ams-OSRAM AG (AMS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call on the abstract publication about ams-OSRAM reassessment of the [indiscernible] strategy. I am George, the call's operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Juergen Rebel, head of investor relations. Please go ahead.

Good morning, and this is Juergen speaking. Thank you for joining us on such short notice. In the call today, we have Aldo, our CEO; and Rainer our CFO. We wanted to give you the opportunity for questions and answers after last night's ad hoc notice, and we're happy to do so after some introductory remarks by Aldo and Rainer. Aldo, please go on.

Thank you, Juergen, and welcome, everybody, and thanks for joining on short notice. Yes you are as surprised as we probably were yesterday by the reason for this call. We were informed that the cornerstone program that we've been working on for a number of years now has been canceled. On the microLED side and that, of course, caught us by surprise and also caught us off balance, if you will. We have been making, I think, very solid progress over the last years on the technology. And therefore, were clearly expecting this program to continue and to become a launchable product in the near future as we have also discussed with you. But the customer has decided otherwise, as we were informed. The -- yes, the shock is still there, I must say. We just came out of also our internal communication with our employees, and our teams, and they have been working extremely hard on this, both on the technology and R&D side where we have solved over time, many very difficult results. Result's important for this technology to be resolved. And we think -- we continue to think that we have a very strong technology base here. And as on the operations side where the Kulim factory was built in record time and is also on the operational side and start to also contribute the development effort. So the teams are, of course, also very disappointed and are wondering about the next steps like you are normally speaking, we are in the process of absorbing the clout ourselves. It is film application space and technology space that is exciting the prospect had appeal for us. At the same time now with the cornerstone program being canceled, it just make the introduction at least in this time frame, much more difficult, given that it is important that you have a lease program to start with to really bring this technology to life because it is not only our piece of technology that needs to come alive. You also know, there are a number of other steps in this chain as well that need to come alive to make it feasible to really process these ultra small structures into exciting display technology. So in that sense, the lead customer is important and a lead program is important also to then ramp up, get the learning curve going and we have to see now how we now yes, develop this effort further and see how we can use what we've learned in the same space, but potentially with a different time frame. Also in spaces left and right of the technology that we've been working on. We have to see how the building blocks fit together for a number of these other applications. So that's why we said yesterday in the report, we are reassessing the situation. However, it's also clear that the launch at the volume at the time frame that we had envisioned, it's not going to happen. And therefore, there's also a number of financial implications that I would like Rainer to comment upon.

