INFICON Holding AG (IFCN) Earnings Call Transcript & Summary

Thank you for reminding me to switch on the microphone. I start all over again. Good morning, and welcome, everyone. My name is Bernhard Schweizer, Investor Relations contact at INFICON. I have the pleasure to host the Microsoft Teams session of our live results conference here in Zurich. Thank you for joining the INFICON conference on its fourth quarter and full year results. With us today are Lukas Winkler, CEO of INFICON, and Matthias Troendle, CFO. The management team will first present the results and then take questions. During the management's prepared remarks, online participants are kindly asked to turn their microphones and cameras off. You should have received by a press release on the Q4 and full year results, together with the link to the accompanying visuals to this web conference and also the link to the annual report. All these documents are available for download in the Investor Relations section of the INFICON website www.inficon.com. We are broadcasting a live conference via MS Teams. We thus ask online participants to post their questions preferably in the chat function in MS Teams in writing. This should be the second icon on the top right-hand menu. Management will then read out your questions and answer them after the prepared remarks. The live audience, of course, here in the room will be able to ask questions orally. I would also like to inform you that we record this web conference to archive the audio file later on, on the INFICON website. The oral statements made by INFICON during this MS Teams session may contain forward-looking statements that do not relate solely to historical or current facts. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations as well as future results of operations and financial conditions. We undertake no obligation to publicly update or reverse any forward-looking statements, whether as a result of new information, future events or otherwise. Having said all that, I would now like to hand over to Lukas Winkler. Lukas, please.

