LEM Holding SA (LEHN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the 9 Months Results of 2021/'22 Conference Call and Live Webcast. I am Alice, the Chorus Call operator. [Operator Instructions] 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, sir.

Thank you very much. Good morning, ladies and gentlemen. Thank you very much for joining this webcast. We would like to introduce the LEM 9 months results for our financial year '21/'22. My name is Frank Rehfeld. I'm the CEO of LEM. And I'm here together with Andrea Borla, our CFO. For those 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 society to transition to a sustainable future. You can see the agenda for today. After my opening remarks, I will give you more detail on the business performance of our 2 segments. Andrea, our CFO, will then introduce our financial results and then I'm going to outline what we expect in the future afterwards. Now also the third quarter of our financial year '21/'22, we are happy to announce that the strong growth momentum with which we started in the year is continuing. This growth is happening in a very challenging environment it's needless to mention. On one hand, we have to cope with the effects of the pandemic that is now impacting us since more than 2 years and on the other hand, we are facing component shortages and logistic challenges. But, at the same time, the megatrends that are the base of LEM's growth story are further accelerating in the area of renewable power generation and distribution in automation and digitization and in the area of new energy vehicles. So as indicated, the strong business rebound that we showed in Q1 and Q2 has been continuing also throughout Q3 and this across all regions and all businesses. We are therefore proud to report record sales and profit for those 9 months of our financial year. Despite the overall topline growth of 26% that I will explain in greater detail in the business section, we could have grown in the last 9 months even more by about another 10% if we could have had all components available in time. We were disappointed not to be able to satisfy our customer demands in the way that we were used to satisfy them before despite enormous effort. The investment confidence is remaining solid in all our industry businesses, driven by the acceleration towards 0 emission world and also the electrification trend in the automotive industry is accelerating and confirming our strategic focus towards new energy vehicles. This slide shows the GDP growth rate from 2019 to 2021 and the expected growth rate for '22 and '23. Despite the fact that the rebound level of 2021 after the corona dip is not sustainable, long-term the World Bank assumes an average global growth of 4.1% in 2022 and a 3.2% growth in average in 2023. Not new, but still worthwhile to be mentioned in this connection with LEM who has every second employee and around 38% of its sales in China is that the growth rate of China is expected to be between 5% to 6% in the years 2022 and '23. Now I have been mentioning already that we've been disappointed not being able to meet all our customers' demand. And important part of our teams are working day and night in order to find solutions for our customers despite the ongoing supply chain crisis. The availability of semiconductors is and remains our biggest supply challenge. The strategic decision 3 years ago to build our own fabless activities will help us to get more flexibility in the future. However, will not be a solution to the ultimate bottleneck of the semiconductor shortage, which is the wafer manufacturing capacity. The capacity build-up in the semiconductor industry will not be fast enough to meet 2022 demands and we, therefore, expect throughout the next 18 months fuel shortages. However, starting from middle 2022, we expect a gradual improvement. We are convinced that the ability to deliver is becoming an increasingly important USP and therefore invest in the second sources as well as in additional production capacities. Now, with that, let's move into the business performance. LEM is delivering its sensors into the following core applications; motors and drives, power storage, renewable power generation and energy conversion, and energy metering for traction application and fast-charging stations for electrical vehicles. We are organized into business segments, automotive and industry, where automotive has today a share of about 23% of the total LEM turnover. Both segments saw a nice double-digit growth in the first 2 months -- 9 months, automotive by 16% and industry even by 27% at constant currency. Looking at the geographic spread of our businesses, the fixture has not been changing against what we've reported in our half year call. All regions were growing with a comparable double-digit speed. China is and remains with 38%, our single biggest market, followed by Europe with 31% and both markets were also the growth engine in Q3. You will see the contribution of industry and auto segment to this picture in the following performances. So let's move and start directly with the industry segment, that's 77% of our total sales. All our industry business have been strongly recovering in the last 9 months against 2021. Even the traction business picked up by 10% against 2021. The drives business, that was weak throughout the last 2 years, strongly rebounded with almost 40% since the delayed investments in the industrial and consumer sectors are now getting realized. Amongst those are also the investments in the semiconductor capacity. The renewable energy sector was mostly driven by solar in China and the investments into European vehicle charging infrastructure with our DC meter. Nice growth also in high-precision, mainly driven by test measurement equipment for the automotive market as well as the medical equipment that recovered to pre-pandemic levels. Projecting this picture now from a regional perspective, also this picture has not changed against our half year call. You see that Europe has been seeing the fastest growth and all other markets grew slightly less, but still strongly. The growth in industry in Q3 was impressive across the board. However, we continue to see inventory fill effects after the stocks were depleted in the last year. With 35%, China remains the single biggest country for LEM industry sales. Obviously, all regions benefit from the return of investment confidence and reflect stronger customer demand. This is as well confirmed with the U.S. with 23% growth in Q3 and rest of the world, which includes Japan, Korea and India with 36%. The ramp-up of our newly launched products goes very well. Just to mention a few here. Our HOB product with high bandwidth up to 1 megahertz, it's trend towards faster switching frequencies, the LWSR, a closed-loop current sensor for 300-kilowatt solar inverters, the CDSR, a residual current measurement sensor as well for solar, but also charging applications, HTRS, for the truck side market within traction; and the ARH for our smart grid customers. Let us now look deeper into the second business segment, the automotive business. Also, in automotive, you see an overall nice growth. The main driver for that is the increase in customer acceptance of new energy vehicles, consequently EV and hybrid car sales where LEM is designed in are picking up and we see this reflected here. Unfortunately, even stronger than in industry, we were hit in our automotive business by the semiconductor shortages. This would in particular true for our charging system and our battery management businesses. While motor control was growing by 36%, the battery management application developed substantially lower. The reasons for that was the microcontroller shortage that I was already referring to and also the further planned and foreseen reduction of our combustion engine business in the U.S. Q3 bookings are back to more realistic levels. Still those strong bookings confirm the fundamental demand for new energy vehicles. Now also looking here, at the global distribution of our automotive sales, you see the importance of China further growing. With an enormous growth momentum of 40% in the last -- in the first 9 months of this financial year against the same period last year admittedly from a rather low base last year. China is now responsible for 51% of our sales in the automotive segment. Also, our European business has shown growth, driven by the CO2 fleet targets that the European manufacturers have to achieve if they don't want to get penalized. Unfortunately, the component shortages in Q3 have been reducing the growth speed within this 9 month period. The performance of our business in the U.S. is not satisfying since the transition to EVs was not sufficient to compensate the decline of our battery sensor sales in combustion engine vehicles. The rest of the world market, namely Japan and Korea, we managed to slightly improve against the half year from minus 1% to plus 0.5% growth. Now we also work for sure on our automotive product pipeline and the products that you see here for battery management and motor control are prepared for the trend towards more compactness and lower cost. The CDT Series response to the need for the measurement of residual currents in our chartering systems and to protect basically the user as well as the grid. Now with this, I would like to hand over to Andrea, who will introduce the financial results.

