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 this online Microsoft Teams webcast. Thank you for attending INFICON's conference on its second quarter and half year 2026 results. With us today are Oliver Wyrsch, CEO of INFICON; and Dimitrij Lisak, CFO of INFICON. The management team will first present the results and then answer your questions. During management's prepared remarks, you are kindly asked to turn off your microphones and cameras. You should have received by now the press release on the Q2 2026 results together with the links to the accompanying presentation for this conference and the half year report. All these documents are available for download in the Investors section of the INFICON website at www.inficon.com. [Operator Instructions] I would also like to inform you that we are recording this web conference to archive the audio file later on the INFICON website. The oral statements made by INFICON during this MS Teams session may contain forward-looking statements that do not relate solely to historical or current facts. These forward-looking statements are based on the current plans and expectations of our management and are subject to several 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 now like to hand over to Oliver Wyrsch. Oliver, please.

Thank you very much, Bernhard. Welcome, everybody, to our earnings release Q2 2026. We have the usual agenda today. First, I will tell you a couple of key messages and figures of the quarters, talk about the target markets, businesses and then talk about the full year expectations. After me, then Dimitrij Lisak, our CFO, will go into more financial details. When we look at Q2 2026, I'm very excited to say there's a couple of really strong components in it. I think 3 really stand out. Orders are really going up quick and accelerating across all sectors, all different businesses and products. We have sales that grew really nicely and we have also a very strong profitability, a big step-up reflecting this completed efficiency measures that we talked about in the last couple of quarters. If we go more into the detail. The Q2 sales is a clear record quarter of $198 million, up 18% year-on-year, 9.5% versus Q1, which is already a strong growth quarter as you probably remember. We have growth across all regions and key target markets. The book-to-bill ratio is well above 1, one of the steepest inclines ever driven by record order intake across all regions, but also all different markets have shown a very positive momentum; of course Semiconductor & Vacuum Coating the strongest. Talking about this market, there we had also the strongest sales growth of 31% year-on-year after also a strong Q1 that was growing already a big step up from last year and sequentially therefore, Q2 is 13% up in this quarter. General Vacuum continues the positive momentum, 11% up year-on-year, minus 3% quarter-on-quarter. However, that is just a timing thing because the orders are strong. I believe we will have further positive momentum going into the future of growth here as well. RAC/Auto increased by 9% year-on-year and 13% compared to Q1 amid still demanding automotive market, but there's a couple of very strong drivers in there as well. And then Security & Energy, as you know, this is the timing. With the big government programs, we had strong orders in Q2 also from the U.S.. But year-on-year we declined 31% in sales, but improving 55% versus Q1. When we look at the other operating results. Gross margin 46.6%, that's 0.7 percentage points above previous quarter and plus 3.5 percentage points versus Q2 last year. Operating income I think is most relevant here to mention, USD 42.3 million or 21.3% margin versus Q2 last year of 15.1%. It's an improvement also sequentially of 5 percentage point. So a big step-up from the last quarter much like we explained. We are now past this reconfiguration that we needed to do last year and we accelerated a number of strategic initiatives also as part of last year where we built a stronger footprint in the East, strengthened our innovation abilities in that area and also managed the cost in the West or in general more efficiently. While we still invest of course, but we also needed to go through this configuration as you see and that clearly shows a positive effect. There's still some sand in the system. Obviously FX effects and tariffs haven't gone fully away, but I think we could more than compensate this with this program of reconfiguration. Operating cash flow robust of USD 48 million. Organization, I just mentioned it. We are very proud to say that this reconfiguration was completed of the footprint, manufacturing and innovation and it showed resilience through recent supply chain disruptions. Also regarding the trade tensions, we feel we're very strong positioned now for the future. We continue the investment in leading-edge R&D on a similar level as before and we are increasing production capacity. Obviously with the accelerating order intake as well, CapEx of USD 8.7 million for this quarter. Full year, we would expect something around USD 35 million. If I then jump to the different geographies. It's a strong quarter and growth in all regions year-on-year. Certainly, Asia Pacific for understandable reasons has most dynamic, but we can say all regions had positive momentum. Europe and Americas with nearly 20% while Asia Pacific over 30%. China looks a little bit slower here with 5.6%. However, that's a timing thing. The orders were also there very strong I think nearly the highest in China. So this is a very positive outlook for all regions I would