INFICON Holding AG (IFCN) Earnings Call Transcript & Summary

Good morning, and welcome, everyone. My name is Bernhard Schweizer, Investor Relations contact at INFICON. I have the pleasure of hosting the webcast of our third quarter 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. [Operator Instructions] You should have received by now a press release on the Q3 results, together with a link to the accompanying visuals for this web conference. All documents are available for download in the Investor section of the INFICON website, 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 these sessions may contain forward-looking statements that do not solely relate to historical or current facts. These forward-looking statements are based on 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 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, everyone. Great for having you here today, and welcome to our earnings release in Q3. About the agenda, we have the usual agenda. First, I will tell you a bit more about the markets, the key messages, about the target markets developments and about our full year expectations. And then I will hand over to Matthias Troendle, our CFO, for more details on the Q3 results. So certainly, stormy times these days. But at the same time, it's the time for making bold moves, we believe, and it's not the time for hunkering down. And we actually have quite a lot of optimism here. And I will tell you in the next couple of slides, why we see it that way, even though, of course, it's also a bit rough going [indiscernible]. The Q3 results, we have an ongoing positive order trend with the third consecutive quarter with a book-to-bill above 1. In a quite demanding environment in all our markets, we show continuous resilience despite the market weaknesses, and we have temporary profitability impacts due to the trade disputes ongoing. If you look at the orders, we can see that they increased substantially year-on-year, and they're up in all end markets and all regions, except Europe, with resilient sales year-to-date, roughly flat. And shipping these days is also a little bit disrupted at times through these trade disputes. So for us, we looked at this as a flat development and also Q3 sales of $164 million. We look as a good results. We had a tough comparison with last year. We'll get back to that when we have large semi orders out of China chip maker that we delivered. If you look at the segments briefly in our overview, we have growth of semiconductors in all regions, offset by a weakened market in China. Regarding sales, resulting in flat year-to-date, minus 1%. The broad ramp of the industry, we believe, is further delayed due to these disputes and negative investment developments where projects delay further on the timeline. They don't go away, but they move out further. So we believe ramp is rather second half '26 or even partially in '27. General Vacuum is growing in 2025 with another good quarter, plus 7% year-to-date, plus 6% quarter-on-quarter. Solid Q3 RAC, Auto results, I will talk more about that. Growth, even though the market is partially in consolidation, plus 4% year-to-date. Security & Energy is in a usual cyclical downturn where we have government program timings mostly defining these cycles. We have, however, already received first larger orders again from the next program wave. If you look at operating results, operating margin at 14%. The key factors there are lingering temporary impacts from the trade disputes. One key thing there is the capacity duplication. I'll get back to that in a minute. Negative foreign exchange effects. That's mainly the strong Swiss franc versus the U.S. dollars and the tariff impact. Efficiency measures are in execution around all that. So regarding the capacity duplication, what is that, as you know, in Q2, we showed how we move the production. This reconfiguration is largely concluded now, and we have adjusted to the new trade world in that sense. What we though still have is we have capacity in the former production location that needs to be ramped down over time. If you want to look at that in a big picture, then you could say we have still too much capacity in the West as we have ramped up in a real fast pace in the East. Now it's about ramping down the capacities in the West that we do not need anymore because we supply our customers directly out of the East. Then when we look at the FX impact, these affect part of our locations. It's an effect, we're also working on ramping down. It's basically similar measures, right, moving around headcounts and capacity. And tariffs, I believe we have been able to reduce quite significantly versus the last quarter through these measures, though there's some that still remain, and some few ones will even stay for foreseeable future. If I continue here, we will go into this -- all these topics in more detail through the presentation. Operating cash flow at a robust USD 27 million. And then when we look at the organization, as I mentioned, the production reconfiguration is concluded. But of course, still some of this duplication needs to be managed, which we are with high priority working on. With this new setup, we avoid the substantial trade dispute impacts. This is barriers and tariffs, other factors that we are able to avoid like this. And I believe we are very well positioned now for future different scenarios. There's a lot of uncertainty, of course, and I believe we're positioned for all of these different scenarios. We continue to invest in leading edge R&D with 8% of sales. I think this is a key point when we look at our orders. I'll get back to that also in a minute. When we look at CapEx, this is a little bit slower than before. I believe we have the CapEx -- when we move production capacity, we typically don't need so much additional CapEx because we're moving tools and so on. So we're looking at about USD 20 million, USD 25 million for CapEx. When we look at the overall pictures and also tie it together while we push forward with leading edge R&D and are really optimistic there is -- we're winning for 3 factors really. And that's also why we could show orders different than many others in these industries where we have really interesting R&D pipeline where we're winning new business. We're opening up new