Jenoptik AG (JEN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the financial results 2023. [Operator Instructions] Let me now turn the floor over to your host, Dr. Stefan Traeger.

Yes. Thank you very much, and a very good morning also from our end here in Jena. We have a bit of an echo in the line. I hope everything is fine. Well, all good? Okay. Let's get going. So a very warm welcome here from our end in Jena. With me today, as always, is Prisca Havranek-Kosicek, our CFO. And we, as I said, warmly welcome you from the lovely office here in Jena. Before we get into the details of our financials, and Prisca is going to dwell on that in way more detail, let me just stress some of the highlights of 2023. 2023 has been an overall, I believe, good year for Jenoptik. We really had some positive developments operationally and in our financial numbers. Let's start with some market insights, if you want. We, as Jenoptik, really see some megatrends which remain intact for Jenoptik. We know that there is a concern overall that the macroeconomics deteriorate. We do see geopolitical risks, not just on the horizon but really actually sort of materializing in the bigger scheme when it comes to tensions between the United States and China, in particular, but also some other geopolitical events. However, as I said earlier, overall megatrends for Jenoptik really remain intact. We're a society that's ever more driven by data, and the digitization of our world is accelerating, actually, which does, in the mid and long term, provide tailwinds, in particular, for our semiconductor activities. We do see things like artificial intelligence coming ever more into our daily lives, but we also believe that we are going to see mixed realities, AR/VR solutions, not just on the horizon but maybe around the corner. It might not be there today, but we believe it is -- this is maybe around the corner. There's the society we're living in that gets ever older and that does require ever more effective solutions for health care systems. Things like personalized health care will play an ever more important, an ever bigger role in our world, and we are very well prepared for that. We can contribute to that megatrend. Last but not least, we all are acutely aware in particular, in fact, of the latest events that safety in all public places is a concern, which helps our SMS division. We also say, as I said, we have a robust demand in not just semiconductor equipment but also some biophotonics areas and some others. So by and large, again, we do see market environments that are somewhat challenging, driven by geopolitical considerations, but overall, still a good marketplace. At Jenoptik, we really do focus more and more on operational excellence, if you want. In 2023, you have seen us focusing on optimizing our output and expanding our capacity. We have grown the business by around 9% organically in 2023, which is another year of, not quite, but almost double-digit growth. In 2023, we have just opened up a new site for our medical activities in Berlin, and for some of you, that might be a bit of a flashback to our Capital Markets Day in Berlin, where we had a nice, I believe, factory tour there, the new facility that helps us to grow that medical business going forward. Very important for us. Construction of our new fab in Dresden is progressing according to schedule. We do expect this new factory to go live in 2025 for the ramp in semicon in 2025. We prepare ourselves for that in 2024. So in this actual year, we plan for a very complex move from the existing facility to a new facility. That is representing a one-off effect in terms of costs. We come to that a little bit more later on. We do plan with significant cost -- quite some cost here to move a semi fab. That's not something that's simple and we do every day. We don't call our movers around the corner for that. It's a very complex process to move into a new factory, and we plan to do that in the second half of this year and, again, to be prepared for a significant semi ramp in 2025. Financially, I mean, again, we're going to see that in a minute, but this year has been very successful in many of our KPIs. We did grow the business by almost 9% all organically. We have an EBITDA of EUR 210 million. So basically a 90 basis points margin expansion from 18.8% to now 19.7%. There are some one-offs in there as always, and we always have some one-off effects. But by and large, I think that's a great development in terms of operating profitability of the company. Order backlog really is at a very high level. We had, again, a year with a book-to-bill above 1 despite the fact that we try to ramp up our sales capacities and our output as much as possible. We do have an order backlog, which is at a very, very high level, which gives us the confidence, actually, to guide for mid-single-digit sales growth also in 2024, but we're going to come to that at the end of the presentation. We have some issues in the company when it comes to working capital, and that's [ other ] the stuff, but we've managed to significantly improve our leverage. Jenoptik is now at a 2.0x net debt-to-EBITDA. And I think that, for us, has been an important consideration in the last 18 months. Since interest rates started to rise, we focused much more than in the past on deleveraging our balance sheet. We're now, as I said, on 2.0x net debt-to-EBITDA. I think that's a very, very comfortable ratio. We're happy with that. Of course, it's always going to be a focus for us, but for now, I think with 2.8 (sic) [ 2.0 ], we are in a very comfortable place. We're really actually happy with that in this day and age. I think focus on deleveraging has been important in the last 18 months, but as I say, we're now at a very, very good place. With that said, yes, turn over to Prisca. And Prisca is going to explain in way more details our financial numbers.