Sorry for your patience. We just have some issues with the presentation, but it should show presently. Okay. Let's live with that. Good morning, everybody. Thank you for joining our conference this morning. It looks like we have a little small screen here, live I have to apologize for that. A few weeks ago, I would have made a funny joke and maybe even made a remark about the sudden death of the COVID-19 pandemic. But given the circumstances in Ukraine, it probably would be out of place. But let me make at least one remarkable remark. I have been here probably 15-plus times in this house of Ruden and presenting the annual results and we always had good and nice weather. And that's a fact. That's not a joke. Even today, it's beautiful out there. It's a lovely calm morning. With that, let me just jump, jump is easier said than made. I cannot even move. Probably need some technical help here. How do I go to the next slide? Let's start with the fourth quarter 2021, with a new record quarter that we had in growth in all regions and in all markets with the exception of Security & Energy market, which actually last quarter of 2021 was behind the last quarter of 2020. The sales growth was primarily driven by 2 facts, semiconductor market and China. Those 2 facts generated this huge growth that we had in the last quarter of last year. Book-to-bill ratio is again above one, which means that we have, of course, also a record backlog, which is on one hand side, very nice to have. On the other hand side, it's a pity that we had to increase our lead times and our customers don't like that, and they have to suffer unusual high delivery times from INFICON. The organic growth rate was close to 25% above the last quarter of 2020, which again shows the very healthy market and also our healthy market position in those target markets. The gross profit margin suffered and it was a little bit below the last quarter of 2020 primarily driven by the fact that we have to pay very high premiums to get our materials in order to be able at least to deliver certain products, especially the brokerage fees that we have to pay to get the electronic components went through the roof. Nevertheless, we ended last quarter with a new record level also on the operating income side and finished with a 21.5% of revenue. Now let's move to the full year figure. Here, we clearly can say all markets and all regions contributed to growth. Also our smallest market, you will see that later, it only contributed a little bit to the growth overall. Semi & Vacuum Coating market, I really have to say it was primarily the semiconductor market, not the vacuum coating market that actually did contribute to the growth. And if you have to highlight one region, it's clearly Asia again. And inside Asia, it's primarily China. Overall, we, for the first time, reached $500 million. I still remember some of you faced it, probably heard the term 10 years ago that we like to reach $500 million by 2020. Michael is smiling. Now with 1 year behind the schedule, we reached the $500 million, and that's a good -- I think it's a very nice milestone that we reached. And even on the bottom line, we reached $100 million operating income, which was a target 10 years ago as well. Now finally, we can say, yes, we reached this very important kind of landmark and target. Now we can focus on the next big step forward. What I have said for the last quarter of 2021 is almost true also for the full year, as again, driven semi, it's China. Gross profit margin, a little bit higher, but really not much. And given the growth we expected a better gross profit margin, but as I said before, material supply issues made it impossible for us to improve our gross profit margin. Of course, we had higher overhead costs as well, driven by more people. We now have more people in R&D and sales as well as marketing and we had to accrue for higher bonus expenses given the fact that we reached a record year. On the net -- on the operating income side, as I mentioned, the 20% has not been reached yet, but at least we reached $100 million. And so next time, we have to hopefully talk about 20% plus on the operating income side. Graphically, you can see it here, the breakdown into our target markets, dominated now by the blue color, which represents the semiconductor vacuum coating market and then followed by the general vacuum market, a more industrialized RAC and automotive market and the small contribution from the Security & Energy market, which is 4%, but more, I think, remarkable. I have to move to this side. More remarkable is the trend that you see on the bottom of the chart, where you see the breakdown into the 3 large regions that we serve. Asia now has reached the size of Europe and North America together. So that's a kind of an impressive -- pretty impressive move. If you look at the trend starting in Q1 '19. Now at the end of 2021, it really went up and through the roof. Again, a major contributor was China, but all the other Asian countries, they did very well as well. Now let's go market by market. I start with the smallest one. In Security & Energy market, where we had a little bit better result from the sales point of view than the year ago. But nevertheless, it was a disappointing year for us, primarily due to the fact that we never reached a large order from the U.S. Department of Defense because we have -- did work on a new product, and I have to move to that side again. Now the new product you see on your lower right side, with that product, we expect actually that the U.S. department is going to start reorder again. We already had first discussions and they tested already. So technically, you are ready. Now we are just depending on the release of certain funds from the U.S. government to actually go into next round of investments for those warfare detection portable instrument. Now having said that, at least 2 positive elements that I'd like to highlight and the positive elements are coming clearly from the energy market. On the energy side of this market, we did increase revenue based on the fact that we finally get the breakthrough with our portable gas line monitoring device that people can carry and find leaks in those gas distribution pipelines that are buried underneath the streets. We signed up an agreement with the largest U.S. service provider. They switched completely to the INFICON product. So we will continue to grow that sector as well. And the second contributor to this energy positive element on energy side is the biomethane market where we get a nice contribution to the top line based from customers in -- primarily from France, but also in Italy, where they now started to inject biomethane into the gas distribution system, and they have to make sure that the biomethane has the highest degrees, so 99.9% purity. Otherwise, it should not get injected into the grid that distributes the natural gas. So we expect for 2022 growth primarily driven by the fact that the U.S. Department of Defense should start reordering product. Again, and there are some programs that have been announced already. So I'm quite confident that 2022 will be better than 2021. Now going to the next market, the Refrigeration, Air Conditioning & Automotive market, where we now have the COVID year behind us. 2020 was clearly affected by COVID-19, especially in the car industry. Probably you remember that car manufacturer stopped their production when the pandemic started. And so we suffered as well in 2020. Now we are clearly in the post COVID area. So there are some catching up effects that we have seen, again, from the automotive industry, whereas the RAC industry remained relatively robust. And the single biggest contributor in 2021 is now coming from the battery testing market for new lithium ion batteries that the e-car industry desperately need. And it -- with our know-how that we have established in the RAC market as well as in the traditional car manufacturer markets, we were in a pole position. We also get the #1 position in the supply for our leak detection products to this very interesting and fast-growing lithium ion battery testing market. Why do they need to be tested? Very simple. Lithium ion battery filled