applications that weren't possible to be centralized before. There was no measurement possible before. So that's also a harsher environments with all the leading edge logic, for instance, or leading edge memory. There's clear market share gain and there is also a couple of interesting smaller markets that we focus on that we find are equally interesting as the semi market, good growth, good profitability and they actually show strong resilience in this more difficult economic time. So 3 good drivers for why our orders are up. And I believe this is the time for bold moves for INFICON, really move forward and focus on the customers. So if we dive into the different perspectives here, worldwide markets and sales, we made one change for you, a little bit increased transparency in the sense we show now 4 regions. I think it's quite relevant to show these 4 regions. That's how we internally think. That's how we structure our innovation, organization and also production and supply chain. So we're looking now at Asia Pacific, China, Europe and Americas. If you look at the development there regarding sales, you can see 2 regions are down in Q3, 2 regions are up. All in all, you can see a positive trend, especially in Europe and Asia Pacific, and China and America is a bit slower. There is some reflection of the U.S. trade restrictions in that. If you then jump into the different target markets, starting with Semiconductor and Vacuum Coating, we are in a very strong position. As I just mentioned, I believe now is the time where we really expand our footprint there in the market, opening up new publication, gaining market share. And the innovation pipeline is on fire. I think it's also in the slower times the time where you can, with your customers, truly innovate on the next generation of products or the one after of their products. And that's really what we see these times. When we look at the general market developments, the broad industry ramp, as I mentioned earlier, we believe, is delayed due to the trade tension, which constrains the growth and delay the investments. That is the timing that we cannot influence. That's the industry. Some subsegment, though there are, of course, already ramping, but it's too narrow, specifically the one around AI, that is HPC and HBM, certainly, very interesting. That's a few players that play well and there's a few others that's trying to catch up. That's where CapEx investments happen on a larger scale and where we see an acceleration, but it is still too narrow, when you look at other submarkets within the semiconductor market. There is everything from being really quite hot and ramping to slowing down again. And I think also what is interesting as opposed to maybe also other cycles is it's a bit back and forth. So we see things like last year in China, we had an acceleration in chip makers investments that we then also shipped. That is also why our comparison year-on-year on the Q3 is tough because we shipped that all in Q3. Then we saw a slowdown of this chip maker business in China, but an acceleration of the tool maker in the first half of this year, we shipped that too and now we see again that has slowed down, but a bit of an uptick again in China. So there's so much -- this is an example, so much going back and forth, the visibility is really quite low. So when we look at the market outlook for semiconductor, we look at this flat to slow. And the main reason for that is actually, we are trending flat to last year, and I think if we have shipped everything, we could be even a little bit ahead. But the last year's Q4 quarter was really quite huge, an absolute record quarter because we shipped so much also for the chip makers, that $100 million to repeat that, that will be not so easy. It's possible, but that's why we are saying flat to slow on this. All in all, really optimistic about what's happening in the partnerships with our customers, where we work on the next generation of our products, a lot of new wins across the board. Quite exciting technology updates, and you'll know -- you will hear more about that in other formats as well. If we then jump into RAC Auto target market, I think also here, we expand our already strong position. This is a market that overall is not growing necessarily, at least part of it, especially the EV part of it has just passed through rock bottom and is now picking up slowly. But we clearly gain market share there with our leading edge products. I think we are at least a generation ahead there. And we're also winning in the East, which is very important. That also shows how localized we can operate, innovation and manufacturing. So here, we had a growth of, as you see on the chart on the right, of 30% in 2023, but you could sustain that level and grow ever since in 2024 and also this year, we show growth with year-to-date, plus 4%. So I think we expanded this market. Important next to auto and EV that again is past the rock bottom and seems to be solely picking up in spite of all the headwinds from policy to consumption. Two other things are also important. One is the build of data centers is something where we profit from clearly, obviously, on the semiconductor end market, but we also profit from it here because why air conditioning market is a key supporter of these data centers, a very key ingredient to build large data centers, and that's where we see a really strong dynamic now emerging just over the last couple of quarters. And the other one is a bit of a longer-term one. The new refrigerants due to the climate policy changes that drives our new sensor growth, that's also new innovations from us that are able to detect these new refrigerants. That drives that market as well. So all in all, a really strong R&D pipeline. I think ELT is strong. Stratus is strong. There's a couple of other strong products here. What also is a factor here is specifically for the handhelds, our competition is American. We were able to relatively quickly move now in Q2 our production out of China, everybody manufactures in China, and now we're supplying globally out of Malaysia, and we see market gains there too because of this really fast reaction. Yes, it cost us. We got a big thing, right? We see it in the operational income, but we also see the benefits on it already now emerging