Meyer Burger Technology AG (MBTN) Earnings Call Transcript & Summary

Dear shareholders, dear investors, ladies and gentlemen, my name is Gunter Erfurt. I'm the CEO of Meyer Burger Technology, and I have the pleasure to welcome you to our virtual fiscal year 2020 presentation. Today, we will present to you the fiscal year results but will, moreover, focus on the transformation of our business, of our company and the milestones achieved, and we'll also give you an outlook of the coming period and the coming years. Please let us go through the milestones of last year, of this year of enormous transformation of Meyer Burger. Exactly a year ago, we presented to you our results of the year 2019, and the company was at a very, very critical point. And the Board of Directors had decided to evaluate an option of Meyer Burger entering into our own solar cell and solar module business. And a year later, we are standing here with many, many milestones achieved and with 2 factories being currently equipped with new tools in order to start the production ramp of our new business in the second quarter of this year. But before we go into the fiscal year results and the details of our business model transformation, let us review the last year together. So we started in March with the decision to evaluate this new option and worked very hard on a share capital increase, which was only possible because of your trust in our company and in our new business model. With the CHF 165 million gross proceeds, we can now do this transformation. And we have done more than this. We have also strengthened our team. We have identified and hired our new group CFO, Mr. Jurgen Schiffer, who will speak to you today, and we have as well hired our Managing Director, Moritz Borgmann, who is responsible for the commercial and sales side in our new business. We have also continued restructuring the company and concluded the sale of our PiXDRO business in April 2020 end, of our plasma technology business Muegge and also were able to repay the bond of the company. Before we go into the detailed discussion of our new business, I would like to hand over to our group CFO, Mr. Jurgen Schiffer, for the public -- publication of the fiscal year results 2020.

Hello. I'm Jurgen Schiffer. I'm the new CFO of Meyer Burger. I'm presenting you now the financial statement 2020 of Meyer Burger group. 2020 is a year of the transformation. Transformation means a transition from the old business model to the new business model. All activities and events are reflected in these financial statements. The figures, results are as expected. So please let's step in, in the presentation of the key figures, the balance sheet, the income statements and, of course, to the result. Comparing to the last year, we see the sales at CHF 90 million -- reduced to CHF 90 million, which is not a surprise. The EBITDA, of course, comes from CHF 1 million to minus CHF 45 million. And now the net result declines from minus CHF 23 million to minus CHF 64 million. So let's have some good news. We will see the cash, cash equivalents in 2020 at CHF 150 million. Also, if you take a closer look to the financial liabilities, current and noncurrent, it is near 0. Also, the liability ratio is about 12.5%, which is quite good news. In the balance sheet, let's start from below at the equity. Equity was about CHF 260 million. We have an equity ratio of 88%. Last autumn, we repaid our convertible bond of about CHF 26 million. This results through a financial liability, nearly 0, as I already mentioned. Also, we have a net debt of about CHF 157 million, which is a quite good message, I mean. Let's take a look to the asset side. We step in the cash and cash equivalents with an amount of about CHF 140 million. I'll show you here the cash bridge. We started end of 2019 at CHF 36 million. Have a deeper look in the operating cash flow, minus CHF 35 million. Then, of course, we sold business, got some cash, CHF 23 million, also restricted cash, we got free out of the running business. And of course, we already mentioned convertible bond, minus CHF 27 million. And we have, of course, a capital increase of CHF 155 million. And here's a minus CHF 21 million, you see us investments in the new business, which results to our CHF 150 million. With this CHF 17 million restricted cash, we have already in cash CHF 157 million. We focus already on the asset side to the working capital management. Out of the business flow, reduction of production and sales of the old business model. We have also reduction in the working capital management, in trade receivables, inventories and, of course, the trade payables. Another important slide would be the property, plant and equipment. We started 2019 at CHF 33 million. And also see here preinvestments of -- the investments in the Project Indium is CHF 18 million. And of course, some debt investments we did last year, the result 2020 is 80 -- CHF 33 million. Let's go to the income statement, please. We have, as already mentioned, CHF 90 million net sales. If you take a closer look to the order backlog from last year, you see that fits to the business from last year. Our operating income results to CHF 37 million, which gave us some buffer, but it's not enough. Minus operating expenses, we'll see a result of the EBITDA is minus CHF 45 million. Minus depreciation and amortization, we have a net result at the end of CHF 64 million. And here, we close the cycle with some of my words at the beginning, so this is a result of the financial statement 2020. Thank you.