Thank you, Stefan. Good morning to all of you on the call. First of all, let me reiterate what Stefan said. Despite the challenging business environment in form of a deteriorating macroeconomic situation, Jenoptik has seen continued business development throughout fiscal 2023, with a healthy high single-digit revenue growth and overproportionate profit expansion. Now let's look into our performance on group level, starting with market demand on Page 6. Order intake in fiscal '23 came in at EUR 1.09 billion order intake. And we believe that denotes a solid level, even though it's about 8% down compared to a very high fiscal year '22 figure, which, if you see it in a broader context, was already about as high as our sales target for 2025. Fourth quarter order intake was down approximately 15% year-over-year due to timing effects of bigger projects relating to our NPC segment. As you can see here, our book-to-bill ratio on group level remained above 1 but has reduced versus the prior year. Our order backlog remains at a very high level, Stefan mentioned this just before, and was up by around 2% compared to end of 2022 despite, as you know, the strong revenue growth that we realized in 2023. So this provides us with a very robust basis for the coming quarters. We expect to convert roughly 87% or, in absolute term, EUR 650 million of this backlog into revenue within fiscal year '24. Now turning to revenue and profit development on Page 7. Looking at the left graph, you can see that the top line development remained strong, with revenue up by about 9%. And we had no effects from portfolio changes, so this growth is purely organic. FX had a minor negative effect on top line development of approximately 1 percent point. The main growth driver in this period was once again our APS division, which posted low double-digit growth, but also Smart Mobility Solutions and our Non-Photonic Portfolio Companies contributed to growth, albeit at a lower pace. Moving on to profitability on the right side of the slide. As you can see, we have again improved our profitability, and the strong top line growth converted into a substantial profit and margin improvement. Group EBITDA came in at around EUR 207 million (sic) [ EUR 209.6 million ]. EBITDA margin was markedly up by 110 basis points, mainly driven by scale effects. Looking at profits from a divisional perspective, the main contributor in absolute terms was our APS division, and also the turnaround as you know of our Non-Portfolio -- Photonic Portfolio Companies contributed significantly. Stefan will go into our divisional performance in greater detail a bit later on this call. Now moving to Page 8 for our regional sales distribution. If we look from a regional perspective, we saw strong growth in our 2 largest regions, both Europe outside Germany and in Germany, both up by around 15% and 19%, respectively. In Europe, all our reporting segments realized double-digit growth. In the Americas, we saw a continuous positive development in the APS division, whereas the go-to-market transition of our SMS business had a negative impact on top line. Importantly, business with our top 7 customers continue to develop very positively. These customers around -- account for around 43% of our total group revenues in '23, and we regard this as a proof of our successful strategy of growing share of wallet with our top customers. Now looking into the P&L on Page 9. I would like to give you a little bit more color on the drivers behind our margin growth here. We saw gross margin approximately 50 bps down year-over-year, influenced by, firstly, lower profitability in [ core ] optics as we are keeping infrastructure costs and expectations of the future business relating to AR/VR and, secondly, some negative product mix effects in our SMS division. Looking into functional costs, as you can see here, we remain disciplined in our OpEx despite our continuous investments into R&D. And as a consequence, functional costs are growing at a rate significantly lower than revenue. Now let me briefly explain what's going on in our other operating result. Here, we've seen a EUR 2 million improvement year-over-year. There are, however, some special effects. We've opted to run our impairment testing procedure for our NPCs, no longer on segment level but on a business level, that is, Prodomax and Hommel, as a matter of cautiousness. As a result, we took an impairment charge of around EUR 8 million on Hommel in Q4. As a reminder, this is in addition to the impairment charge of approximately EUR 4 million in connection with the sale of our 33% stake in TELSTAR-HOMMEL Korea in Q2, which we have already reported in our half year results. So this adds up to EUR 12.7 million in fiscal year '23 while in '22, we took an impairment charge of EUR 13.9 million, and that is relating mainly to INTEROB. Nevertheless, our EBIT came in at around EUR 126 million, considerably up by 24% year-over-year. Further down the line, our financial result was at minus EUR 15 million, primarily reflecting the substantial rise in interest rates. As a reminder, our exposure to fluctuations in interest rates remains limited as approximately 2/3 of our debt is at fixed rates. And finally, earnings per share reached EUR 1.27, up 32% versus prior year. And ROCE was up 117 bps to 9.6%. Moving to cash flow. We've made very good progress in cash flow compared to the year before. Looking at operating cash flow pretax is up at a higher rate than EBITDA as investments to working capital has slowed somewhat and our net working capital intensity has reduced. As we are continuing to invest into our capacity, accounting CapEx was up by EUR 4 million year-over-year, reaching EUR 110 million which -- where you see the main projects seen on this slide. From a cash perspective, however -- or for example, these agreements are not reflected. We have recognized the inflow from the sale of real estate assets relating to our NPC segment. And this double -- this low double-digit million inflow was the reason why our cash investments were down year-over-year, as you see on the slide here. And as a result of our strong free cash flow, as Stefan has already mentioned, we reduced our net debt significantly year-over-year as our leverage, and we are now standing at 2x leverage versus 2.6 at the end of '27 (sic) [ '22 ]. So I think this is a very good achievement, as Stefan has already mentioned, for the fiscal year. Moving to Page 11, looking at sustainability. If we look at our sustainability score card, I'm pleased to report that we made excellent progress in this last fiscal year. I think there are 3 aspects to highlight in my point of view. Firstly, in the environmental area, we reduced our CO2 emissions by another about 15 percentage points versus our base year 2019, with the accumulated reduction reaching more than 50%. As we look forward, we have, therefore, consequently upgraded our '25 target for this KPI. Secondly, we have given ourselves a target to reach net zero on our Scope 1 and 2 emissions no later than 2035. Finally, on employee engagement, and that's an important KPI, the respective score that we reached was once again above the global benchmark levels, indicating the attractiveness of our company vis-à-vis our own employees but, of course, also potential new ones. So overall, we're happy with our performance on sustainability in '23, and we remain committed to shaping our profile going forward. And with this, let me turn back to Stefan to cover our divisions and our outlook.