in these gains. Okay. Then we move on to the next target market, General Vacuum, quite excited about that. I think we show continued sales growth after 2024 was slower. And remember, 2023 was COVID opening and shipping of all the backlog, so a bit of an outlier. But now in 2025, we see continued growth. And you see, year-to-date, the plus 7%, year-on-year significantly up, quarter-on-quarter up. I think this shows also the strong position that we further expand. This is a bucket of many smaller markets, maybe 20 or so that we carefully select regarding our position, what we can contribute the growth potential, the profitability potential, and I think now is also the time of this smaller industrial -- advanced industrial markets or also big science markets or life science markets, which show strength where we can further expand our position, but they also grow. One thing is missing still is the solar market, which is an interesting part of this basket of markets. We believe this is still in consolidation. There's a lot of overcapacity, specifically in China. And it's very likely that the recovery really only comes end of '26 or even slips partially into '27. Nonetheless, I think there's a lot of reason for optimism as we also hear build out our strong positions across the submarkets. The last market, Security & Energy, as I mentioned, we have #1 product here. But this is driven by this large government programs, big ones in the U.S. but also across NATO and also in the East. We have been rolling out a couple of programs over the last couple of years, you see the massive growth that we've shown from '22 to '24. This year was expected to be slower, but we have already seen good order entry again. So the first pieces are coming. This is not a full new cycle. I think we are still working on the new programs, and they will come in. But it's a good sign of how dynamic this is. And of course, with the security situation, defense budgets go up all around, specifically in Europe. Plus, specific new HAPSITE generation is able to go into a number of new applications, explosives, narcotics, environment testing. These are all additional submarkets that we are adding over time. Remember here, the qualification period is really multiple years. So this all takes a lot of time. I think we show good progress. But until you truly see it in the numbers for these new markets that will still take some time. But we have first really interesting wins. And then when we move to the expectations 2025, I think there's reason for optimism for us regarding our market position, how we expanded our order situation and also the market outlook. Orders remain strong. The third consecutive quarters that are above 1, quite significantly above last year. Year-to-date, across multiple dimensions, what is difficult is still the outlook. I described it before with the example of China, but that goes across different submarkets, different geographies. It's a back and forth. It's murky. It's changing quick. It's volatile. I think for us, it's key that we're well positioned that we expand our position and then whatever submarket then will start to ramp, we are part of the game. And we can show that already now, I believe, and we'll continue to do so. So the uncertainties are there, but we also have prepared ourselves over Q2, in particular, but also Q3 to be positioned with our global footprint for innovation, for manufacturing to be really close to the customer, react fast and supply product but also innovate together in all 4 regions, which I'm very optimistic about for the future no matter what exactly the impact can be. Efficiency measures though, are required, right? I told you but broadly, it's a ramp down in the West and the ramp-up in the East, but that doesn't go entirely -- that goes a little bit in parallel, right? So that's the time where we are in, where there's certain inefficiencies. So when we look at the full year guidance, we narrowed it to USD 660 million to USD 680 million of sales and an operating income to 16% to 17%. I think this gap to 20% -- 20% is our benchmark. 20% is where we're going to go back to. Our business model is 20% plus, and we have a path beyond that. There's three major factors if you look at the full year. One is this duplicated capacity that we are rapidly reducing. One is FX, which is largely Swiss franc, which we are also addressing, but it will probably not go fully away. But we are addressing it with also moving. And the third one is tariffs and tariffs we have already halved from the last quarter, and we further worked on this as we optimize the stream of the goods across the INFICON world. And with that, I finish with our typical picture here. Follow us If you want to have more insight. What's going on at INFICON on different dimension, I think there's 2 or 3 interesting most recent post that we made. One is the expansion of the Cleanroom in Longmont, exciting new expansion for our American customers and to supply them more closely and faster and ramp there. That's a product that we do there that ramps real quick. Actually, that's part of the new market gains that we make. Malaysia, you know about that, but you can also see that we are investing into further global service, always stay close to the customer, especially in difficult stormy times that's when you gain. So we expand global service and repair capacities, especially also in these times. So we continue to invest in that. And you also see leading edge product development across the board from big science, like they're close to Chicago and Fermilab. I actually personally know this experiment quite well. It's a super exciting experiment where they challenge the standard model of physics. And then also, of course, in a more broader sector where we lead the thinking around how smart manufacturing needs to look in semiconductor fabs where we're taking over the lead of the global semi org's special industry group that develops the future vision of that. So across the board, I think, really interesting news about, yes, it's also been a difficult quarter, a lot of extra work impacts on the bottom line, but I think the optimism is well justified. So with this, I want to close and move over to our CFO, Matthias Troendle, who'll give you a few more details on the financials.

