Jenoptik AG (JEN) Earnings Call Transcript & Summary

Hello, and good morning, everybody. A warm welcome to our Jenoptik 2023 Capital Markets Day here in Berlin. I'd also like to welcome all the participants in the Internet for today's session. My name is Andreas Theisen, and I'm the Head of Investor Relations and Sustainability at Jenoptik. From our end here today, to fulfill the agenda that you see on the screen, are our CEO, Stefan Traeger. We have our CFO, Prisca Havranek. We have our Executive Board member responsible for APS, Ralf Kuschnereit, as well as Kevin Chevis, Executive Vice President of the Smart Mobility Solutions division. Today's presentation will cover a mid-stage review of our Agenda 2025 More Value. And we will also provide some dive deep into our growth platforms during the session. We have dedicated 2 Q&A sessions in today's program. And once again, for those of you following us via the Internet, please send your questions to Sabine Barnekow of our IR team. She will hand in those questions to the discussion. Please also note that today's event will be recorded, and we will provide a replay of this morning here later on, on our website. Before we start our program, I would like to show you an introductory video of the amazement of photonics, and here we go. [Presentation]

Good morning from my end as well. My name is Stefan Traeger, I'm the CEO of Jenoptik. That's great to have you all here in the room as well as on the Internet. For 2 years after the last Capital Markets Day, and those of you who have been with us last night, remember that I said last night, remember the last Capital Market Days, we wanted to invite you to come to our facility in Hamburg, and then we ended up doing it all online at the time. We're still living under COVID restrictions. Last 2 years, from our perspective, and I think you will all agree to that, have been characterized, if you want, by a lot of changes in the world. COVID acted as a catalyst really to the digitization of the way we live, digitization of our world has accelerated big time in the last few years. That, in turn, has provided a tailwind to some of our businesses, particular semiconductor and electronics activities, driving even more organic growth than originally anticipated. On the other hand, 2 years ago, the concept of interest rates was like almost gone. There were no interest rate. As a matter of fact, there were negative interest rates at the time and we didn't have a lot of inflation. That has changed. Today, interest rates are back in the game and inflation has risen in the last 2 years, which does mean for us that the innovation that we want to drive in our core marketplaces, but we do see that almost like inflated or very accelerated organic growth. Innovation there and the investment into that becomes more expensive. We have to be, dare I say, a bit more careful how we deploy our capital and a bit more specific and focused as to where we go for growth and how we, as I said earlier, deploy our capital. For us, at Jenoptik, the last 2 years, we believe, have been very, very successful, actually. We achieved quite a lot of what we set out to do. From a growth perspective, we are really on track of where we want to be in 2025. From a margin expansion perspective, we're actually quite ahead of it. You all have seen that we guide for EBITDA margins of around 19.5% of sales for this year already and our original target for 2025 had been around 20%. So clearly, we have to do something here. And those of you who have seen our press release this morning would have realized, I believe, that we are guiding for higher margins now for 2025. We are raising our margin guidance in terms of EBITDA margin of sales to now between 21% and 22%, whilst keeping our guidance under top line. All of that is possible by our innovations. All of that is possible by operational excellence. And frankly, by what we call customer intimacy, but the fact that we are really, really, really deeply integrated some very, very important customers. And in the next few minutes, the next few slides, I would like to share some thoughts with you as to how we enable as a company and, frankly, as an entire industry, as to how we enable modern technologies beyond what we all have dreamed off a few years back. And let me start with the one thing that I think everybody has in mind these days, and that's the digitization of all worlds. When it comes to silicon-based computer chips, it wouldn't be possible to produce those structures that we see here on this image without light. Our vision is enabling brighter futures with the power of light. And a big part of that is, of course, the digitization of our world. Digitalization for our world is important. It's not just -- it makes us sort of go faster. It also enables us to do business with less emission in a more sustainable way. So building computer chips wouldn't be possible without light. It wouldn't be possible without optics because pretty much all of them are actually produced using what's called optical lithography. And within pretty much all machines that are used to produce chips by optical lithography measures are our sensors. In a way, we're pretty proud to say without us, silicon-based computer chips wouldn't be possible, and that's, I guess, a pretty bold statement. But I guess most of you are aware of what we're doing. So in a way, we enable the heartbeat of the economy these days with our technology in terms of digitization of our world. However, computing using chips is one thing, exchanging the information is another. And we also enable modern forms of communication. I think what we all have in mind is these little devices. As you probably know, with TRIOPTICS, we play an important role in how these little -- for those of you on Internet, I'm holding a cellphones in my hand, how this little cellphones are used today, not just as a means of communication, but also to take images, to share videos, to share a lot of information, these cellphones are used for. And I'm not quite sure if you know that we also, as Jenoptik, enable what's called routing of information in big data centers using gray scale lithography out of our Huntsville, Alabama plant. So again, not only do we enable the production of silicon-based computer chips, we also enable the sharing of that information via Internet and other measures. Let me touch on another very important subject, and that's the quality of life. It's our health. The world's population is becoming ever older. And that puts a lot of stress on health care systems around the globe. We have to find new ways of treating diseases, and we learned one thing from the pandemic, then that's health care systems around the globe are an important factor in, as I said earlier, the quality of life and how we feel. And again, with an aging population around the globe, stress on those systems are ever bigger, and we have to find ways to deal with that. A very important way to deal with that is actually to do medicine on molecular levels, on DNA levels and genetic levels, not just cell side, but even within the cells, we can now do health care. We can understand disease as much better, and we can treat them much better compared to the past. And a big part of that is, for example, DNA sequencing. And here, we are playing a very important role with our optics. We do not build machines that do, for example, DNA sequencing or cell biology. But if you open up those boxes, you'll find our optics inside. And that's a very important factor as well. Our way of doing business typically in many, many ways, is enabling certain advancements in technology, is enabling life science and health care with other partners. We are a partner to those industries. And those of you who have been with us last night to yesterday to the factory tour, you have seen how we enable modern forms of dental care, for example. We also help to make our roads and communities safer. We can all debate about ethnic -- ethical rules and speed control and all of that, and in particular, here in Germany, we like to drive fast on the autobahn, but truth be told, those are actually just a few kilometers and a huge grid of roads. And as Kevin will explain later on, the car is, on the one hand, an important way for us to get from A to B, but it's also actually one of the biggest killers in mankind. And to do something about that is also a mission of ours. Light of future is that the power of light also means for us to enable safer environments in mobile applications and for mobility systems. So I hope I could show you at least some examples of where we act and how we act. If you remember and reflect back in the last few minutes, we essentially deploy optics and photonics, and photonics being the mastery of light, science of applying light to certain means, we deploy optics and photonics, in particular, into marketplaces around semiconductor and electronics, life science and health care and smart mobility. Those are our 3 core marketplaces. Marketplaces that are driven by really global macro trends and that are driven by changes in our world. And I believe marketplaces, which are here for long-term growth. We enable them. We enable them via partnering with important players in these fields, particularly in semiconductor and electronics, life science and health care, and with our products for smart mobility. So we deploy our core competencies really into those attractive markets and overall believe that we can create above-average growth with that with our technologies. If we take a broader view though on how we developed at Jenoptik over the last few years, I think, it's fair to say that we have seen a lot of portfolio change, a lot of portfolio change in Jenoptik. Those of you who follow us for a longer time, those of you who remember back in the days, sort of the teens of the century, Jenoptik has been really a very diversified industrial conglomerate. Some of you might remember the times when Jenoptik was designing and building actually the elevator in the Airbus A380. And when Jenoptik did, for example, develop rescue hoists for helicopters and those types of things. That has changed a lot. We have, on the one hand, disposed of a lot of assets in the lot of parts of our company. On the other hand, we've also added a lot of business to our core marketplaces, to our core businesses. So whilst undergoing a substantial transformation in our portfolio to essentially focus us much more on our core competencies and what we are really good at in terms of optics on photonics, we also grew the business. And from about half of the company being in our core markets and about half being sort of off-strategy in 2016, we are now essentially a core photonics company. We have some businesses still in the portfolio that are not necessarily core. We talk about that in a minute, but by and large, the transformation of our portfolio is basically done. We will explain throughout today what that means for us. I can sort of reveal already. It does mean for us we will see way less M&A activities going forward. Our focus for the next 2 years, for the second half of that strategic period will be on driving organic growth via innovation and customer intimacy and expanding margins by providing operational and driving operational excellence. In the same time, actually, our focus on core customers and important customers has increased quite a bit. Today, Jenoptik generates 40% of its sales with 7 key customers. Now you could say, why is he even pointing out that? Isn't that the risk to the company? We believe it's actually a strength. We believe it's a strength to be highly integrated with big, large customers. I mean, we are not talking small start-ups here. We're talking big customers. We're talking big customers in different industries that have different either cyclicities or even not cyclical. Yes, our strongest foothold if you want, is in the semicon industry and we are in all big players in semicon manufacturing equipment providing parts of the market segments. So all those names that you have in mind, if you think about our customers, yes, they are very dominating customers. They are very dominating players in these markets. There aren't that many people who can do, for example, optical lithography or optical inspection at the level needed to do a high-end DUV or EUV chip technology. So yes, there are only a few customers for us, but those customers, man they are all pretty big and chances they will survive is pretty big. So I don't have any fear that our big customers in semicon might, for whatever reason, not being here in the next 2 years. However, we also have very large customers in the life science arena, and life science and health care is way less cyclical, and that helps us to balance out potential risks in terms of cyclicity in semicon and life sciences. And I will say we don't see any risk in semicon as well. We can certainly discuss that later on today. We do not see any downturn here in the foreseeable future. But should it be the case, we still have our life science and health care applications. And of course, our mobility applications. So core message here, yes, we do depend on a few large customers, 40% of our sales are generated with the 7 biggest customers. However, we don't think that's a risk. We actually think that's a strength because we are really, really deeply integrated into these customers. They are large, they are huge and they are in very attractive industries. I explained earlier that we feel that the portfolio transformation for Jenoptik is almost done. Again, I'm underscoring almost, we still have some homework to do. And I'll come to that in a minute. But by and large, given that we guide for around EUR 1.2 billion in sales in 2025, our dependency on nonstrategic business on assets in NPC is basically a very little part of what's left of nonstrategic assets, so to say. And on the other hand, we have deployed a lot of money to strengthen our core. Yes, that does mean that the capital we did deploy in the last few years was quite substantial. For the history of Jenoptik, we actually took a lot of money in our hands and we made it to work, basically made our balance sheet to work. And I have to say in the past, maybe our balance sheet was a bit lazy, if you want. So now we made it to work, and now it's time to make sure that we get the return on that investment. So first message, the portfolio transformation of Jenoptik is almost done. Our homework left to finish, but by and large, you're done with that. At the same time, I think the financial transformation of our company is significant. We have a lot of organic growth in the past and even more so going forward. And I think what's even more important, we expanded the margins, the profit margins of Jenoptik significantly. And whilst in 2016, we, as Jenoptik posted around 14.2%, I think it was 14.2% of sales as EBITDA. Again, we're now guiding to be at around -- between 21% and 22% of sales at the EBITDA line in 2025. A lot of times, I'm asked, what is the value proposition actually of Jenoptik? What's your strength? Tell me sort of your core, your key differentiator. What makes you unique? And then there are many ways to explain that. I could start with our optical expertise and how we enable micro structures on advanced optics. And I could talk to you about how we enable with our life science expertise, DNA sequencing and all of these things. But if I look at it sort of from a satellite view, if you want, there are 2 factors which makes us strong across all of our businesses. There's on one hand our technology. We understand the application of our customers. We're not necessarily always the ones that come up with the crazy ideas that at some point in a decade from now, may or may not become a product. We are particularly good in spotting new applications and enabling the product of our customers. The application excellence and industrial manufacturing knowhow, that's what really makes us strong. Taking technology and convert something that comes out of a university into an industrialized product, that's what makes us strong. And on the other hand, it's our customer access and our relationship with our customers. We are truly designed in. And in many ways, in these industries we're talking about, once you're designed in, you're designed in. It's very hard for our customers to actually swap us out because they on their end, towards their customers have regulatory approvals to fulfill, for example, in medical world or in the semicon world, I think, the term is copy exact. Once a semi process runs, you do not touch it if you don't have to, right? So entry barriers and our industries are really, really high, and that's why customer relationship is so important for us. So again, if I think about Jenoptik and what are really our strength or what really makes us unique is the combination of our technology and the access we have to certain really big key customers and the relationship we have with them. As I pointed out earlier, our world has changed. And for us, that means our priority shift. You could say, well, your priority shift because the world has changed, that's true, but also, frankly, because we actually achieved quite a lot in the last few years. So we do shift our priorities now from a position of strength. In the last few years, the focus of Jenoptik, our focus as a management team had been to transform Jenoptik from an industrialized -- from a diversified industrial conglomerate to a focused technology company. That transformation is basically done. From now on, for the next years of this strategic period, we will focus on organic growth. In the last few years, our business has been characterized really by a series of M&A steps to transform that portfolio. Going forward, we will focus on operational excellence because we now can. The profitability of Jenoptik in the last few years has been increased, yes, by diligent management, but truth be told simply because we invested a lot in high profitable businesses. So M&A actually, the portfolio transformation plays an important part in us expanding our margins. In future, we expand our margins by even more innovation, even more customer centricity. So our priorities shift going forward. Our new priorities for our business in the next few years will be organic growth, operational excellence and innovation and customer centricity. In order to enable that, we are going to once more change the business setup of Jenoptik. We actually aim to verticalize our APS Solutions division in 2025; however, for now, we will keep our reporting structure and our management structure, we will still have the next 12 months, the APS division that you know and the smart mobility division that you know. Underneath that and the way we act in these divisions, we will basically dissolve the matrix function that we have in APS. You might not be aware of that, but within this fairly huge APS division, the largest part of the company, we actually run businesses in a matrix fashion. We have a joint sales force and we have a joint operations network to generate synergies. It makes a ton of sense in a way. However, becoming much bigger in these individual marketplaces means that synergies whilst they're there, they're preventing us sometimes from actually growing because they're preventing us from focusing even more on particular customer segments. So from an operational setup, you will see us talking way more about verticalized segments within the APS division in the next 12 months. And our intention is in the sort of distant future to even possibly dissolve APS and run the company completely in 4 verticals. Semiconductor and electronic -- semiconductor and advanced manufacturing, biophotonics, electronics and metrology, and smart mobility. But that's for the future. That's for the next strategic period. For now we stay in the structure that we have on the top level. We manage the business in those divisions that you're aware of. But underneath, if you want under the hood, we start to verticalize our businesses much more to run the company in those segments. So we will see more customer focus with that step. We will see more direct business responsibilities and more efficiencies in those verticals. And I have to talk about innovation, obviously. If innovation is driving our business, obviously, we have to put even more focus on the innovative power of ours. We will spend -- we will continue to spend, I should say, substantial funds for innovation. Not always do you see that in our P&L. I think those of you who analyze us a bit more closely know that we have 2 parts of innovation basically, 1 being in the R&D line and the OpEx, but the substantial part of our innovation is actually in our COGS because we do customer-specific innovations. If we innovate for a particular customer, then under IFRS, that shows up in the COGS. So you will see us to continue to allocate substantial funds in our innovation power. But we also will increase our sort of scouting for new ideas, new technologies because that's what makes us strong. That's why customers come to us in the first place. So innovation will remain a major driver for Jenoptik going forward. Quick word on the famous NPC segment. Within the NPC, the non-photonics companies, we have today 2 companies left. Everything else has already gone. So we have Prodomax left and we have HOMMEL ETAMIC left. Our strategic plan remains intact. We fully expect by 2025 to have sold Prodomax. Prodomax is a business that's very strong, runs very nicely at the moment, highly profitable, enabling lots of growth. So it's an attractive asset, I would think, for potential acquirers and we intend to sell that because it's strategically not fitting to the rest of our business. Prodomax does not use optics. And the synergies for us are very little and, frankly, we also do not want to be that much disposed -- or exposed, I should say, towards the automotive industry. So Prodomax is to be disposed within the current strategic period, and really, that remains the case. HOMMEL ETAMIC is a bit different. HOMMEL ETAMIC actually has a number of different product lines, about half of the business of HOMMEL, 40% to 50%, is actually an optics. It's called the optics line and the vision line. And only 50% or so, 56% is in non-optical businesses. We have to understand and have to do a better job in analyzing what's the future for those non-optical businesses. The optical business, we wanted to keep anyways. So we will continue to investigate the future for HOMMEL, maybe the best future for HOMMEL is actually how -- and that's sort of the idea here, how HOMMEL, skills and capacities of HOMMEL in future could possibly support the growth in our optics businesses, where we need more capacity and need more investments, basically. So Prodomax to be disposed of within the current strategic period. HOMMEL, the business could be developed either internally or externally, depending on [Technical Difficulty]. So to wrap it all up, again, going forward, our focus will be on driving organic growth, driving operational excellence and driving innovation and customer centricity. And with that, we believe we can, on the one hand, continue to aim for EUR 1.2 billion in top line sales. And at the same time, now actually aiming for between 21% and 22% of that sales to be posted as EBITDA in 2025. And with that said, I'll hand over to Kevin, who is going to explain way more in detail what we are doing in terms of smart mobility. Thank you very much.

