LPKF Laser & Electronics SE (LPK) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the annual report of LPKF. [Operator Instructions] Let me now turn the floor over to Bettina Schäfer, Investor Relations.

Ladies and gentlemen, thank you very much for joining our conference call today. You should all be able to see our presentation directly on your desktop. What's on the agenda for today's call? We published our annual report today. Götz Bendele and Christian Witt will give you a quick overview of the business development in 2019 and on our current situation, including the corona challenges. After that, we are ready for your questions. And before we start, I would like to point out that any forward-looking statements are based on estimates and on information currently available. These are forward-looking statements and not to be understood as guarantees of future performances and results. I now give you Götz Bendele.

Thank you so much, Bettina. I hope everybody can hear me. This is Götz Bendele. Today, we are going to talk about a couple of things. One, of course, the development of LPKF during 2019. I will give a brief overview. And then in a bit, Christian will share some slides with some of the key financial figures and give some more details on those. In addition to that, I also would like to comment on the recent developments, how we are affected by the coronavirus pandemic that has, of course, changed the world we live in quite a bit in the past few weeks, and what we are doing to address it and what we can see today about the impact it might have for our business. So I would like to start out by saying a few things about 2019. 2019 actually was a very successful year for the company in almost every single regard. Our revenue has increased quite a bit over the previous year, EUR 140 million. This is the highest revenue -- annual revenue that LPKF has had in its history, and that's, of course, one milestone and we're quite happy about that. With the higher revenue, earnings has also increased at just above EUR 19 million. It has almost but not quite tripled versus the previous year. More importantly, each of the 3 or 4 business units that we have has been able to generate earnings. This is also the first time, if not since ever, and certainly for a very long time in the company. And more to the point, this profit was earned after all corporate costs, which has changed the accounting. You may recall that until 2018, we had a segment called Other, which basically contained just the corporate cost. In 2019 and following years, we don't have that anymore. Even after this, each of the 4 business units has shown profit. So that's quite good. And medium term, we intend to grow further. We have published a medium-term guidance in February. No change of this. We expect a future strong contribution of our LIDE technology in a number of industries and a number of applications. But also, we expect further growth in each of our current business units, and I mean, of the current business within those business units. We've done a fairly detailed bottom-up assessment of the key applications for LIDE. Those where we were able to quantify, we have analyzed them, added them up and obviously applied some discounts based on the way we have been forecasting our business since Christian and I have been onboard in 2018, so that we have as accurate as possible a reasonably conservative estimate of the future. Our financial position in 2019 has strengthened considerably. And of course, in today's situation, having reserves is probably quite a bit more important than we would have anticipated even last year. Free cash flow, more than EUR 40 million, more than double the year's earnings. And obviously, good share of this came from the earnings. The balance came largely from reducing our working capital, which we have been able to cut in half. It's been reduced to -- reduced by more than 50%. So final number is less than 50% of what it was at the beginning of the year even though the revenue increased in that year. Main topics here, and Christian will say more details about this, obviously, the accounts receivable that we have been able to reduce, but also inventories of parts, finished goods, et cetera, that we also were able to reduce. Net-net, what comes out of this in terms of financial position? You may recall, as recently as the middle of 2018, we had more than EUR 40 million net debt. 1 year later, by the middle of 2019, we had eliminated this debt entirely. At the end of the year, we had built up a net cash reserve of just under EUR 25 million. And obviously, quite happy about that and something that will also give us a fair amount of peace of mind in today's situation. Commenting a little bit about today's situation, especially the impact or potential impact of the coronavirus pandemic. Obviously, just from a society level, this is a very serious situation. No