Good morning, everyone. Welcome to our Q3 conference call. As usual, I will guide you briefly through the financials and also comment the guidance. So let me first start with the highlights for Q3. In Q3, the book-to-bill ratio was above 1 for the third time in a row, which is very good. And we also saw a substantial order increase year-over-year and in all end markets. Our sales showed a slight decrease with 4.9% versus Q3 last year. The gross margin just addressed by -- and commented by Oliver dropped clearly to 43%, hit by temporary impacts from trade-related disputes and reached 43%. As a consequence, operating income reached $22.9 million or 14% of sales. From a balance sheet point of view, investments and capital expenditures reached $6.1 million, slightly higher than last year and also slightly higher than in the previous quarter. The cash flow ended with solid $26.7 million, driving the cash to a level of $60.5 million, which is $9 million higher than Q3 last year, and the equity ratio increased by 4 percentage points and reached strong 69%. Now let me go a little bit more into the details. As you have seen and as commented, we reached sales of $163.9 million compared to Q3 last year, which represents a slight reduction of 4.9%. Compared to previous quarter, this is slightly lower by 2.1%. Oliver did already comment the end market developments compared to Q3 last year, sales to the General Vacuum market increased for the third time in a row and did grow by 20%. Refrigeration, air conditioning and automotive sales developed well with a plus of 9%. The Semi & Vacuum Coating declined by 14% versus strong and actually the second-best quarter last year, and sales to the Security & Energy market dropped by 52%. When we take a look to the regional performance, which we have expanded and modified and we did breakdown Asia into Asia Pacific and China, and we'll do this also for the future. We see that Asia Pacific surged by 23%, where sales to most markets did grow strongly. China decreased 22%, mainly due to slower Semiconductor business. Europe increased by 4% and Americas were slow due to weaker Security & Energy business. Let's go to the operating expense. R&D costs decreased by 5.3%, driven by some efficiency gains and while we still continue to focus on our development activities and the related investments. The SG&A cost did increase by 4.8%, but this increase is mainly driven by foreign currency impacts and costs stayed tightly managed. Now turning to the margin situation. Q3 margins have been under pressure and declined. The gross profit margin reached 43%, basically the same level as Q2 and decreased by 4.4 percentage points versus last year Q3. The operating profit for the third quarter reached 14% compared to 20.3% last year, a reduction of 6.3 percentage points. What are the main reasons for that. We had several temporary negative impacts direct or indirect related from trade disputes, which were tariff impacts due to increased base tariff levels, which is mostly related to shipments from Asia to the U.S. as well as from Europe to the U.S. These are the main drivers. Cost due to strategic duplication efforts reconfiguration of the production when we had negative impact on the gross margin and operating expense from persistence from headwinds from the exchange rates. Main drivers here, as Oliver mentioned, the euro and the Swiss franc against the U.S. dollar. And on top, we had, of course, some other efficiency measures we had to implement, which did drive this down. All impacts together did account for around 6% -- 6 percentage points. Let's talk to the income tax. Income tax for the third quarter was at $7.1 million and which represents a tax rate of 47 -- 24.7% compared to 21.2% in Q3 last year. The net income reached $17.3 million or 10.6%. This is due to the lower operating income and somewhat higher tax rate. Now let's move on to the balance sheet highlights. Our net cash reached $60.5 million, which is about $14 million lower than end of last year, but about $9 million higher than last year Q3. The turns for inventory developed stable with $2.4 million and the DSO ratio reached 48 days, a good and comparable level to Q4 last year. Our working capital, which consists of accounts receivables, inventory minus accounts payables closed to $224 million or 34.2% of sales and with that ended about $9 million higher than end of last year and about $4 million lower than previous quarter Q2. The increase in inventory -- the increase is mainly driven by the change in inventory for the working capital, which is also impacted to a certain degree by some unfavorable currency movements. Our operating cash flow reached a solid level of $26.7 million improved against previous quarter by $8 million and slightly lower than Q4 last year. And the balance sheet, as already mentioned at a strong equity ratio of 69%. So those were my comments on the balance sheet and Q3 results. Just let me finish with the guidance. As you can see here, we show revenues and operating income or sales and operating income. We are positive on the order situation and in general, with the assessment of our various end markets which we serve. Certain risks and uncertainties definitely are connected to the results and the ongoing trade disputes and the unfavorable FX impacts might remain. Based on that, we updated and narrowed our guidance for the full year of 2025 and expect revenues of $660 million to $680 million with an operating income margin of 16% to 17%. With that, I would like to close the presentation. The next events are our Analyst Day here in Balzers, Liechtenstein on November 20. And then we see us again in March with Q4 and the full year results for 2025. And now we are ready to take you questions.

