VIGO Photonics sums up 2022

• stable revenues throughout the year, despite the difficult market situation
• reduction of the cost base - significant improvement of results in the fourth quarter on a quarterly basis
• reprocessing price increases - the effects will be gradually visible in the results in 2023
• extension of the management board

 

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

In 2022, consolidated revenues of VIGO Photonics amounted to PLN 67.8 million (-5% y/y), adjusted EBITDA adjusted for the impact of settlement of subsidies to ongoing R&D projects amounted to PLN 14.9 million (-45% y/y) and adjusted net profit PLN 7.6 million (-66% y/y). In 2022, sales of detectors and detection modules amounted to PLN 63.7 million (-5% y/y), including PLN 40.5 million (+30% y/y) in the largest industrial segment. Sales of semiconductor materials in 2022 amounted to PLN 4.2 million (-3% y/y).

In the fourth quarter of 2022, VIGO significantly reduced its operating costs - on a quarter-on-quarter basis, operating costs were comparable to the third quarter, while general and administrative costs fell by another 15%.

The lower level of total revenues in 2022 compared to 2021 is primarily due to lower revenues from the military application and lower than previously assumed revenues from applications for industry and transport as a result of lower availability of some components and disrupted supply chains.

A year of activity in a very volatile market environment is behind us. Geopolitical turmoil related to Russia's aggression against Ukraine and the resulting turbulence related to the unstable global economy and disrupted supply chains, rapidly increasing prices of energy carriers, rapidly increasing inflation affecting higher costs of doing business and difficulties related to the supply of components have affected the level of previously planned revenues and financial results. In 2022, we focused on mitigating the negative impact of the market environment on VIGO's operations. We have regularly informed Shareholders about the impact of these turbulences on our business and the countermeasures we are taking. From the current perspective, I can say that despite many challenges, we managed to achieve our goals - reduce the cost base, process price increases with customers, properly manage supply chains, expand the sales network and expand our offer - says Adam Piotrowski, President of the Management Board of VIGO Photonics.

In Q4 2022, consolidated revenues of VIGO Photonics amounted to PLN 20.3 million (+8.6% y/y, +21% q/q), adjusted EBITDA net of subsidies amounted to PLN 5.5 million (+6% y/y) /y, +65% q/q) and adjusted net profit PLN 4.7 million (+21% y/y, x18 q/q).

 

Sales of detectors and detection modules in Q4 2022 amounted to PLN 18.2 million (-10% y/y), and sales of semiconductor materials to PLN 1.5 million (-24% y/y).

 

In the fourth quarter of 2022, the company recorded significant sales increases in science and medicine applications (2.5-fold increase y/y) and in the industrial segment (+11% y/y). During this period, the Company also recorded an almost two-fold increase in sales on the Asian market (PLN 4.5 million compared to PLN 2.4 million in Q4 2021), thanks to new orders from the science and transport segments. Total sales to Asian markets in 2022 amounted to PLN 12.9 million (+85% y/y).

 

In the fourth quarter of 2022, difficulties related to the availability of components for some products were still visible, and therefore some orders were postponed to subsequent periods. Despite the unfavorable conditions, throughout 2022, in the key industrial segment, we increased revenues by over 30% year on year, and if not for the difficulties related to the availability of components, the revenues of the industrial and transport segments would be even higher. In addition, problems with the availability of some electronic components reduced our year-round contracting in 2022 by approx. 5% - the difficulties, however, concerned only part of the production of detection modules for transport and industrial applications - says Łukasz Piekarski, member of the board and financial director of VIGO Photonics.

 

In total, throughout 2022, the largest share in sales was attributed to industrial applications (58.2% of revenues) - these are detectors for gas analysis, emission monitoring systems and gas leak detection, as well as systems for the latest generation semiconductor manufacturers. Military applications in 2022 accounted for approximately 12% of VIGO's revenues and included detectors used in smart munitions control systems and detectors warning against tracking.

 

The next group in terms of share in VIGO's revenues were transport systems (11.5% of sales) - these are systems for detecting failures in high-speed railways and systems for detecting fires in trains. Scientific and medical applications accounted for approx. 10.6% of sales, and the segment of semiconductor materials for approx. 6% share.

After the cost reduction in the first half of 2022 and the introduction of additional savings, VIGO's operating costs have clearly decreased since the third quarter of 2022. At the end of the third quarter of last year decreased compared to the end of the second quarter of the previous year. by 14%, while in the fourth quarter of 2022 they were comparable to the third quarter (a slight decrease by another 3%). The company also maintains a tendency to significantly reduce general administrative expenses - in the fourth quarter of 2022 they amounted to PLN 3.9 million, compared to PLN 4.6 million in the third quarter and PLN 5.7 million in the second quarter of last year.

 

Our saving measures bring measurable results - we stopped the trend of rising costs despite the difficult market situation. In addition, as we announced when publishing estimates for the fourth quarter, it was "flat" in terms of sales dynamics, primarily due to the postponement of some orders related to the global supply chain and access to components, as well as the price negotiation process, to 2023 with customers, which lasted throughout the fourth quarter of last year - says Łukasz Piekarski.