say and also a great result year-on-year. If we then jump into the end markets. Semiconductor, we continue to build out our strong leading positions. This is a lot related with the strategic partnership we have in the top account in the industry where we work together on the next generation of their product challenges. I think this is leading to a very strong product pipeline that we continuously execute and launch new steps at the leading edge of all the measurement issues and data analytics issues that are in the market to push the industry forward. We see here the strong growth that I mentioned earlier. Orders significantly up. This is not a normal ramp. This is the steepest we have ever seen with a big jump up. We grow a lot from 30%, but the orders also are really steep. And there's a lot more to come when we look at the projections that we talk through with our strategic partner and the customers. When we look at the reasons for the driver, naturally there is the data center build-out and with that connected leading-edge logic, high bandwidth memory, but there's more in there. It spreads out across the semiconductor ecosystem also into other sectors; communication, automotive, IoT-like chips; they also profit from this build-out. So we see really a momentum across all these different submarkets that we are looking at and working in here. And then if we jump into the technology end markets. We normally look at 3 different parts here. All of them are specifically selected synergetically in terms of R&D, in terms of strategy, but also with strong growth profile and profitability profile. When we look into these 3 parts, we have automotive, refrigeration, air conditioning. Strong CAGR overall, like in all markets we have a track record of growing above the market. Also here not only in semi, we continue to grow sales up 9% year-on-year, 13% quarter-on-quarter, solid order intake. However, underlying, it's a bit mixed as well. I believe automotive hasn't regained the momentum it had and EV is in some regions accelerating, in some regions not. So that's a bit of a mix. Storage batteries is actually more exciting. Some of it is data center driven, some of it is other usage and also consumer batteries are actually quite resilient no matter the most recent dynamics in the market. Service handheld expansion, this is aftersales service tools. These are continuously growing over the last years. It's a continuing growth story. And the new HVAC next to the general HVAC and heat pump development, there is also a data center driver establishing. And not to forget the new refrigerant regulations due to climate change, this is also a continuous driver for the sector. What is exciting now that hydrogen gets a bit more expensive or even scarce, we have launched a new product, Arnova, which is leak detection with air and argon clearly; much cheaper, much easier to get. I believe this is going to be a breakthrough product as well further establishing our #1 position in this market. If you look at General Vacuum, this is across many different advanced industries. Sales 30% plus (sic) [ 11% plus ], minus 3% quarter-on-quarter. Again strong order intake. This is a timing topic more than anything else and we believe this is going to be continuing strong growth. We have the #1 position here with the most complete instrumentation offering. A couple of industries -- some markets here have more dynamics. I believe some of the smaller ones, newer ones, are exciting; big science, space robotics, but also life science. And then solar is still a bit soft. I believe we are still working through this overcapacity and looking for the next bigger step, the next techno, something around ferrous guide, something like that. That is a little bit out in the future, probably only at the end of this year or beginning of next year. Then the smallest segment briefly, Security & Energy. Again, this is very much driven by large programs. We got strong orders in Q2 mainly from the U.S., but also other programs are warming up. There's obviously rising defense budgets, which will drive this segment further, but the procurement processes are not as efficient as fast as we would maybe like. With that, I jump to the expectations 2026. INFICON raises the full year 2026 guidance. Orders are very strong, really the steepest incline and a lot more to come. With what we see in the market, we also believe that we can execute. As you've seen, we have shown good quarters absorbing this growth and scaling up based on our reconfiguration and our work prior to this. So we are quite confident for the future with the upcycle accelerating, but also the other markets as I explained earlier. There are some risks that remain; trade disputes, geopolitics. With that, we would move it from USD 710 million to USD 750 million sales to USD 750 million to USD 780 million sales and operating income we narrow to 19% to 20% from previously 18% to 20%. And with that, I conclude. Again as always, if you want to know more about us; follow us in the different channels, you will see all this exciting news in different developments of new products, but also collaborations be it space, be it with big technology companies. And you also see here new product launches are announced there and, in particular what I mentioned earlier, the liquid digital detection system, Arnova that now works with air and argon; doesn't need hydrogen to do the same thing. So with that, I would like to hand over to the second part of our prepared note with Dimitrij Lisak, our CFO, that will give you some more details on our financials.