Yes. Thanks, Prisca. And as always, I'm going to start with the big one. APS, if you follow me on Page 13, you'll see our financial numbers for Advanced Photonic Solutions division. You do see that order intake is somewhat down with EUR 826 million versus EUR 907 million last year. Now do keep in mind, please, that last year has been a significantly ramp of orders, in particular for semicon and other activities in APS. So those of you who follow us a bit more closely and who have seen us throughout the year will remember that I always pointed out that this year, we're looking particularly into book-to-bill ratios. And at least integrated over the last 12 months over the fiscal year 2023, the book-to-bill had been at 1.01, so essentially, yes, at 1. Essentially, our order intake and sales figures are almost identical. Sales grew by 10.6% again to now EUR 821 million, strong performance operationally, in particular, in our factories and our operational entities. As a result of a book-to-bill of basically 1, the order backlog beginning of this year is at the same level as last year, and that's giving us, as I said, confidence into -- going into 2024. Profitability rose, again, to EUR 182.6 million in terms of operating EBITDA. Margin is at almost 22%. We do have some negative effects. Prisca pointed out already that we do carry some structural costs in particular in TRIOPTICS to do -- or to be prepared for a potential next wave of AR/VR solutions coming our way. As I said earlier, we believe in that business. We believe in mixed realities. We believe in AR/VR. It's not what we expected it to be. We wanted it to be growing earlier, but we believe that in the long run, there is a future in this business -- in this AR/VR solutions business. Obviously, TRIOPTICS is [ more ] into that. And we talked about that in detail, and maybe there will be some questions in the Q&A session. Let's go to Smart Mobility. Order intake in Smart Mobility is somewhat down. We've pointed to effects that we see in Americas. Sales is stable at 4% growth, mid-single digits, so we're okay with that, to now almost EUR 119 million. What is a bit disappointing actually is the EBITDA margin. The margin in this business declined considerably, actually, to 12.9%, so around 13%. That can be contributed -- attributed to actually 2 effects. We haven't had a mix effect in that business. We have had projects that have been under pressure, projects with modern technologies that we rolled out, where we had some sort of additional project costs. So mix effect here points to project mix basically. And again, investments in strategic markets, that's -- [ as published was ] saying we had one-off costs in America for building up our own sales force which, of course, you always have one-off costs here to build up a sales force, and then the top line follows a bit later. So that put pressure on our EBITDA margin and particularly in the Smart Mobility Solutions. If you follow me to Page 15, please, to our Non-Photonic Portfolio Companies. Here, we see a pretty good development actually. Order intake is essentially at last year's level, and last year has been a good year in terms of order intake. Both companies actually produced good numbers, Prodomax as well as Hommel. We have seen not only order intake around last year's level but also revenue. Revenue grew somewhat to now EUR 121.1 million. Book-to-bill ratio here is at 1.21. So again, building backlog in this business, in particular, of course, in Prodomax where we have project business that's important to have enough backlog. What is pretty sort of apparent is EBITDA margin was -- pretty significantly actually. The EBITDA margin, the operating margin of our NPC companies is now at 14.1%. As you all know, Prodomax is highly profitable. Prodomax is a very, very profitable company. Prodomax is, in terms of profitability, quite a bit above group average actually. However, also HOMMEL ETAMIC actually posted a positive operating EBITDA figure, and that's very good to see that we basically turned the corner here in terms of