Thank you, Stefan, and good morning to everyone here and online. It is my pleasure to be able to spend the next 15 to 20 minutes talking to you about Smart Mobility Solutions, what we do, why we do it and most importantly, to talk to you about our plan for organic growth over the coming years. Now many of you, some of you have been here before or think about us and say, "Yes, we're the team, we're the people that makes speed cameras." And that's true. We do, do speed cameras, but we do a lot of other technology, functionality and services in the smart mobility marketplace. And when you look at our expertise, our core competence, we actually use inventory created from camera technology to see things and to link that with other measurement devices, laser, LiDAR, all these technologies to measure moving objects in difficult environmental circumstances. So if you imagine a car traveling down the road at night, it's dark, you can't see very well. They're driving very fast, particularly in Germany on the autobahns. And our expertise is to use photonics to capture imagery to measure moving objects. And yes, that ends up as a camera of some form or another, but it will also use AI and other techniques to see from that image moving objects, and we have to measure things precisely, and we have to do that in a very consistent manner. And the reason for that is if we are to issue a speeding offense, a red light offense or something of that nature, that ticket, that offense needs to be precise. It needs to be accurate because our clients, which is often the police, local government, transport authorities need to make sure that we are always correct. Giving out an incorrect speeding ticket is not acceptable in our marketplace. So it's high precision. Constantly, we have to do that in a repetitive way. And so those camera platforms enable us to create functionality, applications for different things. Are you entering a yellow box? Are you turning in the wrong direction? Are you using your mobile phone, not wearing a seatbelt? All these topics, all the functionality from that can be created from imagery, which we do. So our strategy is quite straightforward. We want to leverage that expertise and that functionality. And rather than simply selling it and maintaining it, which we've done a lot of in the past, we want to move up the value chain, broaden our service provision, provide longer-term higher recurring revenue services. And that means not just supplying the technology, it means processing the tickets, the offenses. It means communicating with the members of the public who may have committed that offense at that time, enabling them to pay their fines so that we can transfer the fine revenue to our clients. And the reason we want to do that is because those revenues will grow year-on-year. And over time, the margins in those revenues increase and that gives much more certainty to our growth plans. In the past, many of you will know that our business performance in smart mobility has been centered around 1 or 2 major projects each year. You have the project. It's great then the project finishes. So we're making a transition to provide those projects more as services across a wide business service. The second thing that we're doing in our growth plan is investing in new technology. And yes, we are being quite successful now at delivering new functionality for our existing cameras. But what we're looking to do is to create a new platform for the future, and we're making investments this year and over the coming years to make sure that, that happens. So when people talk to me about speed cameras, it's not a popular subject often. But the market we operate is a serious market. It's estimated that every 24 seconds or so, somebody dies. And it's not just about people that die it's about the people who may be injured in a car accident. And 50 million people is the estimated number. That's a huge number. It's a human cost. And to every country, there's a financial cost because you have to have the infrastructure to care for these people, mental health, critical care, all those things. And in the young age group, 5 to 29, it's estimated to be the biggest killer of human beings. So if the motor vehicle was a disease, there will be all sorts of initiatives, foundations and so on to do research to reduce that number. So we take it very seriously our role. The technology we put out in every case, we can demonstrate a saving of life and a reduction of injured people. That's a really positive, positive thing. And of course, cars are also used to commit crime and criminals need to move around, whether it's organized crime, people trafficking, burglary, all these sorts of things. So the data we can collect and the information we can process, it's very helpful to the police and security services. A child is abducted, it's really helpful to know where that car with that number plate, if you know the number plate, where it might be, where it might be going? Where was it last seen. All of these things have tremendous value to our client base. And also, we all know this, the world has to reduce emissions. And the motor vehicle is one that is quite a serious contributor to that. If you can moderate speed and by that, I mean on a stretch of road, reduce the fastest differential to the slowest and bring speed more consistently you reduce acceleration, you reduce braking. That reduces emissions. And we have some technology out there, which have been put in precisely to do that, to moderate speed at certain times of the day to reduce emissions in given areas. And generally, around the world, everybody needs to improve road safety. It's a global problem. So let me tell you a little bit about us. You can see in 2022, EUR 114 million of revenues and about 40% of that is recurring revenue. So we already provide some services about 500 people. And we operate in 3 key segments: Traffic law enforcement, which is what you expect, speed cameras or those sorts of topics. Civil security, this is where we provide data and intelligence to the police services so they can track vehicles and we can identify suspicious vehicles, vehicles that might be doing reconnaissance, vehicles that are identified with individuals who shouldn't be in that place and that makes policing more efficient and more proactive. And more recently, road user charging, that's not just providing camera technology to tolling, but it's also about emissions control. Can a vehicle be in this place if it's got this emission profile. And we have our own offices in Germany, of course, the U.K., various places in Europe, North America, and Australia. And we have 2 different ways of approaching the market. One is through our own direct sales force to our client and others through third parties. So we operate with about nearly 50 partners around the world currently. And we are the B2G part of the company. So we deal with police forces, local authorities, governments and so on. And we actually put things on the road side, and we put computers into data centers and so on. So there's 3 key growth drivers in our marketplace. I mean, firstly, all our clients want more functionality. They want new applications. And the current one, which is important, is distracted driving. Are you wearing a seatbelt, are you using your mobile phone? So to do that, you've got to be able to see into the vehicle through the windscreen at high speeds, multi-lane, at night, bad weather conditions and so on and so forth. We see lots of our clients now want to have service-based technology. There's less capital around to spend on new projects, so we're seeing quite a shift now and clients being receptive to having a service-based operation. And also in new countries, emerging countries, Latin America, Africa, places like that, we're seeing the concept of Vision Zero, which is a global initiative to try and reduce deaths on the road to 0, which probably thinking is impossible. But nevertheless, that's what people are striving to do. We're seeing new countries come out and say, "We have to do something. How can we do that?" Service-based revenues is the answer to that. So our response is, yes, we are doing a lot more work using AI and fusing sensors, the different technologies you need to be able to see and measure what's going on. And we are gradually converting our business, and we're in a transformation mode to provide more services, more business services, the whole thing. Technology through to the ticket to collecting the fines. And we're also seeing in this new marketplace in new countries, a whole host of new opportunities. And this year, we've won our first 3 contracts in those places, which is really, really great news. If you look over time about our marketplace, what does it look like on the road side? Well, back in 2010, it was pretty straightforward. It was a speed camera, a red light camera working in isolation. Today, it's that, but it's illegal turning, it's yellow box, it's other moving offenses, and it's a requirement to provide data to the police services in some countries, so quite changed. So we now provide -- our platforms provide a lot more integrated functionality. Going forward, the market requires us to be able to see the entire junction from every direction. And to be able to monitor and measure the direction and speed and performance of vehicles in every direction, but also other vulnerable road users, bicycles, people, children. So going forward, our technology developments are headed in that direction so that we can plug and play functionality, we can plug and play other sensor technology so that we can give information, real-time information to vehicles. We can give real-time information to the people, the organizations that manage the traffic flow across the city. So let me just talk about some of the things we've been doing because we've been working on organic growth and increasing our recurring -- our share of recurring revenue over the past 12 months and particularly a key area for us is the Americas and North America in particular. We used to provide all our technology there to a third-party company and that relationship has now come to an end. So our response to that was to build out our own service provision, as I said, put in the technology, run it, process it, collect the fines for the customer. And the reason for that is that the value to us is much higher. If we sell something and we then maintain it, the ongoing revenue is quite low. If we run it as a service, it's significantly higher. And these contracts will run 2, 3, 4, 5 years, some of them 5 years plus 1 plus 1 plus 1. So we see an acceleration in our top line through these contracts and an increase also to the percentage of recurring revenue going forward. And I'm pleased to say we've already won a number of important contracts in the Americas and the first 2 have gone live in the last month. As we go through into next year, we will then bid for larger ones. So a very exciting opportunity. So we have been investing in our business proposition. We've been investing in our sales channel and all the people required to support that. We've also been expanding our market reach in new countries. So the opportunities here often are around us supplying technology to a third party, and us getting back a share of the recurring revenue, which is really important because we can supply -- as we're the designer and the manufacture of the equipment, we can supply that pretty much at cost. We get a long-term share of the recurring revenues that they get. So that also is something we've done, and we're now operating in 5 new places. We talk about new applications, distracted driving, for example. This year, I'm pleased to say we went live in Victoria in Australia with a revenue-based service for the supply of distracted driving. It's the first one that we've done, and we see far more of those coming over the next period. So we are now putting in technology in other countries to demonstrate what we can do. A really exciting opportunity for us. And we will further invest in new platforms. It's absolutely key to us that over the next -- this year, next year and the year after, we'll be investing more money, more of our time into developing a new platform for the future. So to sort of summarize that, it's quite simple, quite straightforward as a strategy. And we're going to continue to invest and grow our business in the Americas, North America, Latin America and various other places and get a better share of the wallet. It's important to us because those services can only be delivered with our technical expertise. So we're in a very good place to provide a better service because we actually know how the thing works. We're expanding our global reach, as I said, in new countries, and we are going to continue to invest in new technology going forward so that we have a platform for the future. Okay. That's pretty much it. There's now an opportunity, I think, for questions.

