LEM Holding SA (LEHN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Half Year Results 2020-2021 Conference Call and Live Webcast. I am Alessandro, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Frank Rehfeld, CEO. Please go ahead.

Thank you, Alessandro. Good morning, ladies and gentlemen. Thank you for joining us on this webcast where we would like to review LEM's half year results of our financial year 2021. My name is Frank Rehfeld. I'm the CEO of LEM, and I'm here together with Andrea Borla, our CFO. For those of you who are not yet familiar with LEM, LEM is providing sensors for measuring electrical parameters, namely current, voltage and energy, and with those help our customers and the society to transition to a sustainable future. So today's agenda, after my opening remarks, I will give you more details on the business performance of our 2 segments. Andrea Borla, our CFO, will then introduce our financial results, and I am going then to outline what we see for the future. Today, we would have loved to meeting many of you in person again here in Zurich after this was already not possible in May for our '19/'20 results. Unfortunately, the second wave with a worrisome increase in infection rates in most of the European countries that, again, forced us to run this as a virtual event. You surely all got used to increasingly work remotely with your teams and in your companies, and also, we analyzed the opportunities that come with this new way of working. At LEM, we had to react to the increased infection rates in October and the resulting changes in the governmental guidelines from November. We are moving back into an increased home office mode again. For us, for sure, safety of our employees is of utmost importance. But every one of us, the -- she or he in office or at his desk at home, is going live every day because we are convinced that the COVID pandemic as challenging as it is short term, will midterm accelerate the megatrends of electrification and renewable energy production that are the base for LEM's future growth. LEM has proven to be rather resilient in the economic environment. We continue to be a reliable partner for the industry and automotive sectors. And our customers can depend on LEM no matter what economic and technological challenges they face. We are pleased to report that we have finished the first semester with sales down only 4.4% in constant currencies as well as stable profitability. We continue to have a strong balance sheet, even in this tough economic environment. The main reason for that can be found in our large customer base as well as the balanced geographical distribution of our customers. In particular, the restarting growth in China has helped in the first semester, specifically in the area of renewable energy. We saw improvements in the order book in Q2, which we take as a good sign, however also do not over-interpret. Looking to the long term, there is little visibility on how COVID-19 may impact our customers, in particular now in the second pandemic wave. Looking at the COVID-19 impact in H1, safety of our employees and their families had and still has the biggest priority. At the same time, the whole LEM team is intensively working with our suppliers on minimizing the impact of the pandemic for our customers. We also continue to focus on executing our strategic opportunities. Our Chinese as well as our Bulgarian operations were running at full capacity during the last 6 months, whereas we reduced our capacity in Switzerland to 70% since August. In all sites, sanitary measures for all our employees were implemented. One of the biggest challenges during the lockdown was the supply chain management both inbound, but even more importantly, outbound, since limited transportation means were available. This has been impacting our gross margin. Despite the fact that the order book in H1 has been shrinking against H1 last year, we saw some positive signs in Q2. Looking here at some global activity indicators from the IMF from October 2020, and you see the time line until August '20. This is the last date when data was available. You see here, the industrial production in blue, the monthly trade volumes here in red as well as the manufacturing PMI in yellow that rebounded stronger and is typically a leading indicator against the other. Now this graph obviously shows that the global industry shares some optimism with respect to the foreseeable future. Nevertheless, I would also recall that the very same IMF gives a GDP forecast for 2021 that is still below 2019. As the last one of my opening remarks, I'm very happy to share with you that Rodolphe Boschet has been joining LEM's Executive Committee from September '21. He is responsible for the global HR function and will focus on the cultural transformation process that we have been starting 18 months ago as well as hiring and development of talent. He joins us from Danaher where he has been in various local, regional and global roles working in France, the U.S., Denmark and Switzerland. With this, let's now move to the business performance. LEM is delivering sensors in motor and drive business, the area of power storage, renewable power generation and energy conversion as well as provide energy meters for traction applications and fast-charging stations for electrical vehicles. We are organized in 2 business segments, automotive and industry that have about a 20-80 share of the total LEM turnover. Both the Industry and the Automotive segment saw reduced sales in comparison to last year's first semester. Based on constant currencies, this was a low 1-digit percentage. However, the top line was impacted by about 10% and 9% in Automotive and Industry, respectively, due to the strong Swiss franc. Now looking at this picture from a geographical spread of our business, you will notice that only our Chinese sales were stable in comparison to the same period of the last financial year whereas all other regions were dropping. In particular, the North American setback was substantial at 27%. This explains that the Chinese share of our business relative to the other regions has been increased to now 37%. China restarted growth already in Q2 whereas sales in all other regions remained flat at/or -- at rather low levels. You will see more details in the geographic spread by business later on. Now let us move deeper into our 2 businesses and starting with the bigger one, the Industry business. In