. But at least we see first signs, which is -- that are good news. We see also that Europe is it's kicking in more compared -- proportionately compared to what we have seen over the course of the first quarter. On the chip shortage, the question -- so supply and demand side. So that's definitely the highest risk that we are seeing at the moment in the operational business. It's a risk itself, as you mentioned, because the global chip shortage will also most likely lead to higher demand on CapEx goods for the semiconductor electronics industry, which our equipment is part of that. So then this means for us that most likely, this shortage is a good sign that the demand will stay high.On the supply side, I mean, the situation is that we have 2 different kind of topics. We have I would say, very technically critical components, where we have sometimes single source, and there is no other chance. These components, interestingly, are not the biggest issue. We -- sometimes we have a shortage here, but it's only impacting some products. The more difficult is on the [ C ] part. So pretty relatively cheap and simple parts but they have a shortage. And the lead times went up from a couple of weeks to 1 year within a very short period of time. And we don't know what's around the corner, to be honest. And this is our day-to-day work. But you can see from the numbers that we have shown and demonstrated 40% output plus in the Q1. And the production in April, I can say, also went well, and we also are positive for the coming weeks and months. So but that's keeping us busy, and it's definitely a risk that we need to -- yes, that we need to properly address.So on the last point, the earnings before tax margin. Yes, this is -- yes, the story I'm repeating. When the market goes up in the quarter like you see this quarter 1, you see what the company is able to deliver. However, we believe in the future of the company, and we don't want to stand still at EUR 200 million or EUR 250 million. We want to create something much bigger. And this is why our steering point stays the same. We want to achieve a sound profitability, and this level of soundness is around 12% earnings before tax margin. And everything else, we are willing to invest and unfortunately, invest in our -- in most of the cases means OpEx. So we are willing to reduce the earnings before tax margin to 12%, but the majority of this willingness is investment, it's not operations. From an operations standpoint, you can see that -- I mean, we still have very high R&D quarters. The company could do 18% or 20%. It's about what are we willing to invest and how much do we believe in the growth of the company in the long run. And we believe in the growth, and this is why at least our steering point will be to manage the company -- if we have room to maneuver, to manage the company at the steering point around 12% earnings margin -- earnings before tax.
That was very helpful. Just a quick follow-up maybe. I remember that you in, I think, 2019 slowed down your hiring processes, has that now returned? And is it hard to get new people in the current environment?
Yes. So this is absolutely correct. What we have seen is, I mean, we are running 2 ways. We had a relatively large growth in 2017 with 50% organic growth. Also here, we -- there was kind of a lag effect. We started the hiring program. It took some time. And at a certain point in time, the revenue stagnated for, let's say, 1.5 years, we make more kind of a side move. And the organization was built up to the -- around the 12% point. We stopped then. Last year, we had no -- almost no hires, and now we restart because of the potential we see in short term, and we want to use this momentum. It's definitely not easy to find people. However, we have created a good employer brand. Especially in Germany -- in the foreign countries, I mean, we are still relatively small. But in Germany, we attract people with the good employer marketing and also, corona is not making it easier to find the people and also to go through the process of hiring. But in general, I think it's okay. But if we have now -- we have now a queue of around 50 to 60 people around the world. I definitely believe it will take us a couple of months to get these people. They will be not on board tomorrow. It will take a couple of months. Other questions?No other questions today?
So I have here some questions, sorry.
Yes, Jurgen, yes.
So can you explain the start-up of the demand for medical sector, please?
Yes. So the -- on the medical sector, maybe for your information and to put everybody on the same page, at the moment, medical is approximately 10% of our revenue stream. And in general, we see that medical in the longer trend is over proportionately growing. So the company grows at around 15% on average year-by-year -- some years, slower, some years higher. But medical is growing, and we want to let grow medical by 20% to 25% in the long run. Last year, Medical had a negative corona impact. Certainly, there was 1 segment in medical that is lab automation that was -- that had increasing demand. But many other applications, be it skin cancer detection, ophthalmology and others were down. Were down by 25% to 30%, you can also see it at companies like Zeiss or Topcon, who are big players, for example, in ophthalmology devices. So what we believe now is with hopefully, corona -- that the uncertainties of corona will go away and also the hospitals will have capacity for other things than recovering corona patients. We hope that the investments will rise again over the course of this year and that this market, again, will pick up. And then we are back again in the similar story. So medical is not as cyclic as semicon electronics. So we foresee kind of a 20%, 25% growth. And our ambition is to grow, let's say, the medical portion of our business in the long run more towards 20% then to 10%, but this is really a long-term story because you can imagine that we have the design business, and you can imagine that, especially on the medical side with certifications involved, that it takes quite a long time until we win a customer with our camera or vision technology that also needs to design a product that needs to be certified. So there are -- this is a multiyear process from typically launching the product until we see revenue because of those strong lead times in the [indiscernible]. But after last year, also for this year, we believe that the situation in the medical sector will get better. And obviously, the lab automation is booming and also there will be quite some demand, but this is maybe 1% to 2% of our overall revenue. So it doesn't move a big needle in the corporate revenues stream.
So the next one is, can you give the middle term guidance?
Yes. I mean at the moment, we have -- the only guidance we give out is the 2023 guidance, the EUR 250 million. So we will review this guidance by end of the year. So I cannot give you any other absolute number. However, I can tell you that we are also beyond the 2023 year. We are committed to grow the company at a pace of around 15%. We don't foresee that we need to put this down. So -- and you can make up yourself the mind what you believe where we will end up this year and maybe next year, but clear numbers I cannot give you today. We will work on this by the end of this year.
So that's all for the moment here on my side.
Then I ask again the audience in the meantime, somebody got more questions? If not, I hope that the format was good for you here. And that the audio was clear that you could see the presentation and everything worked fine. I thank you for your attention today, and we see other in the half year call again. And have a great afternoon. Thank you. Bye-bye.