Comet Holding AG (COTN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Comet Full Year 2024 Results Conference Call and live webcast. I am Tamara, 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. You will now be joined into the conference room.

Ladies and gentlemen, welcome to Comet's full year Analyst and Investor as well as Media Conference. Thank you for joining us today, either here in the room or via our webcast. With me today are our CEO, Stephan Haferl as well as our CFO, Christian Witt. Before the gentlemen give you an overview on the financial performance as well as the business environment, I would like to remind you that we will make some forward-looking statements today. So before we start, please read through the disclaimer. After the presentations, we will have ample time for Q&A. With that said, I hand over to our CEO. Stephan, please?

Thank you, Ulrich. Ladies and gentlemen, welcome to Comet's presentation of the 2024 annual result. We truly appreciate you being here, either in person or on the webcast. I'm also especially pleased to introduce to you today our new CFO, Christian Witt, who started on the first of January. So give him some grace afterwards, it's only 2 months. He will provide a detailed overview and insights to our financial performance. You will have the opportunity to meet him in person afterwards during our, let's call it, [indiscernible]. At the same time, I do not want to miss the opportunity to officially thank our interim CFO, Nicola Rotondo, whom you've all met, who has supported me throughout the fiscal year 2024. Now before Christian will guide you through the numbers, I'd like to take a moment to provide an overview of the broader macroeconomic landscape and industry developments that have influenced this year. So our business environment improved significantly over the past year. And then upswing in the semiconductor cycle start. As a result of this development and the implementation of our strategy, I can report today a clear improvement in our key financial figures. Revenue grew by 12.1% and EBITDA margin improved to 13.6%. We generated substantial free cash flow of CHF 41.4 million and more than covered our cost of capital, achieving a ROCE of 10.4%. This marks the return to value creation in 2024 after a rather weak 2023. Significant milestones included the successful completion of multiple Synertia generator qualifications expanding on the success we have broadened our Synertia product offerings with the introduction of the new Matchbox line to better meet the changing needs of our customers. And the recent launch of the CA20 X-ray system fab showcases our dedication to fostering innovation in the industry and enabling the next technology inflections. Moreover, we have made strategic advancements in strengthening our commercial presence in key markets, especially in Asia. Our expansion project in Malaysia demonstrates our proactive approach to meeting the growing demand for our products and services as well as expanding our abilities to manufacture in volume, in a best cost manufacturing area and set up an investment which will significantly improve our scalability, profitability and the resilience going forward. So before we start with a review on the developments of our key end markets, let me first make a remark. Given our significant revenue share from the semiconductor and electronics industry accounting for over 70% and projected to rise above 80% in the future, we will focus primarily on these sectors and provide less detailed insights to other industrial markets served. Therefore, we have consolidated our various industrial end markets such as automotive, aerospace and security into a single market view for the purpose of our financial market presentations, which we refer to as other industrial segments. Now as we navigate the ever-changing landscape of the semiconductor industry, let's first discuss the varying growth rates across different microchip segments. While the industry is experiencing very positive momentum, it is important to recognize the disparities in growth within specific segments. Specifically, we have observed strong demand for leading-edge devices, driven by AI applications leading-edge logic and DRAM, particularly high bandwidth memory. Both grew strongly, both in device revenue as well as WFE spend wafer fab equipment spend. The robust growth in these areas reflects the industry's emphasis on high-performance computing and memory solutions where our products and services play a crucial role. However, at the moment, this is a value and not a volume play. In NAND, a typical volume play in the past cycle spend has been lower than for other types of microchips. We anticipate an uptick in 2025, signaling a positive outlook for this segment. Although the exact timing of the upswing is uncertain. In contrast to growth in some areas of the industry, the consumer electronics segments such as PC, laptop and smartphones has experienced subdued or partially even negative growth, impacting overall industry expansion. As a result of those developments, the estimated wafer fab equipment spend grew by approximately 4% in 2024. Unlike the semiconductor industry, traditional industry more closely linked to GDP growth, presented a different environment. In some of those industries, we observed only moderate growth, coupled with the change in the competitive landscape, marked by price pressure in selected areas, challenging in the global -- challenges in the global economy, particularly in Europe and China were only partially offset by modest recovery in the U.S.A., driven by factories like reshoring and infrastructure investments. In the automotive sector, we noted stagnant car production and slower growth in electric vehicle sales, while these trends pose challenges, they also highlight the importance of innovation and adaptation to meet evolving consumer preferences and regulatory standards. On a positive note, we have seen strong demand in air travel and increased defense budgets, indicating growth opportunities in these areas. So let me briefly explain what the divisions have achieved in terms of milestones in 2024. Firstly, at PCT, we have significantly improved our manufacturing efficiency and optimized our footprint. We have enhanced productivity and profitability, positioning us very well to capitalize on market opportunities. Secondly, we have secured multiple customer qualifications for our innovative Synertia products, strengthening our relationships with customers and expanding our market reach. Lastly, we have launched the Generation 3 Matchbox module, which runs on the same control and software platform as our Synertia generator platform, further enhancing our product offerings and enabling us to stay ahead of market trends. We've introduced new features and functionalities that add value for our customers, driving innovation and differentiation in our customer product portfolios. And we are strongly engaged in co-creation and qualification projects with our customers, a lengthy process as we have, especially learned on the Synertia generator platform. In our X-ray Systems division, IXS, we have launched the CA20 fab system, a cutting-edge product designed for in-line and outline semiconductor applications. We have achieved a first commercial success with CA20 in 2024. This very early success demonstrates strong market interest and validates the value proposition of our product and our X-ray system strategy. To take advantage of the CA20 market opportunity, we have established a strong sales and service presence in mostly key Asian markets. These measures targets on enhanced customer engagement and satisfaction, driving growth and market penetration in the region. Our focus on building strong relationships and providing excellent service is key to our success in these markets. In our X-Ray Modules division, IXM, we have launched new high-resolution modules for semiconductor inspection, a significant milestone that has expanded our market reach and enhanced our competitive edge. These cutting-edge modules enable us to meet the increasing demand for advanced semiconductor solutions, especially also the CA20 system. And finally, I'm pleased to announce that we have commercialized MesoFocus for battery testing, advanced imaging applications and secured first relevant orders for sealed Microfocus modules, a testament to the market acceptance and demand for our advanced solutions. These initial orders underscore the value proposition of our products in meeting the needs of our customers and obviously are a cornerstone, if not even the most important cornerstone of our strategy. So let me summarize 2024 in a nutshell. In 2024, we rebounded from the very low point we experienced in 2023. First and foremost, we have observed that the semiconductor market is experiencing an uneven recovery with certain segments, as mentioned, showing slow growth, while others demonstrate more resilience or even strong growth. The semiconductor industry is in a peculiar situation where very high investments go into devices and applications with currently very low volumes compared to past patterns. Our X-ray divisions have been affected by weak industrial segments and increasingly competitive market, leading to selective price competition and a more challenging operating environment. In the PCT division, we have made tangible progress in the commercialization of Synertia. On the other hand, our IXS division is still facing weak profitability, prompting us to prioritize growth investments, including market penetration efforts for CA20, along with strategic initiatives to improve its performance. The IXM division has demonstrated solid performance in soft end markets showcasing our resilience and ability to adapt to changing market conditions. And with that, I hand it over to our CFO, for an in-depth discussion of the figures. Christian, please, your first time.