The first questions will come from Jörn Iffert.

I would take -- or I would have 3 questions, and I will go back in the queue. The first one, similar to Q2, the margins were maybe a little bit short of market expectations. Can you give us a margin bridge? What exactly was the duplication cost, tariffs, you mentioned was around 100 basis points and what was FX? And what is the path out of this? When do you expect margins, gross profit margins to go back to this 46, 47 percentage points? This is the first question, please.

Okay. Let's do it one by one, then I'll start, and then Matthias can add a little bit. So for Q3, specifically, it moves around, maybe as a first comment, right? So Q1 is very different from Q2 and Q3, again, is very different from Q2 and Q4 will also be different. So this is all moving around. So what is exactly happening? So in Q3, we have the tariffs at about 1 percentage point, and they're talking now operating income margin, yes. And then 2.5% is this capacity duplication. And then about 2 percentage points is the FX impact. And then there's a few more smaller items, smaller than 1 percentage points for the restructuring, right? There's severance and there's things like that when you were moving around your organization. So when you look at the full year, we would say that we end up with about 3 equal shares, probably the capacity duplication could be still a bit bigger than the other ones, but the 3 shares will roughly be the tariffs, the capacity duplication and the FX. And there's a few other things still for the reorganization that will be though smaller. If you look at Q3 over Q2, I think that's also an important factor. In Q2, we said we have about 2 percentage points tariffs. That went down to 1. So that shows we are working through this at a very accelerated rate through this reconfiguration and it's all bureaucracy in place, and I'll tell you also bureaucracy is complicated. These times, nobody has clear answer, so there's a lot of back and forth. But we're working forward and have made really good progress, so we've halved that. And the capacity duplication, you could hardly see in Q2 yet, obviously, because we did it during the Q2. So that was about 0.5 percentage points at the time. And the FX was about 1.5% in Q2 and decreased a bit. I think it works itself through the system. Also when we look at next year, one scenario is -- could be exciting in the second half, a nice ramp in semi and a couple of other markets ramping, one scenario, the other scenario is we end up in a stagflation maybe in U.S. and other places, inflation goes up, growth slows down because of hesitation for investments. So there might be more on that, we will see. So -- but to kind of roughly bridge you from Q2 to Q3 to full year, that helps you maybe on the opening. I think maybe, Matthias, if you want to get a few more points on margin maybe...

Not much to add. The tariffs, we -- the impact of tariffs is going down in comparison to Q2. This is, on the one hand side, a little bit driven by this escalation period in April, May. So the tariffs have been high in Q2 in April, May, especially, but there will be also worked on many items. And of course, we implement certain structures which did help to minimize it to a 1 percentage points level. And the biggest swing basically is in FX and capacity duplication. As Oliver mentioned, FX was 1.5% roughly in Q2. Now we see a more 2 percentage point level. Was the impact foreseeable? Yes, I would say, but the level and the actual scale of the impact was a little bit higher than what we expected actually in Q3. I must say, for FX. And then we have a set of different other measures, which roughly account for 4.5%. So in total, about 6%, from a year-to-date point of view, at least 6% comparison is in the range of 3.5% plus/minus a little bit. So year-to-date impact is in that area of 3.5%.

Maybe a general word, Jörn, because you also asked where we're going from there. So while we're not giving guidance for next year, of course, but we are the 10%-plus operating income company and the system hasn't changed. This, for me, it sounds maybe too optimistic to you, but I'll explain you why. This is noise in the system for me because we are moving now and making gains but we have to go and do it quick. I think this is the time where we do the bold moves and not hunker down and protect our margin. I think now is a time where we can actually really make these moves. We have customers which I tried to outline, and now it's also a bit more in the system still, right? We're ready for a ramp actually in different markets, not only semi, but it isn't coming yet. It isn't broad enough. But when it comes, we will be ready for it. And this will lift the whole system up. So I have no real particular reason for pessimism or we don't on our profitability either. But I think where I'm truly get excited is what can you achieve in the stormy times in this difficult times of the agility. And that's what we really try to play. And that's also the reason for our optimism. I think let's see what happens in the year from now, how far we get into this. I think it's quite exciting. But we'll see, right? Whatever scenario it is, if it's a ramp, it's clear, it's fun. It's like strapping like always, when you have a semiconductor ramp. If not, we'll play this play -- this game where we go and gain market share where we R&D a lot and then pushed forward like this. I hope this answers your question.

And I would move on maybe with the next two questions, I will take them together. Second question is on China. Semiconductor business was down. You explained there's some lumpiness but that order accelerate already? And have you monitored any changes on market share that you lost some market shares, for example. And the third question would be the leading indicators like the memory chip price, I mean, going through the roof. This usually would indicate that supply is tight. You are saying the opposite. Your vacuum peers are saying the opposite. But how do you explain then the materially increasing chip price at the end of the day when supply is too much?

