Basler AG
XETRA:BSL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
5.14
12.64
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Basler AG
You don't have any saved screeners yet
Good afternoon, everyone, to Basler Q1 2023 reporting. For those of you who don't know me, my name is Hardy. I'm CFO or COO of Basler, I would like to present our Q1 results today. Before we start with the presentation, I need to refer to our disclaimer that all the statements I'm making today are based on assumptions made by the management Board using information there at the point in time. These forward-looking statements are, by nature, subject to significant known and unknown risks answered. Yes. Let's have a look to the agenda today. For those of you who joined the call on a regular basis, it's an agenda, you know, we start with an executive summary, giving you the highlights on the Q1. And then we dig deeper into the financials, have a quick glance to our share performance and some further information. And at the end of the presentation, I give you an outlook for the remainder of this year, also for the midterm. And after the presentation, we will have maybe our time also for Q&A session. Let's start with the executive sum of it. So first of all, looking at the market environment. And as projected in the last call, the wind is changing in our markets after, let's say, 2 years or and 2 years of demand also fueled by the chip prices. And we see, looking at the German industry, so all the German manufacturers for vision components, we see a decline in booking of 4% in Q1 versus Q1 last year and the decline in bookings of 13%. So you see here that the bookings are even maybe clients higher than with regard to billings. So it looks like the industry is still on the way to slow down, but I come later chip supply, this is -- the other good news is continuing to be normalizing. So there are very rare cases of shortages. In most of the cases, the supply is much higher now than the demand that we see the classic COVID effect that now stocks are piling up at our end, but also at distributors end. And so on that side, we see more of a push from the supply rather than gap and supply what we have realized in the last few years. What is very interesting and worth to mention in the stress here is that we see very regional high regional differences in the market. And let's go through this, starting with the China market. So after the zero COVID policy, we are still waiting for a stronger rebound. So the rebound is still muted besides application of solar and electric gallery CapEx equipment -- sorry, late vehicle battery CapEx equipment, but consumer electronics and especially also lab automation is very, very weak. The overall economy is still waiting for a rebound.In Asia Pacific, we see severe downturns in the area of semicon and consumer electronics and ads in the APAC region, this is a big portion of the overall all economy. If you look at vessels also from Taiwan or Korea, there is a significant downturn in at the moment. This downturn is not a normal downturn due to the high [indiscernible] of the demand over the last 2 years. The swing back is pretty strong, and it's comparable to what we have seen back in the [ retail ] prices. In North America, the market is also weakening. We see stocks piling up at our clients in varied industries, and we see especially also here, the downside in semiconductor electronics CapEx and also on the logistics side. So this is very specific. The logistics market is in the downside because of also the first coverage everyone consumed via online retailers. And this is now going into different retailers and also in this money expectant service sector. So this industry is impacting. So in Europe, in comparison to those other regions, we see robust and strong growth Also, our numbers, I come to this in a minute, are very strong. So after performance in this environment. And for quite some time, we are running behind the industry in the first quarter of this year. Bookings are down by 39%. Obviously, we had a very high bookings made last year, but bookings are still weak. This year, they are on a low level. We come to specific numbers later. Billings are down by 15%. So the reason why we run behind the industry is our high exposure to weak vertical markets, namely the semicon electronics logistics and in China also laboratory automation and the region, so a very Asia heavy business portfolio in our regions. What we also experienced in Q1 were quite some further cancellations from the Asian region, especially from China. These cancellations were from a net infuse higher than what we have expected. So we see still these dynamics undergoing. And all in all, the results were negative. So our pretax earnings margin was minus 3%. So we have here to report for the first time, I think, since Lehman crisis 1.5 decades a red quarter. So what's also for us, a challenge was that in the first quarter, our hypercare phase of the change in the ERP system. And we had successful go live when we ported this 1 January or 2 January. We are running at more essentially in Q1. Obviously, we were very hot and extraneous hypercare base. And in this hypercare base, we have also continuous issues with the process in the outgoing goods area. And this also led to a situation where we missed our internal revenue growth for Q1 by and large, EUR 3 million because we were not able to ship those goods out -- this obviously then it's an non addition this Q1 reporting where we would have liked to ship those products. So as I reported earlier that this was a weak quarter. I mean we gave already indication. We reacted already