question about it. It has major impact on people, on communities, on the economy. And we don't know how significant that economic impact will be. I think most experts expect some sort of a recession, a pronounced recession. What we don't know is, of course, how pronounced it will be. We also don't know how long it will take until recovery sets in. So this is the unknown. And specifically for our business, our business is not a consumer business. So even at this early stage, I think it is clear that we are affected less than the overall economy. If I read the news about what happens to airlines, travel companies, restaurants, et cetera, I feel it is quite a different world what I see when I 'go to the office.' By the way, I'm doing this call and doing my work, just like most of my company, from the home office. Our offices are mostly empty because we have started planning for reactions to the coronavirus situation. Well, in China, at the beginning of January. Everywhere else, in and around mid-February. So quite early. Some measures that we have taken to increase the robustness of the company in this situation and to make -- to reduce the likelihood, I don't think we can eliminate it, but reduce the likelihood of any closures as much as possible. Obviously, a whole bunch of measures around hygiene, starting with things like no handshakes. This almost sounds quaint now, but this is what we did in mid-February when I think we were early there. In the meantime, we have sent as many colleagues as possible into a home office. And this is well above half of our staff are now working from home in all the European locations. But the basis of this more than half includes production which is the one part of the company that, of course, cannot work from home. We have separated each location in a number of sections. We have eliminated physical contact between the sections. So different groups of people take different entrances and no longer interact with each other. So that should anyone in the company get infected, it minimizes the impact. Of course, cannot eliminate it. To date, we have no -- none of our colleagues has been affected, thankfully -- has been infected, sorry, thankfully. We have not any kind of production closures to date. We have changed the way we conduct sales activities as well as service activities. To do so without travel. Of course, international travel is fully eliminated and domestic travel is mostly eliminated. And in some cases, people still can go somewhere by car, but for the most part this is no longer possible. We now have the ability to do a number of sales activities like sample processing via live video link. We have also been able to do some service activities [ which is done ] with the experts that would under normal circumstances have flown out there on a video link to conduct the service activities. So I think net-net, the things we can do, we have been doing. I feel we are as a company within our scope of activities, we are relatively well prepared, probably as well prepared as can be. Of course, this does not take the weight from the seriousness of the overall situation for people, for countries, for society as a whole, which I do not wish to minimize at all. Because of that uncertainty, we have also commented in our -- in the published annual report as well as the -- I believe, the press release, which said that the ability to give a specific concrete forecast, meaning one with a number, for the current financial year 2020 is quite limited. As recently as 5 weeks ago, we were convinced and quite optimistic that based on at the time, an expected limited impact of coronavirus, of the coronavirus pandemic, we would expect revenue and also profits to grow further in 2020, even though -- even then we did not quantify that. At this point, I would qualify that statement and say, if there is a more pronounced recession in the main markets that we are active in, and of course, the main markets being not just Europe but also North America. And especially East Asia: China, Korea and Japan, mainly main markets there. If that were to occur, then it is also conceivable that we might see a reduction in revenue and corresponding profit for 2020. At this point, we do not have a specific guidance, that is we do not have a number that we can guide for 2020. I'm happy to answer questions about the actions we have taken towards addressing impact of the pandemic. At this point, I would like to turn it over to Christian, who I believe is looking forward to share some more details on our numbers with you. What I'm going to do is I'm going to skip over these slides that are basically slides of what is LPKF, I believe most of you are familiar with LPKF, and focus on the financial outlook. Of course, any questions you might have about our LIDE technology, about any other aspect of the business. I'm very happy to answer right after this. Christian?

