CrayoNano - Q&A - Q1 2024 Results Webcast - 23 May 2024
CrayoNano - Q&A - Q1 2024 Results Webcast - 23 May 2024
https://crayonano.com/file/CrayoNano-Q1-FY2024-Trading-update_consolidated_QA-23052024.pdf
1. How confident are you in converting the pipeline and the scaling of revenue?
{Answered by Dr. Michael Peil, SEVP & CRO)
We remain highly confident that we can continue both building as well as converting our pipeline. As detailed in our release this morning, we are in active discussions with a number of global names, some advanced, which could meaningfully scale revenue in the near to medium term, and we hope to announce a further new contract as well as other partnerships shortly.
The current weighted pipeline in 2024 has a value of NOK 67m, and due to the profile of the global names we are in discussions with, even if we land just a few we would progress to a highly scaled and subsequently profitable business. We calculate our weighted pipeline using probability factors, with higher percentages the closer to signing, for example the testing stage with a customer is assigned a 20% probability factor.
We continue to have an order book of a minimum NOK 13m value to be delivered in 2024, with opportunity to both add new meaningful contracts as well as increase the value of each of the five first frame contracts already secured beyond the initial volume amounts. We are confident that revenue will build as the year progresses, with it likely to be second-half weighted due to current lead-times.
2. What is the reason for the recent CEO change? And what skills does Thomas bring to the business, and what are his key priorities?
(Answered by Jens Kielland, CFO)
It was always the intention that I would temporarily hold the role of acting CEO, and ultimately reassume the CFO role to which I was appointed in April 2022. Bringing in Thomas to work alongside me allows CrayoNano to benefit from new and highly relevant expertise and experience, and expands the breadth and skills of the Executive Team. As detailed in the release, Thomas has extensive global experience in client engagement as well as technology development, from the semiconductor and photonics industry.
(Answered by Dr. Thomas Dobbertin, CEO)
As mentioned earlier, my key priorities will be to ensure leading price performance underpinned by flawless operational execution to convert the well filled opportunity funnel into a commercial success. My experience in managing high value and fast-growing business in pioneering semiconductor and opto-electronic technologies and global markets will be instrumental to drive the long term development of the company based on a high performance organizations anchored in Asia and Norway.
3. Can you give more detail on the financing referenced in the presentation? Both the short-term and longer-term funding.
(Answered by Jens Kielland, CFO)
We have a near-term funding requirement and been rapidly progressing very constructive discussions. Per the presentation we hope to be in a position to provide an update on shortterm funding very shortly, with any offer being made available to all shareholders on the same terms.
As also detailed in the presentation, we are working on securing more longer-term funding to fully support the ongoing progression of our strategy. This could take the form of loan notes or other forms of debt, or investment by strategic investors, or a combination, and again we will provide an update as soon as we are able. Strategic investors could be companies within the wider related industry with complementary operative- or strategic activities, or other synergy potential.
We also have other sources of financing available, such as public funding and grants which we have previously secured, as well as credit facilites. We continue to have a credit facility of NOK 12m, and as previously outlined is it highly feasible that we can increase that to NOK 25m as we scale up revenue. It is linked to working capital needs and receivables.
4. How is the product development roadmap progressing? Has the timetable for the launching of the next generation product been extended?
(Answered by Jens Kielland, CFO)
We have made further progress in the development of our UV-C LEDs in the period, and importantly are continuing to grow the total addressable market and applications for our product through ongoing technology and pricing. Through recent engineering, we have been able to achieve a first progress and could reduce the price by about 10%, providing benefits to customers and improving their competitiveness in the market. We are still targeting to implement a significant step forward to a market leading position by reducing the priceperformance parameter further targeting for substantially, with pilot products planned for end of 2024, followed by production and deliveries in 2025.
{Answered by Dr. Michael Peil, SEVP & CRO)
Driving down the price-performance KPI is key for growing the total addressable market by becoming competitive against other disinfection technology in more and more disinfection applications and for high volume market segments. The current main competing technologies are UV lamps and chemical cleaning, with both having several drawbacks. Chemical cleaning isn’t environmentally friendly, whereas UV lamps are mercury based, need more service maintenance, and are bulky, which aren’t well suited for smaller applications. The total cost of ownership of disinfection systems is most important for the end-customers and an integral part for our UV-C LED component and the system designs of our partners and customers.