Craig Abbott, Kepler Cheuvreux. Kevin, perhaps I'll start, just 2 questions for you, please. Once you mentioned a couple of times they're increasing your recurring revenue share, but I don't think you actually mentioned what the current share is just to give us at least an indication and how you see that progressing over the next couple of years? And the second question was, I just didn't quite understand you mentioned you can only provide these services -- or Jenoptik is the only one positioned to provide these services, I didn't quite understand what exactly is the USP that Jenoptik offers that your competitors don't offer?

Okay. I mean the recurring -- the services we offer include technology and the processing of the offenses all the way through to collecting the fine revenues. And one of the things that we excel in and this came out from what Stefan was saying earlier, is that our relationship with our client base is based upon trust and delivery. We always deliver and we solve their problems, and we don't make mistakes. We're not perfect, but we always create a relationship where there's an element of trust. And if you operate in the police marketplace, I often say this, police officers are pretty much trained not to believe anything you say. So the key thing is working with them, not for them because they're doing a serious job if they're looking for a missing child or they're trying to reduce the accidents on this given stretch of road, it's really serious to them. They make a real positive impact. So we have a role to play in that. So we focus very much on being proud to be a part of that and making sure that we act in a way that helps them achieve their objectives. So our relationship and service, apart from the fact we know how to measure things precisely without failing and we do that very, very well. And there are very few companies in the world that actually do that. In terms of the recurring revenue developing, and we're currently at 40%. We're looking for that to increase in a very positive way over the coming years. And over time, each year that will incrementally grow. Most of these contracts that we have now that we're starting to deliver, you have options to increase the scope of supply during that contract. So managing that relationship and managing those contracts, absolutely key to success.

Martin Jungfleisch from BNP Paribas Exane. Two questions maybe. First one is, you mentioned you targeted a growing customer concentration, which is part of the business model. Can you remind us what the top 3 customers are in terms of sales today? And how you see this develop by, let's say, 2025 or maybe even further out? And then how can you exactly gain share of wallet with ASML or maybe any of the other larger customers? And then also maybe if you can talk about competition and you mentioned joint R&D, what this could do if this would require any joint CapEx and so on? And then the second question is more on the margin side. I mean, so you obviously hiked the margin guide for 2025. But a lot of your semi peers and customers are obviously seeing a bit of a downturn, expecting flat revenues next year. And so how much does the guidance actually require a recovery of the semi market by beginning or mid next year?

So for obvious reasons, we do not share specific customer names in terms of #1, #2, #3, #4, #5, #6, #7, but I can disclose, as I said earlier, the largest 7 together are representing around 40% of our sales. I think it's not a big secret that our largest customer has its headquarter in the Kingdom of the Netherlands. They are large customers in the Netherlands, and one very large customer of us is in the Kingdom of Netherlands. And the other -- I mean, the top customers are also semicon customers and there are not that many semicon machine companies out there. They do optical inspection. In particular, there is no other customer for optical lithography than there are 2 customers for optical inspection, and those are sort of making up our largest customers. Then we have a large customer in life science and health care to do with the picture that I showed earlier, we see DNA thing. It's a large customer of ours. And we have shown you last evening, what we do for the dental area. And here, we disclose that we have a large customer that is a very important part of the [ dense play ] group. So please do understand that I will not tell what customers, which rank and the specific values. But to give you at least a qualitative understanding who those customers are. In terms of margins with the semicon industry and the development of the semicon industry, I think it's -- I'm getting that question fairly often. So how come that if sales of chips itself, sort of orbit flat, and why don't you see that and stuff. And my typical answer is, look, I mean, between us and any fluctuations in the semicon market, it's a fairly big reservoir in a way or a fairly big tanker, one, which is our biggest customer. And if you listen to what they're sort of saying and they're saying, well, yes, '24 might be a transition year. And actually, we see that as well. '24 might be bit more of a transition year and '25 will be a huge growth year. And that's fairly typical in this industry, so it's not something that we're not used to. What it means for us though is, we have to continue to produce. We are limited by capacity at the moment, in particular, in the semicon arena, and we have to use 2024 to be prepared for even more growth in 2025 as we will continue to produce. And then according to PoC IFRS revenue recognition, we will basically -- you will not see that much of a downturn in semicon market of ours in 2024. You'll see continued growth and margin expansion in semicon. But Ralf is going to detail that a bit more, in particular, when it comes to the business models and how we can gain more share of wallet, I'll refer to the afternoon session, to the later session of the day.

Adrian Pehl from Stifel. On your group guidance, I mean, obviously, there are 2 vectors on increasing the margin. One is mix because probably APS is growing faster maybe than the rest of the business. And the other one is margin growth within the segments. I was just wondering if you could give us some ideas on how to weigh these 2 vectors there?

It's typically more mix than anything to be honest, as much as our semicon business grows and the other high-margin businesses grow, then we do see mix effects. I would add though that I think a few people have been surprised or actually, a number of people have been surprised about the margin development in NPC and why that develop that positively lately. In a way, it's also mix, but it's basically stopped the bleeding in some of our assets. In the past, we had interrupt and particular customer not too far from here in the automotive industry doing electric vehicles, and we lost a lot of money there. So it's operational excellence in terms of stop the bleeding in parts of the business where we are less profitable. It's mix. And frankly, it's also overhead coverage. Full grow and we keep our sort of overhead fairly flat, then we see that, obviously, as a margin expansion on the bottom line.

Malte Schaumann, Warburg. Kevin, 3 questions for you. First one on competitive positioning. Do you think with your platform, you're able to gain market share because you have the better offering than what peers developed? Then on growth, you talked about the new functionalities. Do you think that you should -- I mean, growth had been good in some years, have been better in other years. Do you think that growth will be more stable going forward? I don't know if you can share a number? And then thirdly, on the margin, do you think that the new functionalities already we do some leverage of your platform, which already raises the margins? Or is that something you would then rather expect at some point in the future as you have to continue to invest in the things upcoming?

Yes. Okay. Firstly, in terms of the current technology, I mean, we are adding functionality to our existing platforms and we're making really good progress with that, and we're winning new contracts competitively with that. So we're quite confident about that. In terms of the longer term, having what we call a plug-and-play platform for the future is something we're really focusing on sort of separate from design work we're doing for customers now because you have to differentiate the 2 because we're very busy doing design for now and for next year and the year after. So what we're investing is a new platform for the longer term. That so -- we know what to do. We just need to make the investment, which we're now committed to doing and execute that over the next 18 months, 2 years. The margin development is, it's going very much from these recurring revenue services because the longer these contracts run for, the improvement in margin goes year-on-year. And we are very fortunate being the equipment supplier and manufacturer. Our cost to actually do it is lower than many of the companies that have to buy the technology from people like us to actually do that. So we see top line growth and margin expansion over the period through those increased recurring revenues. Does that answer your question?

Yes. It's Stefan Maichl from LBBW. I have question for Kevin. I mean, your order intake is rather lumpy due to the project character of your business. So to speak about a product or the project pipeline by regions currently, and going to margin, is there a chance to stabilize or to improve your EBIT margin this year in 2023?

So you're absolutely right. In a given year, if we have a large project, we get a really strong order entry. And if that project is delivered the following year, that year, we don't get another project like that. The order entries, as you say, it's lumpy. It's project-based. One of the things we've done over the last 18 months and is probably discussed at the last event we had is, to reduce our dependency on those big projects because we don't want to run our business being up this year down the next. So our recurring revenue over the last period has -- as a percentage of the overall revenues has increased and we see that going forward. The other thing you have to bear in mind is that when we win a service-based contract, you can't book that all into the order book because under the accounting rules, you have to book it each month when you send an invoice. So what is important for us going forward is what we call the framework contracts, which we've won, which don't actually appear in the order entry. And that's something -- I don't have the numbers today, but that's something which has increased well over the last 12 months. And going into the next year, we'll continue to increase. And then you will follow that by seeing the revenues coming up because we'll be booking those month-on-month, year-on-year.

And on the specific sort of EBITDA margins per division, we don't give any guidance within the year.

[indiscernible]. Kevin, maybe a question for you. I was wondering, I mean, with the change of the -- just the way that you generate revenue and SMS, I would wonder whether you can give us a bit more granularity on the software-based revenues that you're making. And I mean you had in the past, what was this, 50% target, software revenue target. Maybe you can give us a bit of a view how that is going to develop into the next years? And then also, I mean, with just the -- I mean now you gave us a sense how the business is changing. Will you report also that in the future, how much project-generated revenue you will make and how much service-generated revenue you will make? Is that something that you plan to report and to give more granularity in the future?

Stefan will answer part of that question. We, as an organization, we're big on photonics and imagery. That platform requires software to develop the functionality. So yes, we are increasingly writing more software for sure. We have quite a large AI team that does artificial intelligence work, which again sits on the platform. So it's a combination of the 2. In some cases, the software is run as a service for some of our clients. We've got a number of clients that want our back-office technology as well as our cameras as well as competitor cameras feeding into our back office. So again, those are revenue-based solutions. We've got solutions running in the U.K., in London with the Metropolitan Police, in Australia, and they generate good recurring revenue year-on-year. So we don't normally break out that from our numbers at this particular point. But nevertheless, software is an increasingly important part of our business.

And we do not have any intentions to change the reporting structure in the next 12 months at least. Should that change, we'll let you know.

A question for Kevin. Thank you for the presentation. And when I listen to you, it sounded like you're running a huge growth business, also from simple cameras to complex solutions, more software, more recurring revenues and so on. Now given your historical top line, you're probably slowest growing part of the group. It's roughly 10% of revenue. You have, obviously, the semiconductor business and the medical business growing much faster. So probably, if you can't really accelerate your top line number you're going to -- basically the importance of smart mobility is going to further slowdown. Is your aspiration to live with that and say, okay, from 10% to 9% to 8% to 7% every year from revenues? Or do you think -- is your view that you are able to, at some point, keep up a bit, not -- probably not 1:1, but keep up with the rest of the organization?

Yes. I mean, I think, there's a number of things I'd respond with on that topic. I mean in the past, we have always been reliant on 1 or 2 major projects every year. And you rarely get 2 or 3 in any given year. And so we may have a huge input of revenue 1 year and that's not there. So next year, you're trying to recover that with other technologies. We've also had a period where we've had through COVID and various other things, we've had to do quite a lot of R&D work because of obsolescence of technology. And a lot of companies, people like Sony, for example, end of life camera sensors earlier than they planned. So we had to do some work around that, which slowed us down a little bit. But we've overcome all those topics now. And in the last 18 months, we've been developing new -- generally new technology, which we started to sell. And now that we've built out our business service where we can do the whole process, the opportunities really opened up for us, particularly in North America. Through our opening of the sales channel directly ourselves, we've got an extensive prospect list, all of which is qualified. And so we've been investing in that area with people, operation support. And I do see growth starting to take off. And we want to be in line with market expectations on growth in our business. There's no reason why we can't do that. There's no reason why once we've proven we can do this, and it's successful, we could do better. And so yes, we're really excited. I think the recurring revenue is underpinned by technology, good service, good client relationship, help us get on that hockey stick.