Thanks, Götz. Hello, everyone, from my side as well. I will give you a good and more detailed overview of the financial performance in 2019 and the outlook into 2020 and beyond. Starting with the long-term trends. What we do see is that we've achieved to grow for nearly 20% for 2 years in a row, 2018 and 2019, and that we've been able to achieve that broadly. So over various business units, over various product categories, over various types of customers. And that was very important in our strategy to put the company on broad feet, and we have done so. The management action program we've initiated in mid-2018 and which we've continued throughout 2019 has focused on profitable growth in all segments as well as cost reduction and cash and working capital management. And you can see the respective results. On the EBIT side, the reason that we've been able to achieve EUR 19.2 million in profits is simply the operating leverage, reasonable fixed costs and good growth on the revenue side. I will go later on -- I'll go ahead later on the guidance to '20 and the guidance to '24. Looking specifically at group figures. The most important revenue contributors to the 17% growth were the Electronics and the welding segments. We'll have a look at some more details forthcoming. On the EBIT side, as mentioned before, the leverage to increase the volume and to have more or less constant fixed cost, or very underproportionally increasing fixed cost, is what we have done in 2018, what we've done in 2019 and what, in a similar fashion, with underproportional growth or with shrinkage of fixed costs, we intend to do, respectively, in 2020 and beyond. That is possible because we also have quite a few actions on process improvement inside the company, digitalization of parts of our processes and so forth, where we have, on the one hand, lots of homework to do; but which is, on the other hand, lots of potential on our side to become more efficient in our indirect processes on the fixed cost side. Looking at free cash flow. The EUR 42 million free cash flow generated is a record number and was basically possible due to the strong growth, on the one hand, in the earnings; the tax loss carryforwards we are using from past years, especially in the German entities; and the significant working capital improvement. Yes. The order situation is a clear decline. And the decline which we have been seeing in the end of 2019 is basically due to cyclical effects which are related to some large orders in the Electronics and in the Solar segments. And that's mostly an issue of timing, when do we get which type of order. Looking at revenue by segment and looking a little bit into the performance of the different segments. Electronics is the segment which has grown most, more than 25%. And we also had -- especially had a strong fourth quarter here with about EUR 15 million turnover just in this business unit, which was coming from some larger orders which we have received and delivered there as well as smaller -- normal-sized order to -- not small but smaller customers, which also give us a nice and more constant business. On LIDE technology, we've delivered a LIDE system to a key semiconductor customer. That is not so important for the revenue 2019 as such. The revenue of LIDE in 2019 was as forecasted in the past, a low 7-digit amount or low single-digit million euro amount on the revenue side, with the very low to no profit contribution. The interesting part about that news is that with this very significant and key customer, we are being qualified in the semi industry -- semiconductor industry as a supplier. And once we have that qualification that, that 1 supplier qualifies us and uses us for the serial production, and this is the process which is going on at the moment, that will help us very much into getting into the other semiconductor companies. So that's more something where we expect further growth in the future and where we have only seen a small part of growth in 2019. Secondly, looking at the Welding segment. Welding has grown also nearly 25%, and that is fantastic in 2 -- for 2 reasons. On the one hand, we've had some restructuring activities there, including a change of management in the end of 2018. We have focused very much on customer, customer needs. We've heard those comments in early '19 from customers, "Hey, you have understood. Now we can do a road map together." And some of you might have heard this quote before, it is paying off. It is paying off because we've received the customer orders. We have about 50% automotive impact to our industry in our customer base, in our sales figures here. And what's very interesting is that we have also grown in the automotive segment, where all the rest of the world basically has somewhat trouble. That is particularly notable because it confirms what we've communicated in the past. What's the reason why customers are buying, and not only in Welding also in other segments, it is the next model. It's the next product they're going to bring out. And when you have the next C-Class or the next Volkswagen Golf. And that model has more plastics, more sensors and more electronics inside. There's more solutions where we can help the customer to be most competitive and to have the design he wants to have. So that has shown to be very successful. Other advancements there was in the medical sector as well as in some other applications, we have been able -- where we've been able to place some interesting orders and deliveries. Solar has started from a very good level of EUR 39 million in 2018 and has managed to increase that once more to about EUR 44 million. Very good number. There were a couple of large orders. And the outlook there into 2020 -- and that has started in '19 basically. The strategy which we have been initiating and following to have, on the one hand, a broader customer base in that segment; and on the other hand, a broader technological base to serve more than just one technology inside the thin film solar industry, is paying off there. We are in negotiations for some larger orders with new customers, rather China-based, and that broadens the feet we stand on. We also expect to qualify that second technological base inside thin film within this year completely with one of those customers. So that's a good step forward in '19, and it is a very good base to broaden where we are and to further grow midterm in the Solar segment. Development, we would have liked to grow more. It's