profitability when it comes to Hommel on -- at least on the EBITDA level. Some of you might ask, what's the current status of your thoughts, and what are your thoughts around disposing off those companies? Nothing new to report here really. I mean we're still strategically interested in selling, in particular, Prodomax. We also pointed out all the time that we -- if we sell it, then we sell it for a price that, in our view, reflects the value of this company. And we always said we have a midterm horizon here maybe to 2025. At this point in time and at this moment, we are not reporting Prodomax as an IFRS 5 company. And you all know what that means. We don't have at this moment -- a point in time where an SPA is to sign the next -- in the very next -- near future. So again, good company, but we still could consider to sell it if the price is right, and timing-wise, we still report it as a company of our NPC portfolio, not under IFRS 5, and I think you all know what that means. With that said, let's maybe look into the future a bit, and let's talk about 2024. And we all know that 2024 in our industry is a bit -- yes, some people call it a transition year. And I think that's a nice expression. And basically, we all expect the markets in the second half of the year to be much stronger than in the first half. And that's something that we see as well for Jenoptik. We see 2024 way more back-end loaded than we typically have it. We see a heavier second half than -- and even usual for us. We do prepare ourselves in particular for the ramp-up in 2025. I mean everybody is talking about the semi ramp in 2025, and we see the same pattern basically emerging for us as well. So let's rephrase it. Transition year, what does it mean for us? We expect markets to be much stronger in the second half. We expect our business to be even more back-end loaded than we always are actually -- or than typical for us. Nevertheless, overall, we believe, based on a solid backlog, we can, in 2024, again, post mid-single-digit percentage revenue growth. And we can expand our operating margins again. We see EBITDA margins to be in the range between 19.5 and 20 percentage points. In that, we expect an impact of around 0.5 percentage point from the move of our business on our factory in Dresden. Again, that's a very complex operation to move the semi side from one place to the other. It's not a simple thing. It's not easy. It's not as easy as moving house. And thus, we do see some one-off costs coming our way in 2024, all in preparation for the expected ramp in semi in 2025. Capital expenditures, yes, at this year's level, maybe even a bit higher than 2023. In 2023, we had CapEx of EUR 110 million at the end of the day. Maybe 2024 will be a bit higher than EUR 110 million but essentially at the level of -- at that level, let's say. Okay. Let's just look even ahead a bit more and into maybe next year already, although it's very, very early days, but we just recently have laid out our midterm target for 2025. And we just wanted to basically reiterate that. We still believe that revenues in 2025 for the company, despite all the short-term market uncertainties that we see, particularly in the first half of this year, revenues in 2025 will be around EUR 1.2 billion. And we believe that our operating margin in terms of EBITDA of sales will be somewhere between 21% and 22% of that sales figure. Of course, it does require the proverbial semi ramp in 2025. That's the basis for that forecast. And everybody is talking about that. Everybody is talking about the ramp that we are going to see hopefully starting in the second half of this year, and then in particular, in 2025, that is the basis of our midterm target, but we do not have any reason to believe that that's not going to be materializing. So we just wanted to reiterate that 2025 is still shoot for around EUR 1.2 billion in sales and an EBITDA margin between 21% and 22%. And ROCE, that should be above our WACC. That's it. Thank you very much, and we're more than happy to answer the questions you undoubtedly will have.