Ladies and gentlemen, good morning also from my side. As the Group CFO, I'm very pleased to present attractive financial results for the first 9 months 2021/2022, slightly exceeding analysts expectations. The strong sales have been the key driver in achieving record profitability both on EBIT as well as on net profit levels. The gross margin in absolute value increased by CHF 30 million, from CHF 100.6 million to CHF 130.1 million. In respect of the gross margin in percentage, we have gained 1.1 percent points. What are the main causes for this positive development? Both production efficiency improvements and scale effects helped to drive the gross margins upwards. Those improvements were somehow dampened by higher input costs. We expect the material costs to further rise during 2022 and we will have to pass on those cost increases to our customers in order to defend LEM's profitability. Our 2 low-cost locations situated in China and Bulgaria cover 80% of all sensors produced by LEM. The percentage of our 2 low-cost locations is expected to increase in the future. The SG&A could be reduced from 17.6% to 15.8% as LEM achieved the 26% sales growth with limited additional costs. The main causes of those cost increases are increase in consultant, recruitment fees and as well as higher bonus accruals as a consequence of the strong results. We are working on several automation and process improvements initiatives, which shall allow LEM to grow the SG&As under-proportionally during the coming years. The R&D expenses increased by close to CHF 3 million, confirming the willingness of not jeopardizing LEM's future growth by optimizing its short-term profits through R&D cost cuts. 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 families, such as the DC meter and LEM's very first integrated current sensors have been very welcomed by our customers and are contributing to our sales growth in this year. Going forward, R&D expenses are expected to remain in the 8% to 10% range. During Q3, LEM suffered from negative foreign currency effects, mainly coming from the recent euro depreciation. Those losses were marginally compensated by gains in our euro hedges. LEM's hot -- LEM's policy remains to fully hedge the net exposure of the cash flows nominated in U.S. dollar, euro and Japanese yen. As LEM has only limited third-party debts, the interest expenses remained modest. The main element of the financial expenses relates actually to expenses on lease liabilities. The effective tax rate is a 13.2%, close to 4 percent points lower than last year. The main drivers are a favorable mix, meaning higher profit shares in low tax countries and some tax credits from our R&D center in France. We continue to benefit from the HNTE tax status in China, which results in a reduced tax rate of 15% instead of 25%. We are as well very pleased of LEM China having renewed its HNTE status for the years 2022 to 2024. And here you'll find the full P&L for both the first 9 months and Q3. LEM's momentum continued during Q3 with quarterly sales at CHF 92 million, while at the same time further improving our gross margin to 48.5%. EBIT and net profit of Q1 to Q3 are very much at the same level. When comparing the first 9 months' financial figures with our pre-COVID record year 2018-2019, LEM could increase its top line by 11% and its EBIT by 26%. On this positive note, I'm very happy to hand back to Frank.