a stable segment. It's a stable development, on the one hand. We have intensified our efforts for growth here that is mostly, in that case, an effort of how we sell and how intensely we can work with customers. So this is where we are putting more effort into because we do have higher expectations also in this segment. Looking at the resulting profits by segment. I think the most pronounced effect what we've seen is also where we've seen the most sales growth. In 2018, we had a loss in the Electronics segment. We had done some restructuring there. Some shortly before Götz and myself arrived. Some other measures afterwards. And we've managed to get from a loss into a EUR 7.4 million profit. Basically, what's behind it? It's the sales growth and it's the cost discipline and this operating leverage, which we've been able to apply. And as I mentioned before, there is no profit contribution yet from LIDE or from LIDE in 2019, because on the one hand, we sell, first, small single-digit volumes. On the other hand, we are investing. We are -- our target is to grow that technology and applications of that technology as fast and as broad as we can. And we invest money into that. And that's also business development, R&D, sales. That's different areas. Number two, looking at Welding. As mentioned before, we have an increased capacity utilization, cost discipline. The positive effects of the restructuring, especially on the management side, is what we are seeing there. And we do have a true profit, a visible profit for the first time here in the segment. Our midterm expectation is that this will grow further and it will come in line with the profitability of the other segments. Looking at Solar. Solar has managed to further increase profitability. Reason for that is basically -- and let's put it that way, for the sales increase, it's a relatively low profit increase. Why is that? Because some of the sales increase is due to selling more machines where we have a margin. Some of it is the so-called components, laser units, which we are basically passing through at a low margin. In general, in Solar, we keep a strong cost discipline and we do manage to grow. So that's the reason for our profit growth here. Development has reached more or less the same profit as last year. There is a slightly worse product mix. But basically, what's the key point here is that we have a lack of growth in that segment. Altogether, looking at 2019, we have 4 segments contributing here to profitability, and 2 of them with a very nice number. So that's a very good step ahead in the direction to become sustainably profitable in all segments and to earn not even -- not only EBIT. But also our cost of capital in all segments. Looking at cash flow. The strong operating cash flow of EUR 48 million is basically due to the EBIT; to the tax loss carryforwards which we have from the past years, especially in the German entities; and then the reduction of the working capital, which you can see contributes more than EUR 20 million to that operational cash flow. On the same -- at the same time, basically, we have used relatively few funds last year to invest. This will be a little bit more this year as we are investing about EUR 6 million in our LIDE foundry. So that amount will increase a little bit. The key point basically is, as we managed to reduce our net working capital we didn't only generate EUR 20 million of cash, we also increased our ability that we grow and generate cash while growing. At the moment, we have about 12% net working capital as a percent of annual sales. Our target is between 5% and 10%. So we want to improve further here, but the biggest step has been made last year. We've delivered that. So that is the key point which also enables us to cash-generating growth in the future. Net cash position, we've reached a net cash position of nearly EUR 25 million this year. That's a very good basis for taking entrepreneurial decisions, acting as an entrepreneur and to basically have a buffer in difficult situations, as the corona situation which we are in front of. We have restructured our debt in the group last year, so we are well positioned in general in that respect. Looking at our guidance. As Götz pointed out, we've been quite positive in February to have a growth in revenues and in profits this year. Forecasting is difficult. So in case of pronounced recession, of course, that indirect effect, as I call it, of the recession on -- will also affect LPKF, to some degree, and that might also end up in decline of sales and profit in 2020. We don't have direct or nearly -- have nearly no direct effects of COVID-19 so far in terms of sales. That's very good. That's good because we see our customers not canceling orders. We see the continuing interest where we are in specific projects and negotiations. And we see that we have -- that our measures are taking effect in terms of the fulfillment and the supply chain. Nevertheless, this indirect effect of a cyclical behavior of the general economy is something which is at the moment hard or not able -- not possible to estimate. For Q1, we have forecasted due to known cyclical and large order timing, group sales of EUR 18 million to EUR 22 million and a quarterly loss of EUR 3 million to EUR 5 million as a consequence of that. That is our stable forecast. Looking at 2024 and looking at, let's call it, the mid-term guidance as we have given it before, we see that guidance where Götz described a bit the background, which is basically the LIDE technology and its potential as well as the general growth potential of our existing strong segments, group sales of more than EUR 360 million, with an EBIT margin of greater 25% in a stable environment. And a stable environment doesn't mean everything needs to be stable anytime. So any smaller dip in of -- due to corona should not really affect the fundamentals of that midterm guidance, because the markets, the technology and the advantage of that technology for the customers does not change. The customer benefits is the same. Our to-do is don't change either. The possibility to execute them is not severely affected. In general, that's an ambitious target, but it's realistic. And we've also taken that with some conservatism. So that is why we work on this -- work on reaching this. That's a hard piece of work. But that's what we believe the company can and the company should do midterm. So thanks very much from my side. And I would then turn to questions.