within the first quarter. With the savings program, this program is on the road. It will give or will become effective starting in April. So we are we have already implemented these measures. Maybe just another topic because we get a lot of good feedback at the moment from our new sustainability report. I featured this in the earnings call in the annual earnings call also here rating agencies have rated us higher now. I just wanted to give again a and we will find much more information in this report. Now also the focus of the company is more towards this direction last year towards this direction. And as mentioned also in the last call, we have clear goals for Scope 1 and Scope 2 to become net 0 emission by 2030. Yes. With regards to the team, we had some new people coming on board in Q1, but very selectively, as also reported earlier, we stopped the hiring process due to the market outlook at the moment. We increased the organization quite significantly over the course of the last 2 years by organic hiring also by M&A transactions. The number of employees are in the range of 1140 by end of Q1. This is approximately 150 employees, higher than compared to end of Q1 last year. So Q1 vs Q1 comparison, we had approximately 140, 150 people more onboard.The mix, as you can see, has not much changed. The majority of our employees are working in the areas of sales and marketing, especially the -- also the acquisitions of the distributor to [indiscernible] and this percentage point here of 37%. IND almost 30%, 27% of our people in action and admin. Worth to mention is also absolute investments due to the reason that we are, let's say, focused on the mid to long run, we increased our R&D departments and also the acquisitions that we did last year had some R&D people on board. So that the R&D investment in total in Q1 is approximately EUR 10 million or was approximately EUR 10 million. And with the weak revenue, it is 90% from sales. So it is far above the steering point of around 13% to 15% from sales. This comes mainly due to the misses of we increased the number. On the one hand, also inflation is kicking in on the other hand, we see at the moment the downturn in the market. Our long-term steering point will not change. It is in the range of 13% maximum 15%. We are heavily investing because we believe in our transformation. So from moving from a camera company, mainly having the clients, mainly in the factory automation space to what we call a computer vision supplier or a full range provided. So we want to attack and serve multiple vertical markets outside the factory domain, also with a higher revenue exposure. I mean, we see at the moment, what happens with the high exposure of automation customers in the semicon electronics space. So we definitely want to be in more balance and also enjoy from the higher growth sectors. So media traffic, logistics and also retail. And on the other hand, as you know, we are increasing our portfolio. We are already offering a loss and a complete portfolio of vision components in hardware, and we are strongly, let's say, investing also to offer more and more software functionality, software tools and software frameworks for our clients. So coming more to the financials. Starting top line with our order and our revenue streams. So first of all, good news, what you see is the order entry decline that we have experienced Q1, Q3, Q4 last year. So the live grade bars here has turned, and we are now seeing that our equities are picking up again. with EUR 54 million [indiscernible] net quarter we are, let's say, at a low level, and this needs to increase further, and we expected also to increase further, but not definitely overnight. It will take some time because it will affect also created, let's say, inventory in the supply chain, and we see still the tough decline in the semicon electronics.I mentioned also that we had, again, quite some cancellations in Q1. These cancellations from its magnitude, whether higher than what we have expected. These cancellations come from all the orders placed in 2022 or even in 2021. This is why we began to show you here the correction, the corrected numbers that you can endure the business development best. So revenue was EUR 56 million, by and large. So what you see on a low level. So the average was more in the range of 65% plus over the course of the last quarters. I mentioned this -- what is also interesting with the strong European market, on the one hand, the weak other regional markets, our regional revenue business shifted private loss, have shifted 5% points from Asia towards EMEA and have shifted roughly 2% to 3% but from America. So that we are now, let's say, below 50% in our revenue share in Asia at this point in time, but with 37% on a record high level for the European market, not a low level [indiscernible]. With regards to gross profit and gross profit margins, we stay at a low level of gross profit margins, roughly 44%, 45% points. This is below, let's say, the average and also the targeted figure. We expect to get back in the 30% area over the course of this year. What we are realizing is that with the lower demand on the one hand. On the other hand, with quite some strict push in from our suppliers. And let's say, the spot price we have to take and follow the last 2 years, and some of them are still sitting in stock, and we are hitting them up. It takes longer than expected to get written of those, let's say, high inventories and also high inventories and where spot is in. So there is definitely a longer lag effect, but we are expecting on the gross margins to rise over the course of the year again. We also see