Ladies and gentlemen, and welcome to the Genoptic Conference Call regarding the Q1 Results 2021. At this time, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation.
Let me
now turn the floor over to your host, Leslie Ilkken. Please go ahead.
Thank you, and good morning, everyone, and welcome to our conference call on the Q1 2021 results. My name is Les Bilskin, Head of Investor Relations and Corporate Communications at Genoptix. With us today are our CEO, Doctor. Stefan Trege and our CFO, Hans Dieter Schumacher. Doctor.
Trege will point you to the key highlights of the Q1. Mr. Schumacher will cover the financials in more depth. As always, both will be happy to answer 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 It is now my pleasure to hand over to our CEO, Stefan Trego. Please go ahead.
Leslie, thank you very much and very good morning from our end here as well. Glad to have you all on 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 Q1 of 2021. And the first real highlight from our perspective is order intake.
Absolutely clear for us. The demand in our marketplaces 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 Plural All the way through 2020, 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 However, today, I wanted to bring you to other examples of marketplaces we're serving And customers we're catering to, in which we also see either ongoing with 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 The division has been communicating that we recently were able to book orders totaling approximately €20,000,000 In North America, for our Light and Safety division, and you will see that our presentation at Light and Safety has shown a very strong order intake pattern in Q1. And 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 US40 $1,000,000 at the end of 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 from the marketplace is that the automotive industry is coming out of its crisis in many ways. So big highlight for us, auto intake, we have seen strong demand in the marketplace for our solutions, Not just in semicon, obviously in semicon, but that's sort of goes without saying, but also in other very important market for us. The result orders were up by 27%, almost in Q1 as compared to the Q1 of prior year. 2nd highlight for us is obviously our Devonshire bonds.
We have We have bonds with sustainable components totaling €400,000,000 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 measures on it, and we're happy to get measures 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 Ingredients, 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, I 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 the world from Mars actually came through our headcount, our Ian Optic 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. Unoptic 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 one 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 places and picked up in others, Which led to a strong order intake of almost €270,000,000 which is an increase of almost 27%. We did get, obviously, tailwind from the Trioptix acquisition and the consolidation effect of that, Excluding Trabtec, so on an organic basis, the order intake would be at almost €240,000,000 So organically, a very strong pickup in demand.
We talked about the new orders that we were able to Look, in automation and integration, I. E, in the automotive industry and in the traffic safety environment, particularly in North America, Revenue is up here as well. We have obviously experienced tailwinds Yes. From the acquisition and from the consolidation effects, nevertheless, also in 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 share performance in demand side, but on the execution side.
There is an increasing pressure In supply chains, there is still ongoing COVID Related restrictions and 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 It's 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 effects of that by now already. And obviously, that should even step up and pick up throughout the year. We didn't get the effects now, but we will see even better effects from that structural improvement of our business that 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 type 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 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 is to say based on challenges in supply chain And based on still ongoing COVID restrictions, in particular, in parts of Europe. With that said, let me Turn the page over to Hans Peter, and he will take you to the numbers on through the numbers in more detail. Hans Peter? 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 number 7, where we have I've 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 KPIs markedly exceeded the prior year figures and are creating a good basis for our 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 Lauda intake. 1 is Concerning lighting production, in Q1 prior year, we booked a relatively big order That order intake, which we had to correct in Q2. So the prior year figure after Q1 is Influenced by this, so it would have been if we adjusted it if we would have been adjusted it already, it would have been even better and a stronger development, This will turn up in Q2 then and then the comparison of the 1st 6 months. And the other remarket concerning vincorion. So Vinkorin is very much behind prior year.
They had a good start in 2020, not much Influenced by COVID-nineteen, but now they are obviously heavily influenced by COVID-nineteen, especially in the aircraft industry, In the aviation business, and this caused this development. But Stefan will explain it to you Later on, when he goes with us through the divisional development. The book to bill ratio grew to 1.5 2, 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 561,300,000, 2022 percent above prior year, also influenced by the acquisition of 3 Optics, But still without 3 optics, 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 But 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 me let us go please to the next slide, Page number 8. The revenue development And as already explained, the contribution from Light and Optics, which grew significantly In the organic business, so to speak, meaning optics, microoptics and biophotonics. And in addition, the first consolidation of We obviously contributed as well to this positive development.
