VIGO Photonics financial results for Q2 2022 – second best quarter in terms of revenue achieved

VIGO Photonics S.A. (WSE: VGO), a global manufacturer of the most advanced photonic mid-infrared detectors, detection modules and semiconductor materials, has published its interim report for H1 2022.

In the second quarter of this year, VIGO Photonics’ revenues amounted to PLN 20.3 million (+13% YoY), adjusted EBITDA adjusted for the impact of deferred income tax reached PLN 5.4 million (-30% YoY) and adjusted net profit totalled PLN 3.8 million (-46% YoY). Q2 2022 was the second best in VIGO’s history in terms of revenue. The value of orders acquired from January to the end of August this year amounted to PLN 59.5 million and was nearly 43% higher than in the same period last year,



In the entire first half of this year, the company generated PLN 32 million in sales revenue (+13% YoY),

PLN 8.2 million in adjusted EBITDA (-43% YoY), and PLN 4.7 million in adjusted net profit (-60% YoY).



In Q2 2022, we achieved double-digit year-on-year revenue growth, despite many market challenges and a high base from Q2 last year. In addition, our order book grew significantly, demonstrating the increasing interest in our solutions. In the second quarter of this year, we recorded the largest increases in sales of our detection modules among industrial application clients: PLN 10 million vs. over PLN 7 million and transport application clients: PLN 3 million vs. less than PLN 2 million a year earlier. The science and medicine division, which is particularly important for our growth, is also on the rise. In this area, in the second quarter, we realised orders with a value 36% higher than in the same period of the previous year. Overall, we ended the first half of this year with revenues of over PLN 30 million and an order backlog of nearly PLN 60 million at the end of August – these are satisfactory levels, considering the difficult market conditions, as well as the start-up of the clean room in the first quarter of this year, says Adam Piotrowski, CEO of VIGO Photonics.



The highest sales increases in Q2 2022, compared to Q2 2021, were generated by VIGO Photonics in the following applications: transport (+57.3%, to PLN 3 million), industry (+37.7%, to PLN 10 million) and science and medicine (+36.2% to PLN 1.2 million). On a segmental basis, in Q2 of this year, sales in the detection modules segment stood at PLN 19 million, up 12% YoY, while sales in the conductive materials segment came in at PLN 1.3 million (up 21% YoY).



VIGO Photonics’ results achieved in the first half of this year were affected by the planned and previously announced start-up of new technological facilities and clean room that took place in Q1, which was associated with the suspension of some production processes and consequently translated into reduced sales volumes in Q1 and the postponement of some orders from one quarter to another. However, this was a one-off event, and thanks to the commissioning of the new clean room, the Company will significantly improve the quality of technological processes, which will translate into reduced production costs and increased production repeatability.



OVERSEAS EXPANSION – INCREASE IN ORDERS FROM THE ASIAN MARKET

The Company is seeing increasing demand for its products. In Q2 2022, it secured more than 30% more orders than in the same period last year. A particularly significant upsurge in orders was recorded from the Asian market – orders from this market in H1 2022 were nearly three times as high as in 2021. An increase of 28% was recorded in the US market and 18% in the European market.

We are very pleased with the increase in the value of orders acquired in Q2. On the one hand, it confirms the constantly growing interest in VIGO products and the development of new applications for infrared detectors. On the other hand, it facilitates production planning, which is of particular importance given the current problems with access to certain electronic components, says Adam Piotrowski.

In addition, from the beginning of 2022, the newly-completed sales team in the US office that opened a year ago is already fully serving the US market.



ARTEMIS MISSION

VIGO Photonics detectors have been placed on board the Orion space vehicle, which is scheduled to orbit the Moon in the near future as part of the Artemis mission. VIGO Photonics infrared detectors selected by NASA have been installed in the Laser Air Monitor System (LAMS). LAMS enables the measurement of carbon dioxide (CO2), water vapour (H2O) and oxygen (O2) concentrations inside the flight deck and space suits.



We are excited and honoured to be supporting NASA on such a great project that will help shape the future of space exploration. The Artemis mission aims to send humans to the Moon again and then to Mars. Our infrared detectors will form part of its equipment and will be used to measure carbon dioxide, water and oxygen inside the flight deck and spacesuits – so these are critical systems to support astronauts’ vital functions on future manned missions. We are proud to be part of this project, says Adam Piotrowski.



IMPACT OF THE WAR IN UKRAINE

Immediately after the outbreak of the war in Ukraine, the Company halted sales of its products to Russia (only 0.3% share in 2021 revenue) and took steps to replace component suppliers from Russia. Qualification of new suppliers is progressing as planned and the company has successfully completed the qualification of the first new alternative supplier. In addition, an existing supplier has relocated its production outside Russia.



