INFICON Holding AG (IFCN) Earnings Call Transcript & Summary

Yes, on my watch, it's 9:30, so it's time to start. Good morning, and welcome, everyone. My name is Bernhard Schweizer, Investor Relations contact at INFICON. I have the pleasure of hosting this Microsoft Teams webcast of our Q1 2025 results conference. With us today are Oliver Wyrsch, CEO of INFICON; and Matthias Troendle, CFO of INFICON. The management team will first present the results and then take questions. During the management's prepared remarks, online participants are requested to turn off their microphones and cameras please. During the following Q&A session, participants are then invited to turn their microphones and cameras on when asking questions. [Operator Instructions] You should have received by now a press release on the Q1 results, together with a link to the accompanying visuals for this web conference. All documents are available for download in the Investors section of the INFICON website, www.inficon.com. I would also like to inform you that we record this web conference to archive the audio file later on the INFICON website. The oral statements made by INFICON during this session may contain forward-looking statements that do not solely relate on 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 operation and financial condition. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Having said all that, I would like to hand over now to Oliver Wyrsch. Oliver, please.

Thank you very much, Bernhard. Welcome, everybody, to our earnings release first quarter 2025. I would like to start with a few general remarks on the markets and our expectations of this year, and then we'll hand over to our CFO, Matthias Troendle, for more details on the financials. Let us jump right in 2025 Q1 results. A solid first quarter with a positive order trend, continued growth in Semiconductor, RAC/Auto as well as a rebound in General Vacuum. However, we see increased risk and uncertainty due to trade tensions. If you look into more details on the sales, we see generally in this first quarter, an improving market environment. Sales increased to USD 158 million year-on-year with plus -- 3% plus year-on-year and 2 extra points, if you take out the negative currency effects. The orders substantially increased with a book-to-bill above 1. Then, when you look at the different sectors, Semiconductor year-on-year increases plus 18%. With good orders, the recovery continues. Solid RAC/Auto sales in a still difficult environment, but we have shown further growth, plus 3% year-on-year. General Vacuum continues the improvement after the backlog reduction still in Q1 last year. We are back on normalized levels and now growing again for the last current quarters. So year-on-year, minus 13% on a tough comparison with a growth quarter-on-quarter of plus 7%. Security & Energy after very strong growth for many quarters, most recently, plus 21% record sales in 2024. As expected this year, slower with minus 27% year-on-year and minus 4% quarter-on-quarter. Operating result, a healthy and improved profitability with an operating income of USD 32 million or 20.2%. The gross margin improved as well by 1.6 percentage points year-on-year. Solid operating cash flow of USD 18 million at a high level. Continued investments in R&D, 8.7% of sales, as well as CapEx, currently in this quarter, USD 5.3 million. For the full year, we expect depending on the required investments and developments, USD 25 million to USD 30 million. If you look at the worldwide sales, we see a strong quarter for Asia, with significant growth year-on-year. Europe and especially Americas in the year-on-year comparison slow. When we then look at the different end markets, first, Semiconductor & Vacuum Coating, we see continues to have a strong position, continuous growth in this challenging environment. But we also see in Q1, the recovery picking up speed with acceleration expected in 2025 unless, of course, trade tensions impact the growth negatively of this market. If you look on the year-on-year comparison, we increased 18%. So you see continuous growth here. When you look at the last 5 years, we were able to grow step-by-step continuously, and we see this also in the first quarter continuing. The market expectation for 2025 is flat to growth. This is depending on this uncertainty and the risk due to trade tension that it is more difficult to see what is the development of this year. Visibility is quite low, remains low based also on past quarters outlook. The recovery is picking up. We believe that there is a positive outlook with further improvement over 2025. Mid and long term, we see strong drivers, but for short term, of course, the uncertainty caused this low visibility. When we look at the submarkets, most of them are moderately positive for 2025. We have seen some acceleration and expect further acceleration. We reported last quarter, there is a positive narrow development, even a ramp, you could call it, around AI investments for HPC and HBM. This trend is broadening now and stabilizing. We see this also in our customers' numbers. So this is a positive sign that the recovery continues and expands. We have ongoing investments in leading edge and other advanced chip design processes. With that, also more sensor use, a broader sensor use. And with this, we continue also our strong R&D pipeline with all these collaborations with the top customers in the industry. When we then go to automotive, refrigeration, air conditioning, we keep our strong position. We have a good development in Asia. Americas is more moderate and Europe is slower, a bit market driven. We expect flat to growth for this year. In 2025, we have seen a first recovery in the market. We expect towards end of 2025, in particular, the automotive and battery EV market to further recover. Year-on-year, we could show more growth also quarter-on-quarter. So we continue to grow here. You see this, a trend over the last 5 years, even in most recent quarters where the market was much less dynamic and even in some of the submarkets of this end market contracting. We believe with this growth, this shows a clear sign that we're gaining market share. We continue our R&D and have a very strong pipeline, working with top customers here. A few of the key products we have talked about in the past, ELT, but also the service tool, the aftersales service handhelds that continue to show resilience even in a difficult market here driven by refrigerant requirements due to climate change. Next market, General Vacuum. We had a very strong comparison. Q1 of 2024 was the