Lyda production is still a little bit below prior year, but With the order intake on hand and the order backlog and the recovery in certain areas of the business automation integration mainly and data processing, We assume a recovery in revenue subscription as well throughout the year. And then we are Clearly behind prior year in
Air and
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 COVID-nineteen probably and Stefan will explain it to you a little bit later, where we also assume a recovery throughout the month to come. Recorion is still handling the Aviation Industry, prices, you can say, and in the power systems area, they are also not Heavy loaded, but the military business is stable, yes. This is the development in the divisions, and Stefan will Going to you more details later on. And then on Page number 9, our EBITDA and EBIT figure. And let me explain it a little bit more that it is better comparable for you.
In the €20,000,000 which is an increase of 47.1 note. In Q1 this year, with a margin of 11.4%. There, we have booked minus A €1,800,000 inventory step up of the purchase price allocation of 3 optics, 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 €22,000,000 On the other side, in this year, we have not booked any Costs for structural and portfolio measurements, which we have done in the prior year.
So the EUR 3,700,000, You could add to the €13,600,000 or you should add to the €13,600,000 and then you can compare it to the €22,000,000 So it's around €70,000,000 which you compare to €25,000,000 22,000,000 Yes. 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 2021, the €6,100,000 which is an increase of 142.7% compared to last year One figure of EUR 2.1 billion, EUR 2.5 billion, there it included EUR 5,500,000 purchase price allocation impact, Yes. In the €2,500,000 of prior year, it's only we included €1,700,000 So it's an increase of €3,800,000 Yes. So the EBIT like for like would have shown even a better development.
But all in all, we are quite happy with solid start in the Q1 also from the profit line Because we will show you on the next slide where you see our P and L in more detail, even black figures The earnings per share and the earnings after taxes was €3,800,000 or the earnings per share, which is €0.07 So all in all, as we think, a solid start, not every division Reported with 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 cost, you see a figure On the same level, like last year, but don't forget the functional cost of the acquisition of 3 Optics are fully included, Yes. Not in the prior year quarter 1, but in this quarter, yes? So this is also a hint I'd like to give To you, yes.
Yes. So nothing more to say on this page from my end here. Then Page number 11, Our free cash flow before interest and taxes and in our case, it's the Zaldo of operating free cash flow minus Cash flow from investing activities, and you see a strong development in the free cash flow, which is €15,700,000 compared to €14,400,000 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 profits, 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 That's in Sharpen also totaling €400,000,000 we have We've successfully placed. And at the end of March, we had already a payout of €100 €30,000,000 which we then used directly in the beginning of April to repay That means we took out of the SIM loan. So we did not Take the €130,000,000 to show €200,000,000 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 The 3 criteria, we focused on the green electricity.
We have a target For our main production site worldwide to increase wind share, which has been in 2019 at 60 63.1 percent over the years to come until 2025% to 75%. Then we have the diversity on the management side, CPI, our diversity rate, which means average percentage of women and of employees of International origin in managerial positions, we want to increase this until 25% to 33%, Actually, we are at 27.8 percent already. And then also very important for our The sustainability target at CN Optics 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 We agreed on the so called GSR rate with our financing community, which means corporate total responsibility rate There we agreed on the average percentage of all suppliers of production materials with an annual purchase in volume of more than €200,000 For which we want to have a complete CSL self assessment available.
And there, we agreed to increase This from today until 20%, 25% to 50%. And if we are successful in these three PPIs, we have agreed, then we can say 5 basis points, just to let you know Listen, we are very happy that the interest in the finance community was so huge. And we had a lot of talks about this, that's yes, And this was very well accepted in the capital market. Then I would like to hand over again to To our CEO, Stefan, who will go with us through the regional development in the Q1 and then They will come back later to your questions. Thank you.