So thanks very much, Stephan.

There you go.

So good afternoon, ladies and gentlemen. I'm pleased to be here today to present our financial performance for the year 2024. But before diving into the numbers, I'd briefly like to introduce myself. I joined Comet as a CFO in January '25. So just 2 months ago. Previous key experience is about 10 years in automotive, CFO of a private equity portfolio company, a start-up and latest as the CFO of the listed German technology company, LPKF Laser & Electronics, which is currently entering the semiconductor industry. All in all, I'm really glad to be part of the Comet team and further develop Comet together with Stephan and the management team over the next couple of years. Let's now look into the development of last year. In '24, we observed a partial recovery that propelled our Plasma Control Technologies division, as Stephan discussed previously. To put it in numbers, the company's positive performance was primarily driven by PCT's top line growth of over 28%. Conversely, our x-ray divisions, which have significant exposure to industries linked to GDP and to the non-semi CapEx cycles were not able to grow, which particularly offset the strong performance of the PCT division. Regarding investments, we kept our capital expenditures lower than initially projected earlier in the year, a topic I will elaborate on further a bit later. Additionally, we further strengthened our financial position in preparation for the '25 and '26 investments in our new facility in Penang and ensuring greater flexibility to size future growth opportunities. The strong financial position also allowed us to increase our dividend by 50% to CHF 1.50. This decision underscores our confidence in the company's performance and our dedication to delivering value to our shareholders. So now let's take a closer look into the specifics of our financial results for 2024. Looking back on the previous year, we encountered a challenging beginning marked by a typical market seasonality, resulting in a subdued first quarter due to weak demand for wafer fabrication equipment. Despite these initial hurdles, we started to observe signs of progress earlier in the year. And throughout the subsequent quarters, this positive trend continued, culminating in a notable upswing in both revenue and profitability during the last quarter. This growth was boosted towards the end of the year by key clients calling off consignment inventory. And it's worth noting that this mechanism is not expected to recur to the same extent in Q1 '25, which is leading to a sequential softening compared to the last quarter of '24. The recovery in the semiconductor cycle propelled a rapid increase in net sales in H2, which was a sequential growth of 35% and that led to a clearly enhanced EBITDA margin compared to the first half of 2024. The increase in profitability in the second half year also highlights our substantial operating leverage demonstrating our capability to restore margins effectively within the semiconductor growth cycle. This underscores the favorable trajectory of semiconductor equipment demand in the course of '24, although the comprehensive recovery from volume business has not yet fully materialized. Looking at the divisional development, a more detailed analysis reveals but the growth within the group is primarily driven by the PCT division. This division saw a substantial increase in its net revenues by 28% with Synertia still making a minor contribution. Sales were mainly fueled by existing business with Matchboxes and vacuum capacitors. Although Synertia felt short of expectations due to prolonged customer testing and acceptance processes, along with the delayed semiconductor industry recovery. Nevertheless, significant progress was achieved in the area of Synertia. At the regional level, growth in the PCT division was mainly driven by Asia, particularly with rising sales in Malaysia and China. Here, we did not feel any negative impact for our direct sales in China, while indirect sales through delivery of components to some of our key customers for integration into wafer fabrication equipment had a minor impact at the EBITDA line and considerable improvement was also achieved. The significant level of operating leverage and savings from the transfer of production to Penang are reflected in the EBITDA margin, which increased to around 35% in the second half year from 9.7% in the first half year. This led to a doubled EBITDA margin in PCT of 21.7% compared to the 9.7% in the full year of 2023. Although not yet reflected in the financial performance, the IXS division made significant strides in the strategic realignment towards the semiconductor industry. The slight sales decline of 0.9% to CHF 160 million was due to the exposure to traditional industrial markets especially automotive that did not perform well in 2024, as Stephan already mentioned. In terms of profitability, investments into the commercialization of CA20, which includes the establishment of a global service ecosystem for lab and fabric solutions led to a negative EBITDA of CHF 4.3 million compared to a profit of CHF 4.9 million in the previous year. Similarly, IXM's performance in '24 was impacted by challenging market conditions persisting from