Comet Holding AG (COTN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Comet Full Year 2021 Results Conference Call and Live Webcast. I'm Mariana, the chorus call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ulrich Steiner, VP, Investor Relations, Comet Group. You will now be joined into the conference room.

Thank you very much for joining Comet's full year presentation for the year 2021. In the following minutes, our CEO, Kevin Crofton; and our CFO, Lisa Pataki, will present you the results of the last year. After the presentation, you will have ample time to ask questions either here in the room, but also over the phone. So we'll open the line after that. The documents we published today are available on our website, since this morning. You can also find the Annual Report with much more information on our figures on the website. Before we start the presentation, I would again like to remind you of our disclaimer. We will make forward-looking statements today, and as you know, there are always uncertainties linked to those forecast. With that, I would like to hand over to our CEO, Kevin, please.

Thank you, Ulrich. Very much appreciated. Great. Good morning, everybody. It's super to see some folks live, all in 3D, which is awesome. I think it's the first one that I've been able to have as CEO of Comet's. So that's fantastic. And also, of course, as Ulrich just said, welcome to all of you. Thanks for being intrepid and making the trip. And for those of you on the phone, thanks for joining. I understand there are few people that actually were supposed to be here live, that couldn't be here because, okay they've got COVID. So thanks for not coming and I hope that you will get a good recovery. So this is going to be hopefully an animated and a rich discussion. Hopefully you all enjoy it. And as Ulrich mentioned, we will take a break at the end for Q&A. So I'll be glad to answer any questions you might have. So I'm going to talk about what's happened sort of at a high level for 2021. I'll talk about what's happened in the industry in '21 and then I'll talk later on when we get to the outlook session about what we see for '22 and a bit beyond that as well. So with that, I'm just going to march right into it. First of all, before you've seen the results already. In my view, they're excellent. And this is a result of really hard work from our employees, we owe them a gratitude of thanks, but also the trust that our customers have given us. They are absolutely embedded with us and it's a privilege to have them as our customers. And of course, you are the followers. We appreciate your support as well. So thank you to you from the Comet team for the results you've helped us get there, and we greatly appreciate that. Now relative to the results, we've already said it out loud in a couple of different ways. It is a record year for the company. Lisa is going to go through the actual results in detail. I'm not. But what I do want to stress is that we've had really very nice revenue growth, nearly 30% year-over-year revenue growth. It's partially dependent upon the division we're talking about and I'll talk about that in a few minutes. And of course our EBITDA margin has actually reached a threshold point, it's a hurdle point for the company to be at 20% EBITDA. And when you run the numbers, you can do the math yourselves, it shows you that we did a very, very nice job in the second half of '21 to get to this level of performance. So I'm quite pleased with the results as a company and as an organization. So record results for the company, really, really positive for us, and I would have to say that most of that comes from staying absolutely relentlessly focused on our strategy. And I'll use that term relentless. We are making sure that we stay true to the core of the company, stay focused on our served markets, particularly in the semi and electronic space, but also make sure that we serve the aerospace, the automotive and the security space as well. And I'll talk to them. In the middle of this page, we talk about the continued progress towards our mid-term targets. To remind you, our mid-term targets 2025, we said that we would have demonstrated at least 15% CAGR year-over-year through the period. We said that we would reach 25% EBITDA and we've said that we would reach at least 30% ROCE. That's what we said we're going to do and I can say we're quite strongly focused on that and we're well on the way to that path. We announced that in 2019. We're 2 years into that. And that 6 year horizon and quite comfortable with where we sit. So in the middle of that page, progress towards our mid-term targets, we're absolutely focused on getting our new products out. We launched new products in 2020 that are bearing fruit in '21. And as a result, we know without exception we've taken market share in '21. And so, I'm quite pleased that what we've done at PCT, what we've done in the X-ray systems division as well as in the X-ray modules division that we've taken share, primarily because of new products that we've launched into this space. And I'll talk about that in a few minutes as well. We also, overall, I would say that we've really focused on how we are positioned in Asia, and as you know, most of you know, we started our mass production facility dedicated to high volume manufacturing in Penang nearly 2 years ago. We said we would fill that factory to 20% by the end '21, and in fact, that actually happened. So we're on track to delivering what we said we would do from the Penang facility. And then also for those of you all that stuck with us, we also announced that we had established a, I would say, boots on the ground in Taiwan, direct sales, direct service in Taiwan, which is the most important region in the semiconductor industry. And so we have boots on the ground, direct sales, direct service and it's focused on really the hub, the top foundries as well as the top OSATs, O-S-A-Ts, those are the outsourced assembly and test companies like ASC and Amkor and PTI. We've improved our overall production and our overall efficiency. We've nearly doubled -- sorry, we've grown our efficiency on employee basis by nearly 50% year-over-year. That's going to continue. We're not world-class, that's quite clear, but we are going to get to a reasonably good performance there. And if I look at the challenges aspect of this, we're all kind of tired of the pandemic, but it was absolutely imperative that we focus on what's happening with our team, making sure that our workplace is a helpful workplace, but also that we're protecting our customers as well. And I can say, we've managed the COVID pandemic environment that still exists in a reasonably good way. And then as everybody knows, supply chain, supply chain, supply chain that's the theme of everything we talk about today, it starts off with chips, but it's something now that affects the entire industry, whether it's electronics, PCB boards, but also cables, wood for crates, I mean, things that we, as a society, we would think of, must not be that big a deal, maybe but it is a challenge and as I've said in many different forms, we manage this challenge really, really day to day. And the supply chain team has done an incredibly good job getting there. And as a result, we've been able to support our customers and meet the demands that they have. So I'm quite, quite pleased with the overall performance there. Now I have to do say, yes, our results are a result of improving end market conditions in every market we serve, different flavors of how -- what that improvement looks like. Of course, the semi industry is in a boom cycle still, and I remember people challenge me on the use of the term super cycle a couple of years ago and I hope that I've convinced that we're going to be super believers at this point. The industry grew somewhere around 34%. I've seen some folks say it might be as high as 40% year-over-year, '20 to '21, but I can say for sure that that's going to continue. So that gives you a taste of what our outlook looks like as well. So that cycle is fully in play. I would also say that in the automotive space, production is definitely improving. It's lumpy, it's really a shallow recovery, but we foretold that going into the year, it's single-digit growth at the moment. It's going to be high single-digit growth quite soon. But on the other hand, what we do see is this whole uptick of the EV, electric vehicle programs. And so by 2025, we're going to see that EV is going to be more than 50% of all cars, light vehicles et cetera that are going to be produced. And why that's important is, that drives, in particular, our X-ray businesses. Of course, the PCT business will benefit from that growth as well, but it really is a key factor in the IXM and IXS businesses. Maybe third [picture] in this slide, it shows cogen engine, remember I'm an aerospace engineer, so I really like this. But the global passenger air travel is increasing, particularly in North America, it continues to recover, where we can see the industry is shrugging off the pandemic. It's a little bit lumpier in China, but the rest of Asia looks to be quite strong, and as a result, again the IXS and IXM businesses will be able to take advantage of that growth as well. And on the security side, that goes hand in hand with the growth in passenger air miles, but also, of course, in the