Thank you, Jurgen, for presenting our financial figures of the year 2020, which obviously reflect our transformation of our business model. And speaking about transformation, I have now the pleasure and honor to unveil Meyer Burger's new brand and corporate identity. We've been working very, very hard in the last weeks and months, together with the great team of Jung von Matt and our sales and marketing people in Meyer Burger to create something new, something really fresh that also shows the transformation and the big steps that Meyer Burger is currently taking. And of course, we are a company of almost 70 years history, and we have a very, very strong and great tradition. And we will, of course, take all our good characteristics of our company into the new era and leave the elements behind, which are no longer needed. And with this, I have the pleasure to launch our new brand. [Presentation]

And here we go. The new Meyer Burger was born, and I hope it is as exciting for you as it is for us. And now with this new company, I would like to give you an update on the company transformation. Let me start with a few impressions of our new sites. This is the still empty solar cell manufacturing hall in Thalheim in Germany. And please don't be afraid building a solar cell factory is like building a house or refurbishing a house. There has a lot to do before you move in on the last weekend, usually, your furniture, and it is pretty similar also in our case. It doesn't take us only a weekend to move in our equipment, but please be assured the equipments were already built or are currently in the works at Meyer Burger and at our partners, and we will move them in beginning middle of April. In flyback, we have already in January, moved in the first smart wire production line and started already producing prototype and certification modules, which are currently in the works of certification with our certification body partner, and we expect the certification to be ready at the end of May, beginning of June. And of course, while we are building our factories, we are not standing still in our R&D. We have continued working in our IBC laboratory at Meyer Burger research in Neuchâtel in Switzerland. And have also continued developing new high quality and high-performance products, solar modules in Thun in Switzerland. The heterojunction solar cell factory in Thalheim was leased with an effective start date of September 2020, and we have since then started and done the refurbishment of the building. Much had to be done and is still to be done in terms of introducing and implementing our facility utility systems before we can move in and hook up our equipments. And in March 2021, we finally received our building permits, which is not too late. I can assure you this is coming at the right time, and we are now doing all the building work that is needed in order to get this factory started. And we will also, in March, with the receipt of the building permit continue doing department-ing work for our envisioned expansion of 1.4 gigawatts. And we have, of course, also commissioned all our suppliers and partners, and they are working now on their contribution to our success. In April 2021, we, as I said, will start the move in of our equipment, and we will, by then, also have the critical elements of the supply chain secured. Much of it is already done, but we have still some work that is -- that needs further focus. In May, we will have the grand opening ceremony when we officially open our factory and start the ramp of the production. And also, the hiring process is going to be completed in June. That's our expectation. We are well on track there. And with a great team on board and all the equipments installed, we will look forward to closing and finalizing the ramp of the first open gigawatts of 400 megawatt of solar cell manufacturing in July, August time frame of this year. In our solar module factory in Freiberg, the time line looks pretty much exactly the same, of course, it has to with the solar cells being shipped from Thalheim in our factory and then completed into our leading smart wire heterojunction modules. We have done the transfer of title in August and take -- took possession of the building and then also started refurbishing the line. The project there runs a little bit different because it's an existing line with all the automation systems and equipments in place, which need to be rearranged in many ways and upgraded. And the way we do this work is a little bit different than what has to be done in Thalheim, but we are on the same good track there as well. And with the movement of the first line already in January, we were able to produce the first modules in February and continue to build further test modules. And the factory opening, of course, will as well be at the end of May, and we will then have started -- we'll start the ramp and complete the hiring, and we'll complete the ramp-up of the 400 megawatt in the same time period as the solar cell line. The CapEx project, all our capital committed and spent with regard to the 400-megawatt project is well on track, and it's more than well on track because we were able to already do some work, which is required for a fast track implementation of the next expansion step reaching 1.4 gigawatt in nameplate capacity as soon as we have closed the financing for this next project. And if you look at the split of our CapEx committed, then the majority, as expected, goes into the cell line because the equipment is all brand new, the facility utility systems are brand new, whereas in the module, we can refurbish the existing line. And we have spent a little bit more than 20%, as I said, already on the potential fast track implementation for our 1.4-gigawatt factory. We have a very strict supplier management in place to control both schedule and cost. And any factory and any great equipment is not good if you don't have a great team, and our team is already there or waiting in the wings to start working on our vision. We were able to identify and to hire very senior and seasoned PV experts in many, many fields, especially in the areas where Meyer Burger did not have a team in place in our old business model. So namely speaking about marketing, speaking about sales, speaking about the sales also in the United States. And we have been able to hire already 90% of the leadership team that is needed for the implementation of the new business model. And this is a great success, and I'm -- I can only be very grateful and thankful to our HR team, who did a brilliant job. And the other positions for especially blue collar workers, operators, maintenance people is planned to happen in the second quarter because we do this aligned with our production ramp plan and, of course, also aligned with our business plan. And with this, I would like to hand over to Moritz Borgmann to give us an update on the sales and marketing side.