the Industry segment, our drives business is still the biggest. The business has been suffering almost 9% in comparison to H1 last year. While we see Asia, including China, Korea and Japan recovering, the U.S. business is still weak. Even in the current pandemic situation, our renewable business was slightly growing, mainly driven by solar in China whereas Europe was flat. The traction business with minus 21% against last year looks weak. However, please bear in mind that we compare against very strong sales last year. Still, the decline reflects lockdown impacts from China and India. Probably not too surprising that the investment into medical equipment like MRI and test and measurement equipment was slowing down during the pandemic, resulting in a drop of our high precision business by 34%. Projecting this picture from now a regional perspective you can see that China showed a nice growth that even accelerated in Q2, whereas all other regions were declining. I would not overrate the increase in the decline in Europe since the summer months in Q2 are typically weaker months due to the holiday season. Please bear in mind that more than 50% of the decline of 9% are coming from currency effects, we had, in particular, a rather weak Chinese yen during the beginning of Q2 and a rather strong Swiss franc against the euro in comparison to last year. Now talking a bit about products. Products, I would like to focus on the renewable business. And this time, we continue to strongly invest into research and development and launched several new product families as well as new product generations. We started shipping our integrated current sensors. You see here the HMSR, that we expect to substantially ramp-up in the months to come. At the same time, we are launching 2 products that are targeting the EV charging infrastructure. On the one hand, the CDSR, a product that measures residual currents and is a product that is used as a safety feature to discover failure current. And we now as well started shipping our DC meter for fast-charging stations for electrical vehicles. We will receive our DC meter -- and we received for this DC meter very encouraging feedback from the market due to the fact that the product is flexible in the way it can be built into fast chargers since the sensor and the metering unit are 2 separate parts. And at the same time, the market is in urgent need of those DC meters since all fast-charging stations need to be retrofitted with certified meters latest by July 2021. I would like to use this DC meter example here again to explain one of LEM's important success stories in product development and also in our -- rolling out our strategic directions. When we opened our R&D center in Lyon in March 2017, the industry business did not have experience in the development of larger embedded software. With a vision to increase LEM's total addressable market beyond our heritage transducer market, we took the decision to go up the value chain towards more complex products. We were hiring, in particular, software competence into LEM's tech force and at the same time, work with partners to jump-start our software competence. This allowed us to develop the DC meter in a record time of 3 years, and we have been receiving last month in October, the official PTB, Physikalisch-Technische Bundesanstalt, in Braunschweig certification for our DC battery meter 400 amps, which will serve about 75% of the fast-charging market. Let's look deeper into our second business segment, the Automotive. You are surely aware that the Automotive sector is under enormous pressure since COVID-19 has sparked the collapse of car sales. Car manufacturers stopped their production and restarted their plants in Q1 of our current financial year; therefore, our Automotive business was also affected. We saw a rather weak Q1, whereas Q2 was stable against last year in constant currency. Based on the almost completely collapsing U.S. market in Q1 of this financial year, we are still selling some sensors into battery management and application of combustion engine vehicles. We saw a very first -- a very weak first semester for battery management. For motor control, a weak Q1 was offset by ramp-up in Q2, so that there was a slight growth in the first 6 months of this financial year. Charging systems, which is still small, but growing important business, is gaining momentum. Looking at the global distribution of our Automotive sales, you see a sharp decline in China, in line with the hesitation in the market in Q1 following the lockdown. However, Q2, we saw recovery. The subsidies program that was originally planned to be terminated at the end of 2020 has been extended. We see substantial growth in Europe, although based on low absolute numbers since the electric car wave is gaining increasing momentum in Europe. We have already been talking about the collapse of the U.S. market and the impact on our sales in the previous slide. On top comes the impact of the decision of the U.S. government to implement weaker emission rules for the future. Our Rest of the World business has been performing nicely in H1 mainly because of our sales in Korea, but also Japan. Now in the current sensing business for automotive, we see 2 important trends that are going to influence our Automotive strategy. On one hand, the trend to miniaturization, which we are answering with our integrated current sensor business, which we're already harvesting first fruits in the Industry segment. LEM has a long experience in the development of ASICs and has grown in the last year's packaging and testing know-how for semiconductors. We can leverage here know-how between the 2 segments and try to maximize synergies for the application in Automotive and Industry. On the other hand, we see a trend towards more complex solutions that we are responding to with modules, a terminology, with which we describe products that are up the value chain from simple current sensors that means mechanical integration and software integration. Here, LEM has also increased its know-how, in particular, with respect to the development of automotive conformed software, talking about automotive SPICE levels. At further opportunities, we are investigating applications adjacent to motor control, battery management and onboard charger DC converter, for instance, in the area of electrical power steering. Now I would like to hand over to Andrea, our CFO, for the financial details.

