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Jenoptik AG
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Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the Q1 results 2021. [Operator Instructions] Let me now turn the floor over to your host, Leslie Iltgen. Please go ahead.
Thank you, and good morning, everyone, and welcome to our conference call on the Q1 2021 results. My name is Leslie Iltgen, Head of Investor Relations and Corporate Communications at Jenoptik. With us today are our CEO, Dr. Stefan Traeger, and our CFO, Hans-Dieter Schumacher. Dr. Traeger will point you to the key highlights of the first quarter. Mr. Schumacher will cover the financials in more depth. As always, both will be happy to answer any questions you may have in our Q&A session at the end of this call. Also, let me remind you that this call will be recorded. A replay will be available on our Investor Relations website after this call. Before I hand over, please pay attention to our usual disclaimer that you will find in the presentation. It is now my pleasure to hand over to our CEO, Stefan Traeger. Please go ahead.
Leslie, thank you very much. And very good morning from our end here as well. I'm glad to have you all in the call. Let's get straight to it. And if you would like to follow me on Page 4 of our presentation, we have put together a couple of highlights, which we believe characterize actually the first quarter of 2021. And the first real highlight from our perspective is order intake. It's absolutely clear for us that the demand in our marketplace is very strong. It picked up in many, many places. We're all talking about semicon a lot of times, and you all know that semicon is a very important marketplace for us. And obviously, semicon is the area in which we have seen very good demand over the last months in [ '20 ], and all the way through 2020, and in particular, at the end of last year. And that carried over into the new year. We do not see any signs of any weakness there whatsoever. However, today, I wanted to bring you 2 other examples of marketplaces we are serving and customers we're catering to in which we also see either ongoing good demand or actually a pickup in demand. Let me start with the orders that we have been able to book in traffic safety equipment for our Light & Safety division. We have been communicating that we recently were able to book orders totaling approximately EUR 20 million in North America, Power Light & Safety division. And you will see later in presentation that Light & Safety has shown a very strong order intake pattern in Q1. And then equally, if not even more importantly, we did see the order pattern picking up and demand picking up in the automotive industry. We have been able to book new automation orders for particularly the North American automotive industry, totaling about USD 40 million at the end of -- or during the course of Q1. As a trend, we have seen the end of last year already. You will remember that we communicated the order intake pattern in Q4, in particular, from the automotive industry, came a bit better. And we do see that rolling into Q1, and all the signals that we do get in the marketplace is that the automotive industry is coming out of its crisis in many ways. So big highlight for us, order intake. We have seen strong demand in the marketplace for our solutions, not just in semicon. Obviously, in semicon, but that sort of goes without saying, but also in other very important markets for us. The result, orders were up by 27% almost in Q1 as compared to the Q1 of the prior year. Second highlight for us is obviously our debenture bond. We have put out bonds with sustainable components totaling EUR 400 million. We've placed that successfully in the capital market. The funds will give us room for maneuver when it comes to additional acquisitions and investments in our core photonics business, which we are determined to do. Hans-Dieter will later on explain a bit more in detail, sort of the strings attached to that bond. For me, let me just raise the point that we do take it serious when it comes to sustainability. We -- our business that wants to become even more sustainable in our actions and in what we're doing, and we want to get pressures on it. And we're happy to get pressure on it. We have linked the bonds to certain KPIs when it comes to making our business better, making our business more sustainable, making us more green in a way. We do believe that our technology helps in making the world a better place. It is our vision and our framed vision is Brighter Futures with the Power of Light. Light in photonics and optics is an important technology and an important ingredient, if you want, in making the world a bit better in terms of using less resources, in terms of making safer environments possible, in making better brighter futures, as we say. And we, as I say, want to get measured by that as well. And again, Hans-Dieter will explain it in a bit more detail. On the very right-hand side of the chart, we couldn't resist but put on an image of perseverance one more time. I'm pretty sure that you all have seen it by now, but we are just very proud of it. We are very proud of the fact that the first images that Perseverance brought to Earth from Mars actually came through our HazCam, our Jenoptik camera and lens assemblies. Obviously, it's not the biggest sort of impact on our financials. But it does demonstrate what we're able to and what we're capable of when it comes to technology. Jenoptik is a technology company, and we are driving a lot of technologies. We're on cutting-edge in a lot of technologies and yes, we're just very proud of the fact that the Mars rover Perseverance has been able to bring such beautiful images from Mars, and that, that has been through our "eyes," through our camera and lens assemblies makes us very proud. So with that said, let me just summarize it 1 more time. If you follow me on Page #6. Again, the demand has been rising and has been very strong, picked up in many places -- or remains to be strong in many phases and picked up in others, which led to a strong order intake of almost EUR 270 million, which is an increase of almost 27%. We did get, obviously, a tailwind from the TRIOPTICS acquisition and the consolidation effect of that, excluding traffic. So on an organic basis, the order intake would be at almost EUR 240 million. So also organically, a very strong pickup in demand. We talked about the new orders that we were able to book in automation and integration, i.e., in the automotive industry and in traffic safety environment, in particular in North America, revenue is up here as well. We have obviously experienced a tailwind from the acquisition and from the consolidation effects. Nevertheless, also on an organic base, we're well underway. I will point out right now and later on in the presentation in more detail, the challenges that we do see currently are not, in any way, shape or form on the demand side, but on the execution front. There is an increasing pressure in supply chains. There is still ongoing COVID-related restrictions in traveling. We have complex products. We do not have commodities. Our products are complex, and they need to be installed. They need to be explained. And for that, we need to be able to bring our service and engineers and our deep people around the globe, which is a challenge at the moment. So let me point it out one more time. Our challenge is not on the demand side. Our challenge is currently predominantly on the execution, to turn orders into sales is the challenge that we face. Nevertheless, I think the numbers will show it in more detail later. We are well underway also when it comes to revenue recognition. EBITDA margins significantly improved. Here again, we did experience the support from the structural and portfolio measures that we have implemented in 2020. We do see the positive effect of that by now already. And obviously, that should even step up and pick up throughout the year. We do get key effects now, but we will see even better effects from that structural improvement of our business as we implemented in 2020. We talked about the bonds already. Let me just at this point already point out that based on the very strong order intake, based on a record high order book, based on the pickup in demand in our marketplaces, we, at this point, confirm that we will be able to produce sustainable and profitable growth throughout the year. We confirm our targets for the year and again, I will explain in a bit more detail the risks and the opportunities that we see. Opportunities are from the market demand perspective. And from the demand side, risks, we do still see around the execution as I say, based on challenges in supply chain and based on still ongoing COVID restrictions, in particular, in parts of Europe. That said, let me turn the page over to Hans-Dieter, and he will take you through the numbers or through the numbers in more detail. Hans-Dieter?