Thank you, Oliver. Good morning, everyone. So I will give you some more color on the quarterly financials, the half year results, reiterate the guidance and the upcoming exciting corporate calendar. First of all, to start off. Q2 was a quarter of record orders, record sales and very strong profitability further strengthening our balance sheet at the same time. The orders, as mentioned before, reached its highest level by far with a book-to-bill well above 1. The order intake was broad and developed strongly across all regions. Sales increased by 18.3% versus Q2 prior year to $198.1 million. Gross margin increased as well by 3.5 percentage points versus Q2 prior year to 46.6%. Operating income ended strongly at $42.3 million, increasing by 67.2%, which represents 21.3% net sales and with this, a sequential increase of 5 percentage points versus the previous quarter. The equity ratio ended solid at 64% underlining the financial resilience of our business. And both the operating cash flow and net cash showed a strong performance, almost doubling versus the reference period prior year. CapEx ended at $8.7 million and we mentioned it earlier, we also are increasing our full year outlook for the CapEx from $30 million to roughly $35 million. Coming to the sales in more detail. We grew 18.3% across all regions and 3 of the 4 end markets. Thereof, the organic growth was 74% and the rest attributed to currency effects. Looking at the regional split: Asia Pacific showed the strongest growth with 32.5% followed by Europe with 18.9%, Americas with 18.7% and China with 5.6%. The operating expenses remained under close focus, overall increasing by 7.1% compared to previous year with R&D costs decreasing slightly by 2.1% reflecting mainly seasonal effects and currently representing around 7% of net sales. While SG&A costs increased by 10.8% driven mainly by personnel expenses, some remaining adverse FX effects and continued investments in our system and infrastructure. Overall, the operating income ended at a strong margin of 21.3% net sales and showed substantial improvement versus the previous quarter and the previous year Q2 as well as year-end. Here, I would like to highlight the 3 key factors. First of all, the improved operational efficiencies after the completed production reconfiguration that we see reflected in the result and also reflected in the improved gross margin by 3.5 percentage points versus Q2 '25 to 46.6%. At the same time, we had a strong top line in Q2. This also supported the margin and the operating income development and continuous efficiency gains and cost discipline on the OpEx side while FX and tariff effects remain to a certain extent, but not as pronounced as in the previous quarter. So these would be the 3 main factors. Looking at the income tax development, it increased to USD 10.5 million mainly driven by a higher taxable income. So there's a significant increase there compared to the reference period in Q2 '25. And the net income increased by 76.4% year-over-year with the margin improvement to 16.3% mainly driven as well by the higher operating income. The balance sheet remains strong and continues to reflect a solid financial position. Here specifically, the operating cash flow almost doubled, increased to $84.4 million (sic) [ $48.4 million ] in Q2 '26. There are 2 key drivers. First of all, the higher net income and at the same time, the disciplined working capital management reflected in the increased inventory turns, increased payables position, but also a disciplined approach to accounts receivables increasing broadly with the net sales growth. Coming to the financial overview of the first half year '26. INFICON had a strong first half year with double-digit sales growth of 16% and improved profitability across key metrics as well as a strong balance sheet. Sales increased by 16.4%, growing similarly as in the Q2 results in 3 of the 4 end markets and all regions. And the operating income increased to around $72 million, increasing by 25% versus previous year and 18.9% operating income margin, which is also an increase versus year-end at 16.7% and last year at 17.6%. And as mentioned before, the equity ratio remains solid at 64% for the half year. With this, I would like to reiterate again the increased guidance. So overall, the guidance is raised and narrowed reflecting the strong half year performance, continued strong order intake and an accelerating semiconductor cycle with the updated guidance being $750 million to $780 million in net sales and an operating income margin of 19% to 20%. With this, I come to the last part, which are the upcoming events in the corporate calendar. We will have the Q3 '26 Media Conference on October 27. And we will have the next analyst visit in Balzers in person on November 19, 2026 where we'll be happy to welcome. With this, I conclude the financial update and will be happy to take your questions.