defense sectors as well. So the 4 primary end markets really, really strong growth in '21 for the semiconductor space, single-digit to high single-digit growth for the remaining 3 industries that you're seeing there. So maybe some comments about what we're trying to do from a fabric of a company perspective. I guess, the first thing, I would say, and I've kind of covered it a little bit ago is our productivity, it's raised, it's increased by almost 50% year-over-year. We are running around 67,000 EBITDA per employee. We expect that to grow, obviously, by 2022 and that's up 50% from the previous year. We also can say that our gross margins have improved significantly. You've seen that from our financial results. It's greater than 300 basis points. I think Lisa is going to -- I know Lisa will talk to those details because, I'm just giving big numbers here. So as a result of that, that's from high -- of course, high volume, but also our product mix is also improving in all sectors of the business and it's a varying degrees of how fast we can make that change, for example, IXS, those products are ordered a year to a year and a half in advance. So we're still flushing those previous orders through our system, but I'll talk about the transformation of that business further in just a few minutes. In the center there where we say we strengthened our proximity to our customers, I mentioned that already. But maybe to give you a little flavor for that, currently now our penetration into the Asian market stands at about 40% of our total revenue and that's up from about 30% a year prior. So roughly a 60% growth year-over-year. We've also improved our footprint. It says here rapid growth in Taiwan and China, I already mentioned boots on the ground in Taiwan, direct sales and service in the Taiwanese market. Of course, we're booming in China, that's a significant growth year-over-year, but also we do have our Korean R&D center, which concentrates on matchbox assemblies for everybody else, but the Tier 1s and we can explore that later on as well. Now in the product and services, I'll get to some specifics when I talk about the actual divisions, but maybe the most important is that we are well on the path to changing the focus of IXS and IXM to be focused on the semi space, the electronic space and even the battery space. And the reason for that is because these tend to be higher margin, higher volume business sectors than the traditional aerospace, automotive and security sectors. So that student body shift is occurring and we're on that path and I'll talk about some of the products that we launched there in just a few minutes. And then on the far right of this page is really our investment in our company and we're keenly focused in investing in our team. We kicked off a comprehensive talent identification and management program during the year, really to understand our high potential talents and also who we can grow with within the company. We've sharpened our values. And if I will remind you, our values really are to be absolutely dead-nut focus on our customers. So customer-centricity is number one. Number 2, we want to challenge and empower our team members. We want them to make decisions at risk and do that with an open mind and willingness. And then also to have this whole trustful collaboration, this idea that we trust each other, that we are making good decisions, we will work together and it's a way for us to make sure that, it's a team effort of making things happen. And we did publish our first full compliant GRI report for ESG purposes. You'll see that in the Annual Report if you haven't seen it already. It's a comprehensive report. Remember, we were sort of ad hoc on this in previous years. Now, we've got a well-documented situation report and it's something for us now to build upon and we'll announce what those metrics and goals are for the company in about the middle of the year or slightly thereafter. Now, a few comments about our divisional performance. And again, I'd say, it's quite good. Each one of these divisions have grown to the point where our company has grown on the order of 30% as a Group, but each one of these divisions were at the 30-percentile or higher in and of themselves. PCT, of course, was higher. It grew at about 36% year-over-year, which is outpacing the market conditions and outpacing our peer competitors. IXS and IXM, both grew at almost exactly 30%. And I would draw your attention to the first bullet, sub-bullet on the left here, for those that have been waiting with bated breath about when do we get announced that we finally got a generator in the marketplace, we have sold our first [ Synertia ] product, we used to call that DaVinci. So this is the first RF generator in our new generator family. We have launched that. We have received our first purchase order. Now I have to admit that I'm shading it a little bit, and the reason why I say that is because that actual PO occurred in the second week of January. So just to be clear, it happened in January, not in December. So I should be fully transparent on that. But I think it's important that everybody understand that. Yes, we're in the marketplace. Yes, the generator has been sold and I'm sure you're going to ask me questions about that later. So I'll just leave it at that. We did expand our market share in, particularly, in the RF matchbox sector. We took 16 new design wins during the course of the year. The bulk of those design wins more than half were Tier 1 level customers. And also I would say that nearly 20% of those also occurred with customers in China. So good regional distribution, good Tier 1 and Tier 2 distribution and the reason why this is most important is because that then bears fruit about a year from now. And I'll remind you, last year we took 23 design wins, and as a result, we do expect because of PCT's performance and because of those design wins that we are comfortable that we will be able to say in April that we have taken market share in the RF match space, again this year. Last year we were at 36% market share, at number one. We should have advanced that as well, and I already mentioned the product transfer. On IXS, we use that terminology realignment. It's a euphemism for saying that we have really redesigned that business. This is a work in progress. I'll remind you, I said that we were starting this whole activity about a year and a half ago. That realignment gained momentum. We reduced the number of products that we sell out of that organization. We start doing custom business. Remember, we are doing a lot of one-off, single-off business items, which you would sell one-off, maybe 2 or 3 years later, you'd sell another one and that's a very difficult set of business circumstances to be profitable. So we've really moved away from that type of business line and we have been extremely focused on high quality, high revenue, high margin business in that organization. And I would draw your attention to the second bullet there in a minute. We have received our first hardcopy purchase order for a system that is being used for inspecting advanced package devices. This is with the world's largest foundry. That's a major win for us and it shows that we can be in that space successfully and that we can probably generate some delight with our customers. And then on the far right here, you see IXM, the industrial X-ray module business. That team has done a really, really good job introducing new products alongside a recovery in their traditional served markets. So we've released the MesoFocus product lines into the electric vehicle space, batteries, electronics, but also in the semi space. In addition, though, we've been able to take more share with the eye on product as well, particularly in the security space. So this whole inroad is happening, and I can say that the team is definitely taking market share. Okay, this is my last slide before I hand it over to Lisa, and I would just hope you'll agree with me as well, I think it's been a very good year. We're 2 years into this 6-year program. Our strategy is definitely bearing fruit. We're staying focused on it. We are and have been demonstrating at least a 15% growth year-over-year. We're well on track to be at about CHF 830 million or more by 2025. We've demonstrated really good progress on the EBITDA performance We should be comfortably at that 25% EBITDA range. And we're very close to the 30% ROCE. And really the themes are basically this, PCT, the Process Control Technology Group, the RF business, just needs to keep doing what they're doing. They need to keep getting the design wins, we need to expand capacity continuously through this period, so that we can stay ahead of the curve in semi. The X-ray businesses will continue the redesign and the transformation of IXS, but also start to capitalize more and more on the trend in IXM. And for sure, we want to make sure that we have a really nice and successful collaboration with all of our partners. Our customers, first and foremost, our supply chain, which probably are getting tired of hearing from all of us at times, but I think when we work together, we will definitely overcome challenges. And for sure, have to say again, thanks to our employees because they've been incredibly dedicated to our success. And with that, I'm going to hand it over to Lisa and see if you can make your way over.