Ladies and gentlemen, good morning also from my side. As the group CFO, I'm rather satisfied to report steady financial results during this first half year in 2020/'21. As already mentioned by Frank, we have been faced with a challenging environment, mainly impacted by the COVID-19 sanitary crisis, and the ongoing U.S.-China trade war. Considering this difficult market environment, the sales held up not so badly and decreased by 9% and at constant exchange rate by 4% only. Those lower sales impacted logically as well as the EBIT and the net profit, which are both lower than last year's performance. Let's now have a closer look on the various P&L elements. The gross margin in absolute value dropped by CHF 9 million from CHF 74.3 million to CHF 65.5 million. In respect of the gross margin in percentage, we have lost 1.2 percent points from 46.7% to 45.5%. What are the main causes of this situation? As a consequence of the COVID-19 crisis, the airfreight costs out of China of our products have substantially increased and hit the gross margin by 1 percent point. In addition, we had also to set up quality provision of CHF 1 million. Those negative impacts could be partially compensated, thanks to efficiency program and purchase price reductions. Our 2 low-cost locations situated in China and Bulgaria cover now 83% of all sensors produced by LEM. The percentage of our low-cost locations will further increase in the future. In view of the soft top line, we have been very vigilant on all SG&A expenses and headcounts. We as well could take advantage from sanitary prices effects such as less travel, no exhibition and government subsidies, mainly in China. As a result, we succeeded to lower the SG&A by CHF 3 million from CHF 28.3 million to CHF 25.3 million. The R&D expenses were reduced as low from CHF 14.3 million to CHF 13 million. Whereas we have continued to increase the number of R&D engineers by 10, we have reduced the third-party subcontracting. We focus not only on renewing our current product portfolio but as well on developing new product families, addressing new markets and applications in the future. Some exciting new product launches as the DC meter and our first integrated current sensor are the first fruits. Going forward, R&D expenses are expected to remain in the 8% to 10% range. In contrast to last year, LEM did not suffer from any exchange net effects as gains on U.S. dollar hedges and losses on transactions compensated each other. LEM's policy is, and remains, to fully hedge the net exposure of the cash flows denominated in U.S. dollar, Europe and Japanese yen. As LEM has only limited third-party debts during the first half year, the interest expenses remained modest. The effective tax rate of 17.5% remained stable compared to previous year. It is a mix of the Geneva tax rate at 13%, the China tax rate at 15% and the mix of all other countries at 25%. On top of that, we have the 5% withholding taxes to be paid for the dividend, mainly out of China. And here, you find the full P&L on the left side for the half year and on the right side of the table for Q2. In spite of having lower sales during Q2 compared to Q1, both the EBIT and the net profit has improved, thanks to a better gross margin and overall lower operating expenses. What are the highlights of the balance sheet for September 30, 2020? The net working capital has increased as net working capital elements as DSO, DIO, DPO have deteriorated. The DSO has increased due to stronger China sales exposure but the accounts receivables overdues are well under control and amounts to only CHF 2 million. The DIO has increased as a consequence of a certain switch from airfreight to train out of China, increasing LEM's overall inventory level. The net debt consists of CHF 45 million short-term debt and CHF 60 million cash on hand. The short-term debt is for the financing of the dividends paid in June and shall be gradually reduced during the second half of the year. The equity ratio dropped from 51% to 40%, mainly due to the dividends paid in June, but remains at the same level as 12 months ago. And last but not least, the cash flow, both the cash flow from operating activities as well as the free cash flow dropped compared to previous year. The main drivers have been the net working capital increase and the first tax payment from last year's IP transfer. Excluding this payment -- excluding this tax payment, the free cash flow would amount to CHF 40 million. As a summary, we have been faced with a very challenging market environment, but we managed to protect: first, our overall profitability, reflected in a net profit margin of 16%; second, we protected as well our balance sheet with equity ratio stable at 40% compared to previous year; and third, our cash flow by generating a positive free cash flow. In these uncertain times, you may now wonder what the future will bring. And for that, I'm happy to hand back to Frank.