Yes. Good morning. Good morning from my side. Good afternoon. Good Evening. I have to say also a few personal things in the beginning. I must say I was extremely surprised. I'm very sad about what happened, I mean, yes, we are saying that the calls with our internal people. I mean we have hundreds of people that are working on the project. We're building a factory in record time and kind of had a huge commitment to deliver the product. And we perfectly thought everything is on track and thinking that sudden change in the strategy of our customer, which truly we don't understand where that suddenly came from. So we are very disappointed and a lot of people in the company are very disappointed. But more than that, I mean, obviously, we have to take some very massive decisions in the next few days and weeks, and that will impact a lot of people. Now let me quickly point out a few of the assumptions we have behind what we communicated yesterday. The first one is the impairment that is nothing to do with goodwill or anything that there is an impairment on their on the building, on the equipment and on the capitalized R&D. So we have some, let's say, EUR 1.3 billion value in the books. Most of that is building and equipment and on the capitalized R&D. And I think the best assumption we could take today is simply saying we write off all of the R&D. And we would sell the tangible assets, the building and the equipment. Now we took some assumptions on what money -- what percentage of the investment, we could recover -- and that led us to the conclusion that out of the EUR 1.3 billion, we have to write off EUR 600 million to EUR 900 million. That also includes the equipment that is still on order, where we have entered into commitments. We will obviously be trying to stop as much of that as possible. But we need to get into discussions with our suppliers there to see what is possible. It does not mean automatically that our plan is to sell it, but that's definitely one of the options. There's other customer interests. But I mean, obviously, nothing that has the same time line and the same order of magnitude. Now on the EBIT impact for '24, we obviously can no longer capitalize any R&D expenses. And we also see a smaller impact that we will get a bit less government grants as we had originally planned. Now at the same time, we have to massively reduce the costs associated with the project, but as you know, reducing costs takes some time. So that's why we say that there will be negative EUR 30 million to EUR 50 million impact. We try to reduce it. And as we will no longer be producing samples in the new factory, we obviously can reduce the work cost there quite a bit, and we will try to do that quickly. We obviously have to keep the factory powered on. We have to keep the HVAC running to maintain the value of the clean room, no matter if we were to use it or a potential buyer was to use it. So as I said, we will try to reduce the impact as much as possible. Now on the cash side, the whole thing is probably a rather positive in the short and medium term, not in the very short, because it will be -- I mean, we have to work to get the cost down, and there is a lot of equipment on order, but definitely we'll try to cancel some of the orders and then going into next year, we should see positive cash effect because we will bring the CapEx down, try to get the cost down as much as possible. So -- and also we're trying to sell stuff, obviously, which would then, in addition, be a positive. Now what does that mean for the midterm? And I cannot give you definite answers, but we have been saying that our growth trajectory is on the reduced base after we resolve some distances and I reestablished the base program. From that reduced base, we would grow 6% to 10%. And a bit of that was associated, obviously, to micro LED. Not too much because we are expecting significant revenues in '26 and some minor maybe in '25. So we said, okay, it's probably no longer 6% to 10%, it's more like 6% to 8%. And as we always pointed out, the majority of the growth comes from existing in our automotive applications, the LED and laser emitters and also from the sensors into Industrial and Medical. Now what does it mean for the adjusted EBIT, and I understand that you're asking for it, please also understand that we cannot give you a definite answer because there's a lot of changes to the model. But kind of giving you a very rough estimate. I mean assuming there were like, let's say, EUR 200 million of revenue in '26, and I'm not saying that is the number, just to build a quick model. And assuming there were EUR 100 million of depreciation in '26, plus then cash costs to run the factory and so on. Now if we eliminate both the revenue and also the depreciation because we are basically writing it off now, impairing it or sell it then we shouldn't expect any significant impact to the EBIT margin in '26. And again, please don't take it as a definite answer, but kind of for modeling purposes. I do not see massive change. And the EBIT margin in '26 is that depreciation will be down, revenue will be down, not too much. It was obviously we'll -- the EBITDA will be a bit lower because with that EUR 200 million, we would have made a bit of EBITDA, quite a bit of EBITDA that will go away. But in '26, that was just the beginning of the ramp of the new product. So the impact on the EBIT margin is probably negligible. In the short term, I said it's positive for the cash flow. It's obviously a negative for the equity ratio, but kind of -- we'll try to reduce the cost as soon as possible, try to take the right decisions on the future of the technology. We'll definitely reallocate some of the resources that we have to accelerate some of the other projects that we have that will be very helpful to also improve our technology position there. I think that's for the introductory comments from my side. And with that, I hand back for questions.

Perhaps before we go into questions, just a few last sentences from my side. I think Rainer has very well described the impact of the microLED change, I don't know. I think what we have to at the same time also keep in mind is what we've outlined already during the last quarter. This company is so much more than just microLED. And of course, high quality LED. With this sudden decision is again very much in the midst of attention, logically so. But the same that we have been saying last quarter is about the other core businesses, that they are really healthy, strong, long-term sustainable attractive businesses also continues to be true. That hasn't changed. At the moment, myself in China this week, there's been a lot of the major car and consumer electronic players here. And I can tell you that we are a highly welcome, highly respected, highly valued partner for many of them here and around the globe. And that will not change because of this microLED change in the situation. And we will continue to push very hard to expand our position in this core market, automotive, where we're the market leader by far since a long time. Medical, a very attractive, sticky market of industrial markets. We are rebounding and selective consumer applications. These are good places. These are good positions to be in and we will continue now to, of course, work even harder on these and as Rainer said. And also the reallocation of a part of our engineering effort towards these product lines will do them good. I mean we have put, obviously, our brightest minds in the microLED technology. And we will continue also here. It's not that we stop completely, but it will be a reduced effort so we will be able to put some of those brightest minds on some of the other areas that we need to create innovation for the other exciting spaces that we're in. And I think that's important to keep in mind. And also with that, the guidance that Rainer gave in terms of growth and in terms of profitability is for me still a very logical picture looking at the underlying strength of these businesses that we have proven in the past and that we are recovering again, we'll be reestablishing the base with the divestments of the businesses that are not performing. And once we have adjusted to this very unfortunate event, then also, yes, the numbers will show the strength of these businesses that we're in and that we have a very strong, well defendable positioning. So just want to get comments that as well to round out the picture. Yes. With that said, we will open up for questions.