Thank you. Okay, perfect. All right, thank you, Kevin and Good morning to everybody. It's really nice to see you all here in person. And for those of you on the webcast, a very warm welcome to you as well. I will go through the prepared remarks here a little bit more formally and then looking forward to your questions afterwards. In 2021, Comet achieved outstanding record high financial results in top line growth, profitability, returns and generation of free cash flow. As Kevin mentioned, these achievements resulted from our commitment to maintain our focus, gain market share, produce efficiently and by proactively managing supply chain and COVID related challenges. Our strong performance has enabled us to return more to shareholders to an annual dividend and to fund the investments fueling our growth strategy. Now turning to the actual results of 2021. The company achieved sales of CHF 513.7 million, an increase of 29.8% compared to 2020, which was also a historic year for Comet. Sales volumes increased in each of our end markets and divisions. Our core markets in North America rose 17% compared to the same period last year and accounts for 42% of the Group's total sales. Since 2020, we expanded our geographic footprint with the new production facility in Penang, Malaysia, new subsidiary in Taiwan, expansion of our sales in customer services in Japan, and in our R&D and demo center in Korea. Our ability to be closer to our customers resulted in 60% sales growth in Asia. Asia now represents about 41% of Group sales compared to 33% in 2020. Gross margins improved by 360 basis points compared to 2020. Each division achieved double-digit growth in volumes with a favorable product mix. This was really our primary lever in driving gross margins for the year 2021. Additionally, faster and optimized production processes led to improved operational leverage that helped offset higher input costs coming from labor, raw materials, components and logistics. Going into 2022 production efficiencies and product mix will further compensate for rising costs. Operating expenses in 2021 were higher than in the same period last year due to investments in growing the company. We invested in people to manage growth in all areas, including operational excellence, supply chain, sales and marketing, and of course, in research and development. Our R&D represents roughly 11% of sales and remains a foundational focus for the Group with investments focused on medium and long-term strategic projects, mainly targeting the semi and electronics markets. It should be noted that net operating expenses, excluding the 2020 gain from the sale of the ebeam business, as a percentage of revenue, decreased from 30.9% in 2020 to 27% in 2021. We achieved profitability at the upper end of our guided range as a result of higher sales volumes, product mix and operational efficiencies. We improved EBITDA from CHF 58.6 million in 2020 to CHF 102.7 million in 2021. This represents 520 basis points improvement to 20% EBITDA margin, compared to 14.8% at the same time last year. Our performance grew margins by 590 basis points, more than compensating for 70 basis points margin erosion due to weaker foreign exchange conversions and the elimination of the 2020 one-time gain from the sale of ebeam. The effective tax rate for 2021 was 18% driven by the taxable profit mix generated from our international subsidiaries. We will continue to monitor the potential local tax changes of our subsidiaries, especially as it relates to corporate income tax in the United States and with new changes in the OECD. As a result of our solid operating result, Comet achieved a net income of CHF 67.4 million representing a net income margin of 13.1% and a return on capital employed of 26.8%. Now, let's turn to the division results for 2021. Our focus on delivering to our customers operational efficiencies and culture paid off. Each of our divisions achieved double-digit sales growth while expanding profitability. The Plasma Control Technologies division, PCT achieved record performance in sales and profitability, executing remarkably against the backdrop of a booming semiconductor industry. Sales increased 36.2% from CHF 224.7 million in 2020 to CHF 306.1 million in 2021. PCT achieved sales growth across key geographic markets, and with all major customers. In 2021, PCT benefited from the start of its production in Penang, Malaysia, which reached 20% capacity by year end 2021 and further cost discipline in operations. These factors, in addition to the strong volume, expanded EBITDA margin by 430 basis points versus 2020 to achieve high 26.3% margins. Division results for the 2 X-ray divisions reflect the focus strategy and the improving market conditions. Let's start with X-ray systems business IXS. IXS achieved important milestones in its focused realignment strategy. IXS sales growth was complemented by competitive wins with newly introduced X-ray systems pointed towards the higher growth, higher margin semiconductor and electronics industry. The division contributed CHF 138.9 million in sales, an improvement of 30.1% versus the prior year. In 2021, IXS returned to profitability successfully generating CHF 8.9 million in EBITDA and 6.4% EBITDA margin. The division managed its cost base while meeting demand and ensuring customer satisfaction. The IXS business continues to focus on its realignment strategy, including cost reductions, virtual installations, discontinuing of low margin custom work and investments focused on the semiconductor and electronics device arena. Results from these efforts will continue to materialize and add to future profitability of the division. The X-ray modules division, IXM achieved sales of CHF 78.9 million, a 28.4% increase compared to 2020. EBITDA margins improved by 470 basis points to 19.4% in 2021. IXM's core markets show gradual recovery, in particular, demand increased in the second half of 2021 in non-destructive inspection and security. The division also benefited from commercial success of its new products ION modules for security applications and the MesoFocus product line targeting the semiconductor, electronics and battery markets. In summary, a booming semiconductor market improved X-ray market conditions focus on strategic objectives, targeted product development and improved productivity measures produced historically high and excellent results for the Group. Next, I'd like to provide a few comments on the balance sheet and cash flow metrics. The solid performance of the Group has continued to allow for healthy balance sheet position at December end 2021, with a cash position of CHF 115.5 million. Comet generated CHF 57.8 million in free cash flow. As, I previously mentioned, this free cash flow result is a record for Comet and was achieved through strong operating cash flow performance. Operating activities generated CHF 70.5 million in net cash, an improvement of CHF 13.4 million compared to 2020. Capital expenditures totaled CHF 11.5 million and represented 2.2% of sales in 2021, reflecting timing shifts in the Q1 2022 of capacity expansion projects in our Flamatt, Switzerland facility. As a result, we expect that our CapEx expenditure in 2022 will be at the upper end of our targeted range of 3% to 5% of sales. Our CapEx investment profile reflects our strategic priorities. We will continue to target investments in production and R&D capacity in several locations globally. We will also invest in digitalization and cyber security efforts. Net working capital management continues to be a focus. Performance is in line with our target of 20% net working capital as a percent of sales. Net working capital was CHF 30.1 million higher than at the same time last year, reflecting our growth expectations, and our supply chain mitigation actions taken to protect the company's ability to meet customer demand. Our favorable cash flow generation has resulted in a negative net debt position for the company. We will continue to allocate capital to strategic projects focused on business growth. We also want to -- we want our shareholders to participate in the Group's success through an attractive annual dividend. Our goal is to maintain healthy and flexible balance sheet and our performance in 2021 reflects the same. And finally, with respect to our capital return to investors, earnings per share has more than doubled to CHF 8.68 per share, compared to CHF 3.56 per share in 2020. Our outstanding operational performance enables us to return a dividend to our shareholders at the upper end of our guided payout range. Consequently, the Board of Directors will recommend at the next Annual General Meeting, a dividend of CHF 3.50 per share, representing a 40% payout ratio. In summary, the company executed exceptionally well in a challenging environment and is well positioned to deliver on our opportunities going into 2022. From my side, I'd also like to take a moment to thank our employees, our customers, our suppliers, and of course, our shareholders for their substantial contribution to our success in 2021. As Ulrich mentioned, additional details on our Annual Report in 2021 performance can be found on our website published on our website this morning. So this concludes my prepared remarks and I'll now hand it over to Kevin to provide a bit more color on our outlook going into 2022.