Thanks a lot, Andrea. So what can we expect for the second semester of the financial year 2021? You've been hearing already, typically, we expect rather weaker second semester that is simply given by the structure of our financial year where China has Chinese New Year, and we see in Europe and the U.S. Christmas effect. But it's clear that COVID-19 all in all gives us little visibility for the next 6 to 12 months. What we are sure about is that both the U.S.-China tensions as well as the pandemic will lead mid to long-term to additional investments into renewable energy, automation and electrification and therefore, strengthen the megatrends on which LEM's growth trajectory is based. However, short term, we rather remain cautious for the financial year 2021. We expect sales to decline against last year and around 10%. And therefore, ending up between CHF 275 million to CHF 280 million and give a guidance for the EBIT margin of around not far off 20%. With this, I would like to thank you for your time and attention and I'd like to open the Q&A.

[Operator Instructions] The first question comes from Reto Huber from Research Partners.

I was wondering, looking at your guidance, what are the areas of your biggest optimism and pessimism looking at the next 2 quarters and in particular, at the one that's starting right now? And also, what's your outlook for the train business for the rest of the year? Then my second -- or actually, third question is looking at your administration expenses. They reduced quite significantly, too, by more than CHF 0.5 million versus last quarter or this quarter a year ago. Is that reduction also more cyclical like the one in the selling, I assume? Or is it more structural, the reduction that you have in administration?

Thank you, Reto. These were quite some questions and please allow me to shortly paraphrase whether I understood them correctly. Let's start with the first one. So what is our biggest worry for the next 6 months? And what is also our biggest, let's say, hope and positive signal for the next 6 months. Is this correctly understood?

Yes, correct.