It's a good question, Jörn. I think this time around in this cycle, it's just a little bit harder to understand what these signals mean. And some of the signals are there, but you don't see the effects of it. And I think it's because they stacked other factors on top or around it that blur the whole effects. I mean, again, if you take Liberation Day out and run that scenario, there wouldn't have been a Liberation Day. In Q1, we saw the signals that there will be a ramp in the second half for semi. Yet, it isn't here. And it came and went in some pieces. And I think the only one that is continuously growing is this narrow AI ramp around HPC and HBM, which is a few key players. I think you all know them and a bunch that want to catch up. And then there's a whole other half that or more that doesn't really participate and has a bit back and forth. The other factor that is also in there, and I think it's important that you guys know that we're starting to participate in that market, too, is the fabless market, which is obviously only software because there's no real hardware unless they're mandating certain hardware from their foundries. But when you really look at the semiconductor market, their revenues increase mainly in the fabless sector, right? So fabless has not so much to do with building manufacturing, right, unless you go and sell software, of course. So there's also this trend that maybe is important to outline. Now you asked us about China. China is back and forth and more than before, volatility. I tried to describe this earlier in the call as an example. Yes, the orders are up again. They have been up and down and up depending on different sectors, different players. I also know the warehouses, they're well filled. Not everything is installed, hard to read these times. I can only say that we are really close to these customers in China. It's very dynamic. It's exciting. The R&D is also exciting there. But the outlook, the visibility is difficult. I think what we've seen is that there's also no reason for complete gloom on the Chinese economy, even though there's a lot of overcapacity. And also, I think there's a little bit of a hoarding going on some points of the time that we've seen in the last 1 or 2 years, but there is also a reason for moderate optimism there across the board in China. I mean, we show also now actually interesting growth. I think it's probably a bit more market share growth than market growth than we show, and it's a bit more dynamic in the market that are not semi to be honest, just now in this most recent quarter. But generally, as we stated, all orders are up across all end markets. So different variabilities quite -- some really made a jump versus last year, and some a little bit more moderately. Yes. I think hopefully, that helps. And I answer both of your questions there, Jörn.

The next questions come from [indiscernible].

I would have two. On the first one, so this year, you have book-to-bill above 1. Last year, you had probably a much higher backlog. And when we look at this major order you got in Security & Energy, could you maybe give us an indication of how big this order is? And if we adjust for that, would the book-to-bill still be above 1?

Yes, yes, clearly. This is just one factor. I think this is not actually the biggest piece in it at all. Honestly, the biggest pieces are, as I mentioned, in RAC, Auto and Gen Vac across multiple markets in there where we really see a nice continued growth, especially in this year. Semi goes through this trough because of the stacking of the programs. It's a bit hard at times to deliver. They have really these massive cycles. And that is just the first nice step. So we're talking a single digit, higher single digit, something. So that's -- it comes in pieces also as always. What is exciting is also it comes from new places. So this is interesting because we are or we launched this product with the idea to go address more markets, right? I think the defense market, chemical warfare detection, we're squarely on, we're the leader. But then there's other markets that are related to this and are very similar organizations, and we see now that we're making inroads there. But again, this is really an early indicator and this will go over time. But how you receive these orders. It's -- the timing of it is a little hard to predict. This is about approval levels moving through and so on. But I mean, important for you to know is that the main drivers are actually the other markets. And I would also want to stress also Semi is up. It's not massively up, but it's up. So we couldn't ship everything that came in with the orders. You need to know Q2 was really busy with moving products around, supply chains reorganization. When you move a product from one region to the other, you have to rebuild the whole supply chain, meaning you go for every piece or every part of your product, you go out there in the market and you try to find a new supplier, you need to qualify it. There's a little bit of quality issues back and forth. We have high tolerance as always, high accuracy pieces. So this is a lot of work to be done. So there's noise in the system, right? But like I stated in the beginning, now it's not about hunkering down and protecting the margin. That's what we believe. I think now is the time to move fast, bold and go right in there because we see already the first effect, specifically, I mentioned this move from Shanghai to Kuala Lumpur of the handheld leak detectors, where we now play full on this advantage in the market that we can supply from a different place. And the supply chain is up. I hope this explains a little bit -- gives you a bit color of what happens behind the scenes. So I think we could show really good sales for that, that we have actually a lot of new production sites with new people and new suppliers and everything, right? So if you look at how you ramp up a location, that is extreme speed. I'm extremely proud of how the team navigated this and built this up. I mean, some other players in the field right now are calling out places to find a plot of land to maybe build a factory in a new region. We're there. It's running. It's a little noise, okay? But we're doing it. And the customer really appreciates it. Through these crisis or storm, we have been always right there with them. There is no supply delay. There's solutions. We do pain sharing, we find innovation solutions, we just push right through. So I think that's where my optimism is coming from.

All right. And then maybe on my second question. Unfortunately, it's again about the margin, but congrats on the book-to-bill. So let's assume the operating part goes away, maybe you get up to 18%. But there is also the mix factor, right? I mean in China, historically, I'm assuming you've had better than average margins or at least this has been the story. And this seems to be going down and you have General Vacuum and other segments that are outgrowing. So you are a 20% EBIT margin, but looking forward, is that really sustainable, assuming this muted outlook persist in Semi?