previous years. Softening demand in core markets, particularly in sectors like automotive, created a tough business environment. And in this environment, the division's strategy to focus on growing industries, such as batteries and semiconductors with new X-ray tubes as well as higher end markets showed first positive results in '24. However, market conditions and increased spend for R&D and marketing and sales could not be compensated in '24, leading to a sales decrease of nearly 5% and a decrease in EBITDA to CHF 14.6 million from CHF 23.8 million in the previous year, a margin of only 15.4% compared to 23.8% a year ago. The divisional outcomes just presented contributed to double-digit growth of CHF 47.9 million or 12.1% at the group level despite a negative FX impact of CHF 11 million in last year. Our gross margin rose from 41% in '23 to 43.6% in '24 due to operating leverage and further cost efficiencies of the transfer of some of the production volume to Malaysia. Foreign exchange fluctuations negatively impacted the EBITDA margin by 0.5 percentage points resulting in a margin of 13.6%, which is a 2.3% percentage point improvement year-on-year. Despite the potential for further EBITDA margin growth in '24, Comet decided to strategically invest in further growth initiatives as planned, therefore, lowering the margin in the short run. These investments included expenditures and personnel and to a limited extent, infrastructure to drive the market introduction and the adoption of our new products, particularly Synertia, CA20 and new X-ray modules. The increase in staff expenses by CHF 50 million was driven by new hirings for the implementation of our strategy and reduced the EBITDA margin by approximately 3.3%. We anticipate absorbing these costs throughout '25 with investments expected to generate returns through enhanced market penetration and revenue growth from our newer product offerings. Moreover, our free cash flow showed significant improvement, bolstered by robust operational performance and the reduction in capital expenditures. So the free cash flow yield stood at 9.2% nearing our midterm targets of 10% to 15%. As a result of the advancements, our return on capital employed reached 10.6%. And this indicates that we have returned to earning above our cost of capital and creating value as ROCE was above our WACC of 9% after a challenging year 2023, where we were not able to achieve this. Moving on to the balance sheet. Our net cash position has strengthened, thanks to the improved free cash flow. This positive outcome is a result of Comet's efforts to enhance operational efficiency and manage working capital. Despite an increase in the absolute figure of net working capital due to higher sales, Comet managed to reduce the net working capital to sales ratio. While we have made progress in improving our working capital efficiency, we recognize the clear opportunity for further improvement. Our objective is and remains to reduce net working capital to sales ratio to around 20% in the midterm. The lower-than-expected capital expenditures were primarily due to the timing of key projects such as the construction of our new building in Penang, Malaysia and the new clean room facilities in Flamatt in Switzerland. Consequently, payments for these projects have been postponed to '25. As a result, we anticipate a significant increase in CapEx for this year. For our most significant investment, the expansion in Malaysia, we have planned an investment of roughly CHF 40 million just in the year 2025. In summary, our balance sheet key performance indicators have remained strong as will be further elaborated now. To involve shareholders now approve the performance, we are proposing a dividend per share of CHF 1.50 marking a 50% increase from CHF 2.23. The payout ratio of 33% falls comfortably within our targeted range of 25% to 45%. This decision is part of our commitment to providing an attractive return to shareholders through both value appreciation and dividends, and considering the high investments were seen in '25 and '26 and our new facilities in Penang, Malaysia. Going forward, we will remain focused on preserving financial flexibility to navigate potential economic challenges and capitalize on growth opportunities as they arise. Let me summarize my comments. In 2024, Comet's performance was driven by the PCT division, due to the recovery in the semiconductor cycle, leading to improvements in key metrics. Although the X-ray divisions encountered challenges in the weak industrial environment remain dedicated to investing in growth with a focus on R&D, sales and marketing for long-term gains. The strong generation of free cash flow has resulted in a decent net cash position, positioning us favorably for investments, '25, '26 and other future opportunities. By staying focused on our strategic priorities, we are confident in our ability to drive sustainable growth and create long-term value for our investors. By the way, on the picture, you can see the rendering of our already mentioned new factory building in Penang in Malaysia, which is currently being built and constructed and, by the way, in time. With that, I conclude my review of '24, and I hand back to our CEO for an outlook to 2025. Stephan, please.