Now our biggest worry is probably that even stronger lose control on COVID-19. Because I think the effects out of that cannot really be clearly foreseen. We all know that there are several vaccine options at the moment under development, but we all need to be rather realistic that until basically 40%, 50%, 60% of the world will get vaccinated, some time will pass. So I think the next, easily, 12 to 18 months, we cannot delete the word COVID from our vocabulary. So the better we manage that, I'm very optimistic, the better we will also see an impact -- or the more positive, we see an impact on our business because planability will increase. However, the more we lose control, the more awkward series about the existence or the origins of this virus gets spread around people, I think the more -- I will be worried about foreseeability of rather a short-term future. Now on the positive side, I see the high level of discipline in China. I see that with the consequence with which China manages the pandemic, that there is a clear way out, and we see very positive momentum from China. However, it's clear, China is not alone in the world. And when export markets will again collapse also the, I think, China growth trajectory might get a dip. If you could probably repeat for me the second question, again, was that around the traction business?

Yes, the traction business. What's your outlook, and also what's the momentum at the moment is the question?

Right. Now the traction business, I think, one needs to really fairly evaluate that against last year, which was very, very positive. When you look at it in our traction numbers and the growth numbers over time, last year was rather an exceptional year. So we basically compare now a COVID performance against an exceptionally good performance of traction last year. I'm slightly more optimistic with respect to traction that we will see a rebound and -- because we saw that a couple of projects that were delayed in COVID times and are getting realized, so I would see here -- I'm rather looking a bit more optimistic for traction in the second semester.

Okay. And then, Reto, from my side, the question in respect of the admin and the SG&A expenses of the Q2, yes, definitely, they were lower than in Q1. Now I would be careful to just carry that over the next quarters because the second quarter is, of course, very impacted as well by the holiday season, by the reversal of holiday accruals. I think a more sensitive approach would be basically that we take the first half year and say, okay, this is a level which we could carry on in the second half of the year.

The next question comes from Charlie Fehrenbach from awp.

I actually have 3 questions, if you allow. I would put one after one. First would be if I understood correctly, you reduced the capacity in Switzerland to 70% due to sanitary reasons in relation to COVID. Is it possible that if the economic headwind is getting stronger in the next months that this will be combined also with layoffs of employees? Is this possible? Or did it happen already? Or is it possible in the near future?

Maybe I answer to that. Charlie, thanks for the question. And yes, we reduced, basically, in August, September and October our capacity in Switzerland by 30%. However, the new ramp-ups that we are at the moment preparing led us to the decision to reverse that. So differently from what your assumption was, we are not moving at the moment for a scenario that is worse than what we did, but rather to a scenario that is better.

I'm not sure if I understood correctly. You think...

So basically, we'll go back to 100%.

Okay. So you won't lay off people, actually, that is not planned?

No. That is not planned exactly. So we see due to the ramp-ups that we are doing at the moment and exactly focusing on the products I've been explaining before in the area of DC meter but also this residual current sensor, but also quite some automotive products that we are at the moment ramping up that we go back to 100% capacity.

Okay. And maybe second question only. The ForEx effect was quite strong in the first semester. What are your expectations for the second half of the year?

That's kind of a tricky question because I think nobody really knows what currencies are rolling. So I would not be in a position to give you here an opinion. I can just reconfirm that LEM is hedging 100% of the net exposure of the cash flows in the main currencies, U.S. dollar, Japanese yen and Europe. And of course, we can secure ourselves short term. But let's say in the mid-long term, we have just to face the fact that the Swiss franc historically is always appreciating and always review what activities -- what value-added activities we do in Switzerland and what we do in other countries to increase the natural hedging because this is really the way how you can defend any currency exposure.

Next question comes from Serge Rotzer from Crédit Suisse.

Yes. I have 3 questions in total. I would start with the first one, and I want to pick up, again, the FX question from Charlie. You are guiding minus 10% for the full year. First 6 months were minus 10%, so second half should be also minus 10%. Therefore, I'm wondering, still, is it an FX impact in it? Or is it really underlying because orders have been up by 5% in Q2 and it looks promising more or less. So can you help me to understand the mix? And if then where are you negative then in Automotive or Industry? These would be the question.