Stefan?
Okay. Thanks, Francine. And let me take you Straight into Light and Optics, obviously, our biggest division. As you know, Light and Optics, we cater Optical components and modules, predominantly to customers in the semiconductor Manufacturing equipment space and in the life science and healthcare environment and Light and Optics is also the division in which we have Integrated our very important TriOptics acquisition. I think of those as I saying that the semiconductor environment Helped us big time in terms of order intake.
The demand for Light and Optics has been very, very strong in the Q1, a A trend that we have seen throughout the whole of last year already, 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 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 132,700,000 almost 133,000,000 Euros, yes, it has been helped by Trioptix. Trioptix contributed significantly to the order intake in the Q1. Trioptix had a very good 1st quarter when it comes to order intake, nevertheless, even if you would take out Triadix on an organic basis like for like the order intake After division, it would be up by 32%, so even organically, very strong order intake Pickup for Leiden 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 now by 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 Trioptix acquisition and the consolidation effect, revenue without Trioptix would also be up by 6%. But I pointed out already, book to bill is very, very high. Our order backlog in the division It's growing significantly. And it does indicate that, in particular, in Light and 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 and optics a very, very strong Q4. You might remember that, which on a positive note, turns into a very strong free cash flow in Hydropics in this quarter, a free cash flow that almost €1,000,000 in the Q1, 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 is a tight supply chain.
And of course, our own stock has been depleted significantly due 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 of these kind of things. We would like to get our technical people to Asia or to America as soon as we possibly can to help our customers there, In particular, to also install large machines at times, it is a challenge. Again, 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 acquisition. That is to say, we could go even faster We wouldn't have those restrictions. And eventually, orders will turn into sales and go through that day.
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 used to have PPA effects in EBIT. But here, I need to point out that Due to a certain inventory step up, we do see an EBITDA impact or negative impact in the EBITDA By these PPA effects of €1,800,000 resulting from the acquisition of Trioptix, If we would correct for that sort of result for upticks, 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 and Optics are now completely flashed through P and L in the first We will not see those effects in Q2, Q3 and Q4.
So all in all, Very happy with how it goes with line updates. We are happy enough that Well, we can keep all our factories open. We run a very tight scheme when it comes 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 had 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 and Production. Light and Production is the division, as you all know, That has significant challenges in choppy waters in 2020 due to the fact that light and production to a large extent It's great to see that the auto 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'll 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 and production, which we had to take out of our books in Q2 because they got canceled. Nevertheless, despite that effect, Light and Production has seen order intake growing by almost 7% in the Q1. And if you remember, The order intake in the Q2 of light introduction 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 in production in the first half.
On the sales side, we still have our challenges. On the sales side, license 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 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, LightIn Production had a very tough time when it comes to volume.
And despite the fact that we have Still, yes, mouths 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 and production will post profits in the quarters to come. Light and Safety is almost always a bit of a funny one. As you all know, Light and Safety, Where we cater to public customers, Light and 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 put these big orders out of the North American marketplace. In particular, Which I mentioned earlier, order intake almost doubled in the Q1 of 2021. On the other hand, revenue recognition is down.
Now in Life and 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 revenue recognition is also based on certain challenges and problems in the Play 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 months, so that also the sales side We'll 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 and safety. Again, lumpy business goes in comes in things 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 in the revenue recognition.
Wynn Coriant, on Page number 16, On the other hand, it's 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 patterns, in particular, North America pick up again and the 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 of Evian Koyan keep saying, Aircraft that don't fly don't need maintenance, and obviously, that's not good for us.
So the accordion 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 Really for Vincorion, it in Q2, in particular, Q3, Q4, because the time scales in that business pattern. But nevertheless, it does show that the Covalon 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, it 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 to somewhat stabilizes in the remainder of the year. And I will say that we inquire on this in, as I said, in chocolate waters, in particular, from the aviation industry. However, overall, I think we are, again, back to if we take it all together, we do see a very Clear pattern. A pattern in our business that actually has been emerging at the end of last year already, particularly Q4 And that was into Q1.