[Operator Instructions] And the first question is from Robert van der Horst from Warburg.

A couple actually, but I'll keep it brief. The first couple of questions, on the coronavirus impact. I know that we are all working on guesswork right now. But just to give me an idea, maybe do you see some product categories or some segments especially vulnerable, some -- or even -- or less vulnerable? Or are there even opportunities occurring? I kind of remember that especially in the laser scribing business, we had some low-quality, lower price competition from China that wasn't able to deliver, and maybe also a little bit on how the China business in general is doing right now. And news are coming in that things are going slowly back to normal. Do you already see some impact here? And on the midterm guidance, you mentioned road maps and concrete customer project. Just to give us an idea how this visibility works. Is this -- is the midterm guidance completely based on concrete projects you're talking about? And if so, is there some potential to even touch that guidance if new projects emerge?

Okay. So let me -- I'll start with your first question, if I -- I mean that was kind of more than 2. If I forget anything, please remind me. So coronavirus, a couple of things. We have no cancellations to date of any contract in any business unit. We don't really see that one business unit would be more vulnerable than the other. I don't think that's really the case. I mean none of us -- none of what we have is a consumer business, for example. So we obviously don't have a better visibility than what we've published at this point. We don't really expect -- well, we obviously expect -- I mean we can't exclude there will be some impact. If there were to be a very pronounced recession, especially if it's a global and pronounced recession, then clearly, we will see some impact. At this point, I would say we see probably less impact than I would have guessed if you had asked me 4 weeks ago and described the situation in the world today. We see some projects that -- where the time line moves a little bit backwards. At the same time, we also see some projects where we are contacted and asked to deliver sooner than originally agreed on. Somewhat surprising, and that is happening, not just one, but at times it's 3 times. Then you had a question about China. The China business, interestingly, never thought. During the lockdown, which for some time, of course, didn't just extend to Wuhan and Hubei province, but covered pretty much all of China, everybody was working on the home office, our colleagues, but also our customers. Sales conversations continued from home office. Not to make light of the situation, but I think people, at some point, were bored that having a conversation about work didn't sound like a terrible way to pass part of your day. Projects have moved forward. I don't expect at this point there to be a pronounced dip in our China business, at least on an annual basis. Obviously, that can change, and then it could come back. Various things could happen. But at this point, this is what we see. I believe your second question was around the medium-term guidance. I had already mentioned a few things about that in my introduction. We've basically looked at -- for the LIDE part, I think that was your question, we have looked at what are the key applications that we see there based on where do we have customers already buying pilot volumes, basically, engineering samples from us from our current lab foundry setup. And what is the prospect of these applications. So what we did is we looked at third-party market numbers as hard as possible. And a lot of these applications, those numbers exist. We would take some consensus numbers from well-regarded market reports, then make assumptions on which share of this business, for example, in the display space, just to give one example, we would expect to move to a technology that involve LIDE. And then of course, you can say what's the market share that LPKF is expected to have. Based on those assumptions and our knowledge that we would have in these applications, what, for example, the processing time of one unit typically in this space. Let's say, in other words, what's the capacity of one machine, whether we sell it or whether we operate it as part of our foundry. And therefore, what revenue can we expect from this particular market volume. For those applications where this level of transparency is there, we have done this bottom up. This is a process that started late in the year and extended through February. So quite a bit of work went into that on our end. For other applications where we have this transparency, we have used them and then added them up. There are other applications where we expect business, but that level of transparency and ability to quantify there, those we have neglected for the time being. Then after adding this up, of course, we have applied appropriate discounts to get an estimate for 2024. That's the process. Clearly, and as you would also expect, this is not specific customer projects. I mean the project lead time for our customer product in the space is not going to be 4 years, at least that would not be a very successful project if that ever took so long. But this is bottom-up numbers per application that we have added up and then applied appropriate discounts to, in line with how we have given guidances for the quarter and for the year since Christian and I have been on board starting in 2018. I hope that answers both of your questions. If I missed anything, just let me know.