So let's say, our assumption on the currency is that no major shift in the second half of the year. I think the reason of, let's say, the weaker second half is on the one side, it is really that the second half of the year historically has been lower than in the first half year because, of course, in the western world, the holiday season of Christmas, and in China, the Chinese New Year, which is happening in February. And in respect of second half where we see Industry, Auto, I think Industry will remain challenging and Auto could see some slight upticks in the second half of the year.

Okay. So we would then get 5% -- minus 5% underlying growth despite orders are up, this is correct.

That's correct. Yes.

Okay. Then the second question would be on gross profit margin. We see, again, lockdowns, soft lockdowns, whatever you name it. What does this mean for the gross profit margin? You see gross profit margin heading down again due to airfreight costs? Or on the other hand, your inventory is up. Therefore, I'm not sure what I have to pencil in or what I can expect from you?

Of course, on the one side, we have prepared ourselves. We have some learnings out of the supply chain challenges in the first -- especially Q1. And I think I mentioned it at a certain time, we have also shifted now some of our transportation from airfreight to train. So I think we will be better protected in respect of supply chain. Having said that, of course, again, if lockdown happens and the supply of airfreight capacity is dropping and the prices increasing, we will surely also feel a bit in the second half of the year. But overall, I think we are now in a better position and better protected than during April and May of this current year.

Okay. And then the third question is, we have the impression now that China has been pushing your sales or whatever up, and this is the highlight of the Q2. But on the other hand, I'm wondering how much is then for China domestic? And how much is for nondomestic because, on the other hand, you have airfreight? So country wise and customer, what is China and what is outside China, so Western Europe or U.S.?

Right. So the answer is very straightforward. When we talk about China as a market, this is remaining in China. Now one needs to be still careful. Supply chains in the world are more complex than most people expect. So when we say it's China for China, then it can still get exported at even not our customer, but the customer of our customer and later on to the U.S. or to Europe. And to explain to you the supply chain, for instance, for inverters, for a customer like Audi, it's produced in China, shipped to Japan and afterwards integrated in Ingolstadt. So we show that as China sales, whereas, obviously, it ends up in an Audi e-tron in -- that is built then eventually in Ingolstadt. So when we say China, we talk about the overall positive trend that we see in China because, basically, China is having COVID very, very well under control with very severe measures. But eventually, we trade data protection against death rate. And this is probably a discussion one needs to further have also in our societies. And based on that, China is picking up growth at a very nice rate. Looking at LEM, we do 60% of our production in China, however, only about now 37% of our sales. I think China is even 64% now with respect to production and 37% of sales. Does this answer your question?

Yes, this is what I expected. But so still the share of the 37% is much lower from China. This is what I...

No, no. This is all shipped to China. So this stays in China. But again, whether it's that eventually delivered into an ABB drive that is sold in the U.S., this is what we don't have under control.

Okay. Then probably a last one, if I may. Although I said, I will ask only 3 questions. Do you see the boost in Automotive continuing, thanks to all the subsidies and the regulation? Can we expect much higher growth in -- for the coming year? So for next fiscal already? Or do you expect first stabilization before it can ramp up?

We see that the electrification is going to continue. We had a strong growth in China. As you know, the reasons because there were substantial subsidies at the level of USD 10,000 per car that were then step-by-step lowered and will now, I think, be terminated in 2022. This led to the fact that China basically had 50% of the world market in the past. Now we see stronger momentum in Europe, and you also see that reflected in our Automotive numbers that has been still on a rather modest pace, being now substantially increasing. So we see the development in electrical vehicles increasing. There is no doubt about that. I would be a bit more careful with giving now clear indications that in 2030, it's 50% of the whole car sales because you've been probably also seeing that the skill set that you need to launch an electrical vehicle is a different skill set that you need in order to launch a combustion engine vehicle. And we see a lot of delays in, basically, the supply chain, but also at the final customers because these skill sets need to be built.

The next question comes from -- is a follow-up question from Charlie Fehrenbach from awp.

And I was just wondering if you used tool of short-time work? And if yes, to what content?