headwinds from the Chinese renminbi. This -- the Chinese renminbi has weakened dense against the euro over the course of the last 6 months. Also here, we see something. So the combination of low revenue is relatively low gross margin at a low gross profit of around EUR 25 million. And putting this all together, let's say, on the one hand, lower revenue, lower gross profit margin and also increasing organization has resulted in a quarterly loss of EUR 1.6 million earnings before tax. So here you see the comparison against Q1 2022. So all our entry, as mentioned, EUR 54 million, down by 9%. And sales EUR 56 million, down 15%, gross profit margin was down by 5.5% points. So the gross profit in total was 25% down to EUR 25 million. So EBITDA positive, but on the other earnings figures, EBIT also net income and negative figures with EUR 1.6 million in earnings before tax and due to certain tax payments in certain regions and time rates. Net income was minus 2.2% for the first quarter. On the cash flow side, I mean, we monitor that, starting with the operational cash flow, a negative one. This operational cash flow was mainly negative due to the weak result in the earnings situation. But on top of this, we still have also a lot of push in from materials. We have the glitch of not delivering because of the process issues on the outgoing products for finished products and in total, this resulted in another increase of inventory of around EUR 4.5 million to EUR 5 million. So we have on that side, also increase of working capital on the inventory side. On the other hand, on top of it, we invest in heavily. We have for the S/4HANA projects for the ERP change and also for our building project Moven, we had certain investments in IT infrastructure and software. So this also was a water with relatively high investments of minus 4.4%. We had no extraordinary effects if you compare it to the years before, Q1 2022 and also the Q3 2022 -- we have high investments also in [indiscernible]. We had nothing, no nation action investments in Q1. So this was more of these bigger projects and that run rate is normally more in the, let's say, maybe 3% range than rather the 4.5% range. Also here, a view on the cash account situation, combined with the cash flow. So we started the period of this year with EUR 29 million roughly in the cash account, and we added negative free cash flow of $7.7 million. We paid back some loans, and we also have certain interest rates to pay. So we are -- at the end, we were at the end of the period of EUR 19 million [indiscernible].Yes, these are the financials. Let's come to the share price development. So we -- starting with the beginning of the year, we were around EUR 30 million. End of the quarter, we were at EUR 22 million, a million excuse, EUR 29.85 and end of the quarter, we were at EUR 22 roughly. So the reason, I mean, is our, let's say, guidance we have given out already and also, I guess, then also the annual report figures we have shown. So we are running the amended [indiscernible] index. That really our aim is to get back on track here and to the share price, but also to concentrate that the current, let's say, revenue situation and a situation that's turning an into the growth story in front with [indiscernible]. With regard to the share, maybe one more information, and you might have read it, we officially closed, let's say, our purchasing program for treasury shares because we have not purchased in the recent past. We have also now excess liquidity for the coming months and also in this kind of market situation to further buy shares -- so this is why I want to give you a clear message that we started purchasing program and when we might reactivate such a program, but at this point in time, we wanted to be clear that we are not purchasing shares and also we have not purchased shares over the course of the last month.Yes, let's come with the outlook, how might be the most interesting part for most majority of you. So for the 2023 on the remainder of the 2023, we still see, in general, a gloomy market condition. I mean, we have seen now the first quarter. So our views have not significantly changed on what we have guided in March. We believe that the order entries will stay on a low level in the second quarter. Hopefully, they will pick up further slightly, but nothing bullish to our point of view, what we believe is that the cancellation will take out because we do not have much more risk exposure on orders from 2021, 2022 in the lot basis in the regions where we are experiencing cancellation. So we definitely believe this will pay out over the course of Q2. We expect a recovery in the second half of the year, especially in very weak markets, so semicon electronics, maybe also logistics that needs to be seen. This is what we are hearing from our clients is what we are hearing from our sales force, but also what we are -- what we can see in the press from when you look at the recent balance from chip suppliers, you'll see also they may also expect some signs of recovery in the second half of the year. We definitely believe that geopolitical uncertainties will remain. We also believe that our high competition and the competition intensity in China will stay [indiscernible] because we have a situation where the rebound is not as strong as expected. So the market is not growing at let's say base that this market is used to be. And on the other hand, many companies are fighting for the market share in market. So we definitely believe this side will continue. So on the gross margin side, I already mentioned this, we expect that the gross margins will step-by-step get back to