We do see very strong order intake. We do see 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 over our businesses, very strong demand side challenges in the execution based on the various factors that I referred to. So If you look sort of if you look ahead, we do confirm our guidance at this point. We You 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 corpus to make it all into this year or to get it all into this year.
Nevertheless, we do believe that revenue will grow And the low double digit percentage range, obviously, that does include lift up from Trioptix. And we do believe that the EBITDA margin should be between covered up between 16% 17%, And we do talk reported EBITDA here. We do have the basis for a very good 2021. But even more so, If you follow me on Page number 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 almost all mobile telephones on this planet At some point in time, I have seen a product or a piece of optics at least from our Inoptix group. So the more digitization, the better for us. Healthcare 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 To drive up the demand for photonic solutions also in the healthcare market, we do have the challenge to Produce smelter to produce in a more sustainable way to produce our product on planet earth with less resources, There's more resource efficiency, and that does require even more smart manufacturing, even more optics and photonic solutions, which helps us. Mobility, there's an increasing demand for alternative engine vehicles, electric vehicles, which again It's 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 How we get into 2022, but obviously, our strategic targets, which we originally As guided 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's it.
Let me stop here, and we're more than happy to receive a lot of questions from you. Thank you very much.
Thank you.
And the first question comes from Greg Abbott. Please go ahead.
Yes. Hi. Good morning, everyone. Yes, 3, 4 questions, but 2 of them are related to the same topic From my side, please. First of all, in light and 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 Under risk for the coming quarters?
And secondly, in Light and 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 consolidating in Optics, 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 Vinkorian. You made clear aviation so difficult. On the other hand, defense spending, pretty robust.
Wondered if you could give us an update on the order pipeline you're seeing in inventory for the coming quarters? Thank you.
Thank you, Craig. Thanks for your questions and good morning to you. Good morning to Frankfurt. Hey, let me start with TriOptics, please. Let's just say that TriOptics had I mentioned a very good Good order intake.
Traffic has its challenges in sales in Q1. They do have a good sales contribution. Contribution of their sales bigger to light and optics Has been yes, we do not disclose that, as you know. But let's just say, it's A bit more of 18%, sorry, 18,000,000 sorry, a bit more of 18,000,000 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 firm auto intake. They do have, in particular, the challenge of their machines are fairly Challenging to install and to explain and TriOptix is in particular under pressure in getting people to the customers. So overall, strong performance by Trioptix on the demand side, challenges in the execution, Pretty much the same story that we've talked 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 to people to the location, right? Or is it a problem that they don't have enough people?
Yes. It's exactly that. I can't disclose the locations, but it's almost impossible to get there at the moment for larger installations, larger customers, And that's a challenge to get the people there. We do help. We do try to help with all the hypnotic people because we have Service engineers in Asia, in the U.
S, in places, we do try to help as much as we can. But those are challenging products, challenging to Very challenging to install and yes, essentially, that's what it is. And let me I mean, let's just 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 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. And when I was asked Roundtree updates, I was a bit careful in saying how they perform. That's exactly or that Has been the reason. We did see that already since quite a while. The order intake has been strong, but challenges on the execution side due to COVID.
And Of course, we all hope that it's going to ease throughout the summer, but hey, who knows? In the license safety disruption side, I don't know. Maybe we're managing the situation with the particular supplier That has problems. We're managing the situation. We're 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 it, but it's just not fast enough. I think that's the challenge that we have with this 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 current order pipeline is always it's longer The time lines, 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 No ongoing discussion in Berlin. I think it depends on yes, we all hope that these The decisions will be made hopefully before the elections because after the elections will then the new government has to be Installed and all of that. So there is pipeline, but whether we can We're able to convert it into order intake in the next quarter, in Q2.
I can't really tell. It depends Yes, development out of our control. Is that answering your question?
Yes. Thank you.
Correct. Okay. Thanks, Greg.