Craig Abbott has the first question for you.

Congratulations to the good quarter. Two, please, from my side. The first one is operational. The second one is more about positioning. The first one is just on operational. I'm just trying to gauge a little bit how we should think about the operational leverage in the back half of the year. You said OpEx was up 7% in the second quarter. So clearly it looks like you're getting more top line growth than OpEx growth. If you could talk us through what you're expecting there. That would be the operational question and then I have a positioning question.

Okay. I can say a sentence or 2 and I think then you'll probably want to hear from Dimitrij too. Craig, thanks also for the congratulations. Yes, I think it was a very good quarter. I believe the biggest most important step was that we moved past this period of times where we had too much sand in the engine if I want to say it like this regarding the profitability and we make a big step forward. I think there is more air in there. Sure, there's operating leverage, but you see there is both steps that we did and I believe also in future there is a little bit of both possible. Naturally, what played a little bit against that is the potential trade tensions and the geopolitical risk of the pressures on the supply chain. So far we have navigated this well with this new configuration, but it's a bit unpredictable. And the other thing is that investments also need to be made to absorb this extremely steep decline. So they will probably lead a little bit less cost there in some parts as well. I believe there's not necessarily new locations needed. I believe the footprint is strong, but we will get to the point where larger steps are needed, which are in preparations meaning buildings and more clean rooms and so on. But you've seen our projection on the CapEx, that's our best projection at this point, which will not weigh too much on the profitability beyond what we've seen in the past. So maybe a few more -- a bit more color from you, Dimitrij.

Yes. I'd just like to add 1 or 2 things. I believe the production reconfiguration and also the efficiency measures we took in '25 and in Q1, this helps us to have a good starting point and also to have a good starting position in this trend that we're in now. What I would just ask you to be mindful of is also the topics we spoke about maybe more prominently in the previous earnings release, but this is still remaining and this is specifically the impact of inflation. These are the impacts of potential disruptions that might come. So all this needs to be considered, but we have a very comfortable and strong starting position.

Yes. So some factors are there also still, tariffs and FX. We spoke about that previously. There's not going to be massive jumps on that. I believe this is a slow and gradual improvement as we reconfigure further. I hope that helps, Craig.

That does indeed. And my second question was could you remind us, please, again when we're looking at your Chinese sales, how much of that you're selling actually directly into the Chinese chip ecosystem, i.e., the local players, the local OEMs versus indirectly via your Western OEM customers?

Okay. Yes, that is all direct. So we have also there the split of OEMs and chip makers. We serve both direct depending on the sophistication of the sensor solutions. It's much comparable with the rest of the world really, but it is a little bit of an independent ecosystem as we all know, right? It separates itself. But for us, we try not to make it a different approach all in all while it has certainly its particularities. Innovation is a bit specific and done in China. Manufacturing is done in China not for everything, obviously, right? That is a balance about what makes sense; cost-wise, innovation speed, manufacturing, supply chain. So it has its specifics, but largely, it's a similar model. And what I also would like to say and I mentioned earlier, the sales were a little bit slower than the other side it's a high benchmark, but the order entry is very strong. I think we had also great meetings with top partners there projecting the future. We are very bullish about that market too and also our standing there. And I would like to remind everybody we're there for nearly 40 years. We manufacture there for over 25 years. We do innovation there. We have very strong ties. And we have so far always found a good way of working with our partners in China as well in spite of the complications that we had in trade war disputes.