 

As we informed earlier - from October last year. we have gradually introduced price increases for our products, and negotiations with all customers have already ended. We have successfully introduced price increases of approx. 20-30%, and their positive effects will gradually become more and more visible over the course of this year. We also see a rebound in contracting at the end of the first quarter of this year, which significantly accelerated compared to the level at the end of the fourth quarter of last year. We also see that in April the good dynamics of acquiring new contracts is continued - adds Łukasz Piekarski.

 

In September 2022, a new epitaxial reactor for the production of semiconductor materials was delivered to the company, and production was launched in January 2023. The launch of this reactor will double our production capacity in the semiconductor materials segment, will allow us to serve more customers and start new projects.

 

In 2022, intensive activities related to the development of new products were also underway. One of them was the successful commercialization of a new methane detector, thanks to which the Company recorded a significant increase in revenues at the beginning of 2023 from the American market. In 2022, work also began on a new family of cryogenically cooled detectors and the first significant customers for this type of detectors were won. It was also possible to successfully develop a matrix detector demonstrator for use in thermal imaging cameras for the military.

 

VIGO sales and brand recognition are supported by numerous marketing activities. In 2022, VIGO representatives participated in important scientific conferences and industry fairs, including in the conferences Mirsens, Quantum Structure IR Photodetectors (co-organized by NASA), IQCLSW, FLAIR, E-MRS and at the International Defense Industry Exhibition.

 

VIGO also conducts intensive marketing activities on the American market, where, among others, established cooperation with one of the largest electronic equipment wholesalers in the USA and in the world, Digi-Key Electronics, and also participated in the SPIE Optics and Photonics fair. VIGO also conducts online marketing campaigns aimed at the American market. The company also joined two American photonic clusters - Society of Applied Spectroscopy and Florida Photonics Cluster.

 

One of the undoubted successes of last year, which is also a confirmation of the quality and modernity of VIGO's solutions, was the selection by NASA of the company's detectors for the Artemis mission, completed at the end of 2022. VIGO infrared detectors on this mission were responsible for monitoring the operation of key environmental systems in the Orion spacecraft and allowed the measurement of carbon dioxide, water and oxygen concentrations inside the cabin and suits.

The development of VIGO Photonics as a global organization also required the expansion of the management board - in November 2022, Marcin Szrom, who has extensive experience in the semiconductor and automotive sectors, was appointed to the management board of VIGO Photonics as the Operations Director. supporting the company in improving operational activities, increasing the efficiency of production processes and supply chain management.

 

I joined the VIGO team in an interesting period - the company has very good development prospects and will soon increase its share in the global market. My task in the near future is to improve VIGO's operational efficiency, stabilize and improve the yields and production quality, as well as to prepare a long-term investment plan and development of technological processes - says Marcin Szrom, newly appointed member of the board and COO of VIGO Photonics.

 

The Management Board of VIGO identifies a number of business opportunities enabling further dynamic growth of operations on the global, intensively developing markets of photonics and mid-infrared sources.

 

VIGO is well prepared for expansion in existing and new areas. We are a technological leader in mid-infrared applications, and long-term trends related to the development of technology, in which our products find a wide range of applications, are favorable to us. These megatrends include miniaturization of systems, the Internet of Things (IoT), the development of consumer electronics, the automotive industry and activities related to environmental protection. – says Adam Piotrowski.

 

The global trend related to securing the value chain in chip production and the development of the semiconductor industry in Europe and the USA, as well as a significant increase in security and defense spending by Western countries, is also very important. Therefore, we see very good prospects for us, for example, related to the development of infrared matrix technology for military and space applications, as well as the development of mid-infrared-based photonic integrated circuit (PIC) technology - emphasizes Adam Piotrowski.

 

2023 will also be a year of acceleration in sales growth in the area of ​​our company's core business, i.e. MCT, InGaAs and InAsSb detectors and modules, through further development of R&D and sales teams - sums up Adam Piotrowski.

 

CORPORATE AND INDUSTRY EVENTS

 

• 20 April this year. VIGO Photonics will take part in the 14th edition of the GPW Innovation Day online conference (www.gpwinnovationday.pl)

 

• In the first quarter of 2023, VIGO Photonics participated in the following industry events: SPIE Photonics West (USA) - the largest industry photonics conference in the world, Smart City Summit (Taiwan), Space Industry Days (Poland)

 

• Upcoming trade fairs and industry events: SPIE Optics and Optoelectronic fair (Czech Republic, April), Infrared Colloquium (Germany, May) LASER World of Photonics fair (Germany, June)

 

DEVELOPMENT STRATEGY - PERSPECTIVE 2021-2023

 

In 2021, VIGO presented a new, two-stage development strategy for 2021-2026, in which 6 development initiatives were distinguished - technological areas to strengthen the Company's position as one of the most innovative and dynamically developing enterprises on the market. Until 2023, the Company's goal will be to continue R&D projects in the field of photonic technologies, integrated circuits, detectors made of III-V materials, epitaxy of semiconductor materials and infrared source technology. The technological and technical base will be developed. Due to the current market situation, the Company is currently focusing on strategic initiatives that contribute most to the growth of revenues in the short term. The second stage of the strategy will be implemented until 2026 inclusive and will consist in the implementation of selected development initiatives.