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

Ladies and gentlemen, welcome to LPKF Conference Call for the first 9 months of 2020. My name is Bettina Schäfer. I'm Head of Investor Relations and your host for this call today. [Operator Instructions] The conference will be recorded and published for a period of 2 weeks on our website after the call. What's on the agenda for today's call? Götz Bendele and Christian Witt will give you a quick overview of the business development in the first 9 months of this year and after that, we are ready for your questions. Before we start, I would like to point out that any forward-looking statements are based on estimates and on information currently available. These forward-looking statements are not to be understood as guarantees of future performance and results. Ladies and gentlemen, I now give you Götz Bendele.

Thank you so much, Bettina, and thank you, everybody, for joining us today. And we're quite happy to talk a little bit about Q3, but also more generally about where the company is at and how we are looking to the future, especially, but not only given the more recent developments of a macroeconomic nature. Let's see. I'm trying to switch to the next page. Hopefully, this works. Okay. Where we stand? All right. Let's hope it stays on this page. Great. So Christian will -- Christian Witt will go over the figures in a bit more detail. But looking at it from a distance, where we're at in the third quarter, EUR 25 million revenue. That's not a great figure, it's also not a terrible figure. It's essentially where we've been on average for the first half of the year. I think it's quite okay given the macroeconomic outlook and given the COVID-19 pandemic. Obviously not what we were expecting at the beginning of the year, but I would say, given the overall state of the markets, this is something we are, I would say, reasonably happy with. However, and I think this is the more important message, I think, for all of us and for you on the call is if you annualize this, 4 times EUR 25 million is EUR 100 million revenue. Last time the company was actually at that, company did not have a profit or even had a loss. We said that -- and we've told you over several quarters, and last year and even the year before, even in late 2018, the point that we've always made is that we are working on making the company perform better. And that was not just the same. And because we have done that, and we have succeeded in doing so over the last several quarters, even with this not very high revenue level over the last quarter, we have EUR 4 million EBIT, which is actually rather profitable, but just shy of 16% EBIT as a percentage of revenue and there are no onetime effects on this. If you look at the quarterly report, we've explained some of the measures that we've taken to reach that, there's no onetime effect in there that would drive this. So this is, if you will, a real figure. And I guess one of the questions is how did we succeed in doing that? And the basic answer is a lot of work. A lot of work by all the -- not quite 700 people at [Audio Gap] that have put in more hours, I believe, and more -- at least more effort. Because in reality, in the current economic situation, we and everybody else have to fight more for each million revenue than we did last year. On the other hand, and in addition to that, we've done things like the company-wide performance excellence program that really did a performance transformation of the company that we did from the middle of '18 until late 2019. And all that work, which not necessarily was always fun for everybody who was involved but it's paying off today. And this means not only are we stable and still debt free, but we are fully independent, and unrestricted, I would say, by the pandemic in terms of our economic decisions. Means we can invest and we do invest in our future, not merely in an abstract way but in a very concrete way. We are continuing to build out our LIDE business. We are hiring new colleagues in that area, not only in that area but especially in that area. We are building out our glass foundry, which is currently finalized, finished in Garbsen next to our headquarter, first phase of which will commence production still this year in 2020. We do avail ourselves of the short-term work facility of the German government, meaning in parts of the company, we are working reduced hours. However, wherever we do that, we are able and we do pay the difference to 100% of our people salary. This is something not too many people can do and do it today. We are also, I think -- and I think that's also important. We have a -- we have profit sharing with the employees. We've had that for years. And even this year, and this is based on Q4 through Q3 in each year. Even that is something that we are paying out an amount, obviously, not the same as we did last year, but it is something more than people expected, and it's more than people maybe anticipated when the pandemic first hit. So overall, revenue not so high. Profit rather high. I would say that adjusted for revenue, this is, if not one of the most profitable quarters, if not the most profitable quarter that we've had. It also means that we are not reliant on the economic crisis caused by the pandemic to end very soon to retain our ability to act rather than just react. I think that's also important because we don't know what the future will bring. I will comment a little bit on COVID in just a moment. We are ready for the future. We are investing in our future. We are expecting growth next year. We don't necessarily know how much growth we will have. How much will depend on what happens to the economy, obviously. But whether or not we will be growing next year is not in doubt. We already see initial indications, and I wouldn't call it more than that. But we are seeing initial indications of a resumption of growth. A couple of points that I've also written in my letter to the shareholders. If you look at order entry, and you remove the orders from 1 large customer just in Solar, that's all you remove, then we