with liquid electrolytes will catch fire immediately if it gets exposed to oxygen. Therefore, every battery package that will be built in into e-car needs to be tested at least on 2 levels. And that's where we have our products, very well positioned to gain market share. I do expect this tendency going on even for the next 2 to 3 years because it's already clear that there is no new battery technology available, mass production for the next probably 3 to 5 years. So everybody needs to have enough capacity to build up the huge demand for lithium-ion batteries in the e-car industry. The second growth driver is coming from our handheld after-service, a product market where we actually sell products that are not as expensive as a traditional INFICON product. We talk about prices around a few hundred dollars, not a few thousand, but they are used in 10,000 by the after sales industry. And for the first time, we reached more than $20 million, and we expect growing to $30 million relatively quickly. And we have established a nice distribution network around the world to have access to all the local and regional wholesale distribution network so that everybody knows our products is going to use those handheld battery-powered after sales products. So overall, we have reached almost $100 million in 2021, and I'm 100% sure in 2022, we will have a 3-digit million dollar figure at the end of the year. Having said that, let's move to our largest market by size, but also by opportunities, it's Semiconductor & Vacuum Coating market. And I really have to focus on the semiconductor side because on the vacuum coating side, I do not expect huge growth. I'm happy enough if you can keep the normal trend that we have, defending our market share in optics business and get our business out of the OLED display technology. But as I said, I do not expect huge progress on vacuum coating side, but the semiconductor market shows a number of quite interesting growth opportunities for us, driven by the demand itself, driven by technology changes, people are now going down to 7-nanometer, 5-nanometer, so they need to invest in a very expensive EUV lithography tool, driven by process changes with new chemicals, driven by geopolitical announcements that everybody around the world, the U.S., Europe as well as Asia announced government subsidies to push on establishing what they call a regional semiconductor industry to get more independent from the others. Everybody is fully aware of the situation that today, one of the most critical supplier TSMC is located in Taiwan, and Taiwan is another hotspot from a geopolitical point of view that nobody wants to have a critical situation soon. So therefore, big players such as Intel, Samsung, TSMC announced investments outside of their home territory. And that's where we get our tailwind as well. The second element that contributes to this growth opportunity is the fact that we still gain market share, especially in the market for pressure measurement products. And here, we actually get some tailwind based on the fact that there is a huge growing industry for equipment manufacturer in China, and they prefer non-American products. So our market share for our pressure measurement product in China is much higher than outside of China, just based on the fact that the products are made in Europe and not American technology. And the second part is coming from the new products. We're still looking for expanding our coverage in the semiconductor market on both sides, on the equipment manufacturer side as well as on the end user side, with new ideas. Those of you who attend the technology, they probably have heard the first time about this xPart technology, it is a kind of a special coating that we offer and that business will contribute a double-digit figure for the first time in 2022 as well. And then we have 2 more technologies that are more targeted to the end-user market, monitoring those advanced manufacturing processes where we have 3 key customers already doing tests, and I expect some not double-digit yet, probably, but close to double-digit figure coming from those new products as well in 2022. So it's a combination of market share gains, market drivers itself and new products that's why we are so confident that 2022 will be another great year. And I think it will even go into the year 2023, not stopping by the end of 2022 because the bottlenecks are still out there. And as you know, building up a new fab takes more than just 1 year. And therefore, I'm pretty convinced that we will have a growing semiconductor market for the next 24 months. Now last but not least, in the General Vacuum market, I would call it now more post-COVID area, we profited from a rebound in the business in Europe, especially with our private label partners that we have. And again, China is really at the top list of the growing markets that we serve around the world. So those elements, the European private label market and especially the American general vacuum market did contribute the most to our top line in 2021. And I expect a continuation of that now having already 2 months of 2022 in our books. We see already that there is no change in the dynamics compared to the year 2021. So overall, again, 2022 will be a good year for our general vacuum products that we sell to the market. Now I will stop my part of the presentation with this outlook slide. And if you read all the lines below the title, you see all the good reasons from the market point of view, why we will have a good year market-wise. But now comes the big but, the success of what we can reach by the end of the year heavily depends on our own capabilities to fix the bottlenecks that we have as soon as possible. We're working very hard on expanding buildings, changing setup in the buildings, adding new processes because the volumes are much higher that need -- so we need a new -- especially for products that are a little bit bigger. I'm thinking about leak detectors, where we have also some physical kind of challenges because those products are quite large. We work hard on adding new tools to be able to calibrate all the products that need final calibration. And as you know, the calibration is a part of our IP. We have to build our own calibration tool. You cannot buy them. So they need to be designed and built and fit it out with software algorithms. And last but not least, we are working very, very hard on fixing material shortages that we have. This is probably by far the toughest part of the expansion program because we depend on others. We cannot just influence it directly. And this is also where we suffer the most. It's really coming from the supply side. And inside the supply side, it's primarily electronic parts, although it's kind of how you call it, the snake that bites its own tail. So we supply the electronic industry, but we are depending on them as well. I can give you at least one example. We have 1 large customer, we're not telling the name, who insisted on using computers that have his chips built in. Now we do not get the chips, so we cannot ship the product. So this is kind of the -- is, as I said, the snail or the snake that bites its own tail. And so then the question always who should influence whom and who should suffer because there is a limited product available. So people talk about allocation. And unfortunately, it is the same thing about it. There is this industry in between the [indiscernible] They make a ton of money just by holding some of the electronic components and reselling it, not just 10% more. We are talking about factors. To give you an example, we have reached now for the first time a factor that has 3 digit. So it's 100x more expensive than 2 years ago. With that, let me just make one final comment. This is also why we have kind of a broad range on the guidance between $550 million and $600 million, depending on ourselves, not depending on the market. And on the operating side, at least, we should see the 20% on the bottom line. If we don't reach that, I would be very much disappointed. With that, I'd like to hand over to Matthias, who can explain you all details in our financial numbers. Thank you very much. We take your questions later.