Thank you very much, Gunter. My name is Moritz Borgmann. I'm the new Managing Director at Meyer Burger, responsible for all the commercial aspects, including sales and marketing. And today, I would like to give you an update on the sales and marketing preparations that we have been making over the past few months in preparation of the market entry with our new Meyer Burger PV module. And I'm really excited to now be here and to be working on introducing the new Meyer Burger product to the market. It could really not be at a better time. When we look at the renewable energy markets and PV markets, specifically, the markets are booming. We're seeing a lot of policy tailwinds, among them, the EU Green Deal, the Biden administration has been elected in the U.S., and we expect them to enact a lot of very favorable policies for renewables and solar energy. And against this backdrop of a truly booming solar market, now Meyer burger is entering the market also with a unique product. The product is unique because we have a unique technology, the heterojunction SmartWire technology. And for the first time in the history of the solar industry, we will be able to offer a high-performance product that offers the highest performance available in the market, but at the same time, can manufacture these products at a very low cost, that is, in fact, comparable to the manufacturing cost of the standard PERC technology. And this offers us a great basis to really serve all market segments, namely the premium part of the residential and small commercial rooftop sector, but also, over time, gradually more and more, we can also serve the large-scale, utility-scale sector. And in that sense, the technology enables a unique business model. We can offer this high-performance product, but at the same time, quite easily scale to multi-gigawatts because we can scale, we can serve the utility scale, large-scale markets. However, of course, we know that at the beginning, we will have a -- we will start the market entry with the capacity of 400 megawatts. And so it is quite natural that we will, thereby, enter the market in the residential and small commercial rooftop sector. And we will offer this sector -- we will enter this sector with a product that we believe is very differentiated and has a number of unique features that will make it very compelling to our customers. So first of all, of course, due to the technology, the product offers among the highest performance PV panels that can be bought today in the market. The panels that we will make will also offer highest production quality. The lifetime of the panels will be exceptional. The product will offer very low degradation over time. And again, this is due to the unique features of our technology. The panel will also offer appealing aesthetics, and you see a glimpse of our product here on the left side. It will look quite uniformly black, and this is really no comparison to many of the sort of older traditional solar modules that are not necessarily -- that don't necessarily offer the high aesthetics that we will. And of course, this is really a new -- quite a new feature, we will manufacture ourselves and the modules in Europe, in Germany, at our sites in Freiberg in Wolfen and in Saxony-Anhalt in Bitterfeld. So this is the revival of the European solar industry. Now truly with a deep value chain, we will make ourselves with our proprietary technology, the technology featuring, of course, Swiss innovation that has been developed over the past 10-plus years. What's also very close to our hearts and very important for us is that our product is not simply a sustainable product because it is a solar panel, but also because the solar panel is being made in a sustainable fashion. So we will adhere to the highest environmental and social standards when we make our panels. And we'll also differentiate that way. We are very aware and are looking very closely into what our suppliers are doing so that we can also ensure that our suppliers are adhering to the same high standards that we are -- that we have. And also, this is also a first in the solar industry. We will be able to offer a solar panel that, for the first time, is actually free of the highly toxic lead, which so far is a standard ingredient of solar panels. And last but not least, I also generally think that we will be able to tell a totally different story to what our competitors are telling. This is, of course, a factor due to the fact that we are manufacturing here in Europe, but also a function of the people that are behind Meyer Burger and the great team. And so you may have read about us in the media in the past couple of months. And we truly stand for the revival of the European solar industry. Now this great product, of course, also needs great marketing. And with the help of our partners, among them foremost, of course, the renowned marketing agency Jung von Matt, we have been working over the past few months on totally reinventing Meyer Burger. Meyer Burger's business model has been reinvented and so will be the appearance. And so what you're seeing here today, and Gunter has just unveiled the new logo and the new corporate identity, is a new identity that stands for our new product, which is now a solar panel, and that is a premium solar panel. We quite deliberately chose to keep Meyer Burger as the brand. We think that Meyer Burger has a great heritage, and we totally want to keep that heritage. This rebranding will then, of course, be the basis for a marketing campaign that we will launch starting in later in Q2. Now coming to our sales strategy. So we will be entering the market in the residential and small commercial sector, starting in -- at the end of Q2, beginning of Q3. And our sales approach is a 3-stage approach that means that we will sell to wholesalers, distributors who, in turn, sell the product to installers. And they then sell the PV module together with the entire kit that it takes to assemble a PV system to the end customers. And we're currently in discussions with many of our future customers and distributors and are selecting a strategic portfolio of distributors, approximately 50 in Europe, which will then distribute our product in the future. And we have also, in the course of these discussions, confirmed the price assumptions for our product in the business plan. Now coming to our time plan. Today, we're launching the new brand. In about a month from now, in April, we will launch the PV panel. We'll launch the product, and the panel will then be for sale and installers will be able to purchase the Meyer Burger PV module and sell it to end customers. And then, of course, last but not least, we will be presenting the products at Intersolar EU in Munich in July. And at the same time, as I said, the marketing campaign will also be launched in April. Now one more thing. What we have seen with, as I mentioned, we're very pleased to see the policy developments and the general market dynamics in the U.S. We think the dynamics are very favorable. And this is why we have decided to accelerate our market entry in the U.S. So far, we had only planned to enter the U.S. in 2022. Now given the market environment, we will already enter the U.S. this year. And to this end, we have made a great hire. Mr. Ardes Johnson has already come on board at the beginning of March, and he will serve as the President of Meyer Burger Americas and will be responsible for the sales in the U.S. and the Americas in general. And for that purpose, we will reuse the existing Meyer Burger's sales and service organization. And so with this background, we expect substantial sales already in 2021. With this update, I would like to thank you and hand over back again to Gunter.