[Operator Instructions] Our first question comes from Robert Sanders with Deutsche Bank.

Commiserations. Yes. And I just had the first question was just, could you remind us of the loading on your LED footprint in front end outside of Kulim 1 and Regensburg -- sorry, I mean outside of Kulim 2. So to what degree your utilization and is in Kulim 1 and Regensburg so can -- I mean, to what extent can you serve your growth out of those 2 lines. And then the second one would just be what does the sale and leaseback mean for your ability to sort of generate proceeds from the sort of potential closure of Kulim 2.

Let me take the first one, and Rainer will take the second one, I think. I mean, we have not disclosed loading numbers in detail, but it is clear that we have available space and capacity in Kulim 1 and in Regensburg. So the growth of the next years was not dependent on Kulim 2 to ramp up. In the very long term, of course, one day, yes. But in the foreseeable future, we were planning to have the traditional LED chip being manufactured in Kulim 1 and Regensburg facilities and that continues to be the case also in this new situation.

Yes, Rob. And for the sale and leaseback, I mean, I haven't looked for all details, obviously, but the assumption is that I mean, a potential buyer could either enter into sale or leaseback or we would terminate and then get the money and repay it. So I haven't worked through all the details, but there's definitely the assumption that we could sell it if that is the plan.

Next question comes from Francois Bouvignies with UBS.

My first question is a bit of more clarity on the reason for such cancellation. What is your assessment? Is it a competitive loss or just technology readiness? I'm asking because it seems surprising that it's canceling it. I mean you could argue that postponing is one thing because it's not ready yet. But why canceling? Do you see what I mean? Is it because this customer program won't adopt at all? Or it chose another supplier? Just trying to get some color on that would be great.

As you know, in general, already difficult to comment on this specific customer, but in this case even more so because we just got the information and also ourselves not a lot of clarity around that. I think just looking at the competitive space and what is needed to make the application work, when we said this before, we feel that we are in a quite unique position and if that position is now given up by canceling the program with us, I think it will be difficult to find an alternative for that. So again, you have to ask the customer yourself. We cannot speak for him. But I feel strongly that the technology is alive for us and that there were other decisions being made at the customer side that made it not needed anymore.

Okay. And maybe I understand it's early days and there are a lot of things moving parts. Maybe can you detail the different scenarios, at least that you have in mind. I'm not sure if you plan to still do microLED or you are just giving it up? Or just trying to understand the different scenarios on the table. I understand you will make decision later on. But what do you have in mind in terms of different outputs?

The whole range nees to be thought through. I mean this is for such a significant change obviously, that it's required to be some thought on what to do now -- next with all the know-how and experience that we have gathered in this field. And the investment that we've made at the same time, also knowing that such a large step, you have to win also with a large-scale program and something like that. It should be on a tangible horizon to make that work financially. So it's not such an easy call to make, and we'll have to take some time to really think that through as we've been very focused, obviously, on making this program happen as this was in our mind, the biggest live program in the space available that we were working on and focusing on. And with that. Yes, we have, of course, looked left and right before, but not to the level of detail that is now needed to make this judgment call. So we'll need some time to digest and think it through. But yes, the whole spectrum of opportunity -- of possibility is there on the table.

Okay. If I may squeeze a quick one is, how easy is it to reallocate, you mentioned reallocating potential? I mean I guess you have all the equipments already and it's a very dedicated fab. I would assume it would be very difficult to change to another product line -- and if it's possible, very costly, I mean, is it?