Thank you, Andrea. And for sure, the last slide is about the outlook as indicated. So what do we expect for the full financial year '21/'22 basically for the 3 remaining months? First of all, to make here again, repeatedly the statement, the long-term trends on which LEM is facing its growth remain valid, even accelerate with the commitment of more and more countries towards a more sustainable way of running the economies reflected also in the CO2 neutrality target. This gives us the confidence to invest now into R&D, extend production capacities and floor space. Based on the 9 months topline development and the strong order book, we have corrected our forecast upwards and foreseen our sales of around CHF 360 million and an EBIT margin of around 22%. Precondition, for sure, for that will be that the shortages in the supply chain will not get worse, but rather gradually improve that there is no significant deterioration in the today's conflicts, including trade conflict and that the COVID situation will not get worse. With that, thank you again very much for your attention, and I would like to open now the Q&A section.

[Operator Instructions] Our first question comes from the line of Michael Foeth with Vontobel.

I have 3 questions actually. The 2 first questions are related. If I look at your EBIT margin guidance of around 22% for the full year and the -- compared to the 9 months margin, it indicates a significant drop in the fourth quarter in terms of profitability. And could you maybe explain what your projections are behind this? And this links into the second question, which would be any further comments on input cost increases, wage inflation that you expect in the current quarter? And how your pricing power also relates to that margin forecast? So those 2 questions are linked. And then the third one would be, if you could give us sort of an update or run down on your semiconductor development road map? You indicated that you will continue to invest in developing that over the next 3 years. So if you could give us a bit of an update on that?