Thank you, Lukas. Yes, good morning, everyone. It's a sunny day, after 2 years, again, a physical meeting. This is also very nice, I would say. So on my agenda for items this Q4, the fiscal year results for FY '21, the dividend and the outlook. I will quickly comment. So let's start here with the sales. As you have seen in the press release and as Lukas already mentioned, our revenue for the fourth quarter was $144.5 million, which compares to $116.9 million in Q4 last year. This represents an increase of 23.6%. Taking into account the negative currency impact and a small contribution from acquisitions, our organic growth was 24.6%. You can still already go into the markets, we can highlight that the sales in all markets except security and energy did grow in Q4, especially the Semi & Vacuum Coating market had a strong increase of about $25 million or 48% compared to Q4 last year. Compared to Q3, we had an increase of 18.2% and all markets showed growth. Also here, the Semi & Vacuum Coating market did stand out with about 31% increase. With that, the fourth quarter was our record sales quarter in history. Now let's turn to the regional -- regional. Okay, I was too fast, sorry, to the regional sales distribution. Compared to previous year, we had the highest growth in North America and Asia with 33% and 31%. Both regions showed a strong growth in Semi and Vacuum Coating, Europe showed a slight increase of 3.7%. On the next slide, we see some other financial data. The gross profit margin reached 46.7% in Q4, slightly down by 44 basis points and nearly stable compared to previous quarter Q3. The positive impact of the higher volume was partially compensated for rising material prices, partially strong increased broker fees, trade and duties. So what happened on the cost side? We spent $11.5 million on research and development in Q4, an increase of 8.5%. Additional headcount, higher bonuses and higher internal and external costs related to our development efforts did drive this increase. In selling, general and admin, the expense level increased to $24.9 million or 7.8%. Higher commissions and performance bonuses plus additional headcounts partially lowered by slightly favorable foreign currency expense have been the main driver for that increase. As a result, the operating profit for the fourth quarter achieved $31.1 million or 21.5% after $21.5 million or 18.4% last year Q4. This is an increase of around 45%. Compared to our previous quarter Q3, the result did improve by 41%. The tax expense for the fourth quarter was at $4.2 million, which represents a tax rate of 13.8% due to the profit mix of our international entities lower than last year's Q4 rate. The net profit, therefore, reached $26.3 million or 18.2%. This compares to $17.1 million or 14.6% in the prior year, a 54% increase in absolute numbers. The similar increase we see in the earnings per share. This went up and stands at $10.76 in Q4. Now let's move to the balance sheet. Our net cash in Q4 ended at $54.6 million, which is about $14 million higher than last year. Our operating cash flow, which is here on the bottom corner, developed more or less stable, and we reached a level of $19.8 million, representing about 14% of sales. The inventory turns reached 3.2, better by 0.4 turns compared to last year and slightly -- also slightly better than Q3. Working capital, which consists of accounts receivables inventory minus accounts payables, closed at $151.8 million, clearly higher than last year. $18 million increase in accounts receivables due to the record sales in Q4 and about $14 million higher inventory levels are the main reasons for that jump. The DSO ratio increased slightly and ended at 52.4 days, but still payment morale and behavior of our customers is still very good. The balance sheet shows a very solid structure at 69% equity ratio and no long-term debt. And with that, I -- my comments for the balance sheet in Q4 are finished, and I'll switch over for a full year. So revenue for the full year in 2021 reached $515.8 million, after $379.8 (sic) [ $397.8 ] million in the previous year, which corresponds to an increase of 29.7% or around $118 million. Excluding currency effects of positive 2.5% and the minimal contribution from acquisitions, this represents an organic increase of 27%. As already commented by Lukas also here, and you can see it in the chart, we are able to grow in all end markets and the vacuum and -- the Semi & Vacuum Coating end market had a blast of 37% and the strongest growth. All end markets -- in all end markets, except for Security & Energy market, we also did reach new annual price. Now let's take a look into the regional development for the full fiscal year. Asia, our largest region, it grew by 44%, reaching $284 (sic) [ $248 ] million and about 48% of our global sales. This increase was mainly driven by strong sales in Semi & Vacuum Coating, where we had a growth of nearly 50%. North America with a 25% share did increase by 22% and all markets did well. Europe has now a share of 26% and of global sales and did grow by 15%. Next page, the gross profit for the full year reached 47.9%, showing an increase of 62 basis points compared to previous year. Also here, higher volume was partially compensated by the rising material prices, increased broker fees and logistic costs. Turning to the costs. We spent $47 million for the full year on R&D, an increase of 20.5%. In SG&A, similar picture, a little bit lower, but cost increased by 14.2%. Here, we had again a higher variable compensation, more headcounts and some unfavorable foreign currency impacts as the main drivers for that increase. The operating income, as a result, reached $100.4 million or 19.5% of sales after $61.9 million in the previous year. Year-on-year, the tax expense increased by approximately 82% to $19.3 million, which gave us then a tax rate of 19.4% on average compared to the low 17.7% in the previous year. The net profit reached $80.3 million or 15.6%, which compares to $49.3 million in the previous year, an increase of 63%. The earnings per share reached $32.87, going up about the same level as the net income. Now also here, let's take a quick look to some balance sheet data. Some we have already -- sorry, some we have already seen. So the operating cash flow for the full year increased to $85.1 million or 16.5% of sales from $50.5 million in previous year. CapEx, capital expenditure were $30.3 million, substantially higher and more than doubled due to heavy investments in capacity, buildings, machinery and equipment. The working capital, I already commented, closed at $151.8 million and the equity ratio ended at 69%. Now let's move on to the next item, which is the dividend or the distribution. As you know from our earlier communication in Q3 and also from the CapEx data we typically share on a regular basis, we invest substantial amounts in 2021 and also in the current year in our growth with additional capacities, and we still foresee a higher distribution to our shareholders. The Board of Directors has decided to propose to the shareholders at our AGM end of March, a distribution of CHF 21 per share. This is about 30% increase compared to last year and represents roughly 70% payout. CHF 3.10 will come from the remainder of the capital contribution reserve and will be free of tax deduction and CHF 17.9 will be paid out as ordinary dividend. This also will -- this also means that with that, we will return approximately $56 million back to our shareholders. The payout is expected to take place on the 6th of April. Now as a last item, I quickly come to the outlook. Yes, outlook. Lukas did already go into the detail of the assessment and our expectations of the end markets. Based on our order book, our order intake and the overall business situation in the end markets, we are quite positive for the started year. Also, we must say that due to the current geopolitical situation, the forecast is generally somewhat a little bit limited and difficult. Nevertheless, we expect sales between $550 million and $600 million and an operating income of over 20% for fiscal year 2022. With that, I would like to close the presentation. We are now ready to take your questions.