Well, I mean, I think the comment was in the first line geared towards the reallocation of R&D resources. And that, of course, has a high level of mobility. The bright minds that thought about microLED they can also think about the next solution or the next sensor. They have done it in the past as well. So that's the main focus. Also, I think there is learning in what we have done for microLED for the more standard products, if you will, or the more established products. And we didn't really have time to think that through and to make those derivatives out of what we have learned into the product portfolio that we have. And now we have the time, of course, in a sense, unfortunately, but we do have it now to see what can we transfer from a technology building block perspective to improve our products. And yes, you're right, in terms of the pure production, it is not impossible. I mean we've made switches. If you look at our history, we started the 2 inch, and then we were the first to go to the 4-inch, and were the first to go to the 6-inch and we would have been now the first to be on 8-inch in mass volume. You have to pick the right time to make that switch and the microLED was kind of pulling in that time because we would need that 8-inch capability and also would need that 8 inch capacity. With that now not being available for us at the moment, we have to see whether a transition from 6-inch to 8-inch makes sense already now or at a later date. It's probably a bit early for a move to 8-inch for standard LEDs. Technically it can be done, but we have to now also economically look at it whether it makes sense. So also this is part of the topic that we have to work through now, how do we best utilize the equipment, the infrastructure, the capacity that we have to make best use of what we have learned and make best use of what we have invested.

Our next question comes from Didier Scemama with Bank of America.

I've got a few questions. My first question is on CapEx. Can you give us a sense of the amount of CapEx you spent on the buildup of that fab for that particular customer? And how do you see your sort of capital intensity going forward once you have normalized the situation. I've got a couple of follow-ups, if I may.

Yes, sure. I think I said that CapEx amount before it is we roughly have EUR 1.3 billion in the books, and that includes capitalized R&D. And that also includes the pilot line in Regensburg, which is much smaller, still the CapEx into the factory in Kulim, Malaysia, including the kind of the outstanding or the committed orders is a bit north of EUR 1 billion. We will try to kind of negotiate that we don't have to fulfill the commitments we have. That might cause some cancellation fees. But yes, we would definitely try to reduce CapEx. And then not sure we still have a good EUR 150 million commitment, which is included. Not sure how much we can reduce that. We have to figure that out, but most of that is this year. So for next year, then the microLED-related is supposed to be very close to 0. And that should bring up and down to the -- very much to the target range we had which is around 10% of sales for CapEx.

Very helpful. Second question is, obviously, here, there is a breach of contract. So do you expect to get some damages from that particular customer from cancelation of the project? .

We can't really discuss the terms of the contract, and that is up for discussion with the customer as you can understand.

Obviously, I understand that makes sense. Maybe my time is up. Now my last question is more on the sort of core business going forward. Do you intend to -- because the question was kind of asked before. I mean, you have now an installed base capacity of specific [ MOCD ] systems. Is there any chance you can reuse those equipment to enter new markets, perhaps silicon carbide or gallium nitride or anything compound semiconductor related that would take advantage of the capacity? I imagine the answer is no, but I just want to make sure that there is maybe a recoverable value from those equipment and the massive CapEx spend you've done over the last few years for that customer.

Well, I mean, I think in terms of can we do that would we do silicon carbide tomorrow ourselves. No, I think that, there is quite a lot of other players in that industry that would be far ahead of us. Is some of that equipment usable, what could you get for something like that usable, yes, potentially, yes. So when Rainer spoke about selling the equipment if we decide not to use ourselves anymore if we would decide after the analysis to sell the facility then those kind of players might be the ones that could be interested. This is not so far away from that world. So in that sense, that's definitely a space that we would explore to see that we get the most out of the investment that we have made.

The next question comes from Sebastien Sztabowicz with Kepler Cheuvreux.

We have this new [indiscernible] the microLED strategy. What is the potential road map to move from OLED going forward. If you don't move to microLED, is there any new technology that can, I would say, fill the gap with the OLED technology right now? And the second one, on the CapEx, just to understand what should we put in the model for CapEx for 2024, given the recent announcement. And should we expect that you are at 10% of revenue 2025? You don't have any further savings to go below 10% of revenue of 2025.

Yes. On the first one, obviously, the customer would be the more knowledgeable partner to answer that question. As I see the space, it is not obvious that there's anything beyond OLED and microLED on the horizon. So yes, you have to kind of pick the technology that has been best suitable for the specific application that you want to service. Sometimes it might still be LED that is suitable for us, sometimes it might be OLED. And in some cases, it might be highly transparent and very contrast rich microLED display. It really depends on what the customer is looking for. And we see still that there is overall, if you look at the microLED space, there is activity. I mean we were one player and a major player with our activity and our technology being able to go to very small structures. But there's a lot of other players also working their way into this, which basically is also a signal that there is still a strong belief that microLED is an interesting technology to use. But yes, you have to have the use case and use as defined by the customer. So at the end of the day, weigh the pros and cons or make the right choices for themselves in general, not only with this specific customer, but for all the customers and applications.