Yes, Michael. I will take the first 2 question. So in respect of the Q4 EBIT margin, of course, it depends very much on the top line. And so we traditionally in the Q4, we are hit by, let's say, a slight slow down in February with the Chinese New Year and, as you have seen before, China having such an important exposure in LEM, so we expect, let's say, this total sales to be slightly lower than in the first 3 quarters and then despite, let's say, with the costs and especially let's say the fixed costs being on the same level or even slightly increasing that is the consequence of this EBIT drop we foresee in the Q4. In respect of your second question. So we have already experienced input costs to increase, but still to, let's say, somehow still a limited level, but we expect going forward that this and we -- it's actually more than expect, we know that the input cost will increase quite a bit, be it on raw material, be it on salary costs, and our ambition, of course, is to pass it on to our customers in order to defend overall profitability. We believe that LEM is in a position to demand this price increases and we see that as well in the first discussions we had late last year that we can ask for these price increases. So, overall, we do not expect a significant drop of the profitability going forward.

Okay. If I take probably the third question, semiconductor. So we started basically 3 years ago, based on an already, let's say, substantial know-how that we had in the development of some ASIC structures and -- but we then further built our competence towards packaging and testing and already today we are delivering basically 1 digit million of pieces out of the production facilities. So we have a very full and well-loaded road map for -- basically continuing on the road map for solar, automotive charging systems and motor control and we will double the team in the next basically 18 months. At the same time, we plan to also in source the supply chain management activities that today are still done together with a partner. So there is a clear roadmap of steps that we are going to do in order to further grow this very important strategic business for LEM. Hope that answers your questions.

The next question comes from the line of Miro Zuzak with JMS.

I hope you can hear me.

Perfect.

I have a couple of questions. I'll take them one by one, if I may. The first one is in the industry business. I wanted to know whether you have seen any change in ordering behavior in the last couple of weeks?

Right. Probably I take this one. We have not really been seeing substantial changes there. Now, whether this is an indication for something or not an indication for something is probably difficult to say. Remember what we said about stock filling. We still see stock filling effects and for sure for quite some equipments we are rather late in the supply chain. So if there would be effects as you probably have in mind asking these questions and that would be probably not a signal that the effects are not happening. We are at the moment still seeing a very strong ordering behavior in industry.

Okay. And can you tell us more? I mean, I see the book-to-bill ratio, it's probably going to be roughly 1.5 this year. I mean that's huge, the order intake. Can you give us some more details about how the duration of the order book changed? So because in the past you used to have quite limited visibility into, say, the period of 6 month plus and has this changed today? So do you have more orders, for example, for calendar H2 2022 in the books?

Yes. So, and very clearly, I think, you remember we already referred to that in the previous calls, our order book became longer. So typically we had before an order book that reached more 3 months than 6 month and now our order book increased towards 9 months. So I think there are 2 effects. On the one hand, obviously, we see certain need to push orders, because obviously of the supply chain shortages. On the other hand, we've been also asking our customers to give us long longer-term visibility, even commitments, because a lot of the components that are under shortage need to basically also be bought and there is a longer-term horizons at typically even higher prices and, for sure, we would like them to also have commitments that they have been getting used to.

Okay. Then one more further question regarding the business development, like in the automotive business. I mean, it looks great year-to-date, but let's be honest Q3 in motor control and charging system was way below what you could report in your Q1 and Q2. Can you please comment on that? I mean, China EV sales have been strong in your Q3 still in calendar Q4, can you please comment on that?

Now you are completely right when you simply compare market numbers, look at our numbers and even compare the different quarters against each other. I think the challenge that also we have is the dependency of certain components, in particular microprocessors from certain suppliers. And since you have no compensation measures in a reasonable time frame to basically replace a microprocessor takes 2 years and we are really hit there by this dependencies. So one tends to over-interpret those numbers, but I would suggest not to do so. It's really the unfortunate situation that we are facing with the semiconductor situation.

Okay. Then I try to figure out a bit that basically your raw material input costs, I couldn't find them frankly speaking in the Annual Report. Could you please give us an indication what materials that you're sourcing and what proportion of COGS this makes? I'm trying to find the ultimate goal of this question is to find out by how much you have to increase your prices to compensate the raw material improvement? If you want to answer this, I mean, that's also fine, but otherwise, I would ask what are the input costs and percentage of COGS and what is it basically?