Yes, thank you very much, Stefan. A very warm welcome from my side as well to all of you. Let's have a look at Page #7, where we have shown you the order intake and order backlog figures. And it's clear, the order intake was already shown and explained a little bit by Stefan. But both PPIs markedly exceeded the prior year figures and are creating a good basis for further business development throughout 2021. In terms of order intake, as already mentioned, all divisions supported the strong growth. Let me give you 2 additional remarks concerning order intake. One is concerning Light & Production. In Q1 prior year, we booked a relatively big order as order intake, which we had to correct in Q2. So the prior year figure as of Q1 is influenced by this. So it would have been if you adjusted -- and if you would have been adjusted it already, it would have been even a better and a stronger development. This will show up in Q2 and in the comparison of the first 6 months. And the other remark is concerning VINCORION. VINCORION is very much behind prior year. They had a good start in 2020, not much influenced by COVID-19. But now they are obviously heavily influenced by COVID-19, especially in the aircraft industry in the aviation business. And this caused this development. But Stefan will explain to you later on when he goes with us through the divisional development. The book-to-bill ratio grew to 1.52, which is a very strong book-to-bill ratio compared to 1.29 prior year. And then let me highlight a little bit more the order backlog with EUR 561.3 million, 22% above prior year. Also influenced by the acquisition of TRIOPTICS but still without TRIOPTICS, a remarkable organic increase. And our intention is to put all efforts into the conversation into revenues. So we assume today that it will be -- we will be able to convert around 74%, 75% into revenue in this year. So this is the reason why we think we have a good rest of the year in front of us, so to speak. And then let us go please to the next slide, Page #8. The revenue development. And as already explained to the contribution from Light & Optics, which grew significantly in the organic business, so to speak, meaning optic, micro optic and biophotonics. And in addition, the first consolidation of TRIOPTICS contributed as well to this positive development. Light & Production is still a little bit below prior year. But with the order intake in hand and the order backlog and the recovery in certain areas of the business, automation integration, mainly and laser processing, we assume a recovery in revenue position as well throughout the year. And then we are clearly behind prior year in Light & Safety. But this was linked to project business, which -- and as well as the delays in delivery of electronic components both due to the pandemic through COVID-19 probably. And Stefan will explain it to you a little bit later, where we also assume a recovery throughout the months to come. VINCORION is still handling the aviation industry crisis, you can say, and in the power systems area, they are also not heavily loaded, but the military business is stable, yes. This is the development in the divisions, and Stefan will explain it to you in more details later on. And then on Page #9, our EBITDA and EBIT figure, and let me explain it a little bit more that it's better comparable for you. In the EUR 20 million, which is an increase of 47.1% in Q1 this year with a margin of 11.4%. There we have booked minus 8 -- EUR 1.8 million inventory step up of the purchase price allocation of TRIOPTICS, which was not the case in the prior year quarter. In Q1 2020, no impact in the EBITDA is coming from acquisitions. So the reality would be close to EUR 22 million. On the other side, in this year, we have not booked any cost for structural and portfolio measurements, which we have done in the prior year. So the EUR 3.7 million, you could add to the EUR 13.6 million -- or you should add to EUR 13.6 million, and then you can compare it to the EUR 22 million, yes. So it's around EUR 70 million, which is compared to EUR 25 million -- EUR 22 million. So still a strong development in our margin. And in the EBIT and the earnings before interest and taxes, there, the purchase price allocation impacts are even more significant than in the EBITDA in the Q1 '21 EUR 106.1 million, which is an increase of 142.7% compared to last year. Q1 figure of 1 -- 2.1 -- 2.5 there is included EUR 5.5 million purchase price allocation impact. Whereas in the EUR 2.5 million of prior year has only -- we included EUR 1.7 million. So it's an increase of EUR 3.8 million. So the EBIT like-for-like would have shown even a better development. But all in all, we are quite happy with a solid start in the Q1 also from the profit line, because we will show you on the next slide where you will see our P&L in more in detail. Even flat figures at the earnings per share and the earnings after taxes with EUR 3.8 million of the earnings per share, which is EUR 0.07. So all in all, as we think a solid start, not every division supported strong development, as already mentioned. But overall, we are quite satisfied and looking forward to the development of the rest of the year. On the cost side, in the functional costs, you see a figure on the same level like last year. But don't forget the functional costs of the acquisition of TRIOPTICS are fully included, not in the prior year quarter 1, but in this quarter. So this is also a hint I'd like to give to you here. Yes. So nothing more to say on this page from my end here. Then Page #11 our free cash flow before interest and taxes. And in our case, the result of operating free cash flow minus the cash flow from investing activities. And we see a strong development in the free cash flow, which is EUR 15.7 million compared to EUR 14.4 million. For us, the start of the year is always linked with working capital increase either in trade receivables or in inventories. And our people are buying materials and starting to work on it. And it's mainly not possible to recognize sales and profit, which we will do in the months to come. So we are quite happy with this start concerning this. And let me say here some words to the debenture bonds also, totaling EUR 400 million, we have successfully placed. And at the end of March, we had already a payout of EUR 130 million, which we then used directly in the beginning of April to repay the means we took out of the term loan. So we did not take the EUR 130 million to show EUR 200 million in cash. But in between, the 1 or 2 working days was the end of March procedure. So you will see a clearer picture in Q2, but we started already immediately. So it's just a timing issue concerning this. And we are very happy that we have been able to place ESG criteria. We focused on the green electricity. We have a target for our main production sites worldwide to increase this share which has been in 2019 at 60.3 -- 63.1%, over the years to come until 2025 to 75%. Then we have the diversity on the management side, PPI, our diversity rate, which means average percentage of women and employees of international origin in managerial positions. We want to increase this until 25% to 33%. Actually, we are at 27.8% already. And then also very important for our sustainability target at Jenoptik, which is the sustainability in our supply chain. So we want to increase the transparency in our supply chain in order to guarantee the protection of human rights and the environment. Therefore, we agreed on a so called CSR rate average with our financing community, which means corporate social responsibility rate, where we agreed on the average percentage of all suppliers of production materials with an annual purchasing volume of more than EUR 200,000. Of which, we want to have a complete GSS health assessment available. And there, we agreed to increase this from today until 2025 to 50%. And if we are successful in this we -- KPIs, we have agreed, then we can save 5 basis points. Just to let you know this. And we are very happy that the interest in the finance community was so huge. And we had a lot of talks about this [ at JS ] and it was very well accepted in the capital market. Then I would like to hand over again to our CEO, Stefan, who will go with us through the divisional development in the first quarter, and then we come back later to your questions. Thank you. Stefan?