Yes. Sebastien, on the CapEx I mean, as I said, we still have EUR 150 million obligation related to the microLED project. We will try to reduce that though at this point of time, we have to assume that we won't be overly successful because most of that equipment will have been built. We will try to cancel it even if there will be penalties. Otherwise, probably moth ball it or try to sell it right away, whatever the right option is. At this point of time, I think we should not assume that the number we have guided for, which is a good EUR 500 million plus the capitalized R&D plus that carryover from last year that we can reduce that significantly this year. But once we talk to the equipment suppliers, we're going to report the quality numbers, we will probably have an update for that. And then in '25, there will be, I mean, very little that we have in commitments for that project. So we should get down significantly much closer, or very close to the 10% of sales that we have as a target. And again, I'm sure we would have some divestments related to the project as well. No matter if we sell some equipment or we sell the entire factory, but I would also assume then definitely some proceeds from divesting some of the unused equipment or buildings.

Our next question comes from Sandeep Deshpande with JP Morgan.

Maybe going back to the project that was canceled, was that project for a consumer application or for an automotive application, given that microLED has applications in both the areas as such really. And then I have a couple of follow-ups.

Yes, Sandeep, unfortunately, that's not for us to comment on.

Then my follow-up is, I mean, given that microLED has automotive applications, can you not take the technology on and make it happen in the automotive market quicker than it would have happened in a normal sort of way. Or is it that this project is now completely dead and you would have to -- the next move is going to have to be whether you shut down or sell that factory and all these other bad things as such really.

Well, that's the assessment that we need to make. It is not trivial because we make the light-emitting part of the product, but there's also transfer technology involved that we do not control. And as that's now kind of the project and that all falls apart we have to then -- we focus our efforts on both getting this product towards automotive application, following your example, but also need to find appropriate and qualifiable transfer technology. So it's not a no go. I mean it's clear that the automotive industry is a good place for this type of displays given the contrast and the brightness and the transparency and so on that you can achieve with it, but it's not a treatment exercise either. So by not having this lead project, I think timing-wise, it is not realistic to expect something that could come earlier than what we have been working on anyway and that's got now canceled. If we are able to do this, it will take probably more time. And that's, by the way, I think not only think also if you look at the generic market, the automotive application is -- has shown a lot of interest and potential, but this is a little bit further out.

Then another question I could ask is, I mean, you've been disposing various assets in various areas. Could this asset so-called microLED project be separated out and somebody might be interested in investing in it -- some other company may be interested in investing in it for the long term? Or is there no such possibility given that you're only doing one part of it and you're not doing the full supply chain.

We will think through also this option in the whole scope of reassessing what we will do next. Yes, it's just too fresh to have such far-reaching thoughts, but we will not exclude anything that generates value out of what we have been doing over the last years.

And then finally, sorry, I have to ask this question, you've written down a large value associated with this project. But there is the ongoing -- the debt cannot be written off as actually the debt on your balance sheet still remains. Are there any covenants on that debt that we need to be aware of that could get triggered because of what has happened in the near term. Clearly, over time, you can recover things and various actions you can take. But in the near term, are there any covenants that are at risk?

So I mean, in terms of covenants, there's maintenance covenants really only with the revolver, and we have a massive head room in the net debt to EBITDA . So I don't see anything there that would be a major concern. Yes, the debt remains. That is definitely a good comment. But as I said, I mean, in the near term, I expect rather a positive impact on the cash flow.

The next question comes from Janardan Menon with Jefferies.

Just looking at the margin impact for this year and the profile of margins through the course of this year, you've suggested that the hit on EUR 30 million to EUR 50 million will come this year. And that profitability even in Q1 will be impacted by suggesting, it's going more to the low end of that range of 4% to 7%. I'm just wondering, is the EUR 30 million to EUR 50 million uniformly distributed across the 4 quarters of this year. And are you still expecting a jump in your profitability into the second half given the new circumstances because of the exits from the business businesses that you're planning and the ramp of the other areas in smartphone sensing and automotive LED, which you've been saying that will ramp in the second half of the year. And the second one is just on the possible sale of the Kulim fab -- of Kulim 2. In your experience, what is the time line for this sort of thing to happen? Are we talking something that can be possibly achieved within this calendar year? Or is this more likely to come to fruition sometime in 2025?