I mean maybe something that -- for Kevin, it's more difficult to say, but I can. I know that Kevin and the team had been disappointed when we, from a group's perspective, had slumped the brakes on certain acquisition projects, okay? So we -- Kevin and the team, they spent a lot of time, a lot of effort in certain M&A projects, processes, and we were on 1 or 2, we were pretty close, very close. And we talk large deals, right? I mean, like the size of SwissOptic and then Berliner Glas, large deals. And then given the changes in the environment that I described earlier, we basically pulled the plug at the 11th hour. And it was a big disappointment, I know, for Kevin and his team, and the more so I'm very grateful, we are very grateful for how the team dealt with that and how the team had been able to -- yes, take a bit and then...

It was interesting because we have been very focused on M&A, and we got close to a number of targets and some were not successful and some were stopped, and that's fine. But we've also been investing in R&D and the sales people and the channel over the last 18 months. And what you realize is obvious, isn't it? You can spend quite a lot less, the longer that -- but it's providing you invest in your business, you make progress. So we're making progress. And our sort of need or like to make an acquisition has become less for sure because we are really focused on the R&D. We've been expanding our sales channel. We've won our first contracts. We're in a different trajectory now, which is not dependent on M&A.

Okay. If there are no further questions for now. Then we'll break now or carry on right away with Ralf.

Yes, exactly. So thank you very much, Stefan and Kevin. Thanks for your questions. For everyone, we are now heading for a coffee break here in Berlin for about 30 minutes. So be back right before 11:00. And so just to do the same for those who are online, see you later on. Thank you. [Break]