Yes. Without going now into details and providing you with the figures, but let's say the material cost is clearly a majority part of our COGS. But as I said before is -- and we have lots of different components resource, so the price increases vary quite strongly between the components. Again, at the risk of repeating these, so far in the year, it has been limited, because we still have quite some stocks we could use and let's say the negotiation with our suppliers went on and the real increases, they will only come. But overall, I think, we are in a position that LEM can actually pass on this price increases to our customers, I think, this year. Also, our customers fully understand with the current environment that we offer price increases and very often actually their worry is not so much about the price increases, it's really about getting our components. So I think the situation and our ambition and our commitment is to defend overall the profitability also going forward.

Okay. But we are talking about increases of between 20% and [ 50% ] sometimes in this components and also the raw materials still also the case in your situation?

Probably this would be rather at the higher end of the percentage, but for sure looking at the complete bond and the increases are probably not as severe. But, again, just to stress what Andrea said, I think these times are the times where you get to know a lot of CEOs that typically would otherwise not have talked to you and they are really looking forward to get the components now. We don't play here power games. We really try to push this as fairly as possible. For sure, we -- the LEM's success is a long-term success. LEM's success is not a success of creating short-term profits at the expense of our customers. But for sure when we see and face those situations and our customers not get only confronted by LEM with that, they also get confronted by a lot of other end component suppliers and those increases. We rather see open years for that.

Okay. One last, a short quick one, and I'll go back into the queue. The CHF 2 million of -- or the profits of the euro hedges, which stand against your losses in the financial line, are they booked in the COGS line or in which line are they booked?

No, they are booked in the same line below the EBIT in the financial result.

Okay. So the minus CHF 2 million is a net figure then?

Absolutely.

The next question comes from the line of Daniel Koenig with Mirabaud.

Can you hear me?

Loud and clear.

I had actually just one question, because I looked at the renewable statement you made and it is the fact that the solar industry is booming, while the wind industry has some problems. You can see this in the Siemens Gamesa investor statements. Is this something you are experiencing as well, that wind has problems? And I was wondering how much wind is actually of your renewable segment sales?

Right. So maybe I take this question. I think when you look at our renewable sales, this is quite a wide range of applications in -- there is smart grid, in there is our DC meter, in there is our wind and solar, in there is also UPS. Clearly, also the share of solar in LEM is higher than the share of wind in this part. So, yes, we see that wind not reacting as quickly and then agile as solar is. So I think, yes, we see these sort of effects also in our sales.

Okay. And then I have a maybe a stupid question, because whereas in solar there is the retail segment and then there is also the commercial and industrial segment, to what segment within solar your products go? Does it go mostly to industrial applications, solar parks or is this also for retail?

No. This is not at all a stupid question. And so we are basically rather selling into bigger sort of investment into solar parks and this sort of order of magnitude. And we start to move into the retail in the one or the other area, but the majority of our solar sales are still in the bigger sort of investments, that's for sure, let's be honest, probably also economically and more important than the -- let's say, solar panels that you have on your house.

Your next question comes from the line of Reto Huber with Research Partners.

Yes. 2, it's also related to the renewable energy segment. I'm wondering how much of a structural shift are we seeing there? I mean, the Q3 revenue growth roughly 28%, what boosted the growth more there, is it China solar power or is it more boosted the growth by DC meters in Europe?