Great. Thank you, Lisa. Much appreciated. All right. So I'm going to talk a bit about what we think is going to happen in '22 and probably take some really other comments on the future beyond that as well, I'm sure. So let me just talk what's going to happen really in '22 and I'll go from left to right, as always. In the semiconductor space, it's definitely going to be a strong year throughout 2022. Depending upon who you talk to and who you listen to, you're going to get a forecast of anywhere between up 15% to up 20%. And I'd tell you, if you were only one month earlier, you would have had people telling you it's going to be maybe 8% or 9% or 10% growth. So right now, I would say, barring any other factors, the trend is more up into the right, so 15% to 20% wafer fab equipment growth seems to be quite probable. And so we've gone from CHF 63 billion last year in wafer fab equipment spend, last year being '20 to '21 of about CHF 85 billion, and it looks like it will be about CHF 100 billion in wafer fab equipment spend in 2022. These numbers are going to be bouncing around for a little bit. They won't be consolidated by the industry probably for another month, but that can give you a very good feeling for where things stand at the moment. So we're going to ride that semi wave. I already see people that are looking and forecasting '23. '23 right now, generally speaking, is being high single-digit forecasted growth at this point more than one year away. In the middle there, with the automotive sector, we do expect that we will see continued recovery in the automotive sector. You can see the number here, it's going to be about a 9% growth in production year-over-year. This is an estimate that was done by IHS just this month. So it will be, I don't know, 3 times to 4 times higher rate of growth than what we saw in '21. And that would tend very, very good items for the team in the IXM and IXS businesses. I would also say, and remind you that the content in vehicles, whether it -- sorry, the electronics content in vehicles, irrespective of whether it's an EV or a non-EV vehicle, it's really coming on quite strong. It's going to be about a USD1,000 per vehicle, that's almost 2x what we were saying would be in this timeframe. Most pundits were saying it would be about USD500 at this time, this year, and it's actually going to be about a USD1,000. That's really great for PCT, it's great for IXS and it's great for IXM. And I would say that because of this transition to the EV, as well that I mentioned earlier, that's going to be a big strong pull for the businesses. So I'd say, it's going to be in that 9% or slightly higher growth in our served sectors. In the aerospace sector, we think that's going to continue to recover. It's not going to be a rapid climb out, but it's still going to continue to improve and it will be in the high-double -- excuse me high single-digit area of growth. Asia will continue to lag probably for the first half of this year, but from a long term perspective, Asian travel, in particular, is going to be a driver overall in the aerospace sector. Private aviation, defense, they are still very strong and will continue to be very strong although it's a relatively small niche in the aerospace sector overall. In the security arena, we will see growth in the security sector that will primarily drive IXM. We will continue to see that and I think it's going to be in the high single-digit range, and we'll see that structural travel growth in Asia also will pull the businesses along. So in the aggregate, we're going to see very, very strong pull we think through 2022. So if you take that backdrop, and then look at what we have to do and what our opportunities are, it's really again the matter of seizing our opportunities that are put in front of us. Stay focused on what we're trying to accomplish, stay focused on our strategy, stay focused on our served markets and take the opportunities that are put in place and in front of us. And as long as we execute to that, you will see that if you look at these bullets on the right hand side of this slide, it's basically showing that our TAM, our total available market is growing by something like 1.5 times between 2020 and 2025. But our served available market is growing by more than 2.5 times in the same period. So our SAM is growing faster than the TAM that we're in and you can see the bulk of that is coming from the electronics and the semi space. And that's really coming on the backs of us opening up this RF generator space that we just -- remember, we got our first purchase order in for the division product. And it's also because of our penetration with quite frankly the IXS businesses in the 3D architected space, advanced packaging. So to keep pace with that, what we need to do is focus on all of these major bullets that you see on the left hand side of this slide. PCT, they're going to be like durables in the cage, they've just got to stay in front of the growth that's being pulled by the semi space. And that means that we've got to take on capacity, we got to stay ahead of what our customers demand forecast looks like, we have to get more generator variants into the market. Remember this generator is a platform, if not a singularity. And when I say platform, in the industry, we have power and we have frequency domains that we must be able to operate in. There is no one size fits all, and so there will be multiple variants that we'll be launching during the course of this year and next year. So it's going to be a continuous wave of products in this RF generator category. So our next variants will also go into beta testing in 2022. I already mentioned, we're going to expand our market share in the RF matchbox space. That's an opportunity for us and we think that we can do that quite successfully. And we want to maintain our vacuum capacitor share. We're sitting at, in that 70%, 80%market share range. So this is a protect that domain in the future. And as Lisa just mentioned, and as I've mentioned as well, we have to make sure that we ramp this Penang factory. So we expect that the factory will be filled by to nearly 60% by the end of 2022. Again it was filled at about 20% in 2021. So 60% in 2022, we'll start to see the benefits in a real meaningful way in the cost of goods sold side of the equation. In IXS, we've got to continue that transformation. I've mentioned it. Lisa has mentioned it. Look the performance of that division improved quite significantly, but it's not there yet. So we still got another year or 2 of progress that we need to make and that means we need to be dead nuts focus on the semi space. We need to move the product lines in that direction. We still need to take a few more products out of our portfolio. We need to get on one software platform. We need to reduce our cost structure, not in any sort of lay-off situation. That's not what I mean. But we need to reduce our overall cost structure. For example, we still use an enormous amount of representatives and agents in the industry to go to market. Well that comes at a very high cost, hence why we're trying to get more direct boots on the ground in our served available markets, served regions. And so we're going to invest in that semi space and we're going to invest in new products in that semi space and we are going to reap what we can as a cash cow, the automotive and the aerospace sector. And then in IXM, just grow share in our markets with important new products we mentioned. We've already mentioned the MesoFocus and ION products. We need to continue that ramp. We're going to invest in further products for the semi space, particularly from that items that are used at the sub-10 nanometer design node, that's going to be important for the IXM business. And IXM is also going to start investing further into our presence in Asia. We're trying to give you the idea on my previous 2 slides. Of course, I'm very bullish about what's going to happen in '22 with one point that I need to make sure that I acknowledge and that is the geopolitical situation do drive uncertainties and the Ukraine situation, in particular, is clearly disturbing. Right now today, the impact on our business is very negligible. At this point, we have very little revenue risk and when I say very little, it's I mean really little. And at the same time, our supply chain, so far we have not seen anything in our supply chain to give us concern. Of course, that could change tomorrow or the day after. We've taken these accounts into our guidance, we've taken our supply chain challenges that were already pre-existing to come up with the guidance you see here of CHF 570 million to CHF 610 million in 2022. And I would say that that is well on line with what our overall strategy would indicate that we were trying to accomplish. I think Serge is going to ultimately ask me a question, well, what's the upside to that? And there is upside. Of course, I'll admit that, but there's also downside to this as well, and we've tried to be right through the middle and tell you what we feel at the moment in this time. And our EBITDA margin 21% to 23%. We're going to continue to invest, as Lisa mentioned, in the business. Infrastructure is going to be important to us, new products is important, capacity is important. We're going to take on inventory to make sure that we can manage the demand side from our customers. So, that kind of gives you a flavor for how our EBITDA, we've tried to be quite careful about what we project our EBITDA performance to be. So I think our focus really is on growth. We have to, yes, of course, improve our efficiencies overall and we will continue to do so. And of course, we want to continue to invest in our people and our culture. So I would say, we've got to be steady as it goes. And I think the last bullet under that growth and efficiency and culture, we have to, as a company, continue on a path to become an employer that's attractive to new employees coming. This is going to be a problem for the entire industry, it's a problem for Comet as well. We need to be able to attract talent to our company disproportionately to the guys that are up the road from here like [indiscernible] or whoever is that are out there, we need to get more talent than they do. And so we need to be focused on gathering that in the industry. So we're going to be really focusing on attracting and recruiting skilled workforce. We are going to be really clear about University, for example, University relationships, et cetera. We have to go inform that for ourselves, it's not going to come to us. We are going to have to manage the supply chain. Irrespective of the conflict that's going on right now, we will be facing a situation very similar to 2021 that we're going to have to manage our supply chain prudently through the entire 2022, and in some cases, I think maybe even into 2023. Now I know people are already talking about a second half recovery in the supply chain again, just regarding Ukraine. People are saying maybe second half of 2022, there is a recovery. Well, I hope it's from their mouth to the lord above because I personally believe that it's probably going to be a whole 2022 period where we have to manage our supply chain and manage them very, very closely. And then we are going to have to mitigate energy costs, rising costs in our supply chain as well, logistics costs. So far we've been able to prudently and fairly pass those costs on to our customers. And they've been able to pass those costs on to their customers as well. It's a well-known phenomena. But at the same time, I will say we are not trying to raise our prices in an extortionate way at all. So we're trying to be quite careful about how we thread that needle. All right. So that gives you an idea of what our guidance looks like at the moment. Again, I want to say thanks to you all for your interest in the company and the interest of shareholders, thank you for supporting us and thanks to our customers and our employees as well. And with that, I'm going to go ahead and open it up for questions. I know we've gone a little bit long, but happy to take as many questions as anybody would like to ask.