Moritz, thank you for this update on our sales and marketing efforts. I believe we have made great progress in our project, and we are now ready to enter the market with our differentiated product in April and shipments starting from the second quarter -- end of second quarter of this year. Dear shareholders, let me now close this presentation with an outlook. There's no business without risks. And while these risks remain, we can confirm our communicated guidance. And we do our level best to keep the risks at the low profile and manage them carefully. Some of the initial risks we had identified, we have already completely under control. There is one element, for instance, which is the hiring of a top team, as we explained, is already almost closed for the 400 megawatt and well prepared for the upcoming expansions. And speaking about the upcoming expansions, we believe the solar market is just growing and the sun is shining bright on Meyer Burger. As we have explained, we see a forecasted annual growth rate of more than what Meyer Burger has originally assumed in our own planning. And we are now ready to enter the market with this great tailwind. And we have also prepared our factories for the next expansion. We are doing our best to have a ready full equipment factory that means as soon as we have the financing closed for the next expansion, we are ready to move the additional equipment in and start the ramp as soon as possible. And with this next expansion, we are entering the gigawatt scale of manufacturing. This is needed for us and welcomed because we can, with this capacity, enter into the utility market as a second strong pillar of our new business. And we hope that our presentation answered already most of your questions. And if not, so then we are now open for a Q&A. Thank you very much.