All right. Good morning, everybody, ladies and gentlemen, from my side. My name is Ralf Kuschnereit. I'm the responsible Board member for the APS division and I want to give you a little bit in inputs and an update on that division. And right between the strategy from Stefan Traeger and the numbers from Prisca Havranek, I'm trying to actually explain what kind of business that is? How we do it? Why we do it and why it matters? So that's my job today and I'll try to walk you through that. First, I want to start -- you probably don't know most of our very, very important products. And even if we would try to find that out, you would not be able to do that because we provide optical systems that go into the products of our customers. So small systems going into big boxes of our products. And you won't see any naming of Jenoptik in it. There won't be a press release because most of our products are protected by very strict NDAs and even most of our customer relationships are. So that makes it always a little hard for me to give you a nice interesting presentation, but I still do try to make it insightful and interesting for you today and understandable. So we actually have 2 kinds of business. The one I just described is like we build optical systems that go into products of our customers. So every time our customers ship a product one or several of our products will be shipped with it, right? That's the business model. So our customer sells then we sell. The other one is, that we do in the electronics side is, we build capital equipment. So this is capital equipment that goes into the production line of our customers. So it's machines that help our customers build their products. So it's 2 different parts. The biggest part is the supply to the OEMs. Well, as you can see here behind me on the slide, we mainly serve 3 markets, semi, biophotonics and electronics. Then last night at the dinner table, somebody asked me very nicely saying, "Hey, how do you make a decision, which markets you serve or even on the specific projects?" And I think we developed a very clear pattern for that. So first of all, in our corporate strategy, it says, we do optics and photonics. This is what we are all about. And that's very important because we actually have a long heritage in optics and photonics. We even go back like another optics company to Carl Zeiss. So we inherited all that knowledge, the secret sauce of building optics, but then we also build on that with modern technologies. We're using semiconductor technologies to build optics, so we have a really broad portfolio from optics, micro optics, light sources, sensors, detectors, so we are able to provide full solutions for our customers. So that's number one. So is it optics and photonics? And the second one, we looked at different markets. And of course, we're interested in markets that grow long term stronger than GDP and there's a couple of markets. But the more important factor is -- or the additional factor is, in that market, does optics and photonics play a differentiating role. So can we make the products of our customers better? Can we help them differentiate? Can we create value in these markets? Because otherwise, we are not a high-volume, cheap manufacture. We need something difficult problem to solve. So that's the second part. So this is how we select the market, semiconductor, life science, and electronics. But the third element is also important that we developed over the last couple of years, is it scalable? Because we are not an engineering house. We're not just solving a technical problem for somebody else. We solve a problem -- in the ideal case, we solve a problem together with our customer. We do a manufacturing introduction and then we ship the products for, hopefully, in higher volumes, for us, higher volumes over a long period of time. So that's actually -- and also in hindsight, when we look at it, this is where we make good money where we make good profit. So the rule of thumb, is it OpEx? Is it hard? So is it a difficult problem to solve? And is it scalable? This is how we work through this. And the important part is, and also we have to get close to our customers to drive the revenue. So our experience showed us that when we work very closely with our customers from the very beginning, so codeveloped with them, do some innovation and then do serial production, this becomes most profitable and most reliable. And as you can see here with the numbers, so we created similar statistics as you have seen from Stefan early on. So if we look at '21, 2021 with our also 7 biggest customers, we did 37% of revenue. Now we're doing 50% of revenue or we're planning in '23 to do 50% of revenue with our biggest customers. So we have the clear ambition to expand the share of wallet with our customers. And that requires very strong and very capable key account management. We have very capable, technically capable key account managers. We're getting close with our customers. And what we call it is actually we are planning for a virtual integration. We do this with our customers. We actually offer this to our customers. So over time, we understand their processes. We understand their way of working. We each other understand our strength and weaknesses, and we fully align and become a strong partner with them. So this is how we drove the business in the past, and this is how we want to grow the business in the future. So strong focus on the key customers and expanding the share of wallets. So that's the overview on APS, Advanced Photonic Solutions. Now I want to deep dive into the semi part, the digital age, the biophotonics part a little later and then the measurement technologies. Well, the digital part is, of course, interesting. So I want to start with a question. So why are actually -- the processes we use today, why are they so, so powerful? I see all the tablets here on the tables, you have your smartphones, you have your laptop computers, probably right now connected to the cloud. Maybe what I'm saying is just transcribed by an AI into a text, somebody can download it later. So these processes are so incredibly powerful today and why is that? The reason is because their processes have many, many transistors today. I think the new Apple M7 has like more than 100 billion transistors on it. And that is possible because the structures on the chips get smaller and smaller. So right now, I think the iPhone 15 has a chip that has a 3-nanometer structure in it. It's also a marketing thing, honestly, but it's maybe 1 layer, but this is going to come. So the smaller the structures, the more processes we can create on a chip and the more power we can create, and we can create more calculating power with less energy consumption, too. And how is that done? And bear with me, I'll get where we come into play. So on the left hand side, you see lithography. So lithography is a step to projecting a mask on a semiconductor, on a chip. So the small structure, the 3-nanometer structure, 10-nanometer structures are projected on the chip, very small. And you need incredible optics to do that, which is in the big machines of ASML, Nikon, Canon. Only ASML can do 3-nanometer, by the way. So it's a big projection lens, which is highly complicated. There's a lot of other features to be manipulated to do that. The other challenge, though, is -- I hope I'm not talking -- too many, too many physicists, I apologize if you already know everything on this. So there's a big silicon wafer going into this machine and it's built step-by-step, lithography step, then it's a coding, some etching, and then it has to come back in the lithography machine. And you have to find the spot. I mean, you have to make a crossing on a nanometer level, right? So you have a nanometer structure, 3 nanometers and then now the thing comes back and you have to bring it in exact position, and that's the other big challenge in the lithography system to do the so-called overlay. You have to find a spot. And to do that, it's another big optical system that does that to find the right spot. So projecting it very small and finding it again and overlaying it. So these are the 2 big things, and we are involved in both of them. That's the end of the story. I can't tell you much more about it, but it's a unique technology, can't be quickly replaced and we are supporting lithography companies to do that. So that's the one step. So building the chip and the chip is built layer by layer, modern chip has about 100 layers. And if you think about it, it looks like New York City with all the high-rises and a lot of connections in between, right? It's a 3-dimensional structure. And this also has to be inspected. The second word, yes, I see inspection. And these machines, the inspection, lithography machines look like buses. These are the size -- I mean, lithography probably is like a city bus and then like a small transport bus is the inspection machine. And the inspection machine is not a machine that from time to time comes at the end to look at it. It's an integral part of manufacturing of integrated circuits of chips. It happens all the time. You have to check the bare wafer, you have to check the chip, you have the quality control and you look for defects. And one of our customer calls it, we're looking for the end in the streets of New York. So you have these high-rises, you look for something as small as an ant. Ant, right, the little animal. Ant on the street. So you have to look from a high distance in this very small spot. Why I'm saying this, this is in principle, a gigantic complicated microscope that does that. And if I say microscope, it's optics. So we are providing classical, very high-end optical systems for the inspection. So we are, say, on both sides of manufacturing chips that require optics. There's other machines in the chip factory, of course, but the ones that require optics lithography and inspection, we are in with micro-optical systems, talk a little bit more about this later, what that means. It's not just small lenses. It's diffractive optics meta structures. It's optical components, optical systems, and we have this of both sides, both important steps of manufacturing it. So if we are in this business, and it's a semiconductor equipment business, is the machines that go into these big fabs that we read about every day in the newspapers. So is this a good business to be in? Of course, this business is driven. And there were a couple of questions earlier. This business is driven by the chip market itself, right? And what we believe is that this is an excellent market to be in. If you look at it, if you just look at the newspaper, right, there's announcement like there's a new NVIDIA AI chip today or tomorrow or yesterday. There is -- we're probably all connected to the cloud right now. We are doing edge computing. I mean, data centers are built every day somewhere where it's cool, close to a river or something like this to cool it down because we need so much calculating power over and over again. And the big multinational companies Google, Meta and all these companies build their own data centers every day just to increase capacity to be able to actually specifically run the AI that is coming up for all of us. It's a big driver. Then, of course, we all read that was not long ago, we read, "Oh, the German car industry can't produce cars anymore because we're missing chips, right?" We have the energy transformation. We have the need to reduce CO2 emission. So everything in energy has to be controlled and steered and this is done by algorithms, intelligence and that all drives that market. And last but not least, my hardest argument would be if we doubt that, every day, we read in the newspapers about export restrictions about chips, right? There is a little trade war on chips. And I think we can say if a country doesn't have access to chips, processor technologies. I think we can even say if it doesn't have access to the highest level of industry chip performance, it is a strategic disadvantage. I mean this is happening because it's important. This trade war is happening because it's so important. And I think we can say that the world is running on silicon these days. It's probably still running on oil, but definitely, it's running on silicon in the future. So I think -- and if we look at now, you can trust my beliefs or look at the data that we bring and we look at, of course, I mean, we see a continuous growth for the semiconductor industry over the next couple of years. Most people say at least a decade. And yes, there can be fluctuations, and we talked about this in the break, right? What is '24 like? I can explain it a little bit more and then '25, it goes up. There might be fluctuations, but because of the fact that other than 5 or 10 years ago, there's so many more applications for this chip industry. So the fluctuations actually are leveled out a little bit. They're not as strong anymore. So we believe that the chip industry is going to grow and it will drive the semiconductor equipment industry that drives our business. To be in a -- so I gave you a couple of high-level technology indications that we are a good company in that business and a relevant company in that business. And what I want to share with you is that in the last couple of years, we actually developed from a supplier for these companies, actually for all of the important companies to a strategic partner. So internally announced officially a strategic partner on a couple of supplier awards because we increased the strategy of increasing share of wallet work. We increased our revenue share, and we got very much closer to our customers there. And they appreciate that because they also want to keep their -- the size of their supply chain controlled, and they want to have a close relationship because it's so important. And what that takes is not just the technology. So we need it, and we still need to develop further in R&D capabilities. So we help our customers innovate R&D capacity. We need to perfectly control our supply chain. And at the end, to make it simple, it's an interesting business. So the expectation is that you're just ready every day. So if you wake up the next morning, something happens, you got to be ready. You need to have resources to deal with that. So these are our requirements that we try to develop and we keep developing further to intensify the relationship with our customers and strengthen these relationships to be an integral part of their supply chain. So business can only happen with us and not without us. And the last point that any of our customers is pointing out that we need to be ready to ship resources, shipping capability, being ready for the ramp-up is of utmost importance to them. Continuity of supply there is the first goal. And then just after that comes price. And this is one -- the reason why we built this new factory in Dresden that you probably have heard about. I just want to display it here one more time. It's a super high-end factory. It's very close to the airport in Dresden. If you know the area next to the Bosch semi fab right there. It's built on pillars on the bedrock of [indiscernible] to be vibration-controlled. It has huge clean rooms. It's a state-of-the-art fab, and we are in between the semi fabs. We're not doing semiconductors. We're using semiconductor technologies and applying them to optics, which differentiates us very much. But we need all this quality and these kind of facilities and infrastructure. And we're making the investment, you see the number, EUR 90 million to EUR 100 million. And I know I'm speaking to investors. I know the famous line, cash is king. One of my customers told me, yes, but capacity is king if you have it when your customer needs it. So we're making that investment, and I'm pretty sure it will pay out and we're going online in 2025, and we're bang on time with it. So I hope this is going to be ready and fuel our next step of growth in that industry. Okay. Now taking a step back. Now we're moving from silicon into the bio world, which is an interesting step. Well, if I think about last time, I went to check up at my doctor, probably do that too from time to time, it just feels like 20 years ago, right? I mean you go there, you check with a couple of things and then you maybe get a blood test and it looks like the same. Like, you've compared to 20 years ago, maybe the values are different, but the lines are the same, right? Nothing has really changed. But if you get sick, the world is very different today than it has been 20 years ago. There's so much more capabilities that we have today, and it's -- I mean, immunotherapy, new medications for cancer treatment, understanding. And it's all based on understanding that sickness life happens in the microscopic. Stefan talked about this earlier and, of course, because this is part of our business, right? I mean, about 20 -- no, exactly 20 years ago, 2002, the first genome, the human genome was sequenced the first time. It was a huge effort. I mean it took like 10 years. Today, I mean, if you do a PCR test, it's pretty close to something like this. And for $100, you buy ancestry.com or 23andMe, you get, in principle, your gene sequence, right, for $100. And this was a huge thing. So we have all -- medicine has understood, life science understood there's a lot in the genes, in the cell biology, in the molecule biology, and it changed our world in life science and health care. Again, fortunately, we typically experience it only when we get sick. So -- but why I'm telling that story? Well, as a person coming from optics, it's in the microscopic so you need a microscope and optics companies can do microscope. So the microscope -- it's always a kind of microscope, to be honest, right? So the microscope I'm talking about is not a microscope you have on your desktop. In a gene sequencing machine, in one of the other analytic machines you find in a lab, there's something in it that probably looks more like a high-tech electronic box when you open the hood, but it's an optic. It's an elimination system, like a laser, an LED or lamp. It's a sensor, it's a detector, it's electronics, and it's software. And we are building -- in this business, we're building this kind of optical systems. And they go into -- and that I have to become more specific, research applications, applied science. They go into these systems, and this is a growing business. That's why I was making the story. It's a growing business. There's more and more, it becomes more common to analyze genes, molecules for your health, and it's a growing business, and we are part of it. And also here, we are participating with the biggest players. And if check my rule of thumb, it's optics. It's hard to solve, and it's scalable because this is scaling right now. The other part that we do in health care and life science -- here, this is not following me. On this side, it's more visualization, right? It's what you saw in the factory early on, like a 3D scan of your teeth, but digitization is driving that side of it, right? It's dentistry, it's surgery, and I'll show you an example in a minute. So digitization is driving that. So yes, we had microscopes and we had visualization like surgical microscopes before, it all changes now with digitization. There's more -- systems can create data and data is used to do better work with the tools that I'm going to show in a second. So we have these 2 areas that we're serving, also do lasers a little bit. These areas that we're serving that we think are up for growth. Just quickly one more time the dynamic. So we have -- the market is driven, like in comparison to what I said about the semiconductor part, right? The market is driven, the end consumer is the lab, the hospital, the doctor's office they're buying these kind of machines. Then there's the huge and the big OEMs that have made huge investments into these applications into the clinical studies to prove that this analysis or this treatment does help a patient at the end. They are very big pockets. They're huge companies, and they design systems, but they're very happy to have a partner in the photonics field to outsource that part to them. So this is what we do. We partner with these companies, and we help them succeed and differentiate in the market. And we're building, of course, and de-complexing in that way also their supply chain, no question. And then optical components, we only do in that field if it's not available for it. We can't buy them on the market, right? So semiconductor, we probably, most of the time, very often, we have to build the lens ourselves. Here, we can also partially acquire it. So we have this disposition in the middle. But we are not only -- and this is a little bit of a mixture. So we are mainly basing our business model on the big customers, on the global players because, of course, there's a codependence between the 2 parties, the supplier and the end customer or the OEM. But we also make some bets, fairly dosed, not too much risk. So we're working with small companies and start-ups that come to us because they have a very specific difficult problem that they can't get solved somewhere else. And we think just from the idea that this is very fruitful and it will help the society in the future, so we believe and this can be successful. And I'm just showing without name one, which is a robotic exoscope, this is for brain surgery. So if you ever witnessed brain surgery, probably not, but it's always done through surgical microscope. So a doctor stands in front of a microscope, looks at the brain of the patient, does surgery, which is sometimes taking hours, 3, 5, 7 hours, which is very straining on the doctor because he can't move, has to have the microscope between the patient and himself or herself. Here, it's decoupled. So it's an electronic system. It's a robotic system, just positioned above the patient and then the doctor can do surgery while looking at the screen, so much more comfortable. This is a new innovation, has been tried several times. But we believe that this company is very successful there. They've positioned -- placed it in different hospitals there in the clinical trials, so we're hoping that this will pick up some day. And then also digitalization plays a big role because they can be -- fluorescence can be added and so forth. And the other one is endoscope. We actually acquired a lot of knowledge about endoscopes with the acquisition of Berliner Glas. And we're using that additional knowledge combining it with knowledge we had before. And using something like a multi-spect or developing something like a multispectral endoscope, which helps us diagnose or helps the doctor diagnose, for example, cancer in the bladder because you can differentiate different colors, fluorescence and photodynamic therapy. So again, I know I'm not explaining it in all detail and good enough. But I just want to show we are adding some of these projects to the big multinational companies to kind of participate in the opportunity that we see in these markets. Also here, like in the semi market, technology is a prerequisite to be in the business to be in the discussion, but it needs more to be a partner with the big multinational companies. And this is where probably also the advantage of Jenoptik comes in. The big multinationals don't want to work with a small optic shop or a start-up. They want to work with a company that can pull through if things get tough. Technical problems occur, supply chain issues occur. And our job is to be there and also in the development phase or in the zero production phase when issues occur to be a stronghold in their supply chain. Of course, we're discussing price, but they want R&D competency, they want continuity of supply, and they want a strong relationship. So they have people to work with, to discuss with, to be successful in their endeavor. I mean for them, we are a supplier. Their task to build such a device is typically much bigger than what we can do. Well, last but not least, you have seen that, I can take that short. So after the acquisition of Berliner Glas, where we acquired a lot of competency, specifically for the dental and endoscopic part, we had to find a new building in Berlin, and we are very happy that this worked out. We build it for growth. It's state-of-the-art clean room for this kind of business. And we spent about EUR 20 million to build it to that where we are, but we're now ready to grow with our customer in that field. So third part of APS. It's about optical test and measurement. And so why is this an interesting market. So -- and as you know, this -- we started this in a significant way with the acquisition of TRIOPTICS. We had optical test and measurement equipment. We built that very specifically for certain customers, but it was a very small business, it was the absolutely high end. And we recognized that you need to have some serial products to take a certain share in this market of optical test and measurement. And maybe to understand where we are going, it's maybe good to understand where we're coming from. So in 1991, the founder of TRIOPTICS, Eugen Dumitrescu founded the company. He's been working for a German optics company and he couldn't stop and opened his own company and said, "I want to build optical test and measurement equipment and I want to connect it to a computer." Seems to be an obvious move today at that time, it was still, obviously, at least in the optics industry, a little bit revolutionary. So he wanted to use computer power to connect it to the test and measurement equipment. So he did this. He grew the company slowly, but he was successful. He managed to build this combination, which was fruitful for the optics company. And where he sold it, you see what's the optics manufacturing. At that time, it was just classic optical manufacturing, right? We still remember we had photographic lenses like real cameras and, of course, a lot of technical optics in the industry. There's a whole industry of optics. And he sold this product there. Today, we have many more markets. We have optics entering the advanced driver assistance systems in our cars, right? It's not just the backup camera. It's all the cameras that are surrounding our cars, telling us there's a risk coming from left or right. We'll talk more about artificial ARV arm, augmented reality and virtual ready, not artificial reality. And then we talk about smartphones. And this is what actually made the TRIOPTICS big. So the transition from the photographic lens and bringing the lens into the smartphone, I mean, people probably still remember the first Leica camera was pretty poor. And to really do that transition, it was important to get to an image quality that was really replacing the camera, right? So you don't need a camera anymore. I mean, most people don't have a normal photographic camera anymore. It's the smartphone. And to do that the precision of manufacturing these lenses had to improve significantly. So what we have today on our cameras is several lenses mounted on each other and glued together, and then they are mounted on a sensor chip. And TRIOPTICS developed, tested measurement equipment that is in the manufacturing line helping to adjust the lenses above each other, glue them together and then in the right position, glue them at the sensor. So to create 100% quality control, what we have today in our pocket is 100% quality-controlled camera in the smartphone. And as we all know, we started with one. Most of us have 3, 4 lenses in our smartphones. And this is still the case today and it's still a big business. Of course, it has matured more, right? So it's not growing as fast anymore. But there's still a lot of drivers in the market that keep innovation alive. So I mean, social media photography, Instagram, and when if I go on vacation, I see a lot of people just taking these photos all the time. And there's a driver for better imagery. And again, if you know behind Instagram, there's a whole business, too, right? So tele zoom, zoom optics, there is innovation going on, on the optical side, on our face recognition on our iPhones or other smartphones, other brands. That is driving innovation. And then, of course, weight and shape, right? So they're still sticking out of our cameras, a little bit ugly, so there's still a lot of requirements that are driving the industry to improve smartphones. In addition, we see let's say, a little bit an unclear situation with China. So most of the smartphone factories are in China today. There's a drive to look into other countries, especially Southeast Asia. And if factories move, there will be also a push for more equipment in that market. So we have to say, so the smartphone market has matured, right? It's not like the super steep growth anymore, but it's still very active, and we see this as one of the pillars of the business today. So we have the classical optics, and then we have the smartphone optics. So the big growth driver for the future, we think, is going to be AR/VR. As you all know, -- the big companies like Apple, Meta, Google and others have committed to bring AR/VR live, right? The gaming companies already did that, too. So there's a whole set of applation that is thought of to create new services and values for the world using such an AR/VR device. So initially, it's supposed to be happening today, and we know it didn't. So it has been announced by Apple last year. There is a midteens out there, but it is postponed a little bit. So -- and the reason for that is not that the companies are giving up on this. They're still pushing very hard to bring this out. But the reason is that technologies are not ready. And I'm not talking about the AR/VR glass itself. We look at this in a second, talking about other technologies. There's not enough content. There's software is not done at that level. So there's a lot of things still happening and investing, but it is a little bit postponed. But the key players are still doing significant investments. The innovation is continuing, and we are expecting -- I'm not saying any date. I'm not committing any date, but we are expecting that this business will grow and will be happening because there's lots of applications people think about. I think the obvious one, I think this is what is already started is going to start is entertainment. But it's navigation, it's servicing. It's aerospace, it's defense, it's manufacturing. So all these surrounding of the reality with artificial --with augmented reality is giving more value to customers. I mean, the one I just met somebody who was actually jogging with his AR glasses having a trainer in his losses. So he would run with him and tell him to go faster, go slow, checking the heart rate. So I mean there's things we don't think about today, but I think this is going to come. And again, the big multinational players are very committed to drive this through. So why is that important for us? Because these AR/VR glasses are optical devices, and they're very delicate and they have to be tested very carefully and aligned very carefully. So the first class that we're on the market, if you put them on the motion take after a little while already. So because they're providing a stereoscopic, which means a 3D view, and if angles are off, you get sick. So you don't feel well. So there's a lot. So it's a mass product like the smartphone. It's a mass product that has to be produced at a very high precision level to make it usable and also affordable for everybody. And I don't want to read the list to you. So the dark blue part is these are things that we, at Jenoptik with TRIOPTICS know how to do. This is where we're good at, what we're good at. And we already have products actually standard products for AR/VR or manufacturing. And then there's a couple of adjacent technologies that we are looking at, that we are partnering with, with others to be ready to be a full solution provider for somebody who starts producing AR/VR glasses. And of course, that you can see it's like a main theme in APS. We are already in contact with the big companies. So we're always starting in the R&D phase, trying to build the relationship in the R&D phase, helping them to develop a manufacturing process in the glass itself. And then, of course, our hope and wish is then to be ready and ship the devices when we go into serial production. Last but not least, I mentioned earlier, just one sentence. So we are -- the world is using advanced driver assistance system. I think most of our cars have like blind spot control, like a radar system that controls your speed, you can follow the car before. You have a backup camera. You see new electric cars that don't have mirrors anymore. So they have cameras to look back -- so there's a lot going on. I mean, with the whole change in the automotive industry that people start asking what kind of engine is in the car, -- it's all going to be electrified. The differentiator in the cars become more and more on the electronic systems. It's advanced driver assistance system. Of course, it's car entertainment and other things. So it becomes a differentiator. So it becomes a topic for innovation. And even then now are connected to what Kevin told earlier, so if eventually really automated driving occurs and maybe even connected to some other systems that are maybe industries to really steer the traffic to reduce carbon emissions to really improve the flow, it will be a requirement to have these kind of systems on board. So there's a whole kind of vision for advanced driver assistant that goes beyond our blind spot control and so forth. But thankfully, there is a business today, right? So because the cars already have cameras. And we have a couple of products in the market, and we are already also in this market as a supplier from high flexibility and low volume to high volume and lower flexibility. So again, here, we are providing methodologies and equipment for the R&D area and to the line in the manufacturing. So the whole spectrum of devices, so we can enter on the R&D phase and then go into the manufacturing. So from lab to line is here a little bit the tagline. So in summary, the optical test and measurement business is addressing several markets, and these markets are on different maturity levels. So the smartphone market is still a very strong market, but of course, innovation is not as strong anymore as it has been 5 or 10 years ago. So it's not growing as fast anymore. But it is still a big market, and we are the market leader there. Advanced Driver Assistance Systems is going to grow very surely. It's already happening. All major brands have these systems and they're using it and going further. And AR/VR is a big growth opportunity. We keep our finger across that is happening rather sooner than later. That's just not just in our hands, but we are making sure we are prepared to take that ramp, that's steep ramp when it's happening. So this was the deep dive into the 3 areas. Of course, we are serving many more smaller markets like advanced manufacturers. And as Stefan mentioned, we're also going a little bit into the data transfer. But these are the markets and our main revenue drivers. And I just want to summarize for the overall APS division. As you've heard, I mean, technical excellence is like the foundation of it. And again, here, we can benefit from our history as well as our investments over the last couple of years that we are really one of the top optics companies in the world. Customer centricity has shown to be the one very strong success structures in the business we're in, building very strong relationships, performing, being very reliable with our customers, build these strong relationships, not just with one customer, but with a overseeable number of customers, so also has, of course, an impact on our P&L. So we don't need 1,000 sales reps on the street. We have very dedicated teams working with specific customers. And then manufacturing expansion in many areas is important. Semiconductor again we are looking at the ramp-up to come. So we need to build capacity because if you want to be in that business, you need to be ready to ramp up, but also on the biophotonics side, as you saw it maybe yesterday afternoon, we need to be ready to grow the business, and we're building the capacities there. So I was not showing you a lot of numbers. So I try to convince you by explaining hopefully not too technically what we're doing that we have a strong position in the market that we have a strong position with our customers that we are performance critical for our customers. So we've strengthened this relationship. And that the investments we are doing are very targeted. So they're not random. I know there's a lot of money going out, but it prepares us for further growth. And I think the numbers we could show in the last 1 or 2 years kind of underline this. Thank you very much -- and with this, I hand over to our CFO, Prisca Havranek-Kosicek, and she has all the numbers that I haven't shown.