last part of this big backlog that we worked through, and then normalized starting Q2. Q2 to Q4 last year, we saw slower development, but a steady recovery. And this you can also see when you compare Q1 to the most recent quarters, we could show a quarter-on-quarter growth of plus 7%. We remain in a very strong position as the most competitive full liner in vacuum instrumentation, across all these submarkets in this end market. We are optimistic for the future. It's particularly in Europe, visible now recovery versus prior quarters. The uncertainty, of course, regarding trade tensions makes it hard to predict the development. But based on the most recent developments in Q1, we are moderately optimistic also here and have an outlook from flat to growth. Then we go to our fourth segment -- end market, the Security & Energy. Strong position with a strong product lineup. As you -- most of you know, this is a segment that is depending on government programs and policies. We had a very strong growth the last 2, 3 years. This is now end of some of the phases of the rollout programs with the U.S. Department of Defense. There is more phases coming, but the timing is unclear. Certainly, for H1, we expect this segment, therefore, to be slower. Midterm, we are very optimistic here. We have additional applications that we work on, meaning this is a new market that we can go and explore, and we can also expect higher momentum with the increasing security budget, specifically in Europe, which we already see first positive signs also in this first quarter. We see for 2025 a decrease. With that, I move on to a specific topic that I would like to talk about with you, our worldwide footprint. Why are we continuing to be moderately optimistic as we also guided last quarter? Of course, there is a lot of uncertainty, a lot of additional risk due to the most recent trade tension. These trade tensions, though we see as a longer-term development, in particular, the decoupling of China and U.S., these are developments that we have been following closely and have set up our global footprint accordingly. Today, we believe we have a very strong footprint to reconfigure quickly to any of these scenarios that can potentially materialize. The current scenario, if you particularly look at the setup of the tariffs as they are today, that is also one of the scenarios that we see as likely going into the future, even though some of the numbers might change, but the actual impact of it on how the configuration of our global footprint needs to be, seems to be similar even in similar scenarios, meaning we have anticipated this in the ongoing product transfer projects, meaning moving manufacturing from one location to the other, or opening up another manufacturing location. This has already been ongoing and addresses the current setup as well. So the only thing that we have been looking at most recently was to speed up certain of these projects, given the increased tariffs. So if there is going to be a further escalation, we are very confident that we can improve further. I've seen the team also work after these announcements on Liberation Day, when they needed to make adjustments. This was a matter of days and weeks to reconfigure and make tweaks to these projects with minimal impact on our operations. Also, we remain very close with our customers and have very strong partnerships to adapt to this. Here, I have an additional view where you see the current ongoing manufacturing reconfiguration projects, Syracuse, Cologne, Shanghai and Kuala Lumpur. These are projects that I mentioned before, and they are going to be shortly completed also, and will address the current issues. Now, when we look at the expectations for 2025, we have seen a good order entry across Semi, RAC/Auto and GV markets. This supports the moderately optimistic outlook for the year. That's why we reconfirm our guidance of sales of USD 660 million to USD 710 million, and an operating income of approximately 20%. However, the recent trade tensions add uncertainty and risk across all markets. There was a low visibility, and I think the visibility has further worsened. So we need to look at this with looking at different scenarios. So when we currently look at the positive momentum in our markets, even with the weaknesses and risks that we had before Liberation Day, there is a reason for this moderate optimism. We see a gradual increase in the Q1 and across the year, specifically for Semi. The outlook, though, is under the assumption that there is no major potential slowdown of the global economy or major region and any other major unforeseen impact due to trade tensions, most notably extremely high tariffs between trading partners, as an example, European Union with the U.S. So in this current scenario as we have it today and also the scenario that we currently assume we are roughly going to end up with, after these negotiations take place. We have limited impact. And as I mentioned before, we have addressed already these issues with the currently planned manufacturing reconfiguration. And we can also easily adapt to further changes for new scenarios. What we do say though is, that under certain extreme scenarios, we see a potential temporary impact of up to 2 percentage points of the operating income. Where does this come from? It's not so much the reconfiguration of manufacturing. That's a small part of it. It's basically to absorb tariffs for a certain amount of time until the reconfiguration has been done. This is an extreme scenario. We looked at all the different scenarios. And therefore, we say this is from no impact or very limited impact up to a potential 2 percentage points. We have a pretty clear picture of what is needed and what the costs and impacts are for each scenario. With that, I conclude the expectations for 2025. I want to remind you, follow us. We have all different channels for you to gain more insights on what's going on at INFICON, always interesting new projects and ideas and engagements that you can see. One interesting thing maybe this time is that, we have with Smart software and one of our Smart sensor in a network of different sensors, providing -- provided or developed a solution to a -- like forecasting system for earthquake through gas analysis, very interesting projects, of course, not in our -- one of our main markets. But nonetheless, also the strength and adaptability of our solutions in all kind of different projects. And with this, I would like to conclude my part and would like to hand over to our CFO, Matthias Troendle, for more details on our financials.