Thanks a lot, Kevin, Lisa, for all your explanation. And I'm sure that you have a lot of question now. As we have somebody -- a few colleagues on the phone, so please wait with your question until you got the microphone from Ines or Cornelia, my 2 colleagues, so that everybody can hear it on the phone. Are we ready on the phone? Okay, so the first question is from Michael. Michael, please.

2 questions actually. You mentioned the importance of direct sales and service in Taiwan in the semi industry. And I was wondering if semiconductor production gets more geographically diversified around the world, more regionalized, nationalized, how will you service your customer? How are you preparing to get that direct service in sort of the changing environment in semi? And I'll ask the second one.

Okay. Thank you, Michael. The -- first of all, it's absolutely clear that nationalization is going to occur in the semiconductor space, there is no doubt about that. Our situation as Comet is that, regionally, we're very, very well positioned direct in Europe quite, well positioned. So, I don't see that as an issue. And of course, our biggest development area for PCT is in the West Coast of the United States. So quite well positioned for the new fabs that were just recently announced going into play in North America. We're going to have to continue to expand our footprint in Asia. And then what I mean by that is we're going to have to continue to put more people sales and service on the ground in Taiwan, we're going to have to do the same thing in Korea. We do have a development center and an applications development center in Korea already, but we actually don't have the sales and service team in place in Korea as well. So, we're going to need to do that. In China, we are kind of mixed. We're a mixed business model there. We do use quite a few reps and agents with a core of our own employees with boots on the ground. We're going to expand, we're going to invest in that so that we become less reliant on the agents that we have there. And that intimacy is extremely important. Our customers need to have a direct interchange with somebody that carries a Comet business card. It gives them a degree of comfort. It gives them a great degree of satisfaction. And that's to know they're dealing with the entity and not with a third party to get to us. So I think it's quite crucial. It will require more than maybe the business model of Comet has been in the past because we will have to become more geographically diversed. But we're going to go do that and it's the right thing to do anyway as a company that's growing in the way we are.

Thank you. And the second question is on IXS, the order you got from TSMC in -- for the advanced packaging. Is it in line or at line application and is it a systematic testing of every product or -- and what's your -- what's the pipeline looking like for that kind of business?

Yes. Great. Thank you for that question as well. So just to be clear, I said the world's largest foundry. I don't think I said, the T company, but you're probably right. No, you're right. The situation there is that it's an offline -- it's being used for offline testing, so it's mostly used for failure analysis and for quality assurance purposes. And what that means is, this is for this particular customer to prove out their process flows. I've sort of said this a bit repeatedly and I bore you guys with this. But I think in the future, it will evolve into an at-line test protocol that the industry follows but in in-line test, meaning every single wafer or every set of packaged devices being inspected using X-ray, every wafer day in day out 24 hours a day, 40 wafers an hour. I struggle to see the ability to actually solve that physics problem at that rate. I mean, you're talking about being able to put a test article into a product whether it's from Comet or from somebody else. Put it into that, into that X-ray platform and have it settle, because remember we're granite, thousands of pounds of granite that has to step and settle, and then actually do an X-ray. And to do that in 6 seconds, that's what you would have to be able to do, and right now the industry would struggle with being able to solve that, that physics problem. But doing it in an at-line mode, meaning an AQL level, an acceptance quality level of testing, where you're testing X number of articles every one T minutes maybe 6 minutes in that range, that problem becomes quite interesting. Our view right now in our business plan, in our model, we've only said in our model online. So that can kind of give you the idea that we're being conservative because there is a challenge that we need to go and address. And the way we may be able to address that 6-minute or 6 to 20 minute inspection challenge is with our acquisition of ORS, optical research systems. And for those of you that aren't familiar with that, this is a part of our company now that specializes in artificial intelligence and machine learning, where you can imagine, taking a blurry image via X-ray and because of the learning that's occurred, you can actually make a reasoned decision that's a known good device, or a known bad device without having a perfect picture. That's exactly what happens in the CT space in the medical sector for example. That's exactly what happens in some of the automotive inspection arena as well. So the proof points of that are there. It's what happens in optical inspection in the semi space already. So if not a leap of faith to get to that point, but we're probably a couple of years away from that, Michael.

So the sales pipeline?

So we -- so the sales pipeline again, remember, this is a failure analysis and quality assurance adaptation right now. The 4 -- the overall served available market for this by 2025 is somewhere in that 100 plus or minus 150 systems in that range. So it's double handfuls of tools that are being sold for this application today. In our pipeline, we have quoted to some 7 or 8 different customers with multiple systems. So we think we're right in the mix of it and in very good shape. Okay?

Thank you, Michael. May I also ask you to state your name and company, so that the audience on the phone knows who's talking. Serge, next.

Congrats on the result. Yes. My name Serge Rotzer from Credit Suisse. I have many questions, but I will try to focus on a few ones. The first is, you mentioned the order book that your order book is full with orders you got almost 2 years ago. So can you share with us how much of the order book is covering your sales guidance already to get a little bit of view of the visibility you have? This would be question one.

Great, thank you, Serge. Let me clarify because I probably didn't -- either I said it too fast or I didn't say clearly enough. The order book that I was referring to specifically was related to the industrial X-ray systems business, IXS. And in terms of what percentage of our order book for 2022 does that cover, I would tell you that it's substantially more than half without giving you the specificity, if you don't mind, because that then becomes a bit competitive when we talk about it. So for IXS, it's quite a long range view of what's happening in the business. Overall, our book to bill for '21 was in excess of 1, which gives you a good idea that all of the businesses are in good shape and are scheduled to grow.

Okay. This is very helpful. Then I will move to the sales guidance. This implies growth will be 11% to 19%, if I'm not wrong. I think this is a fair guidance at this point of time, but it's a wide range as well like others do -- other companies do the same currently. But can you share your thoughts with us, what is a 11% growth and what is a 19% growth, what are the triggers or what are the downsides when we talk about 11% or 19%?

Yes, maybe I'll say a few points on that and then I'll ask to Lisa, if I missed anything, because I probably will. On the downside. First of all, on the downside situation, we think that we've bottomed that to at least from what we can see right now, it's really what we see is our low probability. We've taken into consideration a probability that this supply chain challenge is going to continue irrespective of the Ukraine situation. So the downside would mean it could get worse, but nobody can forecast that right now. And as I mentioned earlier, we don't see a sales problem at this point. We have very little exposure. And to give you cut around that, it's CHF 1 million, CHF 2.5 million. It's very minimal from a company perspective and our supply chain situation seems to be okay, relative to the Ukraine situation right now. But it could worsen. So we've tried to take into account what could be the worst case scenario as we understand it that we experienced during '21 for the recovery of everything else that was happening in the supply chain. A further downside on that would be can our major customers in the semi space continue to deliver because of their supply chain risks and that's a hard one for us to really predict at the moment, because the mantra in the industry has always been copy exact, no changes. And as a result you become monolithic in your view and you have some companies like my former employer, that they've got a perfectly optimized operations, perfectly optimized. Any bumps they can't react to it and the supply chain challenges are bumps. So, then they have to go through looking at alternative components and alternative suppliers even, but that violates their copy exact protocol. So in our case, we have been really way ahead of the game, looking at new components, alternate components from different suppliers or new designs to go into a product even to the point where we're looking at also different geographical regions and we are buying a bunch of parts to protect the supply chain. And we've been a little bit faster than some of our bigger customers. They're getting there. So there could be a lead lag situation and what I mean by that is you could see us a little bit more back-ended loaded than front-end loaded first half to second half. But we have to go manage that. Serge, I hope that gives you the flavor on the downside, I think that we've been prudently cautious to talk about where we think the downside is. And similarly upside, there is more there. However, we have been -- we've taken into consideration as well what our customers are saying and what they've shown us in their ability to ramp, and that sort of gives us what we think is the top line potential as it stands today. If the supply chain does improve in the second half, the supply chain, I mean, the worldwide supply chain for our customers and their suppliers, not just ours, if that really happens in the second half like some people believe, there is upside. That's where our upside comes from.