Good morning, everyone. Very happy to have you all here, both in the room and online. My name is Prisca Havranek-Kosicek. I'm the CFO here at Jenoptik. And if we recap the morning today, by the way, we have -- I think we are pretty good in time management. So I'm the only one who can screw it up from now, I won't -- I'll try at least. But if we look at the recap of the day, what we've seen, we've seen Stefan talk about how we execute our strategy and where we are midway of our strategy. And also, I think most importantly, what our key priorities are for the remainder of the strategy period. And if you remember that it will be organic growth operational excellence and innovation and customer centricity. Then we had Ralf and Kevin going into our most important growth platforms and trying to explain both what we do there technologically but also how we interact with our customers because that going forward will be a key value driver for us even more so than in the past. And now I would like to take the next 15, 20 minutes or so to try to explain to you our thinking about the financials and how we think this all ties together and providing you with some more numbers. And when I do that, I would like to reemphasize 3 topics of messages for you. One is how we think double clicking into our growth and margin ambitions, how we think about them and what are the reasons to believe in our view to deliver this profitable growth. The second one is around balance sheet and capital allocation. What is our thinking about where we deploy our capital and why that's the case and why we believe that makes sense. And third one is to go a little bit more into detail on our updated midterm targets and also for those where it's needed, provide some assumptions that may be helpful for the modeling that some of you may be doing after this day. So yes, okay. So going into growth first. Stefan talked about the CAGR in the past, and this was around 7%. However, if you dissect that, you actually see 2 different trends that I've tried to show on this slide. So you see around about 5% CAGR to the period up to COVID, then we take out the COVID impact because there was a little bit of a mass obvious in the growth pattern there. And then since that, in the last 3 years, we have grown by a CAGR of 10%. I think that speaks to what Stefan alluded to the transformation of our portfolio. We think that's a good performance. Now I would say the critical ones of you may say, yes, but there was a high inflationary environment, yes, given that. And then, of course, also, there was a bit of a special situation in semi, particularly in the year of 2022. But overall, we still think that's a very good performance. And the fact that we have a higher share in semi revenues now as our total revenue and also our Life Science business has increased in the total revenue composition. We think that's a good reason to believe that we'll be able to carry this acceleration into the future. So that's on the growth side. If we look at profitability, Stefan has talked about it already, we are ahead of plan. So this is why we are updating our midterm guidance growth. The second one is around balance sheet and capital allocation. So what is our thinking about where we deploy our capital and why that's the case and why we believe that makes sense. And the third one is to go a little bit more into detail on our updated midterm targets and also for those rates needed, provide some assumptions that may be helpful for the modeling that some of you may be doing after this day. So yes, okay. So going into growth first. Stefan talked about the CAGR in the past, and this was around 7%. However, if you dissect that, you actually see 2 different trends that I've tried to show on this slide. So you see around about 5% CAGR to the period up to COVID, then we take out the COVID impact because there was a little bit of a mass obvious in the growth per pattern there. And then since that, in the last 3 years, we have grown by a CAGR of 10%. I think that speaks to what Stefan alluded to the transformation of our portfolio. We think that's a good performance. Now I would say the critical ones of you may say, yes, but there was a high inflationary environment, yes, given that. And then, of course, also, there was a bit of a special situation in semi, particularly in the year 2022. But overall, we still think that's a very good performance. And the fact that we have a higher share in semi revenues now as our total revenue and also our life science business has increased in the total revenue composition. We think that's a good reason to believe that we'll be able to carry this acceleration into the future. So that's on the growth side. If we look at profitability, Stefan has talked about it already. we are ahead of plan. So this is why we are updating our midterm guidance today. We have seen a significant expansion of our EBITDA margin, particularly in the last 2 years. Please note that, of course, there's also been there's mix effect in this, but there's, of course, and relating to the mix effect, also the turnaround of our non-photonics businesses where losses have been sent or businesses have been dissolved that has helped that. I also think it speaks to our pricing power that we have been able to roll over cost increases during a period of high inflation. And last but not least, we've also seen economies of scale in our functional costs. I'll be talking about that a little bit more further on that have supported this margin expansion. So what we believe is that with this we have created a sound foundation to grow profitable going forward. Our aim is to deliver high single-digit growth midterm. And we believe that if we talk today, we heard about our strong ad markets, we talked about AI and digitalization and trends in the medical and life science space. I want to reemphasize the share of wallet that we have increased with our key customers and through our strong relationships, and we are going to further increase that. We've talked a lot about our technological edge, the sound technological base, the innovation that we do with our customers together. And we believe all of that together will help us to drive this profitable growth going forward. And we will not only grow, but we aim to grow profitable. So that means obviously, a margin expansion. And that will come from mix. We've been talking about semi a lot today. I will touch about that further on a little bit. But obviously, as we grow our assembly business relatively stronger to the rest of the group, that mix effect will also show up in our margins. And talking about the scale effects in functional costs. I think Stefan mentioned that we aim to prepare or verticalize our parts of businesses within our APS division that and also the foundation that we have laid already and will continue to lay in our G&A, so namely implementing S/4HANA and IT, creating a global accounting function will help us to further leverage our functional cost and give us a tailwind on our margin expansion. So then switching gears, balance sheet and capital allocation. And I think what you see on this slide, and Stefan has been talking about it is on capital allocation, we have somewhat changed our priorities. We were coming from M&A as an enabler for our portfolio transformation to now our first priority going into investments into our organic growth, both obviously, that CapEx capacity expansion, but of course, also selected R&D investments. So going forward, this is our first priority for allocating our capital. Second priority, this is unchanged, is returning to shareholders through dividends. Our aim here is to be predictable. So we haven't changed anything here. And then third one is M&A, bolt-on acquisitions. And maybe let me touch a little bit on M&A. So it's still part of our strategy, but there's less appetite for this. And I think the key, if we work to do M&A is to be disciplined, to apply stringent criteria. We haven't yet defined them in much detail, but in the order to basically focus on value creation, so short term being accretive, except for technology acquisitions where we would allow for a little bit longer time. But I think you get the gist, right? So that will be the focus. But as Stefan mentioned before, we don't really have to do that much in the near future because we have already transformed our portfolio. And therefore, we believe our capital is best deployed in our organic growth support, which leads into the next topic, which is, of course, capital expenditures. So you know that we are at the moment in a quite heavy CapEx program that is supporting our growth that will enable us to grow the capacity so we can support our customers' growth. Of course, short term, that also means that there is an impact on our cash generation. But of course, once that program tapers off, we will see a step-up in cash generation. We've talked -- Ralf has talked about our flagship project in Dresden. We're very happy about that. And I -- we do not disclose returns of individual projects. So I hope you can understand that. But what I can tell you here is that this project is strongly accretive to our ROCE. So it's a project that we are very happy with and that we will continue to build and then it will come on early 2025 as planned. Maybe last point on CapEx is -- because we always get asked how much is gross CapEx, how much is maintenance CapEx. We believe that our maintenance CapEx need at the moment is around 5%. Now is that maybe slightly elevated, Yes, it may be because there is some parts of our infrastructure that needs updating time over time. And we expect our CapEx once sort of our key investment program is over to gradually move towards our maintenance CapEx level. So just as a little bit of a model assumption maybe. And talking about balance sheet and leverage. I don't think there's any news here, but maybe let me reemphasize, we have a very strong balance sheet. You know that. It's the basis for our transformation of the portfolio, but also for the future growth. We have reduced leverage quite considerably from around 3.5x to about 2.3x at the moment. How do I see gearing? Or what do I think about leverage? First and foremost, we have a very clear commitment to investment-grade rating. There's no doubt about that. I think historically, when we were asked about target leverage, we said we will be comfortable around 2x to 3x. I think given the current macro environment, if you would ask me, I would say we probably see ourselves a tad lower than that. And so that, of course, means we continue to have, first and foremost, our priority to bring down our leverage, continue that good trajectory and delever our company. Financing structure on the next page is very flexible. We have plenty of headroom in our RCF, which we have just extended by 1 more year to 2028. So we have roughly 400 million available there. We have a balanced portfolio on our debenture bonds with maturities going up to 2031, so a very good structure here. And maybe as a quick reminder, of course, we have high interest rates right now, but we think we are actually quite protected from that because 2/3 of our debt is in fixed. So overall, a very sound financing structure. So then next one, going back to our revenue growth ambition and our updated targets. And maybe let's talk a little bit about the assumptions and what has changed. Stefan has told you, the target hasn't changed. We aim revenue-wise for EUR 1.2 billion revenue for 2025. But what has changed somewhat, if you look at the assumptions we had basically in 2021 when the plan was made is that the composition has changed. And Stefan has been talking about divestments and acquisitions. And back then, there was a quite heavy plan for divestments, but there was also a quite heavy plan to acquire additional revenue beyond the SwissOptic Berliner Glas acquisition. And that has changed. So that means we have actually less support from the acquired sales because we -- basically, we don't need M&A anymore acquiring to get to our target because we have accelerated our organic growth, and we intend to do that for the rest of the strategy period. So in that sense, the target is unchanged. The key message is the composition has somewhat changed. And that is also, I think, hopefully, rounding up the story of why we believe organic growth, profitable organic growth is important to us. Now for the models, if you look at the midpoint, for example, of our current revenue guidance for this year and you expirate that to our midterm guidance, you see you get to around 6% average growth for the next 2 years. We believe that's a realistic assumption. However, it does contain a certain buffer to reflect the macro environment across some parts of our portfolio that is, I would say, dampened at the moment. I mean I don't have to tell you that. So there's a certain buffer in that. As you know, we have a fairly high order backlog that will also carry into next year. But obviously, we do not have the whole order book until 2025, which is why we, of course, have to make sure that we have a prudent assumption in there. So then looking again at the rest of our targets, we just talked about revenues, EUR 1.2 billion for the current portfolio. We are able -- Stefan mentioned it earlier, to upgrade our margin expectations from 20% EBITDA margin to 21% to 22%. We have already discussed it, I think, during the current A. The key levers here will be mix with semi and our MicroOptics business, of course, supporting this. We also see a good growth trajectory we saw a medical facility in Berlin yesterday in our Dental business as an example. And we also see continued headroom, as I mentioned earlier, from our functional costs to operating leverage there. We have also changed our ROCE target. Maybe let me also briefly touch on that. Obviously, ROCE is a KPI that is heavily impacted by M&A activity like we have seen for us, right? Personally, I believe it's a good yardstick, but it has to be an all-encompassing yardstick. So that, in my view, means you also have to include goodwill so that you have basically the full capital in your equation here. And therefore, we will change this metric as of today. We will hold us aps accountable to ROCE in the newly defined definition, including goodwill. We have a strong commitment to improving this ROCE. But you know that this isn't done overnight. It's a gradual approach. And our goal for 2025 is to have our ROCE before WACC. So before I move on, maybe for some assumptions for the models that may be helpful to give you some data points here. Depreciation, amortization, we expect largely to be flat as we have, of course, increased depreciation from our investment program, but also amortization tapering off, so largely flat. Interest, we expect to peak this year based on our interest rate scenarios and then gradually come down afterwards. Tax rate, we expect to be around 27%, 28% for the period. But this year, we have a slightly elevated tax rate estimate about 29% because of our transaction in Korea. Working capital, you know that we have some work to do in our working capital, particularly on the inventory side. I personally believe executing on the operational excellence here will be key in the future. However, as you know, we have the factory interest men coming online. So that will also potentially mean a bit more working capital, extra working capital during the time of the move. So overall, we have only included in our model a moderate improvement of our working capital ratio for this period. CapEx, I think I've already talked. Free cash flow before taxes, obviously, very much impacted by the cash effect of the investment program. And with that, that is sometimes hard to predict. Therefore, from a cash conversion rate in our definition, we -- I would expect a volatile cash conversion rate somewhere in the range of 40% to 60% for that period. So that was the financial targets. Last but definitely not least, nonfinancial targets. I personally -- and I think we, as a management team, believe that corporate responsibility is more important than ever in this day and age. So I'm actually particularly proud that we are also upgrading our nonfinancial targets as similar to the financial targets we have partly reached them, particularly in the area of environment, where we are upgrading our targets because our performance has been quite good, I think. And at the same time, we are introducing a new commitment to reach net zero for Scope 1 and 2 by 2035 at the latest. I think our ESG efforts have also been recognized by our customers, but also the fact that we have improved our sustainability ratings, I would say, across the board. So important topic for us, and we'll continue to perform on that one similar to our performance ambition on the financials. And with that, bringing me to a close. What I would like to leave you with is Stefan mentioned that before. I think we have transformed, and I think that's a very important measure. It's not the most important for me, at least for today. We have transformed an industrial conglomerate to a leading photonics company. That is the achievement of the last couple of years. We will continue, but this is a very important message. We have, because of that, significantly enhanced our business and our business portfolio. Investing in organic growth takes CapEx, but will step up cash generation once the investment program is over. Value creation is important to us, and we are committed to ROCE improvements. And we have been able to update our financial targets despite the macroeconomic, let's say, uncertainties that definitely have surrounded this financial year and probably also the next 12 to 18 months. So with that, I would like to close, and I will be handing over to Stefan to wrap it up.