Yes. It does. Some short follow-up. So on the first one, on the -- basically for 2020. You mentioned that Welding, for example, has 50% automotive exposure. At the moment, it seems that no one's working at automotive factories really. So at a certain point, I would expect some impact here. And another segment, which is the Solar segment, which was already kind of weak in Q4, Q1 won't be any different. Do you see an impact? I was assuming that there was some logistic problem maybe to deliver or something, but this seems not to be corona related in any way, shape or form. So do you here expect to see any uptick soon?

Looking at the segments. The Solar segment, quarter 4, that there were no deliveries of machines that was absolutely planned. That was not any surprise. That depends on the timing of our customers. And for Q1, there's one customer which already a while ago asked us to shift the delivery of the machine because he's delayed in his factory. So that is one thing where something -- and that's a small single-digit million euro amount shifts from Q1 through Q3. But that's about it when it comes to the larger orders. The Solar segment is the segment where we expect structurally the most stability and the least impact from the coronavirus. Why? Because the customers here are long term, and they are committed to execute their plans, and they have the financial means and the mission to execute their plans. And when we look at the conversations with them, then the conversations have not slowed down during the crisis in China. So the signals I have on the Solar segment are, I would say, the most constant ones of all. Development with the state, the government-induced purchases, which are part of what we see there, from universities, from certain institutes and certain applications, that is similar. That's a relatively stable component. So that's basically what we see there specifically. On the other hand, your question on Welding in automotive, automotive was weak for the rest of the industry in '19 already. We see that the automotive suppliers, the Tier 1s, which are mostly our customers, they are buying the equipment, which they intended to buy. Why? Because they need it. The change will be, if companies decide not to launch a new model, that is when there's a change for us. If they launch a model just a month later, so it's a month later. But our determining factor for -- if customers buy our equipment and we can help them with our equipment is the new model which they will launch.

Yes, one thing to add. I mentioned that there are some instances where projects have been accelerated. Somewhat surprisingly, one of those cases is actually automotive project for a Tier 1. They asked us to deliver the machine as soon as we can, sooner than previously agreed. Go figure.

The difficulty, and to add that is when you want -- when you call a customer today and tell them about the opportunities we can provide to them, the customer is not as receptive as he was 3 months ago. The customer might be somewhere in semi-isolation or whatever or tasked with other things or even put to short-term work. So this is basically, in the acquisitions of new projects in the -- in industrial customers, this is where we will see some impact. Might be timing, might be whatever. But this is where I expect some impact when it comes to the acquisition of new projects.

The next subscriber, next question, Richard Schramm, HSBC.

Yes. I would also have a question concerning your midterm guidance, which obviously is more important than this short-term outlook, which no one can tell anyhow. So if I understood you correctly, the -- yes, market assessment for your LIDE technology you have made is not necessarily based on applications which are already accepted by customers. So you have mentioned the special one in the semiconductor segment which is now through and which has opened the door to this segment. But obviously, there are other market segments which still need to do this step. So could there be a delay in this respect because that's the process which you quite obviously cannot control here? Can you elaborate a bit on this? And second, even assuming that you would be right and achieving the corresponding contracts from your customers in the years ahead, how would you manage this growth? Because it would clearly lift your company into a completely new dimension. So how can you scale all the functions necessary in this process here? And isn't there the risk that it might come to frictions, which, at the end of the day, might also be quite costly ones?