And the next question comes from Malte Schaumann. Please go ahead.
Yes. Good morning. My first question is on the gross margin. You know, if I strip out the PPA effect From to optics, I think within 31%, lowest quarterly gross margin in 10 years. So maybe there's maybe you can shed some additional color on if it was product mix input costs, What else might have affected the gross margin?
Sure.
It's actually You mentioned one point TriOptics that has been in effect, obviously. There is another effect though Coming out of the light in production arena, if you think about the composition of the sales in light in production, We have these two pillars. We have the metrology piece, which will produce almost like standard product, 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 production street for those of you who are not familiar or that familiar with it.
And 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 from third parties and other things. So the bill of material is very high. And obviously, that converts into relatively low gross margin yet very high EBITDA margins. And that's why, in particular, on light and production, the more we shift the business towards the actually highly profitable Automation Integration Business, the more the composition of the P and L changes towards lesser Gross margin, more functional costs sorry, but less functional cost lesser gross margin, lesser functional cost Resulting into higher EBITDA margins.
Okay. So nothing in particular that should raise Some concerns or whatever?
No. No, I don't think so.
Yes. Okay. Good. And then on the order pipeline, I mean, you Seem to be quite optimistic. So it doesn't seem that there were maybe whatever too many one off kind of one off projects, catch up effects, whatever that Contributed to strong orders.
Maybe some more general comments, how you see products evolving in the pipeline. And then I mean, Q2 is almost the first half is almost over. So yes, is that added to your confidence level? And are you seeing things moving in your pipeline?
Yes. And 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 followed the principal pattern of the business in Q1. So again, very good demand, order pattern very strong. Is that any numbers Yes, in principle following, same issues, very strong order intake and sales, Yes.
And it's the challenges that we talk about. I mean, we did have a bunch Good orders and large orders in Q1. I mentioned 2 in my The beginning of the presentation, in particular, in light and safety, I mean, that 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 Q1 twenty 20, which we did have to take out in Q2. So if you go back to the page In your notebook where you have Q2 2020 on light on production, you will I found that it was very low from an order intake perspective, and that gives me confidence that the comparator basically for lighter production is fairly easy In Q2 under the order intake side. So not a particular pattern. Life and Safety did have large order intake. There 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 semi con, biophotonics and the whole issue around the OLED optics business. And it's yes, it's almost crazy what's going on in the semiconductor 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 the customers, obviously.
And If we could produce more, we could certainly take more offers.
Yes. I mean, Your ability to step up in production capacity in the macroeconomic production has been kind of limited or It takes quite a while before Bevela really able to produce these. So what's your capacity utilization look like? And is demand really exceeding Your capacity by big margin and then I'll be on
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 Hard to get. And as I say, we have been working Saturdays and over the weekends and stuff.
And we did invest and we did agree to invest, by the way, in Dresden. I think we can I think we can I was looking to Hans Dieter here and to the colleagues here? 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. I'm not quite sure whether I can publish
more details.
We will publish more details in months to It is exactly. The EUV is going through the roof. But as you say, it's and we have published that we purchased already the new the equipment for lithography. But it's not something that we can we can't flip a switcher. And so it's not going to help us significantly And the rest in Q2, Q3, Q4 are busier.
But I do think that this is really sustainable. I mean, the digitization of this world It's just going on like big time. And if anything, then it will be with us for Yes. 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 visit? What's
your visibility when your customer and your suppliers are able to Provide you with the sufficient amount of equipment you need.
Yes. Well, I mean, at the end of the day, that's a question of where the shortage is coming from. And 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 in a world economy has not been foreseen.
So it will be It's hard to answer the question, but it's not as if we can fix one particular problem. Yes, We are able we hopefully are able to fix the problems that we have in life and 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 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.
Okay. Thanks.
Thank you.
And the next question comes from Uwe Schupp. Please go ahead.
Yes, sir.
Good morning or good afternoon, gentlemen. Two questions, if I may. Firstly, just a clarification really more on the consolidation impact from TriOptics. Did you say on the Light and Optics impact that it was a 36% organic growth, I. E, without TriOptics and about a 6% for revenue, so 36% for order intake and 6% for revenue.