Thank you very much, Oliver. Good morning, everyone, and welcome to our first quarter call. No surprise. I will cover the Q1 financials, and will briefly also comment the 2025 guidance. So first, let me start with the highlights for Q1. The orders improved and the book-to-bill reached after quite some time, again, above 1. Sales did increase by 2.6%. Gross margin was strong with 49.4%, and the operating income improved in absolute figures and reached 20.2% of sales. Our equity ratio shows 74.1%. And the cash flow was solid, and the net cash reached a very high level and improved clearly versus last year by $33 million. The CapEx started a bit lower with $5.3 million into the year. Now, let me go a little bit into the details. As you've already seen from our press release, we achieved revenue of $158.3 million in Q1, which represents an increase of 2.6%. Taking into account the negative currency impact, the organic increase was [Technical Difficulty]. Maybe somebody goes to mute. Thank you. So as you've seen from the press release, we have -- Oliver, let me quickly comment the market trends again a little bit. Oliver already commented, the developments in the market, and we can report that sales increased in the Semi & Vacuum Coating market and Refrigeration, [ Automobile ] and Air conditioning, while the General Vacuum and the Security & Energy market declined by 13%, respectively, 27% compared to Q1 last year. Compared to previous quarter, we had a little bit different picture, which the previous quarter was a record quarter, and we had some sales decrease overall of 10.8%, mainly coming from the Semiconductor and Security & Energy end market, while Refrigeration, Air Conditioning and Automotive did grow by 7% and General Vacuum returned to growth, increasing by 7%. The regional distribution, which you can see on the right side, shows strong growth in Asia, mainly driven by semi, while North America and Europe did decline clearly. Now, let me go to the next slide. The gross profit margin reached 49.4% in Q1 and was up by 170 basis points compared to last year Q1. Lower freight costs and the very favorable mix have been the main drivers for that. Talking about costs, we spent $13.8 million on R&D in Q1 as a percent of sales. R&D increased from 7.9% to 8.7% in the first quarter. Additional headcounts, external support costs and many projects in that area did drive this increase. In SG&A, the cost level did increase to $32.5 million. Cost for additional headcount, infrastructure and several initiatives have been the main reasons for that 7.8% increase. And the operating profit for the first quarter reached $31.9 million or 20.2% of sales after $31.3 million or 20.3% in Q1 last year. This corresponds to a slight increase of 1.8%. The tax expense, income tax expense for the first quarter was at $5.5 million, which represents a tax rate of 18.9%, which was a little bit lower than in Q1 last year. And the net profit reached $24.9 million or 15.7% and it slightly decreased due to negative foreign currency impacts, which have been partially compensated by this lower -- slightly lower tax rate. Now, let's move to the balance sheet. Our net cash, as mentioned already before, reached $87.3 million, which is around $12 million higher than end of last year. The inventory turn rate developed stable at 2.4x and the DSO, days sales outstanding, was 47.6 days and comparable to Q4 last year. Our working capital closed at $222.4 million or 35% of sales and that ended $7.6 million higher than end of last year. The main driver for this is increases in inventory and the accounts receivables levels. Our operating cash flow reached a solid level with $18.1 million compared to $22.5 million last year. And the balance sheet shows also a very solid structure with an equity ratio -- an improved equity ratio of 74.1%. Those were my comments on balance sheet and Q1. Finally, a few words to the outlook. There is positive momentum in certain markets as well as uncertainties in a very dynamic environment due to the tariff and trade discussions and tensions. Based on the expected upturn in the semi market and based on the assumption that there's no major slowdown in business activities, we are moderately optimistic for 2025. We confirm our latest guidance and expect sales between $660 million to $710 million with an operating income margin of around 20% for fiscal year '25. We believe that we are in a good position and we'll be able to continue to adapt in a flexible way in order to serve our global customers, as Oliver explained earlier. However, under certain scenarios and as mentioned also in the press release, the 2025 operating income margin could temporarily be impacted by up to 2 percentage points. And that's basically the main statements we want to give to the guidance. Let me close with the calendar. The next event, which we have is an analyst visit in Balzers in Liechtenstein. It's a hybrid meeting due or planned for May 12. There is a second one end of the year, November 20. And if you are interested, you can register on our web page. And then we have the typical Q1 and Q3 dates with our second quarter and third quarter results in July and October. And with that, I would like to close the presentation, and we are now ready to take your questions.