Okay. Yes. Happy to answer those. So yes, the -- obviously, when you talk about a 4-year horizon, not everything that you anticipate to see in 4 years is already in place. Otherwise, it would not necessarily be a 4-year horizon. That said, the applications are obviously in different stages. In quite a few cases, the actual application itself already exists. And there is -- otherwise, there would hardly be a third-party market forecast for it. Let's take the split, right? There are people who have spent a lot of energy in deciding what is the volume of smartphones, tablets, et cetera, in 2024, and what percentage of this might be for the smartphone case, foldable displays. This is not something we have to decide ourselves. This is something we can use the opinion of experts. Now staying with the example of displays. There are nonfoldable displays to which we have solutions for the -- which are largely on better quality, and more importantly, cost down using LIDE. For foldable displays, fundamentally, you have 3 choices. You either make the screen out of plastic. That was Samsung's first version. Or you make the display out of ultrathin glass. This is Samsung's most latest version that they launched. Or you make a lot of thick glass that is somehow treated in such a way that it folds, which you can do with LIDE. You can apply LIDE process also to ultrathin glass. And we'll have meaningful benefits on the quality and especially also on the cost side. And of course, you can do plastic, then you don't need LIDE, but we don't see that as the dominant technology for 2024, and frankly, neither do the people who look at that market. So that's the third-party part. And now from that, we decide what volume of that do we expect to go into this different part of the technology and we also then make an assumption on what our market share might be. Obviously, we don't assume we're going to have 100% of any part of that market. So that's how we look at this. And this we do for every application there is. There are relatively few applications. I mean, there are applications we are looking at that are purely, as we say in German, music of the future. Those will be ones that we have not quantified and therefore not entered into our -- the quantification of our guidance. Applications we've looked at are within the display space, within the semiconductor space, that advanced packaging, various type of fan-out packages, geometries that could potentially include glass. That those new geometries are coming, that's a given, because they've been doing that. New packages have been developed for many years. We only started the concept of beyond more where the shrink of the overall device is no longer mainly reflected in the silicon shrink. That's not new. That's something that's been happening for the past several years, where costs down and size down has to come out of the package as well as eventually the whole device. Advanced packaging is a significant contributor to that. And then LIDE technology and glass components that can only be manufactured through LIDE technology or only can be manufactured in a cost-effective way through LIDE technology solve a number of very relevant problems in this space that are seen. Technology's role in semiconductors is fairly public -- published by the major players, though it's not something that's specific. I mean that view is not something that's specific to LPKF. That's the level of part that has gone into this. Now for the applications that we've quantified, we will have at least one, in some case -- in many cases, more than one customer that does engineering samples. And of course, in that exchange, obviously under strict NDA, we look at their road map together. So we have pretty clear ideas what we expect to happen then or rather what our customers expect to happen with it. So that would be my answer to your first question. I think you had the other question about growth. I mean going from EUR 140 million to EUR 360 million in 4 years -- 5 years, pardon, excuse me. I mean if you do the math, that's about 20-some percent. I don't think it's much more than 20% per year. So that is not -- that in itself would not blow any corporate structure. So I think we're generally quite confident that in terms of having the, let's call it, back-end structure sales, sales execution and so on, we should be fine. More to the point, I mean, one of the things that I've found when I started at LPKF was probably too much corporate structure. I mean for -- in the history of LPKF, the company -- it was attempted to give the company probably a more "corporate structure" than probably was optimal at that time or 5 years ago. So at this point, I think we are not suffering from -- even today, we are not suffering from having too few or too -- too few structures or too little structure in the company. I think what we have as a backbone in place should easily be able to handle a doubling or more of revenue. There's not an order of magnitude we're talking about here. If you're saying, well, after this, at some point, you want to become a company with $1 billion-plus of sales, if that were the case, please, I'm not predicting that. I'm just saying if that were the case, then obviously, one would have to expand the level of corporate backbone. But I don't see that as a hurdle. It's not -- I don't think this is a big challenge for us, if executed right, and we have people who know how to execute quite well.

Okay. So that's then for the internal part. And as you are more on a sampling, not just the manufacturer, can you be sure that your suppliers can grow with you, that you will not see any problems on the site, on limitations in your growth prospects?

So far, there are no issues there. No issues on the supplier side. No issues on the production side. We have seen that in an electronics business unit, we can ramp our sales already today with a 4 weeks' notice to about 10 million in 1 month in existing facilities without expanding and so on, without hiring additional people. So that's an ability which we've shown today which is helping us very much to serve larger orders from certain customers. They value the stability we have. And that shows us what our supplier network can do, what our logistics can do and what people can do. And that's why we have a relatively clear visibility that this is possible.

Yes. Our next question, Lukas Spang from Junolyst.

I would ask my questions one by one, that it's easier for you. The first question is on the working capital. You mentioned in the presentation that you want to reduce working capital this year despite coronavirus. But is it therefore possible that we see a temporary higher inventory, for example, during the year, to save fully ability to deliver?