[Operator Instructions] The first question comes from Craig Abbott from Kepler Cheuvreux.

I'll ask 3 now and then get back in the queue. Just quickly following up, Stefan, on your comments on the outlook. And you made it very clear it's more back-end loaded than usual this year. But I'm just wondering if we look back to when we met in Berlin in December for the CMD, has that been -- has that changed a bit? I mean were you expecting maybe more of a balanced year at that time and maybe some of that's been put on hold for now and then push it back to the second half of the year? That would be the first question. I have 2 more.

I guess the answer is actually yes. We do see the markets to be maybe a bit more under pressure than what we have foreseen in last fall. We do see China being under pressure, Asia isn't that strong. We have seen some -- for some of our auto markets are under China. We are not as much exposed to auto any more, but nevertheless, Prodomax, Hommel is there, and the whole conversion to e-mobility, which helps Prodomax isn't going as good as one has thought some months and quarters back. AR/VR, yes, we believe in the long run, it is a big potential, but we don't see it in the short term. And so yes, some of our markets are maybe a bit more under pressure than what we have expected last fall. It doesn't take away from the fact that the long-term trends, the macro trends are still intact, and that's why we wanted to, in particular, underscore our 2025 guidance.

Okay. But obviously, your outlook is nevertheless calling for a pretty hefty pickup in all 3 divisions in H2, right, not just advanced photonics?

That's right. We are saying that we believe we can produce a mid-single-digit sales growth, which is less than what we have seen in 2022 and 2023. So the growth in 2024 versus 2022 and 2023 is decelerating somewhat. And that's, in particular, obviously, first half, as I pointed out and expecting a pickup in the second half.

Yes. All right. And then maybe that leading on to the second question, looking at your new semi optics facility in Dresden. And you've mentioned many times that this -- the expected ramp in semi to come through in '25. So nothing is -- my first part of this question would be nothing has changed on that front whatsoever from what you saw, i.e. -- and in terms of ASML, in particular, [ some intentions ] toward the year-end in December versus what you're seeing now. And secondly, how quickly do you think you can fill that facility over the next couple of years? That would be my second question.

First question, yes, nothing has changed. Second question, I mean, at this moment, everybody is -- our customer is telling us -- our customers are telling us -- I need to be careful here, but customers are telling us we need to be ready for a huge ramp in 2025, and we will be.

Okay. And then my third and final question for now is you mentioned the top 7 customers now accounting for 43% of your sales. And there was a comment made that this was proof of -- evidence that you're gaining share of wallet. But maybe I just didn't see it, but what was the prior year figure, please?

It is up from the prior year figure. We haven't disclosed the prior year figure, but we are on an increasing trend there with a higher percentage in '23 than before.

The next question now is Adrian Pehl from Stifel Financial.

I've got also 3 from my side, starting with actually 2 housekeeping topics. First of all, could you elaborate a little bit on the real estate sale that you had in North America and tell us a little bit about the amount and what the background was there? And the second question is on the tax rate that was quite up in the fourth quarter. Maybe also here a bit of background would be pretty helpful. And is it -- should we assume actually that you consume then your tax loss carryforwards entirely in 2024? And maybe an idea on the tax rate for this year would be helpful. And then the last question is on the margin trajectory in your guidance. So obviously you guide for the same EBITDA margin in last year at the midpoint at least. Should we take it that actually given you are seeing single-digit revenue growth this year, cost inflation is eating this up more or less like? I mean, otherwise, I had the impression that you were presenting also reminding us in the presentation on the one-off effect, if you want, so in advanced photonics. And I would assume some of that drop off might help you this year, but any additional clarity on the margin trajectory would be helpful because I fear that investors might be not seeing that you can steeply ramp up the margin from that level in 2025 to your target.