Maybe we start with the audience. Privilege of being present. So Michael, please?

Congratulations on reaching $500 million. And the question would be, what are the ambitions now going forward? And the second question would be, you mentioned that you expect growth in Security & Energy and also growth for your HAPSITE products from the U.S. part of defense. Now given the geopolitical situation, the price in new frame work, unfortunately, generates generally demand for those products? Do you expect any, what have you received already any indications, if you do get more demand for HAPSITE products relating to that uncertainty?

No direct as a consequence of the situation in Ukraine, we haven't had any additional inquiries. And the plans that we have with the U.S. Department of Defense are long-term plans. They work on the new program where we will be a part of it, and there's probably -- they might accelerate one or the other project. But if you ask me, did we already receive some additional requests, the answer is clearly no. Now to your first question, what is our next ambitious goals. We are not ready yet to disclose that, but we have some meetings planned to discuss about what should we disclose? Or should we talk about what will be our next big milestone.

Maybe just one add on financials. In your guidance for over 20% margin, what's the underlying gross margin assumption? Will it remain under pressure and there's always after they are coming from higher sales or will the gross margin result?

Not in 2022. Maybe a little bit depending on the product mix, but not based on the pricing pressure. I believe that we might not even have seen the worst in certain cases. We see some relief in some mechanical components, but we do not see any relief yet from the electronics side of the business.