We have first question coming from Jörn Iffert.

Just to double check quickly, can you hear me?

Yes.

Three questions, if I may, and I will take them one by one. The first one would be, please, when you look on the order trends in the Semi segment, is there a big difference between the OEMs and end users and memory versus logic?

That's one for me, I think. At this point, it's a bit difficult to see real trends. I have to say, it's a bit lumpy and a bit volatile. What we did see is, what I mentioned earlier is that, it continues after Q4 with the most dynamic around AI investments, which is HPC and HBM. So there's memory and leading logic in there. And then around that, we've seen some additional developments in other product lines. But from our view, it was both OEMs and end users, maybe with a slight tip towards Asia and towards OEMs. But it's not something that I would call a trend at this point.

[indiscernible] would agree. I think there's no real trend, and I think still it's mixed with the orders.

Okay. The second question is, I mean, you mentioned there was strong order intake in Q1 and book-to-bill above 1. I mean, what does it mean? Is it fair to assume book-to-bill was at around 1.1, 1.2? And don't you see the risk that we are currently seeing also a lot of pull forward demand ahead of potential tariff impacts?

Yes. So we will -- we are not commenting the book-to-bill exact ratio. But it was a significant improvement versus before that, I can say. What we looked at -- when we looked at the orders and regarding pull-in, we didn't see such a pattern. So I know that, chip makers have seen something like that. But it's important to know that we are one removed, right? We are the ones that help investing in additional capacity. This is also -- if you look at the time line, I think the share prices, the market showed that people were not expecting Liberation Day as extreme as it came out. And hence, that was also the general industry expectation. So there wasn't much evidence from what we see that there was major pull-ins. Now, of course, when we look into the future, there might be something like that, but I think also there's a tremendous amount of confusion as well as almost each single customer relationship has its own flavor depending on where you make what and ship to where. So there is -- difficult to say that there is a clear trend of that even in the future as I see it. But we will be continuing to look at something like that. What I can say is that China, the customers in China, they have been clearly preparing for it. We have been in discussions with them. Hence, also this de facto decoupling state that we currently are in is something that we have been addressing for quite some time actually. So that's also why we can navigate this. Technically, if you decouple 2 major economies is extreme impact, and we would say, in general, in many sectors, there will be extreme impact that will work its way through maybe in a major slowdown. That's one of the risks we see. But for us directly, not at this time, if that makes sense.

Okay. And the last question, if I may. Assuming your base scenario is kicking in and we don't have a material macro backdrop and we don't have material tariffs anyway, a question about the gross profit margin. With lower freight cost with better mix, can you give us more details where exactly what kind of mix was it? And do you see this 49% now as a more normalized run rate going forward?

It would be very nice to have a 49.4% going forward run rate, to be honest, right? So this was really high, I would say. I didn't look back, but I think we -- it's quite a long time since we had this level. And freight trade duties was one aspect, but we also had some, I would say, high running good profitability products in the shipping area, which did help to support this positive trend. As I said earlier, right, I don't think 49.4% is now the new baseline going forward. I still would be happy to be in the range of 48% to 49% or even 47.5% to 49%, this would be good. And it's, again, always very much depending on what we ship and to whom we ship and this is driving the whole thing.

Yes. I mean, I know, you know this, of course, but maybe for the benefit of other listeners, it's not so indicative to look on -- look at INFICON's gross margin, because we have this high mix of gross margins. They're going from 80% plus to 40% plus. What we -- how we look at it is that this 20 or so sub businesses is we really look at operating income. And the goal is there to have 20% plus. And I think you see there also what kind of resilience there is and how fast we adapt because also this Q1 didn't develop as maybe expected, the last couple of quarters were quite confusing, and also the following quarters will. And I think we are good and flexible to adapt when these changes come, and can also -- this you also see in how we manage our cost. At this point, it's still important to note that we are ready for the ramp. So there is this additional cost in there to be taking production lines online when these high orders come in. And Q1 showed in a few more places this positive momentum where you have this clear acceleration that we know from the semi ramps. But it isn't broad enough, right? What I said earlier, it's very narrow around the AI and a little bit beyond at this point.