Yes. Let me start with the real estate in North America, and then Prisca goes into the tax rate and the margin trajectory in a bit more detail. In terms of real estate, we have sold our real estate in Rochdale, Detroit. Some of you might remember that we've built a new factory for what has been the light and production business, our automotive division some years back. And that building was way too big for the remaining activities of Hommel and the laser processing business that we still have. So we have sold that real estate at what -- it was an okay deal for us. We don't disclose the number here, but that's basically what went into that figure as well as the real estate of INTEROB in Spain. Yes, I think that's it. I'll turn it over to Prisca now.

Yes. Adrian, on your question on the tax rate. So the tax rate in the fiscal year '23 was around 34%, 33.8%. And the increase in Q4 is -- or generally, the slightly elevated tax rate is basically coming from the impairments that we can't tax deduct in our tax P&L. The underlying tax rate is still around the 28%, 28.5%, something like that. On the question regarding the loss carryforwards. Yes, you're right, we have been consuming considerable amounts of our -- in particular, the income tax, the corporate income tax loss carryforwards in Germany. And the intention, obviously, is to consume more of them, but they have significantly reduced. And of course, we also see that then our cash tax rate will be going up eventually, getting closer to effective tax rate. I hope that answers your question. Regarding margin trajectory, there's always, of course, lots of bits and pieces in between, but I think you are right. We have mentioned the one-off effect in the APS division in the fiscal year '23. That was a positive. So just to make sure that, that is clear that we don't have in '24. Stefan already mentioned the impact from the Dresden move, where we, of course, make an estimate and put that into our projection. And on the factor cost increase, I mean we have -- I think you're right. We have seen obviously factor cost increases in the year '23. We mentioned the German labor law agreement that impacted us half year. So the full year effect, you will -- we are carrying into '24. So of course, that has an impact on our cost base in '24, and that's also on our EBITDA margin.

Okay. And so from that logic, if you want, so the better margin than by at midpoint, what is it? 180 basis points is largely coming from operating leverage in 2025. And -- or is there anything else we should take into account looking into next year to reach the 21.5%, the midpoint and [indiscernible]?

So I mean we always have mix effects. I mean Stefan mentioned also the trajectory towards '25, which is, of course, based on mix effect assumptions mainly coming from semi, but I think you are right. We will mainly see operating leverage affecting the margin in '24.

Let me underscore that, Prisca. The mix effects for 2025 will be important. Just to be clear, we will need the semi ramp up to make that forecast or that guidance for 2025. And again, everybody is talking about it. We believe in it, but at this point in time -- but we need -- it needs to come in the semi arena, in particular, Dresden micro optic for optical lithography.

The next question comes from Martin Jungfleisch from BNP Paribas.

I have 2, please. First of all, going back to the outlook in order momentum. Do you expect orders to grow mid-single digits this year? And if you would split this into the 3 segments, would it be fair to assume that APS would most likely grow high single digits or even low double digits as the semi market is recovering? That's the first question. And then secondly, you said you expect the business to be more back-end loaded this year. Is that based on sales? Or is it based on orders? Then maybe also tying into this, can you briefly touch on the order momentum in APS orders year-to-date and, specifically, if there's any positive signs on TRIOPTICS yet?

In terms of order momentum in the businesses, I don't see that we have much deviation from what we have at the moment. I think same profile as currently. We have a huge backlog. You're right. So you could say, why is -- why are we saying back-end loaded? But keep in mind that if one factory is running at full capacity, it doesn't mean that the whole company in all factories is running at full capacity. In other words, whilst in some of our factories, we're -- we can't produce more than we do currently, and you all know we're talking in particular in Dresden. We have other factories that are not as highly utilized, shall we say, where we need the markets to come back somewhat in the second half. So I think that's a bit of a sort of color on why we are talking of even more back-end loaded than we typically have. And again, Jenoptik is always back-end loaded. For us, second half, maybe not always, but almost always has been stronger than the first half. In terms of TRIOPTICS, yes, TRIOPTICS is some point where we look into cost structures. We have to look into cost structures, to be honest. We, again, do still believe in AR/VR being an important growth driver for our business and for the whole marketplace. But it doesn't seem as if we're going to see a big uptake in the next few weeks and months, and therefore, it's probably prudent to look into the structural costs at TRIOPTICS to some extent. That's not to say that TRIOPTICS is going [ over drift here ] because it's a business that has more than just AR/VR. We pointed that time and again. And the other parts of TRIOPTICS are still a bit stable but they're, of course, not growing as much as the expectation has been in AR/VR at this moment in time. Long run, we still believe in that.