Okay, thank you so much. Probably a last one, if I may, then on the supply chain question for Lisa probably. When did you notice the impact in accounting from the supply chain? Your inventory you had working down and then really had negative impact on the margin since the -- when did you start it last year, what time?

I mean, I think as we've been -- we've said, we've been managing the supply chain diligently all year long. So it was something that we noticed, obviously, in the first half of last year. We baked into the guide into the second half of the year. I think there is a few factors from our perspective that we were able to leverage to achieve honestly the gross margin growth that we did. So, most of that gross margin expansion did come from increased volumes, but at the same time there is a portion of that that did come from operational efficiencies. So we were able to get the factories operating more efficiently, specifically in Flamatt. We were able to ramp Penang up to 20%. So that was -- those are good things for us. But then obviously, we were dealing with what everyone else is dealing with, which is higher labor cost, higher raw materials, some longer lead times. Now on the flip side of that, we were able to also work with customers to push through some price increases. Majority of those will flow through in 2022. We didn't necessarily see them flow into the second half of 2021.

Yes. One more point on that if you don't mind is that the overall exposure for us last year and going into this year with the cost increase that our supply chain has given us to this point, net-net-net, it's on the order of 0.5%. And with the efficiencies that we're talking about and with the improved mix that Lisa just mentioned, we've been able to offset that with a very good degree of headroom. How about Harald in the back first, and then Michael front?

Yes, gentleman in the back, Mark, I believe.

Should be open.

It's Harald from ZKB. Basically 2, I would say, broader topics. First one is the IHS forecast on automotive. In the past there were mostly 2 updates and I was just simply wondering what from the midpoint of your guidance, if now automotive production turns out to be zero, what broad impact would that be? And the second one is, Ukraine-Russia, what is your gut feeling? What are your customers thinking what could the magnitude be and how long could this situation last? I mean, we are hearing that drivers -- truck drivers are heading to Ukraine missing on the market impacting logistics clearly. And then probably also coupled to that inflation. I mean the risk -- I mean, why it titled to the upside. What is your broad assumption of inflation for your guidance? Thank you.

Thank you. Thanks for the question. I'll take the first 2 and I'll ask Lisa to comment on the inflation side of things. Thanks. First of all on -- gosh, I got to remember the order of the questions again.

Automotive first.

What's that?

Automotive.

Automotive. Yes, the automotive sector, the impact of -- if it's a zero percent growth, just flat relative and IHS -- at 9% is what IHS sits right now, what's the impact to our overall guidance? and to be frank, it's quite low, very low, very low. I would say it doesn't impact our lower end of our guidance in any way whatsoever. Second one?

Your feeling on Russia and Ukraine.

Thank you. The conflict with Russia and the Ukraine situation. That's a hard one, that's a really a hard one to address. And let me just, we've got to look at the mosaic of what -- in particular, the semiconductor industry, how it sits. Many of the raw and rare earth materials come from Russia. For example, palladium is there. 40% of the world's entire supply is coming from Russia and every single electronic device in the world have palladium in it. So there could be a knock on effect not directly to my customers and my customer's customers, but at the next level up there could be an impact there, right? So it becomes a food chain phenomena. In the meantime, you can see in South America or even Latin America and in China, and others on exact material, they're already starting to ramp production. So it might be a cost impact that trickles down through, but it looks like supply demand will probably be okay. On the other hand, there are so many things you got -- you could look at. You can look at neon. Neon is a sourced material heavily from Russia, you can also look at aluminum and stainless steel, particularly 316L, all of those are heavily turned down industrially by Russia. So it's -- honestly it's an unknown. I don't -- how long will it last? It comes down to whether we have a treaty or we not, it could be just a minor perturbation. We're planning as if we are -- our plan at this point today is that we know what our top line looks like. We know what the impact currently today on our supply chain looks like. We've looked at the N minus 2 level, at that level and our supply chain also looks fine today. So we think that we've taken the prudent view today about what the conflict is going to orient itself. So I'm sure that doesn't really help answer your question, but that's how I -- it's the only way I can answer it at this point.

Yes. I mean also psychological question, how end consumer demand now might evolve due to the feel spreadening of the conflict?

Yes, that is a possibility. I think honestly, in some respects, the semiconductor industry, as an example, right now, currently is kind of gone ho-hum, it's sort of like the pandemic. Remember it was an incredible growth year through the years, through the pandemic because societal demands are insatiable right now. And so, mostly the industry right now is kind of saying, well, we have to go figure out how to deal with it. Okay. My gut feel, this is Kevin Crofton, not Kevin Crofton CEO of Comet, my gut feel is that we'll find a way to manage through it and businesses will be -- likely to be okay unless this spreads into a worldwide conflict, and then it's a different story.

Okay, thank you.

Okay. Then we have Michael.

Yes, thanks very much. It's Michael from Stifel. I have 2 questions for Kevin and 1 for Lisa, if I may. So on the supply chain, we're always talking about supply chain issues, but I was just wondering what's -- which parts are really missing at your end clients that they cannot deliver their tools or their machines because of what -- if I'm not completely wrong, VAT suggested yesterday that's actually power tools, that is a shortage in power tools. So assuming some of your competitors are not really able to deliver. Which leads me actually to the second question for Kevin, were you able to sell your Synertia generator because you were actually able to deliver it? Or were you able to sell it because there is something that you do better that you can maybe now explain to us because before you couldn't that. So these are my 2 questions for you. And the one for Lisa, probably also answer right now. So I was trying to do a little bit of math here on my notebook, and I'm not the best in math actually. But when I just make a quick calculation, the lower end of your EBITDA margin guidance, assuming that the IXS margin, which I think is a little bit low actually in 2021, will just go up, let's say, 200 basis points and the rest will stay more or less stable, not even taking into account the Penang factory, the cost initiatives that you have, I'm not getting to the '21, I'm already getting more than '21. So, maybe you can just elaborate...

I appreciate your optimism.

Maybe you could just elaborate a little bit how conservative you really are on the margin side, not on the top line, but just on the margin side, doesn't really add up in my opinion?