Was that the numbers you were indicating?
Yes, the last
one. Okay. But just trying to make To square up those numbers, Stefan, in your earlier remarks, you said or to in answer to an earlier question, you indicated that TriOptics had revenue of just above €18,000,000 with a book to bill of €1,300,000,000 that would point us to order intake of You're in the area of maybe 30, I beg your pardon, 23,000,000 or maybe 24,000,000.
A bit more than that, but yes.
Okay. But if you indicated earlier, I said that you correctly, then you said 36 And organic order growth for Light and Optics in Q1, so that would then highlight or more point towards 32,000,000 or maybe €31,000,000 order intake for traffic. I'm 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. Yes, yes. So I think the Yes. So our calculation is good. Okay.
So the order intake of ClearUpTix I hope somebody has heard that. The order intake of the uptake is somewhere between €25,000,000 €30,000,000 Somewhere between, pretty much between €25,000,000 €30,000,000 And then there is also an effect of the Of a division which is from which has been
transferred from Light Production to Light and Production into Light and Optics division, Which brings also some 1,000,000 order increase with
this. Maybe a €5,000,000 impact roughly?
Not that much, but
not far away.
Not far away from it, yes.
Right. Okay. Got it. Okay. No, that's very helpful.
And I mean, it sounds That sounds a bit 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 started again the factoring program, but it was not it was on the same But it was not it was on the same level as last year. So not no impact coming In the comparison of the quarter, no special impact. And it's anyway limited to 20,000,000 or 25,000,000 €25,000,000 in a year.
We do not more than €25,000,000 But it was The same amount as in Q1, nearly. So no impact coming from there in the comparison.
So we do see a good free cash flow Coming in Q1 from all revenue recognition that we've done in Q4 last year and the payment now, yes.
Right. Got it. And then okay, that's very clear. And then just the last one. I saw that the R and D and also the CapEx We're down quite meaningfully year over year despite the first time consolidation of TriOptics.
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,
thank you. Later one, really, it was not in particularly sort of managed that way in any way, shape or form. Yes. It's just phasing maybe. Nothing in particular.
It should normalize throughout the year actually.
Excellent. Very helpful.
Thank you very much.
Thank you, Uwe. Thanks.
And the next question comes from Richard Schramm. Please go ahead.
Yes. Hello. I have two questions, please. A quick one, just If I got it right, this PPA effect in Q1, did you say that this This will not occur in the following quarters or was do you misunderstand something?
No, that's correct, Richard. No further impact. We fully booked it in place.
On the EBITDA. On the EBITDA.
Not on the EBITDA. Obviously, 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 Touch off 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 one of the other area?
Or how can you cope with this situation? Thanks.
I don't think that we've lost any market share. In particular, I think that the competitors have the same problems. So it doesn't really have to go to somebody else. And in many places, I mean, like in particular in our micro optics arena and segment, there There isn't. Well, I shouldn't say there's some competition, but you know what I mean.
I mean, we're a sole supplier, particular to our customer in The Netherlands and for these products that we and so yes, I mean, we've got this situation by Trying to calm down the customer, but look, I mean, it's Yes. I'd say in some of the areas, we are a sole supplier and the technological barriers Entry for other people are very, very high, in particular, obviously, in our micro optics and the semicon arena, As you know, hard to see that anybody can sort of enter that space at least From what we can tell at the moment. And in the other areas, I would say, Predominantly, supply challenges are not just for us, they are for everybody. I don't think we have lost market share at this mode.
Okay. And then another question concerning Right. And production in 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? Thanks.
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 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, it There still is room for improvement.
Yes. You just mentioned that you are still discussing With employees counsel, 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 As in Germany, we do discuss the total amounts, the parts, if you want, In the first place, with the unions disclosed that, at this moment, we actually booked the calls And all is through a P and L, which has been done in Q4. And then it's about, yes, it's a sad thing to say, but Who exactly, the people, the persons, the names, that's what we're doing at the moment. It's what's called the supply plan That's right.