Thank you, Christian. Let's now turn to the outlook for 2025. We are optimistic -- we are cautiously optimistic on the semicondoctor market. It will again be driven by strong demand for AI applications, so particularly in leading-edge logic and DRAM. The increasing adoption of AI technologies across various industries is fueling demand for advanced semiconductor solutions and will drive the current value play towards a volume play over the next years, especially when AI is increasingly implemented in the edge. Also, we are observing an improving outlook for PCs and mobile devices, improving refresh rates, which are key drivers of semiconductor demand. As these markets continue to recover and grow, we anticipate a positive impact on our business and overall industry performance as the industry will transition more from node upgrades to capacity expansion. While we see further improvements in demand, we see some inventory adjustments along the value chain in the short term, especially in Q1. This is expected to translate into a relatively soft start to 2025. Looking ahead to fiscal year 2025, worldwide fab equipment spending is projected to range between USD 100 billion and USD 116 billion. This forecast represents a potential growth of 0 to plus 5% compared to 2024, indicating a positive trajectory for industry and semiconductor market expansion. In the industrial markets, we are seeing a more positive trend emerging after a challenging period. The first uptick in demand is a promising sign for both of our X-ray businesses. However, it is important to note that tariffs, may pose challenges and risks to global economic development and therefore, also our operations. We are closely monitoring the situation and implementing strategies to mitigate any potential impacts on our business. In the aerospace sector, we anticipate some growth in air traffic. Additionally, defense spending remains strong, providing a stable foundation for our business in this market. In the automotive sector, car production is expected to remain flat, flattish, reflecting the industry's ongoing challenges. However, we are optimistic about rebound in electric vehicle sales and demand for batteries following the slowdown in 2024. So how does our guidance for the look -- for the year look like? The broad described anticipated developments in our end markets lead to the conclusion that we will see an overall favorable business climate in 2025. In the semiconductor industry, as mentioned, the cycle recovery remains on track, signaling positive momentum for all our divisions. However, to further accelerate the cycle, we need the volume markets to recover, not just relying on the performance of the value-driven AI-related segments. While the exact timing and shape of a broader upswing remain uncertain, we anticipate a stronger second half of the year compared to the first half. While the outlook for our end markets is predominantly positive, the current uncertainties in the market create a complex and volatile business landscape. This requires us to remain agile and adaptive in our strategies. Comet is very well positioned to navigate through these environments and capitalize on emerging opportunities. To achieve this, we will focus on our 3 strategic pillars: accelerating growth, enhancing efficiency and strengthening our organizational culture. We will continue to work on commercialization of new products and technologies and leverage our investment to drive sustainable and profitable growth. While we have made good progress with Synertia and CA20, we have not fully reached the desired levels of success in terms of monetization. With Synertia, we need to enhance our position and seize the opportunities presented by a widespread upturn in the semiconductor cycle. Our focus in 2025 will therefore be effectively translating the recent investments into highly profitable revenue, going from multiple low volume to high-volume business and with CA20, pretty much the same thing going from first orders to multiple orders. Lastly, to support our growth trajectory and meet the changing needs of our customers, mid- to long term, we are continuing in 2025 to expand our operations. By emphasizing innovation, operational excellence and strategic partnerships and reflecting this proactively in our investment activities, we are confident in our ability to deliver long-term value. With these final remarks, I conclude my presentation -- our presentation. I would like to thank you for your attention and now open the floor for questions -- your questions.