We have next questions from [ Nejc Lavric ].

I'll start with 2, and then let's see, if others ask as well. Maybe on this extreme scenario where you say that the margin, operating margin could be impacted by up to 2 percentage points temporarily. I mean, can you maybe speak more about the assumptions? Is it more FX driven? Is it more tariff driven? I mean, you also said, you will probably have to take some of that hit on the margin. We're hearing maybe from others that they will still have the same prices and the OEM will be paying at the end of the day. So can you maybe break the impact down a little bit in an extreme scenario?

Yes. So why is it temporary maybe first, we believe we can configure the manufacturing accordingly, or our product streams. So we have been preparing for a number of scenarios. And for once now you see that, the decoupling of China and the U.S., we anticipated this and can relatively easily navigate this. It's always also connected with the strong partnerships with our customers and our suppliers, where we also talk for these scenarios, to be able then to change. When it comes to absorption of tariffs, I think this is the major cost that we see cost impact in these scenarios. And it can be relatively extreme depending on the scenarios that you could imagine, right? Right now, we all don't know, exactly where these tariffs will land. They change really quickly. They change unexpectedly. And they can be much higher than in prior administrations in the U.S., as we have seen. So when you look at those and then the time line of how long it takes to reconfigure and then what you could expect of what you can absorb, with customers and suppliers and ourselves, while always maintaining the strong long-term partnerships, then you end up at such an extreme scenario. So at this point, that's also why we took it into account for the guidance. It's not something that we expect. But what we also want to be transparent with is we look at these scenarios and we understand them very well and we quantify them also well, which goes together, obviously, with a very clear plan of how to react to those. I think we try also to show here more than others that we understand them, and we also want to share that. We generally have a bit more of the policy to be upfront and straight about what is happening and be transparent about this. I do not think that, when you look at the different scenarios, you can easily say there is not going to be any impact on the general population of businesses out there that operate globally, right? So I think everybody has to probably look at extreme scenarios and quantify them and needs to know what are we going to do in that case, right? So when it happens and when you have not such an extreme time line or such an extreme ramp of tariffs, it's much easier to absorb them and reconfigure and change, cost manage, move around resources. So we just look at these extremes, and they would impact us this year because if it's happening now, we believe probably next year, it would calm down a little bit based on midterms in the U.S. So we would expect an escalation rather this year. And then also, our reaction needs to happen this year. Hence, that's why it's a temporary effect that we would -- if it happens, we would expect it to happen in the course of this year roughly. Regarding FX, you had a question as well, [ Nejc ], right? It's like a sub-question. Maybe to address this too, you need to look at our global footprint as well for this. It's important because we are markedly different than some of our peers. We do not have one place where we have a majority of our headcount. So when you look at a location like Switzerland, it's not a large location for us. It's about 15% of our headcount that sits in a Swiss franc area or the payroll is in Swiss franc. When you look at the key currencies for us, which clearly the U.S. dollar is the most important one, they're very well hedged. So our largest headcount are in the U.S. and also our largest customer relationships and supplier relationships are in U.S. dollars. Even across the globe, we have business in U.S. dollars. So this hedges this quite well, changes versus U.S. dollars. The euro is our next important currency. The same there because we have good customers, good supply base, similar to our cost base. So we're quite resilient actually with movements around that. I think, there is some -- still some impact because, of course, we don't have so many customers in Swiss francs. But since the headcount amount is relatively small versus the 1,700 around the globe, the impact is not massive, and it's also honestly something that we have seen a couple of times in history, a strong Swiss franc. And we have certain measures of how to deal with it. So we look at this with quite some optimism. And maybe, Matthias, you would like to say something.