5. What further operations can you move to Taiwan?
{Answered by Dr. Michael Peil, SEVP & CRO)
Following the considerable progress in 2023, we continue to look at optimising our operating structure and introducing further efficiencies, including through increasing operative business in Taiwan which can be considered as the home of the semiconductor industry. Taiwan produces over 60% of the world's semiconductors and over 90% of the most advanced ones. We are currently in the process of onboarding and qualifying samples for a package foundry partnership and are confident to sign a contract at some point in 2024. By moving more of our supply chain operations to Taiwan, we can generate significant cost savings which is in line with our fab-lite business model, as well as grow our capabilities, capacity, and excellence.
6. How many blue-chip names are you in discussions with? And for what kind of contracts?
{Answered by Dr. Michael Peil, SEVP & CRO)
We obviously can’t provide much detail as we are bound by NDAs / confidentiality agreements, and it would be too premature as we want to secure results first, and timings are largely led by our customers. What we can say is that we are engaged with several different parties and started our engagement with them ahead of our initial expectations. The quality of our product and service has already attracted and convinced first market influencing OEMs who have already started their strategic supplier onboarding programs with us. The overall process with customers entails different stages, so our overall work with them will cover several years. As we are focusing on top tier customers the lead-times are longer. For example, design-ins typically currently have lead times of 12 months or longer.
7. When do you anticipate becoming breakeven? And what volume could your current infrastructure support?
(Answered by Jens Kielland, CFO)
We estimate that our current infrastructure can support both the current NOK 13m order book and the whole NOK 67m weighted pipeline for 2024. We follow a fab-lite strategy whereby capex requirements are low, and importantly have already made the necessary investment including on purchased inventory to deliver the NOK 13m order book. We have detailed an outline breakeven modelling in our release and presentation, which is very achievable in the near to medium-term given our active discussions with global names and focus on an optimal operating structure and efficiencies. Per our modelling, if we land all the weighted projected sales revenue pipeline for both 2024 and 2025, we would be breakeven / profitable. However, it is important to note that the weighted pipeline is a projection and can change upwards as well as downwards.
https://crayonano.com/file/CrayoNano-Q1-FY2024-Trading-update_consolidated_QA-23052024.pdf
1. How confident are you in converting the pipeline and the scaling of revenue?
{Answered by Dr. Michael Peil, SEVP & CRO)
We remain highly confident that we can continue both building as well as converting our pipeline. As detailed in our release this morning, we are in active discussions with a number of global names, some advanced, which could meaningfully scale revenue in the near to medium term, and we hope to announce a further new contract as well as other partnerships shortly.
The current weighted pipeline in 2024 has a value of NOK 67m, and due to the profile of the global names we are in discussions with, even if we land just a few we would progress to a highly scaled and subsequently profitable business. We calculate our weighted pipeline using probability factors, with higher percentages the closer to signing, for example the testing stage with a customer is assigned a 20% probability factor.
We continue to have an order book of a minimum NOK 13m value to be delivered in 2024, with opportunity to both add new meaningful contracts as well as increase the value of each of the five first frame contracts already secured beyond the initial volume amounts. We are confident that revenue will build as the year progresses, with it likely to be second-half weighted due to current lead-times.
2. What is the reason for the recent CEO change? And what skills does Thomas bring to the business, and what are his key priorities?
(Answered by Jens Kielland, CFO)
It was always the intention that I would temporarily hold the role of acting CEO, and ultimately reassume the CFO role to which I was appointed in April 2022. Bringing in Thomas to work alongside me allows CrayoNano to benefit from new and highly relevant expertise and experience, and expands the breadth and skills of the Executive Team. As detailed in the release, Thomas has extensive global experience in client engagement as well as technology development, from the semiconductor and photonics industry.
(Answered by Dr. Thomas Dobbertin, CEO)
As mentioned earlier, my key priorities will be to ensure leading price performance underpinned by flawless operational execution to convert the well filled opportunity funnel into a commercial success. My experience in managing high value and fast-growing business in pioneering semiconductor and opto-electronic technologies and global markets will be instrumental to drive the long term development of the company based on a high performance organizations anchored in Asia and Norway.