Picking the margin discussion, where do you see the biggest changes in the fixed cost because you are installing new capacity, so you should have exposed high. On the other hand, we have quite a leverage as said that the range of top line guidance is quite low, with 7% to 17%. So could you help that, it's 20% plus 7% growth? Or is it already targeting 17%? Let's say, midpoint is 7.5% something like that. We are only hearing…

We have not even discussed about all these details, but what I can tell you is that the impact on the fixed cost might not be that dramatic. The fixed cost, there will be some increase, but based on the fact that we invest in buildings as well, not just in equipment and usually investments in buildings have a longer depreciation rate. Matthias would know the details better, but I think we are talking about 20 to 30 years for buildings. And for tools, we only talk about maximum of 10 years. So therefore, the impact will be an impact, but I don't expect a huge impact from addition of the fixed cost.

So can you remind me of the CapEx for this year and to capitalize on this capacity growth?

We do. And this year, we probably will be around $20 million to $30 million again, certainly above $20 million, maybe not above $30 million.

[indiscernible]

No.

I was kidding. Because [indiscernible]

No, it will not because -- no, it will be exactly. We are really higher than last year. So in order to get the same level of bonus, you have to have -- we have to deliver a huge progress on the growth side.

Because there's a discussion, but also another question, as Michael asked about the effect of the premium mall, I'm wondering about this vast load, which took higher from BW. Now they say that it could be because of the EV cost. And so I'm wondering, so for unit testing, battery testing was in the production. Do you see new applications for your battery testing, for example, the transportation, [indiscernible] vessels or whatever.

There are already certain ideas around that, that to have devices made that to monitor certain transport vehicles, but they are not ready to be installed. It is also technically not so easy. You have to detect so-called electrolytes and detecting electrolytes in an atmospheric pressure surrounding is technically not that simple. Because they usually disappear very quickly and the vessel -- evacuate a vessel to find those molecules might be a little bit an overkill, but I know that there are at least some ideas around can those containers be monitored with a certain simplified version of what we sell to the equipment manufacturers. Going in the sequence.

Just briefly your overall view on the semiconductor market. And we are discussing about much CapEx in the whole industry. And you said it yourself and you don't expect it to go down or decrease [indiscernible] longer term? And just to add the second question, in the past, you always have the sequence between your OEM clients and your end user clients. And I was just wondering is it still true the currency inflation and we have so much industry needs and probably less reversion [indiscernible] is the trend seem the same that you see more revenues [indiscernible] 3, 4 months later or has it changed in the current situation?

No. This kind of time delay between what we see on the equipment manufacturer side and usually a little bit later comes the end user business is still the same. But we've increased market share, especially on the pressure measurement side, the shift -- there was a shift between the majority went traditionally to the end users now shifted towards the equipment manufacturing, probably expect in the year 2022 or kind of half of half of the business. So 50% to end users, 50% to equipment manufacturers with still a growing tendency on the equipment manufacturer side based on the fact that we get majority of the design wins in China. So that helps because they don't like to buy American products.

And they already built into the equipment or else for semi and other just in samples. So you said [indiscernible] building their equipment, or sell to someone else, they don't repeat equipment and then that's the [indiscernible]

No, no, it goes into the equipment, but to a competitor of -- to a Chinese competitor of [indiscernible]. Very simple. And so my overall view, this is my personal view. It's not based on scientific facts. I expect the next kind of downturn in the semiconductor not before 2024 or 2025. There will be one. There's almost clear, they will because we build up now capacity. So we will have an overcapacity situation in a few years. But I always have to remind everybody, last 3 semiconductor crisis never lasted longer than 12 months. So even if we are going to have some kind of let's call it semiconductor downturn. It might not last very long. Yes, please.

If I understand you correctly, your supply constraints in many areas, so this might tell you correct that where you end up in terms of top line, depends on your ability to deliver.

Absolutely, it's absolutely yes.

And maybe just to give you a little bit of a feeling, if you could deliver everything where would you end up with in terms of asset?

Above what we guided. Clearly above.

Clearly above?

Yes. Now let's see.

Any other questions?