a normal situation. But it obviously takes longer than what we had expected. We need to clear the inventories. We need also to get with the expenses [indiscernible] over time. This also is very much, let's say, connected to the demand situation, if the demand is higher will run through this faster. If the demand is lower in somewhat -- we are not at the moment in a situation where we have to do more spot buys. So this is over about when R&D starts turning. Yes, headwinds from China with regard to price pressure, also with regard to currency, it's not working here, but also the renminbi seems to stay weak against the euro. And all in all, I mean, the situation is visible in the Q1 report. We are suffering at the moment from a weak market in that situation on the one and also on the other hand, with a larger organization with increase of cost of living. So the cost base is lined a lot due to inflation and especially also due to increase of the organization. which we have done with the midterm perspective. But on the other hand, if the markets are very weak and beyond this position. So putting all this together, we confirm our guidance. The guidance, just as a reminder, is EUR 235 million to EUR 265 million in revenue. Earnings margin, 5% to 8%. So it's -- for this year, we lowered our steering by around 12%, where this is our guiding principle for the long run. So what we are in at the moment is definitely we are more in the area of the lower end of the guidance. This is obvious. We believe the market will pick up in the second half of the year, and hopefully, we can and give you better insights over the course of the year narrowed out for it. In order to keep the company at 5 percentage points profitability at the lower area of this guidance, we have and would like to mention this again, we have already taken measures our savings program. These measures will become effective in April onwards. So we are very confident in making progress.Yes. Looking into the further future, I mean, we are very confident about, let's say, the future markets, the trends of automation, the trends of vision making inroads in many different applications. Obviously, we are having at the moment in a situation of a significant downturn, especially in the electronic semico logistics markets. And we need to see how long this downturn will be in based on an assumption that the market will start to recover in the second half of this year. We believe that we will see another growth phase for our industry that enables us to keep our 4-year plan here, which is to realize EUR 400 million in sales and also being back on a profitable growth track with earning margins of around 12% by 2021. [indiscernible] I come to the end of our presentation and would like to open the Q&A session. You can either write your question in the chat. So my colleague or will read then the question or you can also unmute yourself read questions thoroughly, which I obviously [indiscernible].
Yes. Hello from the cat side. So we're still expecting questions. So we have no questions so far. So the first one is here. [ Mr. Mas ] would like to talk to us. Mr. Mas can talk to us I can hear you.
Sorry for that. Yes, my first question is regarding the good performance in Europe. Could you maybe elaborate a bit on the explanation on what supports this good condition, given we don't have specifically very bright outlook here as well. So what are the main factors that influenced this good performance, please?
Yes. So on the one hand, what I'm seeing, I mean the German and the European market is by far not so connected to the semi electronics industry. So this, I think, is one of the main factors because you see in, let's say, other general automation, be it food processing or automotive activities have -- this is one another. And this is also with regard to the mode, I think, in the German and the European markets is that, that will see that larger projects in this space, for example, electric vehicles, for example, also the inspection. I mean now, let's say, implemented in there are plans that they are implemented in Germany and Europe. And formally, these projects particularly were realized in Korea and India China. Due to the geopolitical situation, I think this is also at least at the moment, something where the mood is keeping upwards. So -- and for the another effect that I'm seeing and believing is the European customers have we're launch, let's say, did not behave, for example, like the Asian customers in the chips and prices of overbookings, overall honoring and very aggressive behavior. So it seems to be that these more smooth management side led to a situation where the industry is less volatile and more robots. Also, we have seen that in general, that it took longer for the Europeans to get to the reduction of the backlog. So this is also another indication. What is surprising is definitely, and this is something we have not seen in the past that Europe can be so strong when other, let's say, CapEx market in U.S., specifically in Asia, slow down. So this is something where we are still very, let's say, look into this very cautiously -- and I can tell you, up to now, the bookings are still -- I had a BMA Board meeting 2 days ago, the members of the Board to come from different vision companies in either systems companies or components companies are also still very positive. So that's generally that's a situation.
Related to this order cancellation that are quite high currently, do you expect to change your policy going forward in order to secure more of these orders or any sense to have some prepayments? Or is it something that you will keep as it is?