Yes. Maybe I just can add, we -- as Oliver said, the majority of our business and costs and also [indiscernible] is really U.S. dollar. We report in U.S. dollar. So this is good, right? From an exposure point of view, we feel quite okay with the other segment major currency, which is euro, where we have also quite okay balance between cost and income. And then, we have, of course, many different entities around the world, and also the Swiss franc. And as Oliver said, also in the past, we had periods of time where we had a little bit high or a little bit pressure on the FX rates and the conversion from Swiss franc to U.S. dollar. Yes, this is existing. But on the other hand, we also see every time some positive impact on the top line, because as long as the -- as it is today, right, as long as, for example, euro versus dollar and Swiss versus dollar is going in a kind of similar way, we also have positive impact on the top line, which is then, of course, then also compensating some negative cost impacts. So overall, I would say from a hedging perspective, we feel okay. Again, it helps a little bit in our -- with our global footprint that we are based in all regions in different currencies, and we did work some years ago quite good on natural hedging activity. It's not foreign currency hedges where mostly banks earn some money. But we were some years ago on natural hedge to compensate a little bit and to reduce exposure. It's not [ hedge ] all the exposure for sure not. But it's -- we do what we can do without other disadvantages in the supply chain. And from that point of view, yes, we look at it, I would say, more relaxed than to the tariff situation and the trade tensions and we watch it. And in case there is action needed, we do something.

Yes. And what you see, and just to make a note of that, if you look at the negative currency impact, it would be -- our growth would be 2 percentage points higher at this point, but with comparable profitability, obviously, also around 20%, hoping, all right? [ Nejc ], you had 2 questions, maybe we answered it already.

Yes. Maybe on the second question, I mean, we speak a lot about risk, and there's a lot of negative sentiment, but your major competitor is a U.S. company. So I mean, is there a chance considering that Asia is the biggest market, especially in the semiconductor, that this would be an opportunity for you? I mean, what are your thoughts maybe on that end?

Yes. I mean, maybe sometimes it could be a bit bolder in our statements. And yes, maybe thanks for this question, we absolutely see this as an opportunity. It's terrible to have this kind of direction of global trade tensions, but it's a level playing field for companies that act to it, and are set up in a better way, maybe, right, with a more global footprint. We see this as a big opportunity. We are just, at this time, a bit cautious until we fully understand what scenario will materialize and how we can best play it. But I don't see, one of these major scenarios where we don't have actually a benefit versus our competition. If you see the growth in Asia, this shows our very strong long-term footprint there. And we can do this also with the decoupling. So this is not what many companies can truly do. I don't know, if everybody truly goes and exercises these scenarios through to the end and sees how they're going to play it out, and we did. Most notably, we looked at Asia and particularly China in the first quarter, again, strategically and have mapped out our strategy, and we believe we have an extremely strong one for growth in Asia, while we, of course, maintain our position in North America and Europe. So yes, I believe there's a lot of reason for optimism there for us.

We have a next question coming from Michael Inauen.

Sorry, probably it's a bit dark here. I'm sitting in my living room. So sorry for that. Anyway, you know how I look. So I just have 3 questions, and I'll just get them out. And the first one would be, when you talk about reconfiguration of production, I was just wondering if you can give a bit more color here, how much of the demand, for example, in the U.S., could you cover with your, let's say, factories or assembly lines in the U.S. in a best case scenario? So would you be able actually to cover there almost all of the demand? Same maybe for Europe and Asia? That will be my first question. Second one would be on Malaysia, the project that you have there. Can you give a bit more color on the time line and what exactly you're going to produce there? And for which clients? I mean, I know this is a stupid question, obviously, it's for Asian clients, but Lam Research is in Malaysia, obviously, I mean, all the big U.S. guys are in Asia, so probably -- or in Malaysia, sorry, in Penang. So maybe you can give a bit more color around that project. That would be interesting because obviously, the other Swiss guys are also already there. And Oliver, you already mentioned the strong growth in Asia and also caught my eye when I went through the presentation that it was extremely strong. Can you elaborate a little bit also what happened there in China? Where are you benefiting there in particular? I mean, I assume local Chinese players. Is it on the mature etch side, particularly that companies are rebuilding their production facilities also obviously because of the decoupling discussion. So maybe a bit of color on that Asia-China topic, if that's okay.