Thank you, Stephan. Thank you, Christian. So before we start the Q&A session, 3 things. First of all, please wait until you got the mic from my colleague, Cornelia. Second, state your name and company, if possible. And third, limit to 2 questions. So you can always ask follow-up questions if there are additional questions. Who wants to break the ice? I see you were 0.5 second earlier. So Doron.

Doron Lande with Kepler Cheuvreux. I wonder if you would still commit to the midterm guidance regarding the trajectory that you gave with the 2025 guidance. Do you still think it's feasible? And also, do you think that the peak of the cycle, I think you -- if I remember correctly, last year, you said 2028. Would you still confirm that?

Very good question. Thank you. We will comment on the midterm guidance at this year's Capital Market Day when we have a little bit more color to how this cycle this time around is evolving. So stay tuned. Please come to our Capital Market Day.

Okay. And then my second question is you mentioned in the press release about increased activity in Japan. Can you maybe elaborate on that?

So we have been in Japan, actually for quite some time, but only with the IXS System division and for basically the entire existence of the Japanese subsidiary, it was solely focused on automotive, Toyota and the likes. And now over the past 4, 5 years, we have brought first IXM in. And now since last summer, also PCT has a presence in the subsidiary. So prior to PCT coming to Japan, they did business through distributors and distributors only. And since one of the big Tier 1 players for PCT actually sits in Japan, it was about high time that we establish a presence with PCT in Japan, and that has now started and is growing.

Juergen Wagner with Stifel. You talked about commercialization of your generator and your inspection tool, CA20, and what does that mean in terms of numbers for this year as we are analysts and like to calculate. And, yes, the second question would be how weak will Q1 be as we are almost through that?

So look, I think you will understand, maybe not that we're not going to share exact numbers for revenue of our new products. As we've mentioned, both Christian and myself, we are not quite where we wanted to be, but we're far enough that we feel very comfortable with our strategy, both the go-to-market strategy as well as now on the execution first results. So I hope that gives you a little bit of color to where we are. To your second question, you will get the Q1 trading update at our AGM. What we see is there is a similar pattern beginning of this year as last year minus the rather large inventory corrections that took place in Q1 last year. Does that give you some color? I'm not going to give you any numbers.

Michael Foeth with Vontobel. Two questions. Can you elaborate a bit more what you are delivering to the defense sector and how you expect that to develop this year? And the second question is in terms of your growth guidance for this year on revenues, can you give some more granularity directionally, what you expect for the different divisions or at least if you're expecting growth in IXS and IXM as well?

So on your first question, what are we delivering into the defense industry? And we always have is x-ray equipment, particularly X-ray modules being used, be it on the aerospace side or in general, the defense side. We're not actively participating with our systems, at least not to a large extent because most of -- or most and the largest manufacturers in the defense market, they sit in the U.S. and as a European company, it's rather cumbersome to participate there. When it comes to growth, the guidance for 2025, all divisions will contribute to that growth.

With PCT being strongest, I guess?

Correct. Anticipated, again.

Thank you, Michael, and we have another Michael.

Michael Inauen with ZKB. One question on the product side. I think we've discussed it a couple of months ago before, but I'd like to come back to this because your largest client on the PCT side is actively pushing or talking about product called Direct Drive, which does not include Matchbox or at least it's called Matchless. One of your other competitors, Advanced Energy is talking about Matchless product. So I think it generates a little bit of concern in the market that Matchboxes might be replaced and being a bit provocative. So maybe you can elaborate on that a bit? And on the PCT revenue growth, I mean, it was pretty strong, obviously, this year coming from a low level, but the way fabrication equipment mix probably didn't really play into your hands in 2024. I mean there was no real NAND investment. DRAM was probably mostly HBM related. So I'm trying to understand where your growth came from in 2024 and if NAND would recover, even if it's later in 2025, you should see a stronger acceleration than what you now expect, in my opinion.