I mean, the ramp will come. That is sure. And now the question is when it comes, and that we cannot influence, but I can assure you when it happens in one of the subsegment as we described over the last year, we are entrenched in most of these segments, quite deeply so then we will go and profit from it. Regarding mix, I will not worry so much about China. China can have good margins and bad margins. It depends very much on the customer there, let's say, maybe how mature they are. Early days, it's a lot about price. This is the same thing. This is an RGA. This is an RGA who is cheaper. And then when you really try to push up the yield, and that just is still actually happening, yields are not as high there at all in the fabs. Then you can really want to push it up, then it comes down to the actual capabilities of these sensors. So we have both. I wouldn't worry about this, frankly. I'm more worried about, honestly, the inflation coming next year and then we'll have to work through that, which will be a lot of wasted time again where we renegotiated all the prices with suppliers and customers. But about overall margin that we go back to 20% that's I'm not worried about, because I know how the mechanics work, how the pricing works, how our outstanding market position is. And in the end that's how we can price, right? When we have true innovation that stands out versus competition and then we can price it the same or better as in the past. I believe we're making actually really strong progress on most of these innovations with our customers. Especially these days, you need to remember in slower years, there is more capacity, more tool time to go and test out things. And most companies, even the ones that are really suffering a bit, they are actually making these investments on the next-generation products. So we do have all these R&D projects ongoing, especially now at a higher pace. Hope that helps, [ Nish ].

The next questions come from Craig Abbott.

Yes, I appreciate you still feel very confident about the business model, midterm getting back to 20% plus is very encouraging. But if we just look real short term for a moment, the midpoint of your new guidance range for this year implies actually a pretty steep increase in Q4 sequentially, both for the top line as well as for the operating profit margin. You've talked us through the bridge factors. Thank you for that. But I'm just wondering how much visibility you have at this stage given all the moving parts in your end markets. How much visibility do you have that you really will, excuse me, will really be able to achieve that new margin guidance for this year?

Yes. Thank you, Craig. Look, I have to say visibility is much lower than in prior times. So there's upside potential, there's downside potential. That's probably what I can say. But we have solid models of how we work through this. We have orders in-house. We know margins. So we can build out a lot of these different scenarios and understand what happens. I think that at this point, the way we see it is this 3, 4 percentage points on the bottom line come from these 3 areas to almost equal parts, right, affects the duplication, tariffs. And I think that's roughly what the different models showed us. So we have, I think, the big strong confidence, but I have to say the visibility is much lower. There's a lot of unforeseen impacts out there in the market and in the supply chain that is difficult. One other thing we didn't talk about, by the way, is in Q3 at the back end, we also had the Moon Festival and the typhoon, which was not a great combination because then the ports were closed for some time right at the end of the quarter. So a little bit of revenue also got stuck in China and Asia because of that. That's just one example that comes on top of the other things. Typhoon happen every year, and the revenue is going to come to us the quarter later. But it is many things these times that are unforeseen, I have to say. It's a different world somehow that we live in. Never it was really fully predictable, but it's more difficult this year very much in particular. Maybe if you have some more comments, Matthias on the margin.

Yes. Maybe when we take a look to Q4, I think -- and then you compare what we guided, the Q4 should be a pretty good quarter from a top line perspective and also a better quarter than Q3 from a profitability point of view. About visibility, I think it's, I would say, as usual, right? So we don't have 9 months of backlog, and we feel safe and secure on the top line. The backlog is at a normal level since quite some time. And -- but yes, we do the forecast to the best of our knowledge with our salespeople and customers and production facilities. So of course, there's a range in there what we can achieve potentially and -- but we also know, as Oliver said, that our risk also on the output side, so what can we deliver when. And so that's one question mark, of course, but we have a range in there and it could be a very good quarter. And that's what we're planning for, actually, when you can calculate it back when you want and then you see it that it should be very good. And yes, it includes certain risks but also some opportunities.

Yes. The problem is not actually sales and orders. I think it's about execution for sales, maybe. But it is about these additional factors that just work itself through the system, and we work on all of them to reduce them dramatically. And as you've seen in tariffs, we have halved them in a quarter. But that is not entirely predictable. The bureaucracy isn't even predictable, right? So yes, Craig, I would like to have more clarity. And we normally don't give a range, right? You see it in that, too, at this point of time in the year but that's a little bit reflecting of where we think we're going to be landing. One more word on Q3. Again, I would stress that last year, Q3 was a very strong quarter. So I think Q3, given the seasonality, I see this as a good sales quarter, even though a few things got stuck because of supply chain and typhoon and Moon Festival and so on. So there's no reason to think that Q4 should be particularly bad. Q4 is always a strong quarter. Internally, we joke around sometimes and call it the Hollywood finish. It's really at the back end of it. With good planning together with the customer, it goes swoops all out, there's a lot of trucks going from our factories always in December.

Michael Inauen has the next questions for us.