Thanks to Ralf and Prisca for your presentation. There's not much left to say actually. Prisca, you said it. We have transformed what has been a diversified industrial conglomerate now into a focused technology group, focused around our core competencies in optics and photonics. With that, we actually have focused our company, our investments to our core markets. We're really strong in semiconductor and electronics. We are really strong in medical, life sciences. We are very strong when it comes to smart mobility. Over the last few years, that transformation has meant a lot of portfolio transformation. It has meant divestments and M&A activities. And whilst we have some homeworks still left to do in terms of focusing our company even more in our core marketplaces, by and large, our portfolio transformation is over. From now on, we will focus predominantly on organic growth, driving operational excellence and expanding margins by even more innovation and customer centricity. And today, we've upgraded our margin guidance to an EBITDA margin of between 21% and 22% of sales by 2025, whilst maintaining our top line guidance of around 1.2 billion in sales for the portfolio, as we noted today and have been asked in the break the question. So if we do sell Prodomax, what that does mean, well, the current guidance does include Prodomax, but you guys can figure the size of Prodomax in a 1.2 billion corporation, it's not that meaningful, actually. But I am expecting questions around that in the Q&A session. So anyways, I think we've made a lot of progress. The world has changed in the last 2 years. There is no doubt about it. From a geopolitical perspective, from a financial and economic perspective. And for us, as a company on our company level. We're proud of what we've achieved in the last years. I think we made a lot of progress. I think Jenoptik very different from what it had been a few years back. But even more importantly, I think Jenoptik has a future that's maybe even brighter. Yes, today, we talked earlier about what we wanted to achieve until 2025. That's our current strategic period, and we're halfway through that current strategic period. But it's very dear to my heart to point out there's a life beyond 2025, and there is more to do. And beyond 2025, if we can still grow, obviously, we're not guiding for that at the moment. That's -- we're going to cross that bridge when we come to it, but I am absolutely convinced there's even more margin expansion beyond what we guide for 2022 possible. So we will continue to grow this business. We will continue to expand margins even after 2025, there is a mid- and long-term future here. But for now, we guide for 2025, again, continuing our growth plans, focusing on organic growth, focusing on operational excellence, focusing on innovation and customer centricity in the next years. that said, thank you very much to everyone online and here in the room, we're happy to take questions.

[ Paul ] from MetaBank. I have a question regarding your new semi fab in Dresden. So how much additional capacity do you expect from this fab in your semicon business? And maybe you can already give some color on the ramp-up phase. So how much additional semicon capacity should we expect in 2025 and in the full year 2026.

Yes. So first, -- so that semi fab is not covering the entire semi revenue. Just to be very clear, this is a part of it. We're doing semi in Ghana in the United States on a different basis. And this is a rough number. We are roughly doubling the capacity on that specific technology, so today. So today, we're a little bit distributed, obviously within the Dresden area and different facilities, which is disadvantage, of course. So now we're building it and this is doubling that specific capacity. Second part of the question, sorry. Yes. So I mean, we're following the demand of our customers. So that's the idea. So that step, we think we can cover the capacity that customer request from us. And we'll ramp up throughout the year '25. I mean I think this should be good for 2 or 3 years. So there's always a good equation right, to create the value out of this, right? So it's a little more complicated.

Adrian from Stifel again. Just a question on your dividend strategy. I mean, obviously, you say we're going to deleverage a little bit more. On the other hand, you're already quite low, and we see peak CapEx anytime soon. At the same time, you're guiding for higher margins. Obviously, it sounds to me that you're probably getting a dividend story at some point. So will we see more defined, more positive dividend story anytime soon, maybe early next year or so?

We explicitly do not have an explicit dividend policy. That was a good plan, I think, where it's more tenants. Explicitly, we do not have an explicit dividend policy. We did say in the past, a number of times that we want to be predictable. So I don't expect any big surprises from us when it comes to dividends. I do believe, in many ways, we are a growth share on Göschwitz actually, hopefully, I think many investors, but hey, obviously, for everyone here to judge, but many investors look for growth more than dividends, I think. But we do want to pay dividends. We do want to make that very clear. We will continue to pay dividends and in a way that we are predictable. So no huge surprises there.

I have a question for Prisca first. You guided for a flat depreciation and amortization line in it towards that. Now given the fact that Dresden facility will kick in and to CapEx. Basically, you may will kick in. Can you please explain further why you just expect flat margins have set depreciation and amortization?

Yes. So maybe as a disclaimer, this is a model assumption to help you, right? It's not exact statement. However, the reason why we expect flat is that we have significant amortizations that come from purchase price allocations from the recent acquisitions, which, of course, amortized over time. And we see that compensating the increased depreciation from the additional CapEx. So that's why we are roughly seeing it cancels itself out and reach that.

Then the first -- the second question would be about the increase in the margin that you're guiding for from 19.5% to the, let's say, 20%, 21.5%, roughly 2 percentage points. Also for modeling purposes, would that come mostly from -- or can you give the split where this is coming from? Is it coming from an increase in the gross margin? Or is it more from the operational leverage and let's say, less selling costs because we only sell the product ones to the Netherlands, right? You don't have to tell it the second time. for example. So like OpEx versus COGS.

So I think I'll -- obviously, I'm not able to give you the exact mechanics on it. But what I can say is it will be -- there will be mix effects. We expect parts of our portfolio. We talked a lot about semi or certain parts, micro optics in semi that to be growing above our group average. So there's a mix effect coming from that. And then the operating leverage will the leverage, I would see mainly on the functional costs. So basically aiming to keep functional cost increases below or significantly below our revenue increase. So those 2 levels will support the margin expansion.

No, he's not much to add. I think it's mix and over coverage.

Is a good assumption to assume 1% from OpEx, 1%...

We don't guide on that.

Michael Kuhn from Deutsche Bank. Mr. Traeger, you anticipated the question, so I'll still give it a try. The targets are for the standing portfolio. If we try to exclude Prodomax what would be the very rough implications? That's the one. And the other question on ROCE above WACC. So based on your interest scenario and the other parameters you anticipate, what would be your expected WACC by 2025?

I think it's sort of really back on the envelope, what 1 could do if I would be in your shoes, if I would have to build a model without knowing the details. I know the details, but I would be [indiscernible]. What I would do is I would take the NPC sales. And I would assume that it's not correct, but by and large, give or take. NPC is half Prodomax half, not quite but by and large. And that gives you an indication of how much of the EUR 1.2 billion is attributable to Prodomax? And if it comes to margins, what I would do is I would think well, the fact that NPC came up so much in terms of margins from negative to now pretty around to around 17% now. I think we've disclosed that it's by a huge amount due to actually interrupt and the project in the factory or Berlin being flexed through the P&L last year. And we always said that Prodomax is very, very profitable and HOMMEL's is around, I mean, it's above breakeven, but not highly profitable, which indicates that Prodomax is around fleet average actually, when it comes to 2025 margin guidance. So the impact of the Prodomax sales to the margins is actually not that big in 2025. It was pretty precise, actually, already.

Good. And then maybe touching on the question on WACC. I mean, I guess you can all run through for your own models, but I'm not probably giving you a huge surprise when I say that our -- our current WACC is probably for the group is probably somewhere around the 11% to 12% neighborhood. For today's view, obviously, I can't predict 25 with that exact measure, but just to give you a rough yardstick, that's how we think about current WACC the group.

Question for Mr. Kuschnereit. I would wonder whether you can differentiate a bit on the content of the TRIOPTICS in the smartphones and in the AR/VR glasses. So I know maybe you can give roughly an indication how much more content, I don't know, maybe on like per device is in the AR/VR versus the smartphone just to get an idea how the total addressable market looks like?

No, great question. I think we can't answer that, yes. So let me describe just my thoughts, right? So the smartphone, which runs in high volumes at the moment, right? I mean this is a market we're really in, but it's compared to the AR glass less complex, right? AR glass has many more components has displaced waveguides and so on and so forth. The question is in what is the final product we still don't know. What does it look like and which share of it can we get the measurement technology. Of course, we're looking for the whole thing, if we can. So I would say, generally, technically speaking, the art classes would be more complex, but I think not possible to predict it right now. But maybe just to give you an indication here.