But just to confirm or go back to the question on APS orders. So would you expect that APS orders would grow -- outgrow the other segments in terms of the growth this year?

I would phrase it this way. You know the size of the absolute size of APS versus the other 2 segments. And you also know that SMS and NPC have a project component. So therefore, when we say we want to grow mid-single digits, the assumption has to be that APS needs to be broadly in line with that from a size point of view. And I -- we cannot comment on volatility coming from SMS and NPC on a quarter basis as there's a project business. But broadly, you'd have to assume APS in line with that because of the size of the -- the relative size of the division. That answers your question.

The next question comes from Michael Kuhn from Deutsche Bank.

Starting with a follow-up on end markets and, let's say, short-term dynamics. I think you already touched on the lithography. Still, let's say, some additional color on H1 versus H2 would be interesting. On medical, same question here and also, let's say, on the subsegments, skin treatment versus dental treatments. Any changes in trends here, anything to look out for? And then lastly, on TRIOPTICS, you mentioned AR/VR. I think you mentioned remainder of the business stable, that I would refer to the smartphone. Is that stable? Is there any growth hope anytime soon? That would be the first question.

Okay. Let me take the last one first because it's the easiest one for me. When I talk about the remaining business of TRIOPTICS other than AR/VR, and it's not just the mobile phone. As a matter of fact, TRIOPTICS sells to optics companies. That's where they come from, originally. That includes Jenoptik and, of course, all our competitors and other optics companies. Now without going too much into the customer list, the sort of the base business of TRIOPTICS is optics, selling to people in -- to everybody that produces pieces of optics. The mobile phone business hasn't been growing in quite some time for TRIOPTICS anymore. It wasn't growing last year, and it's not going to be [ protecting ] to go big time at least in this year. So that's -- those segments are the stable businesses that I referred to, the additional growth -- high-growth expectations that we still have R&D, AR/VR business. Second from the list, bio skin treatment versus dental treatment. By and large, your assumption, I think, correct. Skin -- dermatology applications are more under pressure. We report in our bio segment all the laser diode activities, also to do with some more material applications, and a large part of that business goes actually into China, and that's where the weakness is. The dental business is very much intact. No doubt there whatsoever at this moment. So that's the strong part of the bio business, and the laser business is the weak part. And again, that's driven by missing sales in China. In semi, again, I'm not quite sure. You're basically asking H1 versus H2. We're going to be -- so let me put it that way. We have more than just one customer in semi. In our micro optics business, which is for lithography, as we all know, we produce according to -- and then revenue recognize according to POC. And obviously, we're not detailing any numbers here, but that's more or less a, I should say, flat business, but that's a business that is more or less stable as per plan throughout the year. But the other parts of our semi business are the ones that we talk about, which is more the optics business and to do with inspection and other activities in the semi world.

Excellent. And one on the goodwill impairment and, let's say, the goodwill reallocation. It seems that the underlying business has performed rather well over recent quarters. So is that more kind of a technicality? Or is there more behind this impairment?

Maybe I'll take that question. It's -- yes, you're right. It's a matter of technicality rather than anything else that we have. Because of the midterm sales outlook that Stefan has mentioned, there is nothing new, obviously, that we have decided from a more caution point of view to reallocate the goodwill and, therefore, also test it on the business level rather than the segment level. And that has led to the impairment. So it's a technicality, if you will, to be cautious in that respect.

Understood. And then last one, you mentioned TRIOPTICS and, let's say, the need to look into costs. Could that result in albeit low restructuring expenses? Or would that be too much to think about?

I want to say decline to answer. But let me put it that way. We're not at the point where we're saying, oh, Jesus, a big restructuring, German guideline kind of thing, risks or anything like that. We have a lot of attrition there, and with attrition, one can do a lot. We are analyzing the situation constantly. We always do that as it is prudent. And at this moment -- at this particular moment in time, we believe natural fluctuations and attritions help us. And don't get us wrong. We're not looking into sort of huge restructuring activities there, but we want to be cautious because as much as we believe in the long-term growth there, if a stable business has to increase margins and produce good margins, we need to look into cost, in particular, given that labor costs go up, wages inflate, and therefore, we have to manage them. I guess that's how far I would go at this moment. And I wouldn't read more into that than just that at this point in time.