Okay. Thanks, Hans-Dieter. And let me take you straight into Light & Optics, obviously, our biggest division. As you know, Light & Optics, we cater optical components and modules, predominantly to customers in the semiconductor manufacturing equipment space and in the life science and health care environment. And Light & Optics is also the division in which we have integrated our very important TRIOPTICS acquisition. I think it goes without saying that the semiconductor environment helped us big time in terms of order intake. The demand for Light & Optics has been very, very strong in the first quarter. A trend that we have seen grow the whole of last year already, and in particular, at the end of the last year. It's very important for us also to point out that the demand in biophotonics has also picked up significantly. Those of you who follow us more closely do know that and will remember that we had to report some challenges in the life science and biophotonics industry of -- on our end, at least due to certain particular COVID effects. That seems to be over. Biophotonics business is up big time when it comes to order intake. The order intake of the division has increased by 78.5%, which is a very big number. The order intake is now at EUR 132.7 million, almost EUR 133 million. Yes, it has been helped by TRIOPTICS. TRIOPTICS contributed significantly to the order intake in the first quarter. TRIOPTICS had a very good first quarter when it comes to order intake. Nevertheless, even if you would take out TRIOPTICS on an organic basis, like-for-like the order intake of the division would be up by 32%. So even organically, a very strong order intake pickup for Light & Optics. You do see that the order backlog also raised significantly. The order backlog is up by 22.3%. You also see that the book-to-bill is very, very high. Which we have a book-to-bill of 1.4, which might be a good sign. But actually, it is a sign of the fact that, yes, we have a large step-up in sales. Revenue grew by almost 36%, again helped by the TRIOPTICS acquisition and the consolidation effect. Revenue without TRIOPTICS would also be up by 6%. But I pointed out already, book-to-bill is very, very high. Our order backlog in the division is growing significantly. And it does indicate that, in particular, in Light & Optics, we have our hands full in executing the order intake and turning the order intake into sales. We have ongoing pressure in the supply chain, getting electronic components is a challenge. We're managing our supply chain very tightly and very carefully, but it is a challenge. We did have in Light & Optics, a very, very strong Q4. You might remember that, which, on a positive note, turns into a very strong free cash flow in Light & Optics in this quarter. A free cash flow at almost EUR 16 million in the first quarter. But it does mean that it's basically -- we do see almost like a double whammy in revenue recognition or in execution of the orders, there's a tight supply chain. And of course, our own stock has been depleted significantly due to the fact that we shipped everything that was possible in Q4 last year. And on top of that, we do see ongoing COVID restrictions. Our products are not -- yes, as I said earlier, we do not produce commodities here. Our products are challenging. They need to be installed by service engineers. Often, they need to be explained. And as much as we try to use online medias and communicate via -- God knows what all these video conferences and all these kind of things. We would like to get our technical people to Asia or to America as soon as I possibly can to help our customers there, in particular, to also install large machines at times. It is a challenge. Again, our -- our challenge is not on the demand side. Our challenge is on the execution side. We have a very strong demand, very strong order intake. We do grow. We do grow organically. We do grow by the acquisitions. But as I say, we could grow go even faster, if we wouldn't have those restrictions. And eventually, orders will turn into sales and that goes without saying. We do see that the EBITDA margin is essentially flat versus prior year. That does include, though, significant PPA effects in the EBITDA number. We all are used to have PPA effects in EBIT. But here, I need to point out that due to certain inventory step-up we do see an EBITDA impact or negative impact in the EBITDA by these PPA effects of the EUR 1.8 million, resulting from the acquisition of TRIOPTICS. If we would correct for that, sort of without TRIOPTICS, the profitability of the division would have increased significantly to almost 24% in terms of EBITDA of sales. I would like to point out that those inventory step-up effects, the PPA effects negatively impacting the EBITDA of Light & Optics are now completely fleshed through P&L in the first quarter. We will not see those effects in Q2, Q3 and Q4. So all in all, very happy with how it goes with Light & Optics. We -- yes, we are happy enough that we can keep all our factories open. We run a very tight scheme when it comes to restricting access to our factories, isolating the shifts from each other. We have made longer breaks between the shifts so that people don't see each other to not spread COVID in the factories. We do what we can. Up until now, successfully. We did have certain cases of COVID in our optic factory, in particular, in Jena. But we have been able to isolate them very, very quickly. But, of course, it is a challenge, but we can manage at this point. And we do hope that, obviously, the COVID restrictions will ease throughout the year, and that will enable us to turn orders into sales more quickly going forward. With that said, let me go to Light & Production. Light & Production is division, as you all know, that had significant challenges and choppy waters in 2020 due to the fact that Light & Production, to a large extent, is geared towards the automotive industry. Great to see that the order intake pattern, in particular from the automotive industry has picked up, actually quite significantly. Those of you, again, who follow us a bit longer, you will remember that at the end of Q1 last year, Q1 2020, we reported certain larger order intakes from North America from the automotive industry for Light & Production, which we had to take out of our books in Q2 because they got canceled. Nevertheless, despite that effect, Light & Production has seen order intake growing by almost 7% in the first quarter. And if you remember that the order intake in the second quarter of Light & Production was almost 0 due to this particular effect, without giving any guidance on Q2 