I mean, the reason why we put that all together is because we don't want to really talk here in detail now in figures by business. And what I can probably say is that the DC metering business is enormously fast growing, but still starting from a rather sort of low base. But we see fast, fast-growing demand and the good thing is that we have a very wide customer portfolio that we have a product that is already prepared also for the next generation steps because we will see the future electrical vehicles not only working as to be charged but also a source of electricity. So -- and this will be accompanied with a bidirectional functionality that we can provide. And -- but I think here percentage-wise, for sure, this is an enormous growth, but starting from a rather low base whereas the growth in the solar business is probably, percentage-wise, substantially smaller, but for sure starting from a substantially higher base. Now when you see China really almost doubling their gigawatt investments in '21/'22, this is for sure reflected here in the growth rates. For sure, one would not forget that one of the reasons that China is able to double gigawatts year-on-year is that cost downs in this area are also substantial. So basically the amount of money we get per current transducer in this segment is also under high pressure.

Okay. So the...

Sorry, it's a little bit of complex answer, but I wanted to give you all the aspects.

Yes. So the outlook for the Chinese solar investments you're saying the plan to double those investments in 2022 versus 2021?

Yes, exactly.

There are no more questions on the telephone.

If there are no more questions on the telephone, we will take the questions in writing. The first question comes from Philip Tadayoni from MediumInvest. What is your order intake growth if time adjusted, i.e., customers placing orders further in the future than last year, so like-for-like order intake growth?

Yes. It's a very valid question, but we -- unfortunately, we are not providing this level of details to the public. But in order to repeat, it is clearly that you cannot just take the order book today and compare it to the past. There is a very clearly lengthening of the order backlog and this still, on the positive side, gives us some assurance about the volume also we can sell into the next years.

The next question comes from Tobias Schulte from UBS. EV charging companies are growing. LEM didn't participate at the growth. Are you losing market share?

Yes. Tobias, sorry we've been creating this impression that we didn't grow in the EV charging. EV charging is part of our industry business since we differentiate between industry and auto in the way that we say what has a number plate is auto, what doesn't have a number plate is industry. And so despite the fact that we are also delivering our DC meters to car companies who are also building infrastructures, you see that reported in our industry business. And for sure this is one of our fastest-growing business and I think we have, at the moment, still I think substantial USPs in particular due to the fact that we have a certified DC meter and this certification process is rather complex process. And -- but for sure there is more competition to be expected and this is one of our short ROI and really fastest-growing business and we rather win market share there than we are losing.

The next question comes from Jolanda Stadelmann from zCapital. On Slide 5, you've presented the World Bank global economy outflow, which is quite defensive, how relevant is this outlook for LEM? Do you expect lower sales in China?

Now looking at the relevance, I think, for sure it is for us an indicator in general about investment optimism. Obviously, we don't take those numbers and use them as a forecast for our growth potential, but we take them as an indication about what we can expect in terms of investment, trust investment momentum. We do, at the moment, not expect lower sales in China and if we would expect lower sales in China, then the main reason would be probably the way China handles COVID. And basically, the limits that we see they have is with respect to the mid-term future, but not so much China here as, let's say with the 5%. We all know China came from 10% probably 10 years ago and now we see 5%. But looking already at the size of the Chinese economy, looking at the focus that China in particularly has on renewable and sustainability and also the potential that it has and we rather expect China to further grow.

We have another question from Tobias Schulte from UBS. Gross margin, how sustainable are the improvements? Can LEM keep a gross margin of over 47% going forward?

So the gross margin really depends on the 1 side of our future sales growth, because higher sales will allow ourselves to, let's say, to absorb the fixed cost on more units. So this is a positive trend going forward. On the other hand, as we mentioned before, this increasing input costs and here it's more or less depends on how well we are able to pass on this cost increases to our customers. So the first 2 elements, I would say, tend to rather say, yes, we can defend the current margin. I think what we'll do risk to put as our overall percentage margin down is the mix. Going forward, we believe that the auto part will take an even more important part of our total sales. And, in auto, we expect that the gross margin will drop due to, of course, very intensive price pressure, but despaired with very high volumes. So in absolute terms, this will be a very attractive investment case for LEM.

The next question comes from Felix Remmers from zCapital. Given your exposure to China, are you worried about a slowdown in China due to the 0 COVID strategy and real estate trouble?