Sure. Thanks, Michael. All right. So -- maybe first on the reconfiguring, right, taking you one by one there. As it stands today, so the current scenario as the tariffs stand, right? When I talk scenarios, it's not only tariffs, but it's largely tariffs and a few other things like entity list and so on. So when we look at such a scenario, as I mentioned before, we have anticipated this and are in the final stages of implementing this. We had to speed up the back end a little bit. We didn't expect it's so extreme to escalate on Liberation Day. So we sped up by factor 2 or 3. So we're going to be done in a month or 2 versus maybe a couple of months the projects, or the large part of this project. Yes, what we do is we move -- or actually, we're not moving, but we are duplicating production from the U.S., in Europe and in China. You need to understand that each of these maybe 20 product lines has its own logic to it. So there are some suppliers, there are some innovation partners and there are some customers. And also these customers, even though maybe the headquarters in the U.S., you don't ship there, but you maybe drop-ship to the customer or you drop-ship to a factory or something like that. So each one of these 20 product lines needs its own logic, how you optimize it. Most of them have 2 locations where you manufacture. So you can go and ship to all the different places where customers need that product. And then, there's a lot of factors that are taken into account to optimize this, which we're continuously looking at. So there's some things that you do a first big stroke and then you further optimize, and maybe the sourcing then should be from here or from there and so on. So if there was a big tariff between Europe and the U.S., or a big tariff between ASEAN and U.S., this is not an unlikely scenario, right, technically, that was the Liberation Day announcement. Then, we would have to do about 2 more production moves. So we'd have to ramp up some of the production in our Syracuse and our Colorado facilities. The plans exist. The teams are ready. At this point, we are not sure if it makes sense. You need to take into account also other costs, labor costs, tax cost, shipment costs, sourcing costs. So not only the tariff decides, right? So when you, for instance, have a tariff of 10% in Malaysia, might still be better to manufacture in Malaysia versus in the U.S. as an example. But as we've seen -- as we've shown in the past, we can quickly ramp this up. It's also a discussion with the customer often, right? Where would they like us to nearshore? And U.S. customers actually don't -- the largest part of the products for U.S. customers don't actually go to the U.S. because where is the largest part of semi manufacturing in the world. It's not in the U.S. It's also not in Europe. Maybe 70% plus of semiconductor manufacturing is in Asia. Hence, for us, Asia is an extremely important region. There's more and more also innovation done there, done there first. That goes also for China. That's how we changed our strategy most recently, right? So for our partners, even if it's U.S. customers, they have a similar approach to this. So manufacturing in the U.S. is only, to be very specific to your question there, is not as important as it seems at first sight, as you also said yourself. Many have hubs in Southeast Asia and Malaysia, most notably. So maybe that's to the first question. Then talking about Malaysia, what and to who we ship there, I mean, the most important product line that we wanted to move there was the handheld service tools, this aftersales service handheld, which we do assembly or did assembly in Shanghai factory for a long time. Obviously, the domestic market in China is very relevant to us. But we then opened up when we announced Malaysia some time ago already that we moved this product line there as well or we produce in both locations. And we can do this on a very good cost level, a good sourcing environment. And now, of course, it's in the benefit to have Malaysia as a location because it gives us more options. So there's a few more products that we potentially will move there. At this point, we didn't have to yet, honestly, right? So we can serve all the major customers with this most recent moves. But we do have strong plans to do other things also there. So it can't be closed too much, but this is also customer related, where and how they would like to source, where and how their sourcing strategy works, but it's a big asset, honestly, to be able to do that. Then China, regarding China, we are for 35 years in China in Guangzhou. Yes, we are around for over 50 years, but we have really a very long-standing in China, very strong customer relationship, also sourcing relationships. So there's a big ecosystem that we value, much like in other locations. More and more innovation happens in China first, so when you think solar, when you think EV battery, in particular, but also in semiconductor. So we are participating in that ecosystem as well as one of the strong local players, and we want to further build that up. I mean, most recent discussions with customers, there wasn't much flinching about this tariff announcements, to be honest. The concerns that we've seen with our partners there were much higher 1 or 2 years ago. And I think since then, they have adapted to it. They were probably most prepared to these announcements. Hence also, we roughly stay the course. We might speed up a few things. We might tweak a few things. We are definitely very committed. It's an exciting environment. It's a positive outlook. So that continues to be the same. All right. So that hopefully answers your 3 questions, Michael.

The next question comes from [indiscernible].

Yes. I just have one, if I may. It's regarding your strong sales growth in Asia in Q1. Can you cover all the demand from your Asian sites? Or are also some products shipped from the U.S. or from Europe?

Yes. I guess. So maybe to elaborate a little bit. So back to my explanation a bit when we look at our competency centers, the map that I showed earlier in the prepared remarks. So for each of this, about 20 product lines we have, the system is slightly different, what I mentioned earlier, right? So the ecosystem is relevant. So where do you source? Where you have your sourcing partners that deliver specific precision parts or pumps or PCBs, electronics, things like that, that we require for a high-quality product? Where is research? We have obviously a lot of collaboration there, too, and where is the customers and where do they actually need the product? So for each of these 20 product lines, it's a slightly different setup. But to answer your question, yes, we absolutely can serve our Asian customers. When we say we are prepared for the ramp, this is exactly what it means. Even if you say U.S. customers, a lot of this, when you talk toolmakers, will end up in Asia, obviously, because the absolute largest part of fabs are in Asia. So hence, this was always part of the plan of when there is the next ramp, which we continue to be prepared for and in some parts, has already started, maybe 1, 2 product lines you could really see taking off well as it typically happens with this acceleration in the ramp. So yes, it's fully factored in, and we are ready. Hope this answers your question, [ Martin ].