3. Can you give more detail on the financing referenced in the presentation? Both the short-term and longer-term funding.
(Answered by Jens Kielland, CFO)
We have a near-term funding requirement and been rapidly progressing very constructive discussions. Per the presentation we hope to be in a position to provide an update on shortterm funding very shortly, with any offer being made available to all shareholders on the same terms.
As also detailed in the presentation, we are working on securing more longer-term funding to fully support the ongoing progression of our strategy. This could take the form of loan notes or other forms of debt, or investment by strategic investors, or a combination, and again we will provide an update as soon as we are able. Strategic investors could be companies within the wider related industry with complementary operative- or strategic activities, or other synergy potential.
We also have other sources of financing available, such as public funding and grants which we have previously secured, as well as credit facilites. We continue to have a credit facility of NOK 12m, and as previously outlined is it highly feasible that we can increase that to NOK 25m as we scale up revenue. It is linked to working capital needs and receivables.
4. How is the product development roadmap progressing? Has the timetable for the launching of the next generation product been extended?
(Answered by Jens Kielland, CFO)
We have made further progress in the development of our UV-C LEDs in the period, and importantly are continuing to grow the total addressable market and applications for our product through ongoing technology and pricing. Through recent engineering, we have been able to achieve a first progress and could reduce the price by about 10%, providing benefits to customers and improving their competitiveness in the market. We are still targeting to implement a significant step forward to a market leading position by reducing the priceperformance parameter further targeting for substantially, with pilot products planned for end of 2024, followed by production and deliveries in 2025.
{Answered by Dr. Michael Peil, SEVP & CRO)
Driving down the price-performance KPI is key for growing the total addressable market by becoming competitive against other disinfection technology in more and more disinfection applications and for high volume market segments. The current main competing technologies are UV lamps and chemical cleaning, with both having several drawbacks. Chemical cleaning isn’t environmentally friendly, whereas UV lamps are mercury based, need more service maintenance, and are bulky, which aren’t well suited for smaller applications. The total cost of ownership of disinfection systems is most important for the end-customers and an integral part for our UV-C LED component and the system designs of our partners and customers.
5. What further operations can you move to Taiwan?
{Answered by Dr. Michael Peil, SEVP & CRO)
Following the considerable progress in 2023, we continue to look at optimising our operating structure and introducing further efficiencies, including through increasing operative business in Taiwan which can be considered as the home of the semiconductor industry. Taiwan produces over 60% of the world's semiconductors and over 90% of the most advanced ones. We are currently in the process of onboarding and qualifying samples for a package foundry partnership and are confident to sign a contract at some point in 2024. By moving more of our supply chain operations to Taiwan, we can generate significant cost savings which is in line with our fab-lite business model, as well as grow our capabilities, capacity, and excellence.
6. How many blue-chip names are you in discussions with? And for what kind of contracts?
{Answered by Dr. Michael Peil, SEVP & CRO)
We obviously can’t provide much detail as we are bound by NDAs / confidentiality agreements, and it would be too premature as we want to secure results first, and timings are largely led by our customers. What we can say is that we are engaged with several different parties and started our engagement with them ahead of our initial expectations. The quality of our product and service has already attracted and convinced first market influencing OEMs who have already started their strategic supplier onboarding programs with us. The overall process with customers entails different stages, so our overall work with them will cover several years. As we are focusing on top tier customers the lead-times are longer. For example, design-ins typically currently have lead times of 12 months or longer.
7. When do you anticipate becoming breakeven? And what volume could your current infrastructure support?
(Answered by Jens Kielland, CFO)
We estimate that our current infrastructure can support both the current NOK 13m order book and the whole NOK 67m weighted pipeline for 2024. We follow a fab-lite strategy whereby capex requirements are low, and importantly have already made the necessary investment including on purchased inventory to deliver the NOK 13m order book. We have detailed an outline breakeven modelling in our release and presentation, which is very achievable in the near to medium-term given our active discussions with global names and focus on an optimal operating structure and efficiencies. Per our modelling, if we land all the weighted projected sales revenue pipeline for both 2024 and 2025, we would be breakeven / profitable. However, it is important to note that the weighted pipeline is a projection and can change upwards as well as downwards.