We have to read them. I think there is a couple of questions. There's a question about pricing power. There is -- I have 2 hearts in my body. And on one hand side, I don't want to destroy a good relationship with customers. Also we probably could increase prices dramatically, and they still don't buy it, but some of them have memories like elephants. And once the prices are coming back to normal level, they might then go to a competitor. So we are trying to find a shared the pain deal with customers, but also share the win deal with customers. I'll give you an example. I mentioned before, we pay quite high brokerage fees for certain electronic components. Now we're in discussions with some customers. How do we deal with that? We still want to deliver products because otherwise, we would simply say, sorry, it's too expensive, we cannot put money on the products and ship it. And so we asked them to, what's the best deal to share the pain. Do they share a pay -- do they share a part of the initial brokerage fees? Or do we have a temporary price increase until the situation comes back to a normal supply situation? Or do we talk about the permanent price increase over a longer period of time. So this is what we are currently in discussions. What we, of course, did our list price, but that was not -- went up, but most people don't pay this price, but the list price is usually indicated for the next negotiations on new net prices. So overall, there is a tendency of going up with prices in the neighborhood of 3% to 6%, but it's more inflation related and not related to the current supply crisis that we have. Then there's another question. Let's see, elaborate an expectation for cost inflation in well, yes, there is cost inflation. We just talked about it. The single biggest pressure is coming from the U.S. In the U.S., we are faced with the fact that we have a hard time to find new employees. It's much tougher than in Europe. So the #1 bottleneck actually currently in the U.S. is not material, it's people, and they are paid by the hour, people in the factories. And if they can make $0.50 more per hour, they probably move to next neighbor company. So therefore, we have to play the game and increase our base salaries as well. So we are faced with the fact that on the labor side, there will probably be an increase on our U.S. operations of above 5%. It's not as much in Europe and the price pressure in actually Liechtenstein and Switzerland is much, much, much lower. The single biggest price pressure is coming from the material side, as I mentioned before, because everybody has to cover their costs as well. And our negotiation power on the purchasing side is clearly not as huge as we wanted to have it. And on the electronics side, we have almost no power -- purchasing power, I mean. There are more questions, please scroll it down.

I see that someone is holding his or her hand up. We will presently know.

Please speak up.

[indiscernible] Assuming that there would be no supply chain issues at all, no geopolitical issues whatsoever, a normal world, everybody could deliver what you want. How would your guidance look in that world for this year?

As I mentioned before, it would certainly be above the $600 million top line. Assuming we have already installed all the additional vision and find the people and have the material, the market dynamics on the -- on our order intake book -- they point clearly towards above $600 million top line growth.

Okay. And what would your maximum capacity be at the moment? I mean you are about to increase your capacity. But what would your maximum output be at the moment? And how will it develop over the next few years?

At the moment, it's very limited. But when assuming again, ideal world, everything installed, no problems with supply anymore, I think our base capacity will be closer to the $700 million. But also, again, based on the current shift, most production sites that we have, will work on a kind of a 1.5 shift pattern, so that the machineries are running 24 hours, but we have a main shift producing products, and then we have 2 smaller shifts, making sure that the tools are always filled with products to be calibrated. Most of the calibration and test times take more time than just minutes. So we have to make sure that all the tools are always loaded overnight. Therefore, we are working on a kind of a 1.5 shift model. And it would not help to go to 2 shifts because the bottlenecks again would then be the tools. We have to install new tools first.

Okay. So the bottom line max would be $700 million. And presumably, that would then be involving extra costs as well because getting to the capacity limit is always a bit tricky.

Yes. And it's not just tricky from an equipment point of view, it's also tricky from a space point of view. So we added space in Cologne, we added space in Liechtenstein turning actually office space in production space, and we added space in our ceramic production site in Finland. Finland is currently the bottlenecks for certain products. And in other cases, it's more the electronics components that are the bottlenecks.

Okay. And now given your expansion CapEx plans, how will that look in 2 years or 3 years?

Assuming what I have said before that we might expect some flattening in the semiconductor market in '24/'25, I don't expect that we will go above $30 million in CapEx in 2024, might then go down to more normal levels that we used to have, which are -- which used to be between 10 and $20 million.

No, but what I mean is what kind of capacity expansion is basically planned $700 million is now the absolute limit. What will be absolutely maybe 2 or 3 years?

Don't know that because we really carefully watch what the semiconductor industry is doing. And if we see that what we predict now is not going to take place, let's see, no flattening up, and we have to go into maybe next round of CapEx, but it's too early to predict something like that. Our markets are too fast changing that we can rely on plans that look beyond the 3-year horizon. I'm not sure how to get, who has another question from the MS Teams audience. Just please ask. I think I see somebody. No, it just was happened. Now they have a ZKB guest.