Correct. So to your first question, as the technology spectrum and the process spectrum in the semiconductor industry is widening and broadening, there are different approaches to plasma control emerging. And the direct drive, for instance, or there is also post DC, one other variety coming up in delivering power into a plasma chamber. What we see is it's not cannibalizing. It is complementing the entire equipment and instrumentation landscape. It's a technology that we've been looking into. And it is not entirely Matchless. Some applications, they very well do have sort of integrated a form of matching. Some claim now mostly on one of our friends side that it has no moving parts in, very well possible that they do it on the basis of solid-state devices. It is a specialty. And therefore, we don't look at it as worrisome. It is certainly not cheap, and therefore, it will be used in certain areas. And in other areas, it is not going to be used at all. To your second question, when you look at the growth rate of PCT in 2025, I'm going to give just some very imprecise numbers, PCT grew roughly 28%. The overall semi device industry grew by 20%. Wafer fab equipment spend grew by 4%. NAND grew very, very little. You have some upgrades, but definitely no capacity expansion. So what does that mean? And plus Lam didn't build up inventory. That means we participated in areas that were of strategic importance to us that we have been talking about for quite some time, and that is on the logic side. So we have delivered a proof point that we have transitioned even if it may be ever so slightly but very important for us away from NAND or it's not that we want to go away from NAND, but we have complemented our serving of the industry with more logic. And the last part of your second question, your assumption is correct. Once NAND comes back, especially on the side of capacity expansion, that should be quite a windfall. What we will see presumably developing more and more throughout this year is, however, upgrades. They upgrade the current production facilities for more than 100 layers. And then thereafter only that they will go into capacity expansion. Yes. I hope that gives some color.

Nate from Octavian. The first question for the new CFO. So if I remember correctly, you're also touring around the globe at the beginning of this year. So can you maybe give us your first impression, I mean, where do you see more potential? What are your -- yes, just general feedback and what you would maybe improve? And then on the second question on the guidance. I mean, you have this range. So I'm assuming you have certain scenarios in place. Could you maybe give more details on that? I mean, how are we thinking about the lower end versus higher end? Is there, for example, some potential CA20 sales included there? So maybe a bit more color on that end.

So thanks very much, impressions of the first 2 months and yes, you're right. I was touring or I am touring to some degree, the different occasions to get to know the industry and to get to know the company, both. I think I can say that in the second week Stephan took me on the trip to United States to the ISS conference there, which is a strategy conference for semiconductors. And what I saw is how international this industry is, the same people meet all around the world here, there and there. And that's also the way how we work. You have a truly global organization, which is a change, which has not been exactly that way, I think, about 2 years ago. But that's where Comet is changing -- has changed, especially PCT in many ways that they work as a truly global team so that I really like. Second thing, which I really liked is customer intimacy to really go stronger into how close we work with key customers on new developments. This is a focus point and one can see and feel and hear that in the discussions and in the actions and how the teams are being built and so forth. Number three, 2024, 2025. In '24, we did see a good upswing, an uptake in sales. We also saw a very significant uptake on the cost side, investing into mostly R&D and sales and marketing for the reasons mentioned. For '25, we will continue to invest in sales and marketing and in R&D in particular areas, but we will also have some focus on where to be more efficient in order to have a better leverage out of our sales growth. When you see the guidance, '25 with the growth in our EBITDA margin, you see some of the effect of that, that we will do both this year, on the one hand, continuing to invest to create more and to size existing opportunities. And on the other hand, to see where we can improve our efficiency in the operations.

Excellent. And second question, is there revenue in the guidance for CA20? Yes. So whereas 2024 was we had our focus on getting in orders, 2025 is both revenue and orders and revenue, we already know that we have, but is it going to explode immediately? No.

I would say for the size of the group, it is still small.

Yes.

That's -- to give you a glimpse.

[indiscernible].

In general, I would say, yes, but don't connect semi only with PCT. The more the semi market recovers, the more also in general, the X-ray divisions participate.

We can take more questions.

[indiscernible] with ZKB. Just a question on the CapEx guidance. You mentioned that you're planning to spend CHF 40 million on Penang alone. So what would be the guidance for CapEx for Comet in total? And then the second question would be on the right-of-use assets, lease repayments has stepped up significantly last year from CHF 3 million to more than CHF 7 million. So what is fair to expect in 2025? Is the CHF 7 million now the new run rate?

Okay. Number one, CapEx guidance, I don't think we give a CapEx guidance, right, Ulrich. So no CapEx guidance, but we will have the CHF 40 million for Penang plus/minus. And we will have some additional CapEx in a low percentage of revenue for other projects. Main other projects besides Penang is our new clean room in Flamatt in Switzerland, which will enhance our productivity in certain areas where this is just increasing productivity and decreasing scrap. Second one on the right-of-use assets. I don't have that from the top of my head in here just 2 months, but happy to get back to you on that afterwards.