All right. Why don't I take the margin question first and then we can go back to supply chain? So I mean, I think when we put out the guidance for the year, we are trying to give a 12-month outlook factoring in a lot of different things. So I mean, I think, to go back maybe to the sales discussion because that's really a large focus for us. So, we're seeing the demand coming from the customers. Our order backlog at the end of the year was roughly 50% higher than it was at the end of 2020. And so I think from that perspective, we feel good about the demand that's coming in. We also feel good about where we're able to produce. I think we've done quite a good job in terms of making sure that we have the capacity to meet the demand in the short term. Obviously, I think we need to ramp up. We're spending from a CapEx side to make sure that we're ramping capacity for where we need to go to 2025. But at the same time, the supply chain constraints are persistent. The other thing that -- we talk about supply chain, but we also need to put labor into that as well. So, there are price increases on the cost of labor. We need to make sure that we are retaining labor that we are attracting labor to meet the goals that we have. So I think that just gives a little bit of color around the sales guide. And then at the same time on the profit side, associated with all those factors I just explained with the input costs, and obviously, we're still continuing to work with select customers on pushing through price increases and we've taken a view on that into the margin numbers as well. I think the final thing though to say on the margin, and I referenced it in my prepared remarks, but we are investing in the company and we are investing in digitalization efforts, and we're investing in cyber security and some of the things that we need to do to make sure that we are creating a scalable organization to meet our goals going into 2025 and into the future. So, that's my view on how we thought about margins and with the guidance for '22. So to supply chain.

Okay. I'll take your question on supply chain and impacts. Yes, I'm -- I think I helped Michael in some his slides at some point for his presentation. Look, the situation, if you look at the major subsystems that go into a plasma piece of capital equipment, there is, of course, VAT's product lines, there is typically turbo-pumps and other types of roughing pumps from Pfeiffer and companies like that. And then you have the RF power subsystem et cetera, et cetera, et cetera. The biggest problem for our primary customers is the availability of RF power control systems. That's the issue. And if you were to look at my -- our biggest competitors, they're quite -- well of course, Advanced Energy and MKS, they've been very clear in their results that they reported multiple quarters, that they are having trouble to produce, their supply chain is letting them down. And as a result, they've -- there have been missed opportunities for revenue, and of course, that then has a -- gives a problem to the large Tier 1s, okay, for sure. And so that's a pacing item. There are other pacing sub components, but that's the primary system. In our case, you asked specifically, will we able to capture RF generator opportunities, I think is the way interpret your question, Michael, and I would say no. But I would say on the RF matchbox perspective, the answer is yes. And the reason why that's the case, is that we're well known as a provider of RF matchbox assemblies, more qualified across most of the Tier 1s and Tier 2s with RF matchboxes and so we're able to step in and take positions that maybe our competitors couldn't fulfill. The generator is a different story, and the reason why that's different is, you know, particularly in the Tier 1s, they have to go and qualify a generator, not just on their product, but then they have to qualify that generator as part of their overall piece of capital equipment with the TSMCs and the Samsungs and the Intels of the world. And that's not the work of a moment. So even one of my biggest competitor not able to supply a generator that is form fit function that we can fit, no chances in this timeframe, there is no chance that we will be qualified that quickly. We have had a situation that's come up where one of those very large Tier 1s has said, we need to go qualify your product in anger. But that's going to take time. But before that was like, oh, yes, ho-hum, we will get to you, sometime we'll talk to you, but now it's become, can we have it? So that's -- but that's going to take us time to be fully qualified in Tier 1. Does that answer your question?

Thank you, Michael. Do we have one more question in the room. 2 more questions first.

Oliver Fuehres from ZKB. Couple of questions on the RF generator business. You said you estimate first sales in 2022. So could you give us a ballpark figure what kind of sales you expect this year? And you said addressable market is CHF 1.2 billion. Do you have an estimate what market share you can get in the mid-term in this market? And will it be more Tier 1 or Tier 2 suppliers?

Gosh, that's a big question. Okay. First of all, I would defer about telling you what our revenue line for 2022 is going to be for this generator and that's highly competitive information, first of all. To give you an idea of why we're so careful about divulging that at this point we'd rather talk about design wins and first customers. And the reason is because our 2 competitors that I've already mentioned, they've got boots on the ground everywhere in the world. They want to find out where every single beta site test we have going on is occurring and think about what their reaction in the marketplace would be if they knew exactly what product and which customer are being qualified on, they would go to that customer right away at the highest level of management, and will say, why are you entertaining those guys from Switzerland. What did we do to not satisfy you? How do we make it better? Can we reduce price? Can we -- maybe we need to give you more people, maybe we need to give you spares? They can act like a gorilla in the marketplace, at least that's what I would do. So I would do everything I could to prevent a Comet or A and other to come into my customer because that my customer. So that's highly competitive for us to actually divulge that. But I'll try to give you some flavor. Our -- we've been very clear about saying we'll get revenue in 2022, we'll get some more revenue in 2023. It will be interesting revenue in 2023. But then you'll start to see a significant uptick in '24 and '25 as long as the product does we say it's going to do, right? And we're still on that phase where the baby has no words. It looks really good, it's going to be prince charming when it grows up. We're still in that phase right now. But it looks like, it works. It looks like it does what we say it's going to do on the TAM for really one power regime and one frequency regime, so far so good. As long as the other variants do the same thing, then our stated objective as a company is that we will take 10% market share by 2025. And I've been quite clear that I believe that's a very humble objective because if the product does in every variant, if it does what we say it's going to do, by 2025, we shall have a shot at being at least number 3 in this space. So again -- so you're talking about -- we're talking about CHF 1.1 billion to CHF 1.3 billion served available market in 2025 and we've been very clear about stating our objective is to be at 10% share in that timeframe. Okay. It's good to be in that range and that would be a very major success for the company.

Okay. And then one question on the CapEx. You said, you're expecting CapEx to be at the upper end of the 3% to 5% range. Can you give us an indication of the split between the 3 divisions?

I can give -- Yes, sure, I can give you a kind of an indication of where that CapEx will be directed. So the majority of that CapEx is related to capacity expansion and R&D expansion. It will be in Flamatt, Switzerland, part of it could be in San Jose, California. A minor part of it will be directed towards Penang, and then of course, I'll hand is where we have Aachen, Germany is where we had plan to produce the Synertia RF generator. So, but the majority of the CapEx, it's really around capacity expansion, R&D expansion, it will be disseminated globally. The majority of our CapEx is in the Plasma Control Technologies division. It's our largest division. It's where many of our strategic aspirations are at the moment, especially in the mid to the long term. So that's for the flavor around the CapEx. And the other thing is really again investing in digitalization. And that includes in operations, and so part of the CapEx is related to those activities.

Sebastian?

Sebastian Vogel from UBS. I've got 3 questions. The first one would be on Penang. Can you sort of give an indication or rough indication, a ballpark figure, how much of a margin help that was already in PCT for this year to have a little bit of a better sense, what is the potential going forward? And the other one would be on the RF generator order, just to be clear there, is that just meaning one single generator that has been sold and what is -- or there is a couple of machines been included in there and is the delivery supposed to be happening next week, tomorrow or in 2, 3 months' time, down the road, just to have a little bit of a more of a sense how quickly that will turn into sales? And then a bit of a housekeeping question. Could you share with us the FX impact on the sales number for the different segments? That would be great.

Okay. So you handle FX. And what was the first part of your question?

Can you repeat the first part of your margin question?

Yes, sure. I mean, since you have said that you have already moved some production to Penang, so the question is just like what is the margin support that you have seen in PCT already from this transfer?

So one, if you are ready?