Yes. So I think what we have learned -- I mean we have also to say that there is more an extreme situation we were in with the supply when overnight, more or less the lead times of our supply went from 2 months to 1.5 years and also then the behavior of our customers. While we have definitely learned is to have a more strict governance also on checking the real demand of the customer because the issue in Asia is, and I mentioned this in one of the calls before, legally, we could met and force to ship the product. But the problem is in Asia with certain clients, you are risking that either these clients go bankrupt or this clients simply don't pay. And yourselves in very long lawsuits and you might not see the money. So -- and this issue, I think, will remain. I think it will be naive to say in certain areas well, you can just bolt but the question is how much exposure do you give yourself because we have obviously taken some risk in purchasing material -- and how much do you check the validity really not that those customers can and at the end of the day, we'll take the goods and will pay for it. And I think on that governance side, we definitely changed our philosophy. I mean now the market is also become to swing back. But if we see a gas such as will be [indiscernible] of this extreme, I have to stress this point again. It wasn't extreme.
Another question for me is regarding the saving programs. Could you quantify a bit what kind of savings do you expect for this year, please?
Yes, we are -- I mean, as you can merge its continuous work. But just to give you a feeling -- and we are, let's say, targeting some of the around EUR 1 million per month in savings. And the measures are very different. I mentioned this in the annual earnings call, there is measures of reduction of [indiscernible] payment, there is a reduction of working time is obviously other OpEx cost savings involved. So in all these mix at the moment, we are targeting or we are implemented measures to reduce our, let's say, fixed cost base roughly at around EUR 1 million per month.
And last question for me is regarding China. Do you mean that you lose market share currently? And do you have any tool in your favor in order to keep your position?
Yes, China, the situation is that we, over the course -- I mean not in Q1 in year. And over the course of quarters of the last, I would say, 2.5 years in [indiscernible] the borders were sharp. We have lost or we've launched market share in China against China again essence against Chinese event. So what we are seeing in the situation in China due to the, let's say, Market growth is lower than expected. A long time, the borders were shut, the Chinese competition has focused us on the Chinese market and was very aggressive. And what we are seeing is we are coming into a position in China where we are no longer, let's say, the undisputed market leader in terms of volume. We have to focus on the clients who are willing a premium for Western companies and to pay a premium for unique technologies. Here, we see potential definitely. But we also have to say that not each and every customer that in and that the customer is willing to pay a premium progress. Yes, we believe we are our positioning, let's say, can be only less aggressive apart because simply the situation is that we do not win just by price against a Chinese competitor in China, if both companies go direct and so on and so forth. So -- but there are opportunities. I mean, there are customers looking for a unique technology to our customers looking specifically for Western technology because they export machines into the Western world. And there are also customers who are willing to pay a premium and like our, let's say, performance and are especially when it comes to the software environment so the total I mean you know the product [indiscernible] so some development, which is beyond what our competition.
So we have another question concerning the competition in China. Maybe you explained it a little bit, but could you explain a bit more in detail, Hardy [indiscernible] is asking the question.
Yes, I don't know information are missing. I mean, we -- maybe also again for the group to bring everyone on the same page for most of your topic. I mean we have certain rivals in China that have -- that are multibillion companies. And these companies have deep pockets. They are also willing to invest offer products for a very aggressive price over a long period of time. And these companies also know what they are doing in terms of R&D and product. So -- and we are against that. It's a very sporty competition that is challenging now, not just recently over years already. And we are taking this challenge. The specific element in China is that in China, these companies go direct, like we go. So there is no indirect partner who also wants to have a margin also wants to differentiate and in the market itself. These companies want to also be very aggressive to win market share because these companies also have ambitious goals. They have also some of them in the IPO plans, and this is the situation here. And this won't change in China. I mean we see the geopolitical trends. We are not in the position to change fees. We need to live and maximize. And if we assume that the geopolitical stress will further increase, then the competition in China will move slightly further increase. But on the other hand, we have chances in other areas of the world. So it's -- this game has, as always, risks and opportunities and challenges -- and we are not -- I mean, we are in an industry that is very fragmented multiple different applications, thousands of potential customers and with lots of different products. So it's a fragmented industry. And in the background is growing industry, we are also positive that if we do the things why we can continue our growth path. But we are not ignoring that there are very strong Chinese competitors. And that's just in the can.
Thank you, Hardy. So we have no more questions here on the chat.
Okay. If there are no other questions, I invite you if you have some other thoughts. Please not take us. We are approachable if you have further questions. And I would like to thank you for your attention today and looking forward to our Q1 and Q2 earnings call, see you soon, bye.