here, I would be sort of very surprised if we don't see a pretty strong pickup in the order intake for Light & Production in the first half. On the sales side, we still have our challenges. On the sales side, Light & Production is still down by minus 5.8%. But given the strong order intake, we expect that to become much better throughout the rest of the year. I think what's very positive is that the division is almost at breakeven now in profitability. Here again, you will remember that last year, Light & Production had a very tough time when it comes to volume. Despite the fact that we have still miles to make in terms of revenue recognition and volume, our restructuring efforts actually bear fruit here. We do see, again, the profitability almost at breakeven from an EBITDA perspective. And with an uptick in volume throughout the rest of the year, we're very comfortable that Light & Production will post profits in the quarters to come. Light & Safety is almost always a bit of a funny one. As you all know, Light & Safety where we cater to public customers. Light & Safety is a project business, and as always, in project businesses, it's pretty lumpy. Overall, we're very, very happy with how the business is underway and how the business performs at the moment. Order intake is up big time, and that's obviously due to the fact that we could book these big orders out of the North American marketplace, in particular, which I mentioned earlier. Order intake almost doubled in the first quarter of 2021. On the other hand, revenue recognition is down. Now in Light & Safety, obviously, the sales follows these big orders, to some extent, but we do have underlying recurring revenue business in terms of services and in terms of software business. So the challenges that we do see in the order -- sorry, in the revenue recognition, is also based on certain challenges and problems in the supply chain. There is certain suppliers that can't supply their key product for us fast enough at the moment. And we are hopeful that that's going to change in the next few weeks and months. So that also the sales side will follow the order intake pattern to some extent, at least, and we will see good growth in this business in 2021. And with the pickup of sales in Q2, Q3, we believe that we also will see the EBITDA margins in this business that we are used to from previous years. So all in all, very happy with how it goes in terms of Light & Safety. Again, lumpy business goes in -- comes and turns and roundabouts. But yes, lumpy business comes with lumpy order intake patterns and to some extent, at least also some lumpiness in the sales and revenue recognition. VINCORION, on Page #16, on the other hand, is in really choppy waters in particular, in the aviation industry. Obviously, the defense business is very stable, as you know, but the exposure to aviation is a challenge. Now we all hear that flight pattern, in particular, in North America, pick up again and flight frequency picks up again, but I can testify that having, I don't know, Airbus and Boeing as a customer is no fun at the moment. Or as the colleagues at VINCORION keep saying, aircrafts that don't fly don't need maintenance. And obviously, that's not good for us. So the VINCORION is under pressure, both in order intake as you can see, as well as in revenue recognition. Now we do compare Q1 with a Q1 last year that was still very strong for VINCORION. And obviously, Q1 has not been characterized by COVID as much in 2020. COVID-19 really for VINCORION hit in Q2, in particular, Q3, Q4 because the timescales in that business pattern. But nevertheless, it does show that VINCORION suffers from COVID restrictions, and in particular, in its aviation business. It's great to see that the business managed to stay profitable despite the decline in sales and actually could improve profitability a bit. Which is due to the cost reduction measures that we have implemented throughout 2020. And we do hope, obviously, that the aviation industry somewhat stabilizes in the remainder of the year. But I will say that VINCORION is in choppy waters, in particular from the aviation industry. However, overall, I think we are, again, back. If you take it all together, we do see a very clear pattern in our business that actually has been emerging at the end of last year already, in particular Q4, and that rolled into Q1. We do see very strong order intake. We do see an ongoing, very strong demand on the semicon side. We do see a pickup, a big pickup in the biophotonics arena, which we expected. We do see a pickup in the automotive industry, probably even faster than we expected. And we do see ongoing challenges in aviation. But overall, and if you integrate all of our businesses, very strong demand side challenges in the execution based on the various factors that I referred to. So if we look sort of -- if you look ahead, we do confirm our guidance at this point. We do see, as I say, the opportunities around the very strong markets, great order intake, very strong order book. On the other hand, we do see the risks and challenges around the ongoing COVID restrictions and the logistics challenges, the supply chain challenges, conversion of orders into sales is still a challenge. And we have, as you all know, relatively long lead times in our business. So the question for us is how much of the strong order intake we can convert into sales in the next 2 or 3 quarters to make it all into this year or to get it all into this year. Nevertheless, we do believe that revenue will grow in the low double-digit percentage range. Obviously, that does include lift up from TRIOPTICS. And we do believe that the EBITDA margin should be between -- in the corridor between 16% and 17%, and we do talk reported EBITDA here. We do have a basis for a very good 2021. But even more so, if you follow me on Page #19, I think we have the basis for a very good long-term perspective. I mean a lot of things have been said already. If anything, then COVID has acted as a catalyst to the digitization of our world. The more we all go digital, the better for us. At times, I like to say that almost no single mobile telephone on this planet hasn't seen -- or almost all mobile telephones on this planet at some point in time, have seen a product or seen optics, at least, from our Jenoptik Group. So the more digitization, the better for us. Health care is an important point. And it's not just COVID, but the whole sort of idea about point-of-care diagnostics and all of those things do drive up the demand for photonics solutions also in the health care market. We do have the challenge to produce smarter, to produce in a more sustainable way, to produce our product on planet Earth with less resources, with more resource efficiency. And that does require even more smart manufacturing, even more optics and photonic solutions, which helps us. Mobility, there's an increase in demand for alternative engine vehicles, electric vehicles, again, is driving up the demand for our products. So it's to us, very clear that we're not only going to see a very good 2021, but we do believe that the midterm perspective for the group is actually pretty bright. And we'll see when we get into 2022. But obviously, our strategic targets, which we originally have guided for, for 2022, we will already achieve in 2021. And then we'll see what other targets we can find for the years to come. That said, let me stop here, and we're more than happy to receive a lot of questions from you. Thank you very much.