Jorn Iffert has the next question for us.

The first one for you, please, on the order intake trends. I mean you said book-to-bill materially above 1. And at the same time, your second half sales outlook implies at the higher end that sales momentum remains flattish quarter-over-quarter. Just to double check a couple of assumptions, if I may. Do you see some restocking? Do you see some double ordering? Some customers already ordering for the first half '27 not materializing that in the second half? Or do you see any trends of the order intake has peaked already or is it more a concept of prudence for the second half, which is of course totally understandable in the current macro environment? Maybe some words around this to better grab it. That's the first question.

Yes. I expect a little bit of discussion around probably our projection and our guidance about next year. So it's the last one that you said, it's a little bit of prudence. Again, we're probably still digesting a bit the last year's surprises and that is not what we normally do here at INFICON, right? We would like to be more steady in delivering and also how we perform with this long-term CAGR above the market. I believe we've seen that also now that we grow above the market. The order intake is extremely steep. There is no double ordering. There's no building inventory that we can see anywhere. Quite the opposite, I believe there is a lot of announcement of here's another chunk. We have also market share gains and we have new applications that we unlock that go on top as it has been in the past. So it is a bit on the cautious side. What I will say though is that the order timelines, they get a bit longer. So people would order a little bit sooner for some of the projects. However, we map this out and it does not have a material effect actually for the near term. It is just there's more discussions also about future projects there. We see also some of the movements and that's not a large effect, but that other suppliers have delays and then some expansion projects are moved out. That is not because of demand. That's just probably because of the complexity of the ramp-up in some places. We are very well positioned. We have nowhere the bottleneck. We try to keep it that way and push forward. So if there is going to be more growth and we'll show it in Q3, there's a very high likelihood that we'll have to move it up materially again the guidance, then we will capture it, right? So we do not have that full certainty yet. But we have full certainty that we will have this expansion projects and we'll implement them.

And the second question is to some extent a follow-up, your total capacity expansion. I mean you have increased CapEx a little bit. But how do you see or how do you prepare the company for the next 2 years? I mean what is your potential total revenue output you can generate in 2 years with the current CapEx plans you have in place that we get a feeling what is maybe possible in terms of total output?

Yes. Look, we have always to have also some buffer, but we're clearly now building the company out for over $1 billion because we need to go and be able to deliver on this coming 2 years' projections. So we need to go and do this, implement these projects. Now they are being implemented as we speak. Obviously some take longer, some shorter, right? Cleanroom takes a year plus with some building expansions and then you have tools that take 6 to 9 months that might even delay a little bit because lead times might get longer and then staffing is a little bit a couple of months topic. We have taken on a lot of temps as well to obviously make these steps up in delivery and we continue on that path. Roughly the same steepness. It's a little bit of steps. So we've probably done already 2 big orders level steps and then there's just another one happening now and there might be more steps. We don't exactly know how the shape of it is. But what we know is on the back end, we need to go and work on these projections directly with building up the right capacity for it.

Jorn, maybe to add, CapEx increased a little bit. So to put things into perspective, the number or the projection we gave for this year will be around 60% above the prior year CapEx. So this puts also the numbers behind the statement you just made because that means for us significant investments that we plan already this year into capacity.

It will be with extremely high likelihood a very large jump that we make in these 2 years. It's still early actually where we are now.

Sorry. A quick follow-up and then I'll go back in queue and ask the question. But if we had in 2023 or '22 at around $1 billion semi equipment CapEx, you had $300 million semi sales. Now we are likely going to $300 billion, which would mean your semi sales alone could go towards $1 billion by 2028, '29. Then you have the General Vacuum business, et cetera. So is this scenario where you would you be able to say you have a revenue output of $1.3 billion, $1.4 billion by '28, '29. Is this a big burden?