This is
what's going on at the moment.
Okay. Understood. Thanks a lot.
And the next question comes from Peter Rothen, Eicher. Please go ahead.
Yes. Hello, gentlemen. Coming back to restructuring. So did I understand it correctly that In the Q1 this year, you have not booked any charges additional charges for restructuring? Correct.
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 target might be metrology and Green Coriant?
Yes, I don't think that we will see more in metrology because we booked Quite a lot in Q4. Recurring 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, let's see how the market develops here.
Then for clarification with PPA, you mentioned this effect on EBITDA, €1,800,000 Which will not come again. For the EBIT PPA, does this include this €5,500,000,000 also the €1,800,000,000 which are not going through the €800,000 which are not going through the depreciation and the
Yes, Peter. In the €5,500,000, the €1,800,000 is included. And the €800,000,000 is included. And the whole year amount will be close to the prior year. Yes.
It's around €50,000,000 in the EBIT. We have announced this 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 1st 6 months, we will be always more burdened in this year than in the prior year, So to speak.
But at the time, in the EBIT, you will see roughly around €15,000,000 impact, yes?
Including this €1,800,000,000
Including this EUR1.8 billion. And then the EBITDA is not coming anymore.
Yes. Yes.
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 industrious company, they are seeing some risk in the second half of the year from the higher Material prices, we set also some 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 very quite long contracts, both on our Supply side as well as with our customers, when you asked 2nd 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 Flushed into our P and 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're To what extent we're able to pass it on to our customers over here as well depends. I mean, with very big customers of ours, we have very long Contracts, the price roadmap 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 asked 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 higher cost for electronics and so on.
In some parts, yes. In some parts, no. So it's a mixture.
In some open book And some personal contracts and independent participants.
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 prospect you are playing now.
And we didn't secure the bonds for specific acquisition targets. And also there are some Yes. We don't have acquired 100 percent of Therapeutics yet. There will be cash outflow. How much remains to be seen because there are earn out and profitability bonus and modest clauses and Arnold told us in the contracts with previous owners of TriOptics, but there will be some cash also from that.
And other than that, we're a typical process, but we didn't secure the funds for specific
Okay. So we cannot expect Now in the next 1 or 2 months here to get the message of another significant execution.
Okay. Just Peter, we didn't secure the funds for specific topics, but if some
topics, we
can use it. And if it doesn't happen, it doesn't happen.
Okay. And with your remark on Trioptix with the bonus Malus, how is your view On the development, on profitability, are you confident that your expectations will be fulfilled? Or Do you see some problems or some development, which is perhaps somewhat less positives 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? It is, of course, a double edged sword. 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 auto 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 The agreements are such that we have to pay certain sales and profits targets are achieved within 2021. And I should leave it there, I suppose.
So let me say it on other way around. If some execution of sales and earnings stops into 2022, it would not be that bad
Well, look, I mean, we want to fill we want to have the customer. That's the first and most important thing, Right. The customer needs this product, and therefore, we want to serve our customers, And we want to and we're very determined to help as a group TriOptics to achieve its target Because I mean, we didn't require 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, We're 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 Well, 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 the Anoptic engineers service people whenever possible to support in particular in Asia, but we have Our early organization, perhaps, has a strong presence in Asia.
Don't get me wrong. We always said they have a very strong presence in Asia, but They're saying so, actually in Asia. We help as much as we possibly can. We're not holding back. We pull out all the stops so we can.
But yes, should there be limitations and should there be sales and revenue recognition flowing into Spilling over into 2022, we have less to pay based on the SBA.
Okay. But anyhow, if I understand it correctly, TriOptics has no structural problems. It's currently the situation with COVID more or less.
Correct.
Okay. Thank you.
Thank you.
Thank you for your questions. We have no further ones. So let me hand back over to Leslie Ilkken for some closing remarks. Please go ahead.
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.
Good morning. Thanks.
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