[Operator Instructions] And the first question comes from Craig Abbott.
Three -- well, 3 or 4 questions, but 2 of them related, same topic from my side, please. First of all, in Light & Safety. Given the supply disruptions of the key components you talked about, I just wondered if you could shed some light on how you see that situation developing in the coming quarters. And, i.e., do you feel like you have now sufficient component supply to be able to -- yes. I mean, meet delivery on your orders? I know you mentioned several times, execution is where you see the risk at the moment. But if you could give us a little bit more color on how that situation is developing on the risk for the coming quarters? And secondly, in Light & Optics, you very kindly gave us the organic development in the orders. I just wondered, when you're looking at the TRIOPTICS business year-on-year, I know it wasn't consolidated in Jenoptik, but how that business developed year-on-year, both in terms of their order intake and their profitability? And the final question from my side is VINCORION. You made clear aviation is so difficult. On the other hand, defense spending, pretty robust. I wondered if you could give us an update on the order pipeline you're seeing in the VINCORION for the coming quarters.
Thank you, Craig. Thanks for your questions. Let me start with TRIOPTICS, please. Let's just say that TRIOPTICS had -- I mentioned a very good order intake. TRIOPTICS had its challenges in sales in Q1. They do have a good sales contribution -- contribution of their sales. Figure to Light & Optics has been, yes, we do not disclose that, as you know, but to say it's -- yes, a bit north of 18% -- sorry, EUR 18 million -- sorry, EUR 18 million, a bit north of EUR 18 million. So it performed fairly well, could do much better. The order intake is much better. The order -- the book-to-bill rate of TRIOPTICS is around 1.3. So very strong, very strong order intake. They do have, in particular, the challenge that their machines are fairly challenging to install and to explain. And TRIOPTICS is in particular, under pressure in getting people to their customers. So overall, strong performance by TRIOPTICS on the demand side, challenges in the execution. Pretty much the same story that we've told throughout the presentation. It's pretty much the same for TRIOPTICS.
But that's a COVID-related problem, right, i.e., that they just simply can't fly the people to the location, right? Or is it a problem that they don't have enough people?
Yes. No, it's exactly that. I can't disclose the locations, but it's almost impossible to get there at the moment for larger installation larger customers, and it's a challenge to get the people there. We do help. We do try to help this at Jenoptik. So we have service engineers in Asia, in the U.S. and places. We do try to help as much as we can. But those are challenging products, challenging to explain, challenging to install. And yes, essentially, that's what it is. And let me remind, just to be clear, their revenue contribution is significant. I mean, I'm not saying that they're -- I'm just saying they could do even better if we wouldn't have those execution challenges, yes? On the -- by the way, that's why I was also a bit careful in our last call, in the last earnings call. I think I was a bit careful when I was asked around TRIOPTICS. I was a bit careful in saying how they performed. That's exactly -- or that has been the reason. We did see that already since quite a while, the order intake being strong, but challenges on the execution side to co it. Of course, we all hope that it's going to ease throughout the summer, but hey, who knows. In the Light & Safety disruption side, I don't know. I mean we are managing the situation. It's a particular supplier that has problems. We're managing the situation. We will -- not out of the woods there. I can't tell whether it's going to be sort of over and done and dusted in Q2 or whether it takes a bit longer. I would hope that we will be able to fix that issue in Q2, but I can't really promise that. At this moment, we are limited in the supply, but it's not as if we have stopped production or anything like that. So we can produce, but it's just not fast enough. I think that's the challenge that we have. This is a particular supplier. They're hoping to fix it in Q2 but can't promise it. And on VINCORION, on the order pipeline, well, I mean, the issue with the VINCORION order pipeline is always -- it's longer the time line. As you know, the time lines are very long. There are some important political decisions to be made in terms of certain defense products out of Germany for the European defense market, which is an ongoing discussion in Berlin. I think it depends on -- yes, we all know that these decisions will be made hopefully before the elections because after the elections it will -- then the new government has to be installed and all of that. So there is pipeline, but whether we can be able to convert it into order intake in the next quarter, in quarter 2, I can't really tell. It depends on, yes, developments out of our control. Does that answer your question?
Yes.
And the next question comes from Malte Schaumann.