Probably just to give you additional to add to Christian, I mean, you remember that we have the 4% to 7% of sales, which is the normal CapEx we guided midterm at our Capital Markets Day. So -- and then you have these additional larger items. So you can easily calculate what that brings you to in terms of CapEx for this year.

But it's not the sum of the 2. It's a bit less.

Thank you. More questions before we have a follow-up question from Michael. No other question then, Michael, please. Start with one.

No, I'll start with one, and I have just one. I've seen in the annual report, your revenues to Asia have increased significantly, of course, because of Malaysia. I think you're delivering to your clients that sit next to you in Malaysia. But also your revenues to China have moved up. I think if I didn't get that wrong. Can you elaborate a little bit just on PCT, how you're doing in China because, I mean, the investments there into semiconductor from Nora and AMAG and these guys have gone up significantly. So I assume you benefit from that as well. Can you maybe give us a couple of examples or details?

Right. So Firstly, yes, and that helps us also in the current tariff situation. We do increasingly business in Malaysia from Malaysia to Malaysia on the PCT side. When it comes to business with China, China, we saw even in '23, that business was growing, that has continued in 2024. It's actually across the board. But it goes without saying China is a semiconductor volume market, and there are a lot of investments happening and to a good extent we participate in this development. While you see that China is also trying to build up in supplier vendor ecosystem that starts to compete with us in China. Does that give you the answer you were looking for?

Thank you, Michael. And Tamara, operator, do we have any questions from the webcast?

[Operator Instructions] The first question from the phone comes from Didier Scemama from Bank of America.

My first question is on Synertia. And I just wanted to know you were still happy with the sort of 5% to 10% market share target? And if you could give us an update. I understand your progress being made in Japan, just if you could give us a bit more color on that? And I've got a quick follow-up.

Well, thank you for the question. Are we still comfortable with our guidance, midterm, 5% to 10% market share with Synertia? Yes, we are. And then the second one was on Japan, how we are evolving there, actually quite well and rapidly. I presume that is also directed towards PCT or was that more in general?

I guess, my question was actually outside of Japan because you talked about Japan and how you're opening a sales office and trying to service that major OEM there. I'm just wondering about sort of the other geographies, especially the U.S., if you've made any noticeable progress in qualifying Synertia. That was really the angle.

Yes Absolutely. So as mentioned during the presentation, we have continued successfully with our go-to-market strategy and scored more design wins, but more importantly, also more spec wins. So we are actually very satisfied on that side.

Okay. Excellent. And then one of your, if not your largest customer hosted their CMD recently where they really talked up NAND upgrades as we transition to 500 layers, et cetera. When do you think you might benefit from those transitions at your customers' customers since -- in particular, it seems like it's very edge intensive?

Yes. it's actually happening. So that part is happening. Again, as I mentioned before, what we are especially also looking at is when will they start capacity build-out. NAND has been really peculiar because over the -- I would say, the past 4 years, too little -- very little in my eyes, too little investment has been made. And I'd say, end of last year, we started to notice that something is going on in terms of upgrades and it is happening as we speak. I hope that gives you some color.

No, it does. And just the final one, if I may. So if I understand correctly from your guidance, you're saying PCT is going to outperform the revenue guidance growth for the group. So should we conclude that, let's say, [indiscernible] -- the guidance you've given, which is below consensus expectation is largely a function of industrial weakness? Or is it also a function of weakness in commodity DRAM and commodity NAND and other parts of WFE? Just to understand a little bit the nuances there.

Right. it is more in function of the uncertainties and volatilities that we have factored in. I mean, you can imagine after '23 and especially also '24, where we were rather bullish at the beginning of the year, we've engaged in quite some scenario planning. And again, while we are very optimistic, we have put in more than a modicum of caution in now formulating -- articulating a guidance. So we remain positive on the overall semiconductor market for the year. But then there are so many uncertainties, be it geopolitical or what the global economy is going to do. The tariffs as well as the export and trade restrictions that were just being very, very careful.

Sorry, one more question, if I may. Can you quantify the revenue exposure to defense -- military defense applications overall.

You know what, I'll come back to you with a -- with an educated number. It is in the, I would say, single digit for the group. But I'm not going to -- you're not going to lead me out on a limb here. I'll come back with a more precise estimate.

Thank you, Didier. More questions from phone.

The next question comes from Sebastian Vogel from UBS.

I'm trying more luck again on the guidance in that regard. So from your description of the prospects of the different end markets, particularly on the industrial side, is it sort of fair to assume that like around 90% of the implied revenue and EBITDA delta is most likely related to PCT for 2025 and then the remaining 10% could be split off between IXM and IXS?

I'm so happy I have Christian here. You're in the fire now.