Yes. A couple of questions, please, for you -- regarding -- first of all, your goodwill position because you mentioned the ROCE calculation will now be including goodwill. But irregardless of that, we are now in a much higher interest rate environment. I just wondered if there any thoughts you could hear with us in terms of the goodwill impairment testing procedures. Obviously, you have quite a bit of goodwill related to the TRIOPTICS and the optics acquisitions. I presume in terms of the operational assumptions there, obviously, if anything, have probably been raised a bit since the time of the acquisition due to all the growth potential that you've shared with us today. But obviously, the discount rate is now a different one. If you could maybe give us some thought process there. Secondly, on the working capital efficiency, you mentioned -- you talked us through that. But I just wondered if there are any measures you can maybe be implementing to, nevertheless, in the meantime, perhaps further improve your free cash flow conversion? And my third and final question is if we were to assume Prodomax were to be sold, presumably, this would have quite a positive impact on your working capital efficiency because if I understand it correctly, you have to now prefinance the automation lines up until the moment the customer actually completes the transaction. And the lines are up and operational at the customer site. So I just wondered if you could give us some broad indication on what the positive impact on your working capital efficiency would be should Prodomax be sold?

Maybe let me start with the last one, which is actually, I think, quite easy question. So don't expect -- I mean just as Stefan said earlier, I don't expect too much of an impact from a potential divestment Prodomax on overall, our capital employed. I mean, obviously, leverage will have an impact. But the working capital, you're right in that assumption, but don't forget that there is also customer prepayments that you get in some of those businesses. I don't expect any sizable impact on that. On the question regarding the -- our impairment test. I mean, we don't change the structure of our group. We keep our 3 divisions. We have the same procedures as always. When we obviously, according to IFRS, when we do impairment tests. And as every company will, of course, factoring in our the cost of capital for all 3 divisions. So no anything else to add to that. So it's basically business as usual. And the third one was on working capital, if I remember correctly, right. Operational excellence is the name of the game here. We have already taken down our safety stocks largely, I would say, in our portfolio, base bits and pieces of supply chains that basically in Kevin's business, for example, where end-of-life topics require us to have slightly higher stock levels than we would maybe want to, but that's because of just making sure that we have the components the name of the game on the inventory, and I think that's really the focus is operational excellence, particularly in the APS division, and that has much to do with planning and scheduling manufacturing to really reach potentials that are above and beyond what we've so far delivered. And therefore, we have a plan. We will execute around that, but it will be gradual improvements. And I already mentioned earlier that we will be moving into our new factory, and we would never safeguard the -- we would never risk the operations on that factory ever for a working capital short-term consideration, right? So that will basically go short term against it. I hope that gives you some data points.

Yes. I think there's nothing to add actually. Maybe it's worthwhile pointing out that this topic of working capital is really across the industry. It's not an update specific topic. And we all know it's driven by supply chain shortages in the last whatever, 24 months or so after COVID and everybody was like buying whatever was possible and to change that behavior it's funny, but it does take time. I don't know. It's really funny, you would think, "Hey, come on, simple, you just tell the purchasing people, right? [indiscernible] times changed now". You can go back to what you were used to do 4 years ago. But somehow, people all human beings as opposed. And then there's a real reason, I mean we have long-term contracts. And so it takes a while until it flashes through P&L and balance sheet stuff. So yes, it's an issue across the industry, wherever you go everybody has a working capital reduction program at the moment. So do we.

Two questions, please. One is on health care and the other 1 is on metrology. In the health care market, I mean, in semi, you have a couple of -- one, at least a single supplier relationship. Are there any such relationships in the health care market? And then maybe can you talk about competition and pricing and health care compared to semi? And then in metrology, I mean is the demand for your solutions mainly tied to semi volumes? Or is it also increasing content and more complex semi structure? So what is your the feedback that you get from your customers in terms of growth outlook from these 2 elements?

Yes, on the Life Science side. So on the life science side, it's more like on the project, a case-by-case basis. So we win projects with some of the big customers and then you win the project on the R&D side, you're typically designed in because they can't run parallel. So you win it. And then, of course, if you don't really fail, so you are in. So that's kind of answered the question, but then you kind of for that project exclusive and you're in that device exclusively, if you perform and do everything right. This is how we grow. And then what we see is -- if you win a project, it's getting easier to win another project because you prove your capabilities, your competencies and your reliability, that's kind of that we've been talking all day about it, that's kind of the profile we're giving ourselves and trying to fulfill I mean there's a couple more customers. There's a couple more supplies in the semi business is a little bit different, but we're driving in that direction. On the inspection side, it's -- I mean, there's a couple more for us customers or suppliers on the inspection side, semi-inspection side in the market. And I have to say also don't understand all the dynamics in that market. They seem to suffer a little more in this year than on the litho side. Still, the demand is very strong in our direction. And they seem to be a little bit more volatile on the -- in the direction of the markets, but specifically what's because they also have other devices like etching systems and so forth. But I think what's on the optics and the optics inspection seems to be quite stable. If we have the same multipliers like on the litho side, can I cannot say for sure. But it's growing strongly, yes.

Ralf, maybe if I add to that, in very simple terms, in the lease part of semi optical lithography. I mean there's 1 key player, 1 key customer for us. There are 2 other players, but this 1 customer of ours is dominating in that marketplace. And it's dominating the marketplace for technology reasons because really what these machines do is just -- I mean Ralf alluded to it, I mean, we're talking about 3 nanometers. I mean, that's -- I'm a physicist and nanometer is basically little and atom is 1 angstrom. So I mean, it's really amazing. And as much as these machines can do amazing stuff the product we have in the machine on procurement is nobody else on the planet is actually able to do that at the moment at an industrial level. You can get that technology from an academic Institute -- but on an industrial level, I'm not aware of anybody that's doing this type of optics, nonlinear optics we're talking here at an industrial level. And obviously, yes, has an influence on margins. In the other parts in the inspection part and in the life science parts, there is competition. There are others who can do it, maybe not as good or they have their strengths. We have our strengths we have our weakness there, their weaknesses, but there is competition. It's not like 10 other companies, but there are other people out there can do it, which again has an impact on margins.

Yes, Stefan from LBBW. You want to focus on innovations to strengthen your top line. However, this will trigger some R&D expenses. So could you provide your R&D ratio target for midterm? And the second 1 is on the allocation of these R&D expenses on the portfolio. Will there be a change midterm or will be the same as in the past?

Now we don't have any specific sort of guidance on R&D targets we do though on the OpEx line. But we did say in the past, and I would, I guess, repeat that, that about 10% of sales for the total innovation is a good ratio in our industry. There are people who spend more people who spend less, but I think about 10% is a good ratio. And that does include explicitly what we put on the OpEx line and what we put under to the COGS. Because again, if we do innovation for a specific customer under IFRS, that's recorded or that basically shows up as in the COGS line. So it's a combination of 2 of those 2 numbers that will get to around 10%. And we are I think at 9-point something at the moment. So what we have at the moment, we feel very comfortable with. I don't think, Ralf, we will turn to a lot in terms of like the composition of it. Obviously, we need to invest into the SMS business. Kevin, for the platforms you were talking about but other than that, I don't see any significant changes that.

So we are continuously very slowly increasing the efforts on the semi side specifically. We've done that on the bio side but I don't think the -- you won't get any surprise there.

On new applications over the past 3 to 4 years, do you think that product pipeline you might have as develop better, there are more projects, which might come to or not. So has that changed that period in time? I think you once said maybe every 2 years, [indiscernible] application, which not has been there and then start -- so that's still the case looking at the pictures that...

So if you look at this -- if you look at the optical test and measurement, if you look at these consumer-driven markets, some of the companies have a 2-year cycle. So like the next phone comes out 2 years from now and so forth. And some we're guessing that some of the other products they have this kind of cycle, so you have a little bit of cyclicity in there. On the semi side, and we have a continuous pipeline. And I think what we're really proud of is that in the same terms very often today, but still like the share of wallet, we have -- we're in many more products with the same customers today. So we actually have more projects already today, and we try to continue. So that requires R&D and at the beginning and then getting into a serum manufacturing, so we already have done that, and that's a continuous process at least on the semi side and on the bio side.

Maybe let me add a view here as well also in the sense of prudency. Of course, we have within our business, still some portfolio work to do and the projects, I think sometimes we talk about our bio space, there are some projects where we still need to have some work to do. So it's not that we have done all our homework. I think we've done a lot of it, right? But going forward, there will be some more work to do. That's also related to projects. and the transformation of sort of a product portfolio within a business.

[indiscernible]. Do you think maybe in a year from now that you have clear visibility on what to do?

Yes.

I have a question regarding the semiconductor business. So some companies in the equipment space of the OEMs, the [indiscernible] research as so on. They're exposed -- or basically, they grow in line with the number of wafer starts generally. But some, they are growing with the number of processes and layers and stuff like that. So basically which is much higher than the number of wafer starts ever increasing more complex processes up to 3,000 I've heard. No, I'm not an expert. But are you rather growing with number of laser starts? Or is it more with a number of actually layers and processes and so on?

So we're growing with a number of devices our customers sell. And I honestly don't know exactly this is correlated. So you're making the connection to the wafer starts to how much of the inspection equipment is sold, right? So what we're trying to do is whatever that is, that's the true for ourselves, too, right? So what we try to do is with more components and higher-value components in the machines. So whatever is -- so I don't know. So whatever is true for that space from that area, so how wafers effect machine sale, we try to increase our share of wallet in each [ in silver ] machine. So that's our strategy. And now, overall, like leather steps will probably increase with more complicated processes. But then I'm a little bit out of my comfort zone also, I technically can't say that perfectly here.

And the second 1 regarding the tool you've described in the medical for the surgery -- the brain surgery you camera system instead of microphone. Now I'm sure I would be able to buy a 4K camera video camera from many other players out there who can do very precise optics, but this is visible light. I think for me, 4K is a very low resolution every camera has 10x more today like consumer camera. So can you please explain what is your USP in such an application?

So what the system does is training a 3D image. So this is about -- so first of all, it's a stereoscopic image. So you have to have at least 2 cameras, 2-plus cameras at creating a stereoscopic basis. So they have to be aligned in a way that they can build a 3D image and then the data has processed in the right way. So there's -- it's a lot about an alignment. And then a surgical microscope is always a specific microscope that works in a high working distance. -- into technical. So it again, it's a very specific solution and then probably needs to be sterilized. So it's a very specific solution to a very specific problem which is more complex than it seems maybe at the first point. It's in the medical side, it's typically the system solution that is the unique selling point and it's not the single lens. And it's about understanding all the challenges because putting it together and not working, that's the typical way, right? So understanding the challenges actually coming up. That's why customers very often come to ourselves.

Okay. So if there are no further questions, then let me just close the session today. And every so often, it's worthwhile reflecting back and then sort of sit there, I think what changed in the last few years. And I vividly remember when I started Jenoptik in 2017, it took me about 20 minutes to explain what Jenoptik is doing, and I'm not quite sure if I was comprehensive with in these 20 minutes. I think today, we can explain our company maybe 90 or 120 seconds. I think that's quite something in terms of change in the place. It means a lot to the people. It means a lot to us, and I hope it means a lot to you as well. Very important, though, is not only did we change the portfolio of the company, the culture of the company, the financial attractiveness, if you want, of an investment. I think yes, the word culture they use, that's probably even dearer to my heart. I think as a management team, the CEO and the Board of an at least midsized company, culture is actually very, very important. And we keep using this Peter Drucker quote of strategy for breakfast or lunch or whatever. And I think it's -- in this day and age, probably the most important task of the leadership of the company to actually create the right culture. If we do not have the right culture in the company or the strategy will fail. And that's the thing I think we are most proud of how the culture of an uptick changed from a fairly traditional German industrial conglomerate to hopefully put more model on an agile tech company. And we want to keep that. We want to keep building on that going forward. As I said earlier, we will focus on organic growth. We will focus on operational excellence, we focus -- continue to focus on innovation. And from a cultural perspective, we will focus much more on customer centricity. Whilst we talked about our financial targets for 2025, there is more. There's more to come. There's a world behind in the life behind 2025, hopefully, and I'm very convinced that what we reveal today as our upgraded guidance for margins and our guidance for top line for 2025 is only the next step in a continuous improvement journey. So look for more. Thank you very much.