I have just a couple of questions. Actually three, two around Semi and one is around more the RAC market. And on the Semi side, I'm sure you're not giving me an answer, but I'm just wondering if the Semi book-to-bill is also above 1 in Q3 or not. And then the second, it's pretty simple, and the market starts to be really cautious on China. I mean starts have been already before, maybe it's now easing a little bit even. But the China wafer fabrication equipment 2026 seems down. I was just wondering what would be the impact for you? This is mostly probably also Western OEMs that struggle. I mean, we heard it from [ Lam ] yesterday. So I would like to understand what impact that would have on your business in China if wafer fabrication equipment spending would be down? And the third one. I was pretty surprised now positively hearing about -- I think you were talking about A2L refrigerants in the U.S. and the regulation. I remember I've asked you about it a couple of quarters ago, and you were a bit hesitant on that, but I was just wondering where do you see there INFICON play a role? Because what we have seen in the recent quarters is a ramp-up particularly on the sensor side, included in the HVAC systems in the U.S. So I was wondering where is your role in that business and where do you see that potential?

There's quite a number of questions. Let me go one by one. Semi, yes, all end markets are up. So yes, also Semi. But the most exciting up right now year-to-date is RAC, Auto and Gen Vac. So Semi is back and forth, it's what I described. And actually, when you look under the hood, there's 10 -- 5 to 10 submarkets there, they're all moving around. And the only one that's consistent is HPC, HBM for a couple of key players, and we know them mainly in Asia into three particular places. So yes, I hope I answered that one. Otherwise, get back to me. So for the China, no, you maybe need to give me some clarification because you're asking about China slowing down or are you asking about trade barriers that our U.S. customers would have and if we can still keep the market then?

I mean, it's actually a bit a combination. Yes, because wafer fabrication equipment overall is seen down, so let's move the restriction aside. Overall, the wafer fabrication equipment spending is seen down for China 2026. If that was the case, how would that actually impact your business? Do you think you can still grow in China with the Chinese OEMs, although the overall business would be down?

Yes. I mean, what we've seen a shift over the last 2, 3 years is that the China business moves to Chinese OEMs. And -- but we're as a trench there as in the U.S. for us, we are in China for 30 years. We manufacture there, we innovate there. So hey, I think the American customers are fantastic partners and it's great to work with them. But we can also work with OEMs in China. And the future is that way that you need to work with them, too. They have good innovations. They grow really fast. And this year was the year of the tool makers in China. It's a bit unclear how it's going to go from here on out because the first half of the year was really dynamic positively. But as I mentioned earlier, there is no reason to have real pessimism. But it is obviously over the times when China just plowed ahead. These tech sectors we are in, though they always have a bit better dynamic than the rest of the market. So different tech sectors. I'm not only talking about Semi submarkets. I'm talking about others too, right? So, there's a mix. So we're optimistic there. I mean, in the end, we ship it to the U.S. or to China. And yet, honestly, it all ends up anyway in China and even U.S. customers, you don't get to the U.S., and you ship actually also to Asia for their manufacturing there. All right. So now you had a last question about refrigerant right, Michael?

Yes. Correct.

So yes, I think maybe we have this discussion already a year, 1.5 years ago.

Yes. We did. We did.

Then you put me on the spot. And at the time, I wasn't exactly sure how much it is a driver already. We saw the regulations, we monitor them. But now I think it has really developed in a good tailwind across the board. But it's -- the new thing now is the data centers that come on top. And we couldn't see it either. I think I remember this about a year ago is like do we participate or are we not. And at the beginning, why it's had is it goes through channel partners. So we would also supply an OEM typically, and then it goes somewhere else. So you need to have these conversations with them when you map out the future business together and innovation road map, what do you need and where you're selling this to and so on. And then over time, it materializes for us. But we first see the positive dynamics. So the refrigerants have broadened and you ask what are those. I think one key factor, but it's not the only one is certainly the handheld leak detectors that are growing actually steadily quarter-over-quarter, I think probably for 8 quarters. So don't take me up on this exactly, but, right, Matthias, I mean, they have just been plowing through and building up. And interesting enough, these guys have been very affected by this tariffs and trade barriers. We moved around the production, and now we're really ahead of the competition because we can supply and they can't or with difficult trade barriers and tariffs on top of massive extent. So I'm actually quite optimistic there, too, for future because of this move specifically. All good? Michael, all answered?

Yes.

There are no further questions at this moment. So may I invite you, Oliver, to share your closing remarks with us?

Absolutely. Thank you very much, everybody, for the interest, for showing up, for coming here. It's great to always have such a big crowd, good questions. You are big supporters of us, also give us good impulses in these discussions. I would just close with this. Yes, we have some noise in the system. We don't like it at all. We go back to this 20% plus. But I think the bigger picture here is important. In a storm, you can do bold moves and really move forward, and I think we are, and we'll show you. Well, over the next quarters, we'll show you what's happened. It doesn't matter what scenario happens. We all want to ramp. If it happens a little bit later, also okay for us. So with that, please take it with a little bit of optimism in this complicated stormy times. And then we meet again soon for full year next year when we will then tell you about the full story of the year. And with that, big thanks, have a wonderful day, and talk soon.

Thank you.

Bye-bye.