VIA optronics AG (VIAO) has filed to raise $100 million in an IPO of its ADSs representing underlying ordinary shares, according to an F-1 registration statement.
The firm provides enhanced display electronics for various markets.
Nuremberg, Germany-based VIA was founded to design and manufacture a range of display technologies with a wide array of sizes and form factors using proprietary processes.
Management is headed by founder and Chief Executive Officer Mr. Jurgen Eichner, who was previously Head of Sales EMEA for White Electronics Design Corporation.
Below is a brief overview video of VIA optronics:
Source: VIA optronics GmbH
VIA’s partners or major customers include:
- BMW
- Ferrari
- 3M
- Dell
- GE
- Siemens
- HP
- Lenovo
- Sharp
The company’s primary business segments are:
- Automotive solutions
- Consumer electronics
- Industrial & specialized
VIA has received at least $3.5 million from investors including Cooperatif IMI Europe and Corning Research & Development
The firm pursues OEMs across a range of markets through a direct sales force and marketing team that attends relevant trade shows and conferences.
The company has a global presence, with production sites in Germany, China and Japan.
Management intends to focus its efforts on acquiring new customers in the automotive and industrial/specialized segments, apparently deemphasizing the consumer electronics segment.
The firm is also deepening a relationship with display technology firm Corning ‘to utilize cold forming technology.’
Selling expenses as a percentage of total revenue have risen to 3.4% as revenues have decreased.
The Selling efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling spend, dropped to negative (4.3x) in the most recent reporting period.
According to a 2019 market research report by Global Market Insights, the global market for automotive displays was an estimated $15 billion in 2018.
This represents a forecast CAGR of 10% from 2019 to 2025.
The main drivers for this expected growth are an increase in the sales of passenger cars, with many of them now featuring a center stack display.
Also, the demand for improved safety systems and greater feature functionalities will continue to increase demand for advanced display technologies.
Major competitive or other industry participants in the firm’s various business segments include:
- AU Optronics
- INX
- Tianma
- JDI
- SHARP (SHCAY)
- Continental
- Alpine
- TPK
- Henghao
- Shenzen Laibao Hi-Tech
- GIS
- Mutto
- O-film
VIA’s recent financial results can be summarized as follows:
- Contracting topline revenue
- Increased gross profit and gross margin
- A swing to operating profit
- Uneven and recently negative cash flow from operations
Below are relevant financial results derived from the firm’s registration statement:
Source: Company registration statement
As of June 30, 2020, VIA had $8 million in cash and $85.8 million in total liabilities.
Free cash flow during the twelve months ended June 30, 2020, was $6.65 million.
VIA intends to raise $100 million in gross proceeds from an IPO of 6.25 million ADSs representing underlying ordinary shares at a proposed midpoint price of $16.00 per ADS.
Existing shareholder Corning also intends to purchase $21 million in shares at the IPO price in a concurrent private placement.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $356 million, excluding the effects of underwriter over-allotment options.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 27.7%.
Management says it will use the net proceeds from the IPO as follows:
approximately $15 million for research and development, including research and development relating to interactive display solutions and other camera-enhanced displays, three dimensional displays, new sensor technologies, software enhancements and embedded computing;
approximately $25 million for potential acquisitions of targets that could enhance our interactive solutions for the automotive and/or industrial/specialized markets although we do not have agreements or commitments for any material acquisitions at this time;
approximately $4 million for expansion of our sales, marketing and distribution teams;
approximately $13 million for improvements in and expansion of our existing production capabilities, including with respect to cold forming production by improving automation and expanding capacity in our facilities in Germany and Japan and expanding our manufacturing facilities in new geographies; and
the remainder for general corporate purposes, including, without limitation, working capital.
Management’s presentation of the company roadshow is not available.
Listed bookrunners of the IPO are Berenberg and Craig-Hallum Capital Group.
Commentary
VIA is seeking U.S. public capital to fund its refocusing efforts on the automotive and industrial/specialized display sectors.
The company’s financials show contracting topline revenue but a swing to operating profit and positive trailing twelve month free cash flow.
Selling expenses as a percentage of total revenue have risen slightly; its Selling efficiency rate has worsened and customers have delayed orders, in part due to the effects of the Covid-19 pandemic.
The market opportunity for display technologies is large and expected to grow significantly in the years ahead.
Berenberg is the lead left underwriter and the firm has not led any IPOs over the last 12-month period.
As to valuation, a basket of publicly held Electronics (General) firms as of January, 2020 had an average EV/ Revenue multiple of 1.99x.
VIAO management is asking IPO investors to pay an EV/Revenue multiple of 2.49x despite contracting topline revenue.
While I understand the firm’s contracting topline revenue in the current year to-date, the previous year also featured contracting revenue, which is a cause for concern.
I imagine management is deemphasizing the consumer electronics display market due to margin compression.
In any event, the valuation at IPO, despite Corning’s concurrent private investment, appears to be pricey in the current Covid-19 environment, as we don’t have any visibility into when revenue will begin to grow again.
Given recent negative performance, the IPO price and future revenue trajectory uncertainties, my opinion on the IPO is NEUTRAL.
Expected IPO Pricing Date: September 24, 2020.
Glossary Of Terms
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
To receive automatic notification of new IPO activity, click the “+ Follow” button.