Certainly, it's a scary number when you think about it, but as soon as you start breaking it down, it is a scenario that we have to be looking at as well. We have a little bit of a range of scenarios now we're working on. But yes, it has been continuously accelerating and so it's a bit hard to say where we land, right? But the Q2 was quite extraordinary, I should say, even though we have seen some great jumps. And these partnerships I believe last year was just a huge plus to react how we did and strengthen our partnership when it was tough and it pays back a bit now because we even get on top orders maybe also because of performance of orders. I cannot judge that so well. But I just know there's more coming in, discussions are ongoing and the scenarios are basically updated weekly. So we must look also at the very aggressive ones obviously, right? So in general, the strategy is I think everywhere, but specifically at INFICON. The expansion projects, they pay back anyway. It's about the timing. So it's rather good to be early and then you can maybe delay it out with some activation and some staffing if you really had to. But in this current scenario, you'll probably be on the safe side to just continuously expanding and that's roughly what we do. I think we have every week discussions of other expansion projects in places as we model out the future. It's quite a dynamic -- fantastic positive dynamic, but it's quite a dynamic environment really. Fun discussions.

Martin Marandon-Carlhian has the next questions for us.

My first one is on the '26 guidance. Just for me to understand. I understand that there is some conservatism in the guidance when you look at H2 growth growing modestly versus H1, but also the last quarter I think you were mentioning that we could see a slower Q3 and maybe a stronger Q4 due to some project timing. But I was wondering considering the very strong order intake, is that pattern still valid now?

Yes. Very good question, Martin, because this is a bit what we are also currently discussing. When we mentioned these order trends or also sales trends, this is just the seasonality that we normally have. Q3 is often one of the weaker ones. That is more timing of holidays and summer vacations and timing of project approvals and so on. But it might actually be that this year you will not see any of that. So it's unfolding still, right? The interesting thing is here also a little bit like in Q1 when you have Lunar New Year, you lose a little bit visibility for a minute. And here is the same because the West is a bit absent and also the East during the July months -- during the July weeks. So that's where you would see a little bit less -- have a little bit less transparency of what the quarter is going to look like. But it looks extremely positive as we stand right now. Obviously I cannot comment too much on the exact numbers, but you might be right.

Okay. Very clear. In the semiconductor growth in Q2 more than 30%, do you have a way also to distinguish a bit between leading-edge logic, memory and the rest? And where do you think you have more visibility today?

I mean the drivers now -- leading logic has started earlier. It's really pushing forward in this current super cycle. And then memory, we all know when it started, right, last year with DRAM, with especially HBM. This continued. Both of them are probably 2 equal strong drivers. HBM is a bit more on fire just now in a positive sense. Obviously we know the key drivers there. We work with, all of them have very strong relationships. So that drives it forward. But what is really materially different maybe versus a year ago is that beyond that, there's a positive upswing. And you know these other players in the market as well that were most recently also -- or there's also earnings season for them that they could go and make positive statements and that's exactly what we also see in the market. It goes across IoT, even automotive chips that have different purposes, right? So automotive is also used in industrial, in data center build-out, down to sensors, MEMS, power. All of these have now gained momentum again after a bit of a difficult time, right, the last 2, 3 years I'd say. And that's very encouraging to see, but it is not as big there the CapEx and the projects maybe yet. But at this point, it is a step back versus what we obviously see in memory and logic. But for us, clearly these 2 are the biggest drivers maybe with memory being a tad more exciting even than logic. We've been spoiled with logic anyway, as you know, for some time in terms of growth. I hope that helps, Martin.

Yes, that helps a lot. And the last question for me. You probably saw the combination or the acquisition of Atonarp by VAT recently in mass spectrometry sensors. So I was wondering to what extent does this overlap with INFICON and what do you think about competition there? And also maybe what does it tell us about the prospects of that market if you start to see some M&A momentum in that segment?