My first question is on the gross margin. You talked about the PPA effect from TRIOPTICS. I think a 31% lower quarterly gross margin in 10 years. So maybe as you can shed some additional color on even with product mix, input costs, what else might have affected the gross margin?
Sure. It's actually -- you mentioned 1 point, TRIOPTICS, that has been an effect, obviously. There is another effect, though, coming out of the Light & Production arena. If you think about the composition of the sales in Light & Production, we have these 2 pillars. We have the metrology piece, in which we produce almost like standard products, if you want. And then we have the production tools piece, the automation integration part, which is a project-based business and includes a lot of third-party items. So remember, we do this, these production streams for those of you who are not familiar or that familiar with it. Malte, I know you do know it, but the rest of the audience, maybe not that much. So we do basically produce entire production streams, including robots from other -- third parties and other things. So the bill of material is very high. And obviously, that converts into a relatively low gross margin, yet very high EBITDA margins. And that's why, in particular, in Light & Production, the more we shift the business towards the actually highly profitable automation integration business, the more the composition of the P&L changes towards lesser gross margin, more functional costs -- sorry, lesser functional costs -- lesser gross margin, lesser functional costs resulting into a higher EBITDA margin.
Okay. So nothing in particular should raise some concerns or whatever?
No.
No, I don't think so.
Yes. Okay. Good. And then on the order pipeline. I mean seem to be quite optimistic. So it doesn't seem that there were maybe whatever too many one-off or kind of one-off projects, catch up effects, whatever, that contributed to strong orders. Maybe some more general comments how you see projects evolving in the pipeline? And then I mean Q2 is almost -- the first half is almost over. So yes, is that added to a confidence level? And are these things moving in your pipeline?
Yes. I mean obviously, we do not guide on Q2 at this point in time. But what I think we can say is that in April, the principal pattern of the business follows the principal pattern of the business in Q1. So again, very good demand, order pattern, very strong without any numbers here. But -- yes, in principle, following and same issues, very strong order intake and sales, yes, these are challenges that we talk about. I mean we did have a bunch of good orders and large orders in Q1. I mentioned 2 in the beginning of the presentation, in particular, in Light & Safety, I mean, it was a big, big tender. Second batch of a large deal in North America. We already have been awarded to the batch 1 in last year. We now got the batch 2. And also, in the automotive industry. But I would like to point out one more time that we had this order in Q1 from the North American automotive industry in Q1 2020, which we did have to take up in Q2. So if you go back to the page in your notebook where you have Q2 2020, on Light & Production, you will find that it was very low from order intake perspective and that gives me confidence that the comparator basically, for Light & Production is fairly easy in Q2 on the order intake side. So not a particular pattern. Light & Safety did have a large order intake. There -- it's always -- it's always challenging to predict. But overall, no, I don't think so. I think, in particular, for us, very, very important, as you know, is semicon, biophotonics and the whole issue around all our Jenoptik business. And yes, it's almost crazy what's going on in the semicon industry again. The question is not if we can get more orders, the question is, can we actually fulfill them? Because we don't want to annoy customers obviously and if we could produce more, we could certainly take more orders.
Yes. I mean, your ability to step-up in production capacity and the micro optic production has been kind of limited or takes quite a while before people are really able to produce these. So what's your capacity utilization look like? And is demand really exceeding your capacity by a big margin in that area?
Yes. Yes. We have people working weekends already. And yes, as you say, we can't pick them off the trees here. These are really skilled engineers and they're hard to get. And as I say, we have been working several days and all the weekends and stuff and -- as we did invest and we did agree to invest, by the way, in [ Andreisson ], I think we can, I think we can -- I was looking to Hans-Dieter here, to the colleagues here. But we have agreed to purchase property, and we will invest into further capacity. There are people in the room nodding and people in the room shaking their heads, so I'm not quite sure what I can say.
We will publish more details later.
We will -- very good. We will publish more details in months to come.
That's concerning the [ EUV Power ] .
It is exactly. The EUV, yes, is going through the roof. And but as I say, it's -- and we have purchased already a new -- the equipment for lithography. But it's not something that we can -- we can't flip a switch here. And so it's not going to help us significantly in the rest -- in Q2, Q3, Q4 of this year. But I do think that this is really sustainable. I mean the digitization of this world is just going on like big time. And if anything, then it will be with us for years. Yes.
Yes. Right. My last question, quick one on what's the visibility when external challenges like limited pre supplies can be overcome?
I'm not quite sure if I understand the question. What do you mean by -- oh, at the --
What's your visibility when your suppliers are able to provide you with a sufficient amount of equipment you need?
Yes. Well, I mean, it's at the end of the day, that's a question of where the shortage is coming from. I mean, we are limited in -- predominantly in electronic modules and components and then certain, yes, some specific parts. I don't -- yes. From my point of view, I think some macroeconomic professors can explain that better than I can. But I think that in many ways, the sharp pickup in demand and the sharp pickup in the -- almost like an [ inverted ] economy has not been foreseen. So it's -- it will be -- it's hard to answer the question, Malte. But it's not as if we can fix 1 particular problem. Yes, we are able -- we hopefully are able to fix the problems that we have in Light & Safety. That would be helpful. That's more of a technical issue, which should help us. But overall, in broader scheme, shall we say, the shortage in electronic components and all of that. It's hard to foresee when that's going to ease. I don't really know.
And the next question comes from Uwe Schupp.
Two questions, if I may. Firstly, just a clarification really more on the consolidation impact from TRIOPTICS. Did you say on the Light & Optics impact that it was a 36% organic growth, i.e., without TRIOPTICS and about 6% for revenue? So 36% for order intake and 6% for revenue. Was that the numbers you were indicating?
Yes.
The last one.