So yes, we used the tool. You remember what Andrea said, we basically have been applying this in Switzerland for 3 consecutive months. And we've been reducing basically by 30% in the production -- in the operations areas. It was not across the whole board of all our employees, but it was for the production area.

It was just in Q2 in that case?

Yes. I mean October is, for us, already part of Q3 but basically mainly in October -- sorry, mainly in Q2.

Next question comes from Marc Possa from VV AG.

I would have a question concerning the DC meter. You mentioned the 75% of addressable markets, i.e., why is there those 25% left out? Is this a different technology? Why don't you qualify for basically all of the markets? Or did I wrongly understood that?

Marc, thank you for your question. Now you really go in the details. Thanks a lot for this. The DC BM400 is covering 75% of the market and the DC BM600 will cover the remaining 25% of the market. So basically, simply for stronger charging stations where you can even have more or, let's say, more heavy charging loads connected to and this is, at the moment, readily developed but hasn't been receiving certification from PTB. This is to be expected still before the end of this calendar year.

And may I ask a second question concerning those DC meters. How is the competitive landscape looking like? I mean who else is there? And how do you differentiate? And which technology will then take out the majority of the markets due to a certain superiority?

Yes. So for sure, we are not alone in this rather new and nascent market. Now there are competitor names, just to mention one, Isabellenhütte, who also made their certification public. How does LEM differentiate? I think we have been very early understanding that packaging flexibility in a fast-charging station will be a USP. Therefore, we've been splitting the measurement unit from the calculation unit. So we have basically a smart shunt specifically on measuring and we have a calculation unit that is basically in a second part. You see that also on the picture. And this gives us a high level of flexibility for our customers to package our products in their fast-charging units. We get some feedback from the market with respect to our product, with respect to measurement, accuracy and with respect to temperature stability. And what we can share here is that the feedback is very, very encouraging, that LEM was able to leverage its long-term competence and experience in mirroring electrical parameters and that we have a superior also functionality of this device. But for sure, you will not only see LEM in the market. This is very clear. There will be also other players, but we get very, very encouraging feedback from the market.

Ladies and gentlemen, this was the last question. I will now like to hand over back to Michael Füglister.

We have 1 written question from Jean-Louis Richard from GMG Financial. His question is, can you give me some midterm guidance, this is 2 to 3 years? More specifically, what opportunities do your new products open? Have you got more new products planned?

Good. Thank you very much. I think a very important question that keeps us busy, us means the management, to prepare strategically and on the other hand, also the R&D organization. So we have, from a strategic point of view, in the Industry, but not so different in the Automotive business, basically 4 strategic directions. First, further harvest the opportunities that are existing in our heritage markets. Secondly, to go deeper down the value chain and to offer integrated current sensors. This applies both for Industry and Automotive. Thirdly, to go up the value chain in order to add more functionality and basically more complexity to our products. This, for instance, is given as an example, in the DC meter, and we do also hear the same in the Automotive business by offering, for instance, more functionality in battery management systems. And at the same time, we look towards adjacent markets that differentiate, for instance, for Industry by measuring in smart grid because then you measure in AC, not DC anymore or in Auto by moving beyond the traditional applications, motor control, battery management, DC-DC converter into application fields like electric power steering. We are, for all those areas, developing today and launching today further products. So we clearly expect that the LEM product portfolio will get further additions in these new markets. We should clearly be realistic. This will not be, let's say, substantial in sales within weeks. We rather talk here about months and 1 to 2 years. But we see from the market feedback that our products are strongly searched after. And we are really with very high level of focus. And you saw the R&D investment numbers about to innovate and to renovate our product portfolio. Jean, I hope this is answering the question in a sufficient way.

That was the last question.

Good. Then again, thank you very much for your attention, for your time, for your passion for LEM. It was a pleasure to have this review here with you. Looking forward to see or minimum, talk to most of you on the 4th of February for our Q3 results. And wish you a great day and a great week. Stay safe, stay healthy and looking forward to further cooperation. Thank you very much. Bye-bye.

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