Right. And maybe I'll take this one. I mean to be not worried or to be not concerned would be probably a mistake not only for LEM, but for, I think, every business leader, because we will not see only effects for LEM, but actually for the worldwide economy in case the Chinese growth is slowing down. Let me put it that way that we, at the moment, don't really plan for a contraction, but for sure we are -- also with our presence in China and trying to read all signals in order to really be also agile and ready in case [indiscernible] go in a different direction. But we don't have any doubts in long-term growth of China and would we -- because of that basically not invest into a headcount, in R&D or in CapEx. The answer would be clearly no, because despite the fact that we might potentially see dips, we are convinced about the long-term growth potential.

The next question comes from Tobias Schulte from UBS. Strong growth in drives, outlook for next year, main demand driver?

Right. And so -- maybe I'll also take this one. Yes, strong growth in drives. Now, we typically don't make now forecast by business and -- but to give you still a couple of bullet points, the most important reason is -- for the strong growth is a catch up from -- in particular the last 2 years, where the drives business was substantially weaker than even in the years before. So, I think, when we would extrapolate our drives business in the future, we expect rather slower growth in particular and looking at a sustainable growth rate in this overall machinery tools in automation area and that is still not affected by catch up anymore. So I think at the moment -- and we'd rather think that this is not sustainable over a longer term.

We have another question from -- the next question from Andres Gujan from Carnot Capital. How much of the projects sales growth this year comes from price increases due to higher material costs?

So the price increases for end of December are pretty limited. Most price increases start kicking in now with the stock in January, February. But, overall, over the whole 12 months, if you're talking about the financial year 2021/2022, this still will be rather limited. So if -- the real price increases will kick in mostly into 2022/2023.

The next question comes from Felix Remmers from zCapital.

No, it's already answered.

Already answered, very good. Okay. Next question is from Nicandro Barile from Helvetic Trust. Do you see any interesting M&A opportunity, smaller companies with strong technology?

Right. And so, LEM, for sure, looks rather into the longer-term future with respect to current sensing looks into the megatrends towards more compact solutions, but at the same time rather fast increase in volumes. So we are constantly screening the market for technology additions and, for sure, are always trying to see there what could be next steps. So as soon as there is something to be announced, we would do that. I think there are couple of technologies on the horizon that are very, very interesting to us -- for us, but probably at the moment it's still a little bit too early to go here in any details. But yes, we are not looking for buying turnover, but when we are trying to use our strong balance sheet then it would be into -- an investment into new technologies.

We have another question from Nicandro Barile from Helvetic Trust. What about new client wins?

Yes. Maybe, I also take this one. And so, LEM has a long history with a lot of customers over the last 50 years. You probably know that we are going to celebrate our 50 years this year and where relationships are going on over long time. And these, in particular, refer to the industry business, which is for sure the oldest business we are in. And now in order to really restart growth and -- when you follow a bit LEM, we basically said, with the new R&D investments, it's doubling our R&D of sales from about 5% to about 8% to 10% corridor. We, for sure, go for new clients, in particular, in areas where we also look for new applications. Talking here about our automotive business, talking here about our smart grid business, our integrated current sensing business, the fabless business and also the DC metering activity. So there, clearly, yes, we are winning new clients and this is a very exciting story because we see high demand and surge after our products.

We have another question from Nicandro Barile from Helvetic Trust. What do you expect overall in labor cost increase for financial year '22/'23?

So the range of the cost increase in respect of labor varies much on the location. So our main sites are Geneva, it is Bulgaria, it is in China, it is in France. And we probably had a range between low single digit to, let's say, high single-digit salary increase assumptions and this is really reflecting the local labor market in specific sites.

Okay. Good. Then I would like to thank you very much for your attention again. We'd like to invite you already today for our full year results call on May 24 and wish you all the best health and lot of fun in the months to come. Thank you very much, and have a great day, and then soon afternoon -- weekend, sorry.

Thank you. Bye-bye.

Bye-bye.

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