Yes, I can start. I got to look at the sales number, but I know it's in the appendix. So, on the margin side, again, I think just to kind of repeat back what we had seen happen in the second half, so the major thing here with Penang is that we did ramp it up to about 20% this year. And so that was on schedule, it's on plan, and that was -- we did -- it did what we needed it to do. Again, remember that we're transitioning from manufacturing of our matchboxes from San Jose to Penang. So the real lift from that is going to come 2022 and then into the out years. In the second half of '21, we also needed to compensate for increases in labor, raw materials components, et cetera. So just in terms of where did our margin expansion really come from in 2021, it was generated from volume and a favorable product mix. As I did say, a portion of that gross margin expansion did come from operational efficiencies, but the lion's share of that was really coming from volume. But going into 2022, the ramp-up for Penang should be around to 60% and that we should be seeing an appreciable increase in gross margin from that. Why don't you take the next one, just because I need to check the actual number on the FX.

Okay. The FX. So one last comment on that. So, the summary of that answer is primarily is that Penang was a volume increase situation that we're trying to get it filled. But the overall impact on cost of goods sold is pretty small relative to the opportunity, quite small to the tune of CHF 1 million plus or minus. The -- then if you get to 60% capacity fill it would be substantially more than that, and that's what our plan has always been, by the way, Sebastian. So thanks for that question. The second part of your question about the RF generator. I hope you all don't laugh at me, but remember, I said that we would sell one in 2021. We didn't quite get there. We sold one a couple of weeks ago. And so just to be dead not straight down the line here, there will be repeat orders from that customer for sure. I don't want to go into the specifics of that, if you don't mind. We have 5 ongoing beta sites already -- for that variant already, as I previously announced. We expect more convert a significant portion of that into revenue and into extended purchase orders for the year. And by the way that first unit, yes, it's shipped. Yes, it's there. Yes, it's at the customer. Yes, it's real. Sorry, I forgot that part of your question. And then we have an objective to have another handful or more beta sites going on mid-year, so they'll be carrying on through the course of the year. Can we convert some of those into revenue? I would be -- I would say between the ongoing beta sites we have, plus the new beta sites that we have coming, there is probably the likelihood that will convert something smaller than a handful of those into actual repeat orders, just because of the amount of time that it takes to get qualified. Yes. Hope that answers your question?

And then circling back on the foreign exchange, the impact on sales year-over-year 2020 to 2021 was CHF 5 million.

And how was it split between the segments?

So I don't have it by the split of segments. But the way to think about it is that the majority of our exposure is coming from US dollars, and that is mostly with the PCT customer.

Thank you, Sebastian. So we're already running a little bit behind schedule. So if there is no urgent question in the room right now, then I would ask and we'll come back to you. After that, I would ask if there's one or 2 question coming from the phone. Do we have something there, Operator?

There are no questions registered at this time.

Okay, perfect. And we have another question in the room.

Daniel from 2trade. Just a tiny question to is reference to design wins. If you win a design, does that mean you get the order? Or how does that work?

Okay. So the question is, if I -- if we get -- when we say we get a design win, do you get an order from it right away? The answer is yes. Typically what that means is, you'll get a first set of orders for -- depending on the product that it's going on, right, our customer's product, it will be some 10s of RF matchboxes, you very rarely get a 100 units because nominally, you're getting qualified on either a new product from our customers or a new variant from our customers or you're in a situation where you are replacing an incumbent. So you're getting part of what they are already delivering, not all of it. So it's typically in the 10s, the 10s for the first orders that you really get. After that, if it's on the right -- the right product at your customer, the right end product, I mean, look our biggest customer in one of their product range is they're supplying 500 modules per quarter. That's at least 500 RF generators per module going out the door. So it could be substantial order or it could be with a little tiny customer that maybe their entire production for the entire year is 200 modules, and on the customer mix, customer acquisition.

Do you pay the design?

Yes, under normal circumstances, we do all of the design work, we do all of the -- so we do all the engineering, we do all the design for manufacturing as well as the product engineering. And I'd say, a wholly sold article from Comet, there are circumstances where we do build to print, but normally what ends up happening is it becomes build to print for the first units. Then we do design upgrade on behalf of the customer and then it becomes a Comet design to deliver. So that's the transition that occurs.

Do we have a final question in the room. Then yes, Serge, yes?

Sorry, if I may. A final -- not final, but a question from me. On IXS, I was not sure you mentioned that you see some competitive headwinds in IXS, can you -- what is wrong -- understand this not correctly. Or then on IXS, if this is not true, you showed a road map, you want to achieve 25 initiatives or something like that. Can you give us a feeling how much you already have achieved of this roadmap and what we can expect for this or then even later from that? And -- That's it.

Okay. All right. thank you for the question. If I said headwinds, I don't remember saying that, to be honest, you caught me off guard on that one. Maybe you can wish to mean -- I mean, when did I say that. On the -- let's talk about the IXS transformation, maybe to try and put that into a broader context and narrow down to where are we headed. When I came onboard, we had 26 different products, 13 of which were single one-off custom designed systems that were literally being sold one and then 3 or 4 or 5 years later, you'd sell one and then there were maybe -- so there were 13 of those, and then there were another 13 or 14 network standard products that had quite low margin. That I want to tell you the, is condition. So that was the, is condition. We also will -- each of those platform, those products, those things that we're selling, were on 4 different software platforms. Now, how does a small company have 4 different platforms, software platforms and being able to support that as an entity? That's like having some of your products on a Dell computer and some of them on Macintosh as an example. They don't work the same. All right. We also had 300 agents, distributors and representatives, many of them were historical from the Philips days. Some of you all know, this division was formerly part of Philips and so the contracts that Philips had put in place carried on through that period and you kind go why is that important? Well, they were contracts that were not to the benefit -- maybe at the time, they were, but in today's day and age, the commission structure, the service structure, it was not what you would expect in a capital equipment company that is in the semiconductor market, wasn't fit for purpose. So those are maybe some 3 examples of what the is condition was a year and a half ago. We're down to the point now where we have 6 products that are actually standardized in real and we can produce them repeatedly. We still have 2 custom products that we're still delivering and still building. We are on 2 software platforms and we have a little bit over 50 reps distributors and agents. And where we're headed is that we want to get to a point where we're probably going to have 7 products and we're probably still going to have one custom product that we're going to deliver for a period of time because of the nature of the customer and the nature of the industry that we're in that particular case. By 2025, we should be on one single platform from a software perspective, one, and we'll have something less than 50 partners in the channel. So we're on that pole and then I should have said, remember I said, we will go from 6 to 7, we might go from 6 to 8 new products because you can imagine that we might have a semi only product and electronics only product. Currently today, we think it might be that one additional product will cover both sector demands, but you can envision maybe that's not going to be right, because that comes back to Michael's question, is it going to be on-line, at-line or a one-off sort of test system? And that would be a different architecture. So where are we in that journey? Okay, we've done, we've done the sort of easy parts, sort of and now we need to get through this design and industrialization activity and we probably have another year to year and a half to go in this transformation. So 2022, for IXS, yes, is going to be better, and I hope that all of you all are believers. I remember coming into these forums and there weren't that many believers, but hopefully we've changed that. But it's going to be -- we have work to do, but I've it a couple of times and I'm sure we can make that happen. Hopefully, Serge, that helps you.

Great. So, thank you. Thank you very much for your lively participation in event. We can close the official part of the event right now. Thank you for showing up here. Thank you also the audience that joined us over the phone. After the meeting in here, we will have served some finger food at the back of the room, and management Kevin and Lisa will also be available for you if you have one or more questions. Also thank -- so I would not miss that to Cornelia Bürgi, who organized the event, including the food you're getting after that and the drinks. So thanks for coming to Zurich here. And I hope you stay a while to have a conversation with our management team. Thanks a lot. And See you soon.

Thank you everybody.

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