No, I wouldn't say so. There is all 3 divisions expect to grow and have good plans prospectus and the order entry of the 2 months -- first 2 months also solidify these assumptions that all 3 business units, business divisions will grow. And all of them will also have a significant improvement in their EBITDA margins. That's also what we expect. When you come to the CHF 1 million in the end, of course, this is dominated by PCT. But all 3 divisions will have a significant contribution to EBITDA improvement. Not just one or not just two, yes.

Yes. And to contextualize the margin profile prospects in PCT since there's a lot of things going on in Penang here and there. Just assuming you like make the run rate of the second half year in revenues, like CHF 150 million, you would annualize that CHF 1 million to CHF 300 million. Would you then be still in a position to have an EBITDA margin of 28.5% as you have seen in the second half and for the full year? Or is there some additional whatever efficiency measures and so on kicking in over the course of 2025 that would allow to have a margin that is above that number?

I've gone back on the slide to Slide #10 because there, when you look at the group as a whole, and look at the second half of the year of 2024, you have CHF 256 million in revenue, and you have 18.7% EBITDA. If you multiply the revenue by 2, if you take a similar EBITDA margin, you are more or less somewhere in the ballpark of our guidance, not exactly, but in the ballpark, to give you an idea. And what happens behind that, it happens that we, as I said before, continue to invest. So there are certain things where we will continue to hire certain people for customer projects for R&D. On the other hand, we have particular programs where we will save some money here and some money there, but that might not be disruptive. So it is rather smaller steps here and smaller steps there because last year, we have seen a significant buildup for the most important things. And it was done not very slowly, it was done relatively quickly, which is good because if there's something you want to start, you want to engage, then you do it. So we'll see -- that's why I take the second half of the year, where most of these costs are already in, which was started in last year. So that is a little bit how to imagine that to be. The structural profitability throughout 2025 will be driven mostly by volume, not by profitability measures. We will see some more of that of the profitability improvement in the second half of the year. That's true, but that's not the key driver of our profitability within '25. That remains to be value. I hope that gives you an idea what is driving the numbers. I won't give you the numbers, but the clear idea of what is driving it? So it is step-by-step measures on costs. It is mainly not disruptive. And it is continuing on the strategy and with investments we've taken last year with some add-ons, which we are doing because it does make sense.

Thank you, Sebastian, for your question. Do we have a question in the room?

[indiscernible] Can I come back quickly on the Slide #10, where you made this quotation because why don't take Q4 with CHF 143 million, if I analyze this, I get CHF 570 million, so this would be CHF 50 million above the guidance where you go back and lean back on Q2, Q3 numbers where you are relaxing. So what's the difference of Q4 to the rest? Why should we don't assume that you can achieve these numbers, so meaning CHF 570 million?

I mean, if you assume that you can extrapolate the world linearly, then you're right. And obviously, in our scenarios, we have a rather broad view and a broad gap between what could happen in the worst case and what could happen in the best case. And -- so what we have done as a difference to 2024 is, as I mentioned in my outlook, taken a cautiously optimistic view. There is upside in the numbers, but then there are so many factors that can happen or not during the year, that will severely impact potential growth and alter the trajectory that could be possible and so that is what we factored in and baked into the guidance.

If I may add to two things there. Number one, we do have a seasonality in all business units. So Q4 is stronger than the other quarters. And within the quarter, not surprisingly, the last month is always stronger than the first 2 months. That is normal. And secondly, I think Q4 this year -- last year, we mentioned that we had some stock up of some key customers. So that onetime effect, if you do any extrapolation, we have to take out there as well. Yes.

But still, when I come back to this simple and stupid view I have, and I go back to 2022, where we achieved sales of about CHF 587 million, if I'm not wrong and WFE CapEx have been around CHF 100 million. So this is the low range you are guiding for this year when you say it goes from CHF 100 million to CHF 115 million. So can you explain me where is the difference then exactly to 2022, where we achieved the CHF 100 million WFE CapEx, CHF 580 million sales.

I would say the largest difference to 2022, which was the end of a rather furious cycle is that there is a lot of caution on the side of the device makers, but also the tool makers at this point in time, in the recovery cycle of the semiconductor market. So I would also say, you have to factor the follies of a rapidly expanding market and maybe runaway optimism in the industry out of the numbers.

Thank you, Serge. More questions in here? If not, Tamara, nothing over the phone. So last chance to ask the final question, if not, then thank you very much for your time, for your insightful questions before we part ways. We have a [indiscernible] where you can continue your discussion in a more informal setting with our management. So we would be happy to see you there before you run away. So thank you also to the people who joined over the webcast. We're looking forward to continue our discussions. Thanks a lot, and have a good day.

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