All right. Certainly. Look, I mean Atonarp specifically we know for a very long time. They're around for nearly 20 years and there are around 20-plus people. It's very concentrated on Japan. So they have good products. I believe we have leading products in all their spaces and obviously our portfolio is massively bigger. So hey, competition is good for the business and drives us forward. I don't want to talk about the strategy of VAT necessarily. I believe they have an interest in sensorizing their larger systems, the lock systems. You will have to talk to them about this. Again, it's a very small competitor and nothing that we were considering buying because we have I believe the superior technology and the broader variety. Let's say, if you think about our sensorization as a toolkit, we have a lot more tools in there and in the end each application is a bit of a challenge of how you put these tools, the pieces together to protect against particles or protect against aggressive chemistry and this continuously moves forward. That's a little bit how it works when we say, hey, we adapt to molybdenum deposition or we adapt to selective etch processes in smaller tech nodes. Then each of these application needs an innovation step. So by having the base technology, that isn't yet the game. But hey, it's not a bad company. I think if you have no sensors could be good. But again, it's not for us a major competitor. Obviously we talked about our competitors in the past. I hope somebody like MKS, somebody like that. However, in that space, mass spectrometry, we have 80% plus market share globally also versus MKS that probably is the next largest in that space.

Michael Foeth has the next question.

I have 2 questions. The first one is on operating expenses again. I was surprised to see R&D slightly down when sales are really ramping up. So my question is what level of R&D are you targeting in the future and what should we expect going into the second half and into next year? And the second question is on China. As that industry is growing strongly, are you seeing any changes to the competitive dynamics in China now?

Okay. I'll go first to the R&D question. There's no change in course there or strategy. That's a timing thing. Again, we did a little bit of reconfiguration also of the innovation. So we moved closer to customers, were closer to them geographically as well. And we will continue to have similar comparable levels, 8% plus of sales will be also in future what we do. I would also like to remind everybody the part that is in SG&A is application engineering, but some of it is really what I spoke just a minute ago what these applications are. Some are simple, right? That's just taking a standard tool of us and basically plugging it in to a certain tool and then you roll it out for the whole floor. But sometimes it's a real big step, right? We really reconfigure the base product quite a bit. So application engineering is a big chunk as well. And this is what we pushed a lot most recently and you could technically add that to R&D. So I would not say that R&D is down if you added that in, but I believe it's a temporary fluctuation, right? The sales went up quite a bit, right? If you look at percentage of sales, we do this independently, the R&D investment plan.

So just to complement on this, I mean year-to-date R&D costs have grown by around 4%. So the investments continue. This is purely what you see is a seasonality effect also considering the base of last year, there are a couple of smaller effects to this. So nothing major there.

We will stick to the general strategy of INFICON where we probably first invest in the new opportunities. We still believe same statement. We have a very long list where it's rather difficult to choose and not do too many things. So in that sense, now that we are out of this profitability dip, we will certainly continue to invest there, right? That will not change. We haven't stopped even during that dip of course, but we needed to little bit softer things. So on the second one regarding China dynamics, yes, I believe that's what you see in this 5-year plan as well as the strategy and it materializes. I believe the idea is now the fewer players, stronger players, the global ones is what the market is trying to build or what I believe Chinese government policy is. And that's a good thing we believe because many of these players we know quite well. Some of them are really in the market for 20 years plus and so we grow with them and further strengthen our partnership. For us, there isn't a material difference if a partner is in China or anything anywhere else. Sure, there are certain regulation things that need to be looked at. But in the end, that is okay if there's global Chinese players therefore and maybe less of those with this nearly 0 interest funding and very low profitability that really pushed down prices and moved the focus from value-add pricing to a little bit who is the cheapest. I would say that's a positive turn over time. And of course there's competition, but this is a competition way that we understand where companies grow, get funded normal and also have a normal profitability. But I would still say, right, there are strong companies in China. The trade dispute favors them in many ways to build up their own capabilities and they are doing that in a wide range of deals in semi and outside. So we must be there, we must innovate there, we must work with them, we manufacture there and we stay close to them like in all the other 3 regions as well. I hope that answers your question, Michael, otherwise let me know.