Clear answer, yes, we have actively pursued that because in order to assure the minimum risk to serve our customer orders, we have pulled in certain inventory for existing customer or production orders to make sure we aren't suffering from any logistics or expected closures. So we will see in Q1 and Q2 an increased inventory. But that's very targeted increase. On the other hand, the projects we are having to decrease our inventory on other areas -- in other areas are pursued with the same speed as before. On the receivables side, we will also see some effect because -- and that's more an external effect, the payment morale is not increasing in such a crisis. It's rather decreasing. So that -- we see that. And we see that we are pushing back there and seeing that we find the right solutions with our customers. That works quite well so far, but that will also show rather an increase in Q1, Q2 as what I would expect as a corona effect. The major effect we expect in the improvement in our situation in working capital this year is rather from the inventory side than from the receivables side.

Okay. And then on the midterm target, can you give us some more color how we should expect the way during this period to EUR 360 million in 2024? is it a more linear way or more back-end loaded? Or what should we expect there?

Clearly back-end loaded, and that is due to how such technology is being established. And just to take Götz's example of the semiconductor customer. The customers, that's very -- that's not the same, but generally similar for many applications. First, the customer validates well. What can I do with that technology? Where can I use the most benefit in my next product and my next generation? Now that happens step-by-step and not everything at the same time. Secondly, after he's evaluated that, he's doing design into that project -- into the product. And then if it's an application where you will purchase the equipment, he will purchase the first equipment and then try out the process and qualify the process in his own production. And after that is when the serious production starts. So in each customer, there's a backloaded curve. And then you have the effect that, for example, the first semiconductor customer starts, then the others join, but they have the same curves again. So that's why we will see a very backloaded curve there, and that's absolutely expected. That's also why we are careful with the guidance.

And with the milestone, and I think that's important. For example, I said that the semi-tooling delivery is the first one. That was a milestone, and there will be additional milestones that can indicate that we are either on our way or not.

Yes. Okay. And then a more detailed question on the midterm targets. Can you give us a rough indication how much of the revenue increase is related to LIDE?

Okay. So we can. However, I am -- we cannot give you a specific number. If you look at the increase between now and then, then a very significant share, of course, will be from LIDE. It will not be everything as well. So don't say, okay, EUR 360 million minus EUR 140 million, and that has to be LIDE. That is not the case. Remember, the past 2 years, where we had very little of revenue and no profit contribution from LIDE, we've gone from just above EUR 100 million to EUR 120 million and now to EUR 140 million. We fully intend to grow the non-LIDE business as well. And we are seeking growth in all 4 business units in this side of LIDE as well.

But is it more than 50% of the increase?

We do not comment on that, I believe.

We do not comment on that. But if it was just 30%, that would be really strange.

At the moment, there are no further questions. [Operator Instructions] Now we have one further question from Alina Koehler, Hauck & Aufhäuser. Ms. Koehler, hello? Maybe you're on mute. We cannot hear you.

Sorry. I'm sorry for the late question. I just wanted to know if you could give us a quick update on where you stand with LIDE in all the other applications despite the one in semiconductor you were talking about, for example, display or also medical.

In all these applications that we have spoken about in this call and also in the past, we have ongoing customer relationships for engineering sample. Obviously, with some customers, we are further than with others, natural. But with all these, we see a clear path forward and we see clear progress from where we were 3 months ago and where we were 6 months ago. And that includes applications in the display space, that includes applications beyond that one customer in the semiconductor space, that includes applications in the medical space. Among others, there are others. I think even as far back as the middle of -- well, sometime in Q3, I think we said we had 30-plus customers for foundry. That number obviously has increased since then. And so there's more applications than just in those 3 areas. But those are the main ones that we are able to quantify and develop a relatively concrete growth curve for. Does that answer your question, Alina?

Yes.

Yes. So then there are no further questions.

Okay. Then I would like to thank you very much for joining this call. Our next regular conference call will take place on May 5 with the release of our 3-month report. Thank you, and goodbye.

Thank you, everybody.

Thank you. Bye-bye.