Okay. So just trying to square up those numbers. Stefan, in your earlier remarks, you said -- or in answer to an earlier question, you indicated that TRIOPTICS had revenue of just above EUR 18 million with a book-to-bill of 1.3. That would point us to order intake of in the area of maybe 30 -- I beg your pardon, EUR 23 million or maybe EUR 24 million.
A bit more than that, but, yes.
Okay. But if you indicated earlier, if I heard you correctly, then you said 36% organic order growth for Light & Optics in Q1. So that would then highlight more point towards a EUR 32 million or maybe EUR 31 million order intake for TRIOPTICS. Just trying to -- probably misunderstood you somewhere. I'm just trying to understand where...
Yes. Let me...
You can also come back if that's easier.
We're checking, we're checking. Yes, yes. So I think the -- yes. Calculations. Okay. So the order intake of TRIOPTICS is -- I hope somebody has heard that. The order intake of TRIOPTICS is somewhere between EUR 25 million and EUR 30 million. Somewhere between, pretty much between EUR 25 million and EUR 30 million. And then there is also an effect of a division, which is from -- which has been...Light & Production...
Light & Production division into Light & Optics division, which brings also some million order intake with it.
Maybe EUR 5 million impact, roughly?
Not that much, but...
Not so far away.
Not far away from it.
Yes. Right. Okay. Got it. Okay. No, that's very helpful. And I mean by the sound of it a very strong order pattern, indeed for TRIOPTICS, which obviously is encouraging. Okay. And then the second question I had was on the level of factoring, and if you did any in the quarter? Because I saw that nicely the DSOs came actually down year-over-year. And was that related to factoring at all or not?
No, not all. First of all, we always repaid the factoring throughout the month in the Q1. And at the Q1 end, we start again the factoring program, but it was on the same level as last year. So no impact coming in the comparison of the quarter. No special impact. And it's anyway limited to EUR 20 million or EUR 25 million in the year. We do not more than EUR 25 million, yes. But it was the same amount as in Q1, nearly, yes. So no impact coming from there in the comparison.
But we do see a good free cash flow coming in, in Q1 from our revenue recognition that we've done in Q4 last year.
Entertainment now.
Entertainment now, yes.
Right. Got it. And then -- okay, that's very clear. And then just the last one. I saw that the R&D and also the CapEx were down quite meaningfully year-over-year, despite the first-time consolidation of TRIOPTICS. And I was just wondering whether for how long you think you can keep going there with those relatively low numbers or whether it's just a phasing impact, and there will be more normal numbers going forward?
Later one, really. It was not and particularly sort of managed that way in any way, shape or form. It was just a phasing maybe. Nothing in particular. It should normalize throughout the year, actually.
The next question comes from Richard Schramm.
I have two questions, please. A quick one, just if I got it right, this PPA effect in Q1. Did you say that this will not occur in the following quarters? Or was -- did I misunderstand something?
No, it's no further impact. We fully booked it in to...
On the EBITDA.
On the EBITDA.
Not on the EBIT. It was on the EBITDA level.
Okay. Yes. All right. And then I would be interested in also this problems with execution you mentioned. I mean, it's quite obvious that order backlogs are then piling up, but we can expect that customers will not accept a stretch of delivery times to infinity. So they sooner or later want an answer when they can expect equipment or they might turn to competitors? So how do you see the situation? Have you already lost some market share in 1 or the other area? Or how can you cope with this situation?
I don't think that we've lost any market share. And in particular, I think that the competitors have the same problems. So it doesn't really help to go to somebody else. And in many places, I mean, like in particular on our micro optics arena,and segment, there isn't -- well, I shouldn't say there isn't competition. But you know what I mean. We're a sole supplier, in particular to our customer in the Netherlands and for these products, at least. And so yes. I mean we focus this situation by trying to calm down the customer. But look, I mean yes. I'd say in some of the areas, we are sole supplier and the technological barriers to entry for other people are very, very high. In particular, obviously, in our micro optics and the semicon arena. It's very, as you know, hard to see that anybody can sort of -- and for that space, at least from what we can tell at the moment. And in the other area, I would say, predominantly the supply challenges are not just for us. They're for everybody. I don't think we have lost market share at this moment.
Okay. And then another question concerning Light & Production and here, especially the metrology segment, which was, I think, the main source of trouble in the last year. Can you shed a bit light on how much you have been able to reduce capacity here? What your current capacity load is? Are you still having short-time work or is there now a more balanced picture? And what is about the demand side in this area?
It is getting better. We do see better order intake also for the metrology. But we still have challenges there. It's not as if we're at 100% capacity utilization. But -- and we are currently in the discussion with the Workers' Council. We are executing our programs in terms of reduction of staff and personnel. And at this moment, it's going according to plan. Profitability is better than last year, but still -- yes, there still is room for improvement.
Yes. You just mentioned that you are still discussing with employees' council. So the measures are not fully fixed yet, because I thought they were fixed and it would just be a matter of execution now?
Yes. But it's -- the way it works is in Germany, we do discuss the total amounts or the pots, if you want, in the first place with the union, disclosed that. At this moment, we actually book their goals and follow through the P&L, which has been done in Q4. And then it's about -- yes, it's a sad thing to say but who exactly, it's the people, the person, the names. That's what we're doing at the moment. It's what's called the [indiscernible] is what's going on at the moment.
The next question comes from Peter Rothenaicher.
Coming back to restructuring. So did I understand it correctly that in the first quarter this year, you have not booked any charges, additional charges for restructuring?
Correct.
Yes. And on the other hand, what is your [ guess ] today for the rest of the year, which might be the risk for additional restructuring measures? I think key targets might be metrology and VINCORION?