Yes. Look, that's a lot of very good questions. We said EUR 30 million to EUR 50 million, and we will stay within the guidance band for Q1. Obviously, it will have a negative impact in Q1. I do not exactly know the distribution of the EUR 30 million to EUR 50 million over the year. But again, we will try to reduce it as much as possible to get the cost out. Obviously the negative impact of no longer being able to capitalize it is something that we have immediately. While kind of taking the cost out takes a bit of time. We definitely expect -- what we had said the design wins in the second half of the year and the stock that we regained and also additional savings from reestablishing the base that will kick in H2. So we remain in that way confident of further improvement in the second half of the year. When it comes to the sale, I mean, we obviously have experience with selling it kind of -- we haven't put together a list of potential buyers. We also haven't also even decided that we will sell it or if there's other options what we could do. We have to talk to some customers and so on. So it's too early to give a time line for that one.

The next question comes from Daniel Lion with Erste Group.

I would like to ask, is there -- the discontinued program, would there be any other program that you see materializing in the time frame that's like late in 2025 early '26? Or was this the only microLED program that you've been running?

Yes, this was the program that was the most tangible and then the one that was the earliest large-scale program that's also been focused on very heavily to make this one happen.

Okay. And second one on your balance sheet. When you write down the EUR 600 million to EUR 900 million and reflecting on the balance sheet held afterwards. How do you think about the implications of potentially gaining new clients for R&D programs as they might require a certain balance sheet health in order to step up those programs? Is this an issue?

That has not been a topic of discussion in my last 30 years in semi -- opti-semiconductor space. People come to us for the innovation power that we have and we're still a healthy company with a reasonable balance sheet. We've got -- I think there's no doubt that we are a long-term supplier with the technology skills that they need and therefore, they will continue to work with us is my strong belief.

Okay. And one about the ecosystem, is it is it possible for you to somehow set up such an ecosystem in order to offer the full solution to a potential client in the microLED space? Or would this only work if you have a -- that your clients in the end sets up the whole ecosystem.

We have to see. I mean, we haven't taken care of it because of the clear segregation of who does what in this program that we worked on. So in that sense, it is a bit of a new territory for us. So I can't really answer that question very, very well. The threat needs to be done, and we have to see where it is done best whether close to the LED maker is best or close to the panel makers best. There's no established model for this industry yet. So it is something to be explored.

Our next question comes from [indiscernible]

So I have just one. I basically want to get a better idea on whether in the past, have you ever received any interest from any other potential customer regarding the same microLED even sort of like initial talks or just basic conversation on the same where they showed some sort of interest.

Oh yes. Definitely. I mean that's clear that there is interest in this technology, and there was interest as a partner, we will be occupied working on this program. So we have stayed focused on that. So yes, there has been interest. But at the same time as I said before, this probably was the most significant tangible program in the near future that is that was out there and therefore, we were so focused on this, and we have to reengage as we continue to be part of this technology.

So is it safe to assume that maybe in the near future, maybe by the end of this year or next year, it's possible that we receive a news regarding another such major project coming up for microLED.

Anything is possible, but I think, as I said, large programs at the moment are not so clear in the industry. So it is definitely possible that -- there will definitely be interest in the technology, that has not gone away. And then we will work with those partners depending on our strategic decision on the microLED technology. But the time frame and the scale of the project, as we have previously envisioned it I think will be hard to replace in the near future at least.

Our next session comes from [indiscernible]

My first question is, what is the cash you have available right now? And the second question is what is the sum of available credit lines you have today? My last and third question is, as you said, you have write-offs of EUR 600 million to EUR 900 million. This is a wide range. So is this wide range due to the fact that you don't know yet what kind of compensation you get from the not mentioned customer.

So I didn't hear all the question. I heard compensation, we don't

I can repeat. The question -- the last question is why you have such a wide range on your write-off assumptions EUR 600 million to EUR 900 million. Is it as there is negotiations ongoing?