Ladies and gentleman, this was our presentation part. And so now we are entering into a Q&A session. And before we do this, I can firmly assure you that this morning, the 3 of us did a COVID-19 test, and it was negative. Otherwise, we wouldn't sit here so closely together without wearing a mask. So this is all okay and tested. So let's start with the questions that we received via the chat function. And I will be reading them for everyone to hear them and then we will, among the team, share the answers. One question we received is, since last summer, there have been huge price increases in energy for energy-intense wafer production, for solar glass production. Will this result in higher prices? Will these changes lead to increases in manufacturing costs of your PV modules compared to your plan? So I think we can answer it in -- or split the answers focusing on the sales side, and on the other hand, on the cost side. So it's true that currently, we are in a sellers' market situation for at least some components currently affecting the industry. One is PV glass which -- whose prices have increased in the last weeks and months, the same also for wafers. On the other hand, this is also reflected in the ASPs. We have to speak about the cost side and the materials. We have secured as much material as we could for our ramp. So this is not yet fully done, but to an extent where we believe we can start our production without interruptions and also pretty much meeting our cost targets according to the business plan. But for the other part of the answer, I would like to refer to Moritz to walk us through the effects on the sales side on the ASPs.

So obviously, the changes in the global supply chain are also affecting our competitors quite negatively. And so in fact, we are benefiting from that on a relative basis because the transport costs have been increasing quite drastically over the past couple of months.

Another question refers to our REC project, where we have delivered a solar cell and module line. And the question is, if there's still any outstanding money from REC, and if so what amount? So we cannot disclose the amount, but the answer is yes. There is still some outstanding money. The project is not entirely closed, and we are currently working on it. The line itself, however, is running at full speed to the extent we can tell. So we expect the closure of this project pretty soon. Another question refers to the next or further finance growth. When does Meyer Burger intend to raise further equity to finance growth? So for the time being, we do not have firm plans to raise further equity. We are currently working on a debt financing to finance the next expansion step, and we are in very close discussions with the respective partners. And according to our communication, we are expecting the closure of this financing at the end of the year, beginning of next year at the latest, and, of course, do our level best to pull the schedule in as much as possible. And for the time being, there's -- there are no firm plans with regards to raising further equity. Does Meyer Burger have sufficient cash reserves is another question. If we announced that financing does not materialize, so that fits perfectly fine to the previous question, will Meyer Burger still be cash positive in the 400-megawatt business case according to today's knowledge? So I would like to answer the last part of the question and then hand over to Jurgen for the first part. As we have communicated back in June 2020, we according to today's assumptions and the business plan believe that already with a 400 megawatt fully loaded factories. So this will not be relevant for this year. But for next year, we expect to reach breakeven at the EBITDA level. And so we believe that we are well financed to -- for this first initial capacity. And regarding the cash results, I would like to hand over to Jurgen.

Thank you, Gunter. I would support a statement from Gunter. So we have sufficient cash reserves. So it was planned for the first steps, the 400 megawatt, the CapEx and, of course, the operating cost to finance the operating costs. And we are safe for that phase, and we are planning, of course, for the second phase. So financing for the further steps. So it is fine for us.

Thank you, Jurgen. Another question relates to a sales topic, sales forecast topic. Is there a reliable sales focus for Q3 '21 to Q2 '22 already available? Moritz?

So given the advanced stage of discussions with our customers and the generally very positive feedback that we're getting, our current assumption is that we will not be limited by demand and that we will be able to sell the product that our factory will be producing.