Yes. I don't think that we will see more in metrology because we booked quite a lot in Q4. VINCORION might be an issue, depending on how it goes in terms of the aviation industry. So don't foresee anything more in metrology, maybe something in VINCORION. And then obviously, I mean, we have to see how the market develops here.
Okay. Then for a clarification with PPA. You mentioned this effect on EBITDA, the EUR 1.8 million, which will not come again. For the EBIT PPA, does this include this EUR 5.5 million, also the EUR 1.8 million, which are not going through the depreciation and...
Yes, yes, Peter. In the EUR 5.5 million, the EUR 1.8 billion is included. And the whole year amount will be close to the prior year. It's around EUR 15 million in the EBIT. We have announced it last year. So it's a similar amount in the prior year. Because we have done a lot of bookings in the end of the last year when we acquired TRIOPTICS already, yes. So we will now close the gap more and more. But in the first 6 months, we will be always more burdened in this year than in the prior year, so to speak. But at the final end, in the EBIT, you will see roughly around EUR 15 million impact, yes.
Including this EUR 1.8 million?
Including this EUR 1.8 million. And in the EBITDA, it's not coming anymore.
Okay. Okay. Then with all these supply chain problems, do you see here also some impact on pricing? We all hear from more or less all industrials company they are seeing some risk in the second half of the year from the higher material prices, with that also the component pricing. Do you see here some risk? And on the other hand, what is your situation in passing over these higher costs to customers?
Yes. I don't think there is much to see in Q2 because we have typically quite long contracts, both on our supply side as well as with our customers. But you asked second half, I think -- I mean, I don't have a crystal ball, but I would expect some pressure there. I do think that something will flesh into our P&L, but it's hard to see at the moment. But yes, I would agree. It is to be expected that at least in the second half, we will see some effect here. And in terms of how we -- to what extent we're able to pass it on to our customers, here as well, it depends. I mean, with these very big customers of ours, we have very long contracts. So price roadmaps and everything. It's a bit too early to tell. I don't want to sort of speculate here too much. It's a bit too early to tell. But I mean, if you specifically ask for H2, and I would think there would be some impact there.
Okay. So there are no clauses here to pass automatically over these increases, for example, for the higher cost for electronics and so on?
In some part, yes, in some part, no. It's a mixture.
If we have some open book and some closed-book contracts and it depends.
It depends. Yes.
Okay. And last question, you have now secured some liquidity with the debenture bond for possible acquisitions. Perhaps can you comment, are you relatively close here to do some acquisitions? Or is it really a midterm target and midterm prospects you are playing out?
We didn't secure the bonds for specific acquisition targets. And also, there are some -- yes. We don't have -- acquired 100% of TRIOPTICS yet. It will be cash outflow. How much remains to be seen because there are earnouts and profitability, bonus and model clauses and earner closes in the contract with previous owners of TRIOPTICS, but there will be some cash outflow from that. And other than that, we're in a typical process. But we didn't secure the funds for a specific one.
Okay. So we cannot expect now in the next 1 or 2 months here to get the message of another significant acquisition?
No, Peter.
We didn't secure the funds for specific targets. If some targets arose, we could use it. And if it doesn't happen, it doesn't happen.
Okay. And with your remark on TRIOPTICS with bonus models, how is your view on the development? On profitability? Are you confident that your expectations will be fulfilled? Or do you see here some problems or some development, which is perhaps somewhat less positive than expected?
Yes. I think that's an interesting question because I mean, at the end of the day, what you're asking is, are you confident that you have to pay, which is of course, a [ public story ]. Are we confident that we will have to pay the full amount of the second tranche? Well, it does depend again on how the year develops from an execution perspective. I'm very confident that TRIOPTICS will be well within their plans when it comes to order intake. My confidence that they will be well within their business plans when it comes to sales and thus profit, we'll have to see how the situation develops. We have to see how the COVID restrictions, how long they carry over. I think that's the biggest issue there. And that translates into whether or not we are going to have to pay because the -- yes, the agreements are such that we have to pay if certain sales and profits targets are achieved within 2021. And I'll just leave it there, I suppose.
So say it on -- other way around. If some execution of sales and earnings swaps into 2022, it would not be that bad for you.
Well, look, I mean, we want to fill -- we want to help the customer. That's the first and most important thing, right? The customer needs the product. And therefore, we want to serve our customers and we want to -- and we're very determined to help the group TRIOPTICS to achieve its target. Because, I mean, we didn't acquire the company to speculate on what they can or cannot achieve. We would be more than happy to fully pay all the funds to the owners -- previous owners which are still in the business and are working very hard to make it happen. But you are right, if for whatever reason, some sort of sales rolls into 2022, then there is less payable from our perspective. But again, let me say that one more time. It would be unfair. We're not that's not what we're doing. We're really determined to help them as much as we possibly can, including even bringing Jenoptik engineers, service people, whenever possible to support in particular in Asia, where we have our own organization. TRIOPTICS has a strong presence in Asia. Don't get me wrong. We always said they have a very strong presence in Asia, but the sales are actually in Asia. So we help as much as we possibly can, not holding back. We pull out all the stuff we can. But yes, should there be limitations, and should there be sales, revenue recognition flowing into, spilling over into 2022, we have less to pay based on the SPA.
Okay. But anyhow, if I understand it correctly, TRIOPTICS has no structural problems. It's currently a situation with COVID more or less?
Correct.
Thank you for your questions. We have no further ones. So let me hand back over to Leslie Iltgen for some closing remarks. Please go ahead.
Well, thank you, everybody, for joining the call today. Should there be any follow-up questions after this call, then don't hesitate to contact us at the Investor Relations department. We'll be happy to answer any questions you may still have. Other than that, I wish you a good remainder of the day and a successful remainder of the week. Cheers, and goodbye.
Goodbye.
Thanks.
The conferences is no longer being recorded.