So let me assure that these assumptions do not include any compensation. And this is nothing we want to discuss here right? There's definitely nothing we could book as a receivable to date, that may take time. So we are purely looking at kind of what value, what the assets that we have or what would it have in case we would try to sell it. And there, we are taking assumptions. Obviously, those assumptions are not easy, and we would need to go through it in more detail, more like equipment for equipment or to kind of figure out what is really the value of the building. And that's why there is a range because we will need to do a more detailed assessment going forward.

And have you got the first 2 questions?

[indiscernible]

Okay. Very briefly. The first question is what is the cash you have available right now? And the second question is what the sum of available credit lines you have today?

We have more than EUR 1 billion of cash. We have EUR 800 million revolver, and we have some other bi-latery credit lines. We are planning to use some of that to repay the '25 convert, but I -- definitely cash is not a problem.

Our next question comes from [indiscernible] with [indiscernible]

I don't know how you're able to answer this question, but how well was the microLED technology working? And what I'm getting at is just given the headlines around the project cancellation yesterday, I can see why there'd be a cut, but I'm trying to understand why that would be everything that the potential customer could do. And I was wondering if you're able to comment on whether there was an issue with the underlying technology progressing.

No, I can't really comment on this because the rationale wasn't laid out in detail. We have been -- as we have been saying, the past progressing significantly in our technology over the last years. That's what I know that's what I can see and what led to the customer decision on the cancellation, I cannot answer.

Okay. So from what you saw internally, there was no issue with the technology kind of working by back end of next year, call it, being up to speed manufacturing and being able to be sold to consumers.

So far as we had an overlook to our part of the project, we have said before that we were working towards this time line. And there was still work to be done, but we were confident that the results that are remaining could be solved and that we have a good line of sight on that. And that would still be our view.

Our next question comes from [indiscernible] [ Gupta ] with Goldman Sachs.

Just had one question actually. I might have missed it, but can you just explain about -- more about the creative [indiscernible] and lease that fund you have right now? Like whether you have to return it back or how it's going to work from here on.

I'm not sure I can fully understood the question. The impact of the sales, I think that was related to this project. I mean we have seen some very small revenues in '25 and more in '26. Was the question not related to sales.

Sale leaseback, I think the question was related to.

Okay. So the sale on leaseback was basically we kind of sold the building to some investors and we have the right to buy it back, and we have to buy back after 10 years. So -- but yes, during that time, we pay lease in the way it is -- you can also see that a bit as a financing instrument. It is not a financing instrument, just to make it clear, but it's in a way that -- we give something and later we buy back. And in the meantime, we pay a fee.

Last question comes from Didier Scemama.

Two quick ones. Just wanted to just make sure the accounting treatment of Kulim 2, have you recorded any underloading charges. I assume the answer is no, but just wanted to double check on your gross margins? And then on depreciation, what's the depreciation allocated to that fab if any? And then the second question, obviously you have a relationship with that particular customer on other parts of your business, whether any conversations as to let's say, a broadening of the engagement with that customer as some form of compensation, which would be morally probably the right thing to do for them? Just any color on that would be helpful.

So on the utilization costs, yes, certainly, we already had the cost of running the factory. We already have cost of running the factory, right? We are -- the clean room is up and running. There's always the rule of thumb, that running the clean room already consumes half of the electricity. And we also have people there. I mean engineers but also a lot of people on the shop floor because we have been producing samples for internal qualification, but also being ready to send samples. And we always send samples to customers. So yes, there is a significant cost already there. The depreciation for the building also will kick in very soon. So that in a way is running costs that are already there that we now have to try to eliminate as much as possible. Then on the second question, we cannot comment on the overall status of the negotiation. But we have, of course, a broader relationship and that, of course, will be part of the discussion.

Okay. And just can you say how many people are employed in that Kulim 2 fab?

200.

Ladies and gentleman, this was our last question.

Exactly. Thanks so much for your interest and for your time and the good questions. Unfortunately, we have come together because of this event, we hope we gave clarity and the transparency that you've gotten used to as far as we can give it to you. We have, I think, again, today shared with you our view and our understanding of the situation. And yes, I hope that we can give further clarity when we publish the quarter 1 results and comment on those.

Thank you for joining the call, and thanks for participating in the conference. You may now disconnect your lines. Goodbye.