Yes. It's Harold speaking from ZKB. Basically, I have 2 questions. The first one would be on the automotive end markets. Could you please remind us how much automotive exposure you have? And in your guidance, is there any broader or longer production stoppage priced in? This would be the first question. The second one is on the inflation costs and also your guidance. You mentioned price increases of 3% to 6% on average. If I look at the midpoint of your guidance, this implies plus 11% growth or something. Then subtracting the midpoint of CAG price -- pricing -- price raises of 4.5%. I arrive at roughly 6.5% for the volume growth. Is, first, the math correct? And second one is, I mean, with all these topics, shortage of employees material costs, the broker fees, potentially some disruption of the production routes with also making transportation more expensive. Now would it then be the logical consequence that I would see incrementally lower profits on new sales in 2022?

I certainly do not question your math capabilities, but your assumptions are wrong. I told you that our list price will go up, but nobody pays list price, above 80% of our customers have net pricing arrangements. But the list price might be an indicator for the next negotiation round, but the impact will then be 1 or 2 years later, but not immediate impact. So the immediate price adjustments on our side are much, much lower than the 3% to 6%. Nevertheless, we have not planned for production kind of stop overall in our guidance. We assume that we can continue to deliver, and we have a higher priority on being able to ship versus avoiding brokerage fees. So the priority is really on the shipping side and not saving costs or not paying the brokers. Having said that, I think that your question was also around the inflation-based kind of facts. And I mentioned that already before, as I said, U.S., the single biggest pressure on salary cost and overall, a huge pressure on material cost all over around the world. And the only thing that we now work on is really sharing the pain with some of our larger accounts. And they -- some of them indicate at least they are open for discussions because they do not want to experience a disruption in their supply chain as well. Our customers are under pressure, at least as much as we are under pressure in order to be able to ship the products and therefore, the likelihood that somebody will bite the I would say the sour piece of a network is going up and accept certain temporary price increases. But I think the final remark is really going back to what we said in our title for the guidance, the top line heavily depends on our ability to fix all the bottlenecks, not from the market side.

Okay. One short follow-up then. For the automotive exposure, it would be 1 quarter of production stoppage, how much top line growth might this cost when the customers do not make the call-offs with you because production is not running?

If you look at our exposure into the automotive market, which is, I believe, a little bit more than $30 million. But in the meantime, it's all about close to $20 million is coming from the lithium ion battery manufacturing. And the likelihood that they are going to stop their production is very small. The likelihood that the production of car assembly is going to stop is probably higher, but that has a smaller impact to our business than the market in the lithium-ion battery manufacturing around the world. So because everybody now installs new capacity to make lithium ion batteries. And as long as they get their materials, I think they are more concerned of getting those from rare earth materials, which might have an impact on the capability of being able to make the lithium ion batteries, but nobody is looking for a production stop on the lithium-ion battery side. Yes. There's a question from the audience.

Yes. Just a quick follow-up from before. Regarding the capacity, you mentioned 50% increase over the next 2 years to 10. Can you just simply assume that maximum capacity from $700 million now will go up to approximately $1 billion?

No, not yet because what we already see are the first results of the capacity expansions. I think, as I said before, what we now have as a capacity will allow us to go to a normal $700 million run rate. And then we have to most likely add capacity again. Yes, a follow-up here.

Yes. Quick question on the channel vacuum specific. Have you seen that your growth in transactions, a part of your growth there is also semiconductor growth because some of those clients, I mean large terminal, for example, have you got strong growth also in the semiconductor business? So my question is as long as the semiconductor growth is stable or not [indiscernible]

There is a little bit overlap, I agree, but it relates only to those products where our products are a component of a system that might go into the semiconductor industry. But our large European private label customers do not sell our products to the semiconductor customers directly because semiconductor customers always have some specialties. They want to talk to their manufacturers, and they have their separate interface. They have the special, I don't know, connectors or cables. So the likelihood that a private label product ends up in the semiconductor company is relatively small. But if they are part of a system, yes, it's true. The General Vacuum market growth has some influence from the semiconductor market as well when we sell to the private label customers because we don't know exactly where they will be used. But we know that some of the products are ending up being used in kind of an inspection tools for semiconductor companies as well. No more questions? At least I see nobody has raised the hand and no questions from the audience. And I think we hit a little bit delay of 7 minutes. Thank you very much for attending this annual [indiscernible] conference, and thank you for your patience. And it's almost guaranteed that a year from now, the weather will be nice again. Thank you.