[Operator Instructions] [ Nejc ] has another one.

Yes. If you don't mind, since we have a few minutes left. On your Automotive, I mean, you increased the outlook, right, for the end market, I mean, compared to the previous quarter. I mean, can you maybe speak more about that market or why you have decided maybe to do that? Because if you remember last quarter, I mean, you spoke about this struggling automotive market. We're also reading a lot just the impact from the tariffs. So can you maybe explain more on that point?

Yes, certainly. So it's a small change, right? We went from flat to flat growth. A few factors that came in there. It's, first of all, been visible that the unit sales of automotive has a positive trend for this year. It's not a massive trend, but above last year. Then, there are continued strength in China. I made now a number of remarks. I think, I will not further elaborate. But we believe we are gaining market share. We are opening up applications. We have positive momentum there. And in the end, we also saw a good first quarter with good orders. And to stay with flat when you already see growth in the first quarter that should further improve towards end of the year, right, specifically Auto, led to this decision to get -- go from a flat to a flat growth. So this, of course, still has a lot of uncertainty and risk because of these trade tensions, right? And the tariffs, specifically on Auto or also just on general consumption, which will drive the units sold. If this impact is heavy, then this will slow down or maybe slows down dramatically, and then we would look at another situation. I think that is not the current assumption out there in the market. But the next quarter will probably tell us a lot where we're going to be landing with this and what then really will materialize in this nice little first trend of recovery in that specific market, right? Automotive is only part of this RAC/Auto market, but it's a relevant part, obviously. It drives even a part of the HVAC sales because it's so much related with Auto. I hope that helps, [ Nejc ].

Yes. And if I may, my final question, maybe on your capital allocation. I mean, if we look at the dividend, it has been largely stable, let's say, since 5 years. Your earnings are going up, the payout came down. You're building a net cash position now and you have a high inventory. I mean, so can you maybe elaborate a bit on that? I mean, are you looking maybe to buy something? Is there a chance maybe to raise dividend probably at current prices, even approaching 3%? I mean, can you maybe give more color on this?

Maybe I start and then Matthias, you can give more financial numbers. I mean, the short answer is nothing has changed to the prior discussed strategy. We are looking at [ inorganic ] growth continuously. At any moment of time, we look at 100 to 200 targets. It's typically not big targets, right? The most interesting profile is established technology bolt-ons that we can well integrate and then scale up across our customer access around the globe, which then gives you a nice 2x, 3x potential growth. So that is still similar. When it comes to our dividend policy, and Matthias will talk some more, but there -- it's unchanged. The idea is that we give back in a balanced way. That's why we increased to CHF 21, even though the last year was maybe not a huge growth or a very positive market around us, but we wanted to show appreciation and then -- and give something back. We still also, of course, continue -- want to be able to continue to invest into the future. You see how we invest in R&D and how we also invest in capacity for able to be able to adapt to this trade war tensions or also for ramps. So this is a combination of all this. Maybe Matthias can give some more color.

I just confirm basically, there's not major change in how we treat and discuss dividends. Yes, we increased last year or this year, what we paid in April. This was 5% higher. So there is some improvement in there, but it's not like, I don't know, maybe 6, 7 years ago where we had payout ratios of 100% or 90%. So it's lower, yes. And at the end of the day, I think one guiding principle for us is really that we try to balance our own needs and our capacity expansions, our expansion as a company at all and our investments in infrastructure, building machinery, with the dividends and the capital allocation. So we must make sure that we have enough funds and that we can support the growth of the company, right? And in parallel, of course, being able to pay out a certain amount and an acceptable amount of dividend. I think, that's something we need to balance and where we have every year discussions and we don't have a real dividend policy, I must say, right, based on. The dividend at the end of the day is decided by the shareholders and proposed by the Board of Directors. And every year, we have a discussion. We look into the situation, into short-term and midterm plans and our strategy, including all of these other things, right? Oliver just mentioned, whether it's M&A, whether it's capacity, whether it's new building, whether it's a new entity somewhere in the world. And this is what we try to balance at the end of the day.

Thank you all for this discussion. As there are no further questions, I would like to invite management to share any closing remarks with us now.

Thank you, Bernhard. Thanks, everybody, for joining us today and for the interest in INFICON. It's great to have such an interest every time and interesting discussions around our business. With that, I would like to say goodbye. You've seen our next events on the calendar. I'm looking forward to see you on one of those. Have a wonderful day.

Thank you.