[Operator Instructions] The next question comes from Malte Schaumann from Warburg Research.

Just to follow up on your last point, we see potential cost measures whatsoever. Do you think that your guidance provided for '24 should cover such measures you might take at TRIOPTICS on other areas?

At this point in time, the answer is yes.

Okay. Good. Then on OpEx, you've achieved pretty disciplined OpEx spending last year. So do you expect that you have to catch up? Or can you follow on, on that path on pretty stable, more or less stable or just proportionately low OpEx increases despite some sales growth?

We intend to continue on that path.

Yes. And maybe let me add to that, that, for example, if you look at selling expenses, something like that, there were some amortizations, let's say, positive amortization effect from the order backlog, the acquired one in the '23 number that we won't see, for example, in the '24 number. But by and large, obviously, we're trying to manage functional costs very tightly. And -- but the same is also there, of course, that I mentioned on the other question. We have a labor cost in question in our key market in Germany that we only have the half year effect in the fiscal year '23. For the full year effect, you'll see annualized until midyear. And then there's another increase, a bit more modest, but that is then effective mid of the year. So that definitely will be a headwind throughout the year across, let's say, the labor cost.

Yes. Okay. Next question is on the margin in APS. You're guiding for slight increase -- disproportionately high increase in EBITDA, so slightly rising EBITDA margin. Despite the headwinds you will see from the relocation of the production site and despite the positive one-off you had last year from those release of this [Foreign Language], this accrual. So what's been the driver for the positive margin progression you expect in '24? Is that only product mix? Or are there other effects to be expected?

I think we can't go into more detail inside the APS. But by and large, I think, as Stefan has pointed out before, we expect a mix effect coming from semi, which we expect back-end loaded because of the anticipated ramp-up in that industry.

Yes. Okay. Good. Then a quick one on TRIOPTICS. Are you able to provide a split revenue share of what's the mix between optics, smartphones in TRIOPTICS business?

We do not specify the details here. But I think we can only reiterate that at the moment, we have, let's say, a headwind there on our margin, and that's coming from, as Stefan has mentioned, if you're keeping the costs, holding them sort of in order to be able to execute on the AR/VR business, and that, of course, has a negative impact on our profitability there.

And are there any signs you would see from customers that AR/VR opportunity is closing in? Or did you approach the actual inflection point? Or is that kind of a black box at the moment?

No significant news there.

Yes. Okay. And then last one on the incremental weakness -- incremental pressure. Some markets you saw, I mean, this most likely excluding semiconductors, [ lights ] and then most likely centered around China. Or can you specify -- provide some more details on that?

No, I think you're right. Excluding semicon in the other markets, bio, we have some challenging developments, not in the dental business, but maybe some of you have seen the news in some other areas, not only from the China business, which is the laser business but also from -- [ which is also ] in California and other places where we're seeing turmoil in the marketplaces. So your expectation -- or your assumption is correct. It's in the other places, China driven, but also in other segments other than the hard-core semicon.

There are currently no further questions. [Operator Instructions] And I would like to hand back to Dr. Stefan Traeger for some closing words.

Well then, thank you very much for being with us today. We covered a lot of ground, I think, in the Q&As. Again, 2023 has been another strong year for the company. I think there's no question about it. 2024, it's a bit of a mixed outlook, I'd say. We do believe in the ramp 2025. All the indications that we get, in particular, from our customers in system arena, point to that. There still is a huge pull on us to be ready for the ramp in 2025. We execute our operational excellent initiatives. We execute our activities to provide the capacity required, in particular, for the ramp in 2025, in particular, in the same arena. We do see one-off costs. This year, we have had one-offs -- positive one-offs in 2023. So we wanted to do a bit of expectation management here when it comes to, in particular, H1 this year. But by and large, again, we do believe that we can grow Jenoptik even in 2024 by mid-single digit. We can get operational profit in terms of EBITDA margins between 19.5% and 20% of sales. And I think that's a very solid foundation for the future for our company. Thank you very much.

Thank you for participating in the conference call. This call is now closed. Thank you very much.