Since the outbreak of the war, we have worked hard to find alternative suppliers and have also engaged with suppliers to relocate production – this was successfully accomplished in Q2. At this stage, we do not see significant problems with the availability of components, which had been purchased from the Russian market before the war began, says Adam Piotrowski.



NEW EPITAXIAL REACTOR

A new epitaxial reactor for the production of III-V semiconductor materials (compounds from groups III and V of the periodic table of elements) was delivered to the company in September this year. The company is planning a test start-up of the reactor for October this year, with full system commissioning and the launch of materials production for photonics and electronics scheduled for early 2023. The cost of purchasing and commissioning the reactor is approximately EUR 5.4 million. The start-up of the reactor will double the production capacity as regards semiconductor materials for mass-market applications in photonics and electronics.



INVESTMENT INCUBATOR OPERATIONS AND NEW INVESTMENT AGREEMENT

Already after the balance sheet date, on September 12 this year, VIGO Photonics S.A. entered into an investment agreement with Warsaw Equity ASI Sp. z o.o., Wojciech Smoliński, Marek Kotelnicki and VIGO Ventures ASI Sp. z o.o. The agreement sets out the principles for investing, jointly with Warsaw Equity ASI Sp. z o.o., in innovative technology ventures through VIGO Ventures ASI Sp. z o.o. (VVASI).



VVASI is an alternative investment fund dedicated to investments in technology, industry, new technologies, and innovations from the photonics, optics, automation, robotics, photovoltaics as well as materials engineering sectors and, in addition, ventures originating from the community of scientific entities, focusing on R&D projects that result in the cost-effective production of innovative, high-tech devices and systems. The value of VVASI investment in a single project can reach up to approximately EUR 1 million or EUR 1.5 million with follow-on investments.



Currently, the incubator’s portfolio includes six projects on topics such as quantum dots, vision systems, ultrafast lasers, photonic chip fabrication or chip design.



In H1 2022, the incubator invested almost EUR 1 million in Dutch integrated photonics company PhotonIP. Earlier, at the end of 2021, Spanish start-up Deep Detection, which is working on X-ray-based solutions, also joined this incubator’s investment portfolio.



NEAR-TERM PROSPECTS/SHORT-TERM OUTLOOK

In 2022, the company expects to maintain flat revenue growth compared to last year due to the limited availability of components related to the global market situation (the realisation of the sales and EBITDA plan for 2022 presented in the strategy will not be possible). Some orders will be postponed to the beginning of 2023, which will strengthen next year’s results. VIGO Photonics continuously monitors the supply market in an effort to increase component inventories and works with clients to leverage their market position to accelerate deliveries. In addition, the company plans to introduce a new price list from October this year, taking into account the changes that are taking place in the market environment.



In light of the current component delivery times, it is not possible to produce and deliver all pending orders as early as 2022. Not only have the delivery times for these components increased significantly, but the prices of available components have risen considerably too. These problems are affecting the entire electronics industry worldwide. Supply disruptions are affecting an important part of detector module production – the production of detectors without electronics is running smoothly. The fulfilment of part of the orders has therefore been postponed to 2023, and as a result, we expect flat dynamics on revenue for the whole of 2022 compared to last year. In addition, we will increase the prices of our modules from October this year – the effects of the price hikes will be visible from next year onwards, says Adam Piotrowski.

It is worth emphasising that the current market situation does not affect the implementation of our pro-growth strategic initiatives (MCT+, III-IV, InGaAs, PICs, Arrays, MOCVD Epitaxy and process initiative), their implementation is and will be continued as planned. We are also upholding the long-term strategic assumptions, highlights Adam Piotrowski.

DEVELOPMENT STRATEGY – 2021-2023 PERSPECTIVE

In 2021, VIGO presented a new two-phase development strategy for the years 2021-2026, which singles out 6 development initiatives – technological areas aimed at strengthening the Company’s position as one of the most innovative and rapidly growing companies on the market. By 2023, the Company’s goal will be to continue the R&D projects it has initiated in the areas of photonic technologies, integrated circuits, detectors made of III-V materials, epitaxy of semiconductor materials and infrared source technologies. The technological and technical base will be developed. To achieve the strategic objectives, the Company plans to invest in R&D and technical infrastructure the amount of PLN 30-40 million per year between 2021 and 2023, financed from its own resources and public funding for R&D work. The second phase of the strategy will be implemented up to and including 2026 and will involve the implementation of selected development initiatives.





Contact for media and individual investors:

Piotr Piotrowski, cc group

piotr.piotrowski@ccgroup.pl, +48 697 613 010



Contact for institutional investors:

Małgorzata Młynarska, cc group

malgorzata.mlynarska@ccgroup.pl, +48 697 613 709