are actually looking at an order entry that is now higher than it was last year, both order entry as well as orders at hand at the end of September. And this is against the backdrop of the pandemic, I think it's quite remarkable. And Solar, of course, the orders are always scattered large but on the other hand, few between. So you can't look at a quarterly slice of the Solar revenue or order entry anyway because it comes in large tranches and, of course, not once a quarter. Incidentally, if you look at Solar and say, well, we don't want to look at the company just without Solar, but let's look at that as well. We did announce in late September that we signed a framework agreement with a large customer for a total of about EUR 18 million. Of those EUR 18 million, only an initial partial order of EUR 3 million are recognized as order entry in Q3. So that's not where the order entry comes from. In fact, if you look at book-to-bill in the third quarter, outside Solar, it's actually well above 1. Overall, it's at roughly 1, which is also an indication that we do see elements of growth even now and fully expect the company to return to growth next year. Another indication is that if you look at our largest business unit, Electronics, again, we had 1 large customer there who has pushed some programs and projects from an expected revenue for us this year into next year. Outside this 1 customer, we have grown this year in revenue and order entry within the Electronics segment. Again, in a regular year, this would not be particularly impressive, but given the fact that we are operating in the pandemic, where overall -- the overall economic situation in virtually all of our markets is affected quite a bit. This is something that leaves me confident about our growth next year and in the years beyond. Finally, and I think we'll -- I wouldn't be surprised if we get some questions from the group about that. In our LIDE business as well, we see progress as expected and not really changed from what we would have expected to see if there had not been a pandemic. The order -- the project delays are in -- intend to be in large orders, larger customers, especially within our mature technologies and in general, anything that has to do with the automotive space. But we don't see it in the purely innovation-driven LIDE area, where as you know, we have sold a number of initial systems to customers in different areas, semiconductor, display and the projects of our customers' customers or of our customers with their customers, I guess, I should say, we see them progress on the level and the velocity that we expected. We don't see any slowdown in this area that is purely innovation-driven. I think at this point, I would -- I'm trying to change the page again. I think -- here we go, sorry for that. Yes. Sorry, there's always a delay between my click and the page coming up. Sorry for that. So I do think before I'll let Christian speak about the figures in more detail, it's worth noting where are we at with respect to the pandemic as a company. Obviously, the potential for direct impact on our business is something that has been quite central to our thinking into what we've been doing since the beginning in February of the pandemic. We've had measures in place since then. At this point, we have further strengthened the measures we have in place back to the level that we had in March, April or beyond. We have further ramped up the use of home office, where strictly only those folks have to come to one of our sites to assemble systems come. Other than that, literally, everybody who can possibly work from home is asked to do so. We have a physical separation of the site into a number of sections where people don't interact with each other. Obviously, a strict limitation on visitors and on travel, equally strict hygiene concept, masks, distancing and so on, which, of course, is easy, given that so few people are actually in our site. Even where people still have to do some nonproduction work, we never have more than 1 person in the room because we just have so much space now that's currently being unused. Even in October 2020, where our sites in Germany and also in Slovenia are now in areas that are considered risk areas, and this is actually a difference from March. No individual was infected at any of our sites, that's important, and we have not had any business interruption. We also have not had any further order cancellations. We had 1 small one. I think we reported on this in one of the past calls. No change from that. Yes, we are experiencing delays of some projects, especially from large customers. But again, this is what we did in the past. With that, I would like to hand it over to Christian Witt, who will share some more details about our figures. Christian?

Yes. Thanks, Götz. Hello, everyone, also from my side. Let me give you some more insight into the financials of Q3 and our first 3 quarters. Is it moving forward? Okay. Looking at revenue, has gotten -- that was double click. Looking at revenue first, we've had revenue of EUR 75 million in the first 3 months -- 3 quarters, sorry, EUR 25 million of which we had in the first and the last quarter. Let me we first get this right here. Otherwise, you see the wrong picture for the text. Yes. With that revenue, looking at the background of that, we've had delays due to COVID-19 in all business units. And some of the areas are back on the levels which we had in 2019. Some areas are already growing versus last year, so that's quite good. And that's different from what we had in the first quarter. Looking at the book-to-bill ratio in Q3. And as Götz pointed out, if you take Solar out, and Solar is to be taken out here and looked at separately because it has different dynamics in terms of large orders being received and being delivered, so in the rest of the business, we have a book-to-bill ratio greater than 1. And in Solar, as you know, we've received the respected frame order, which will be converted into orders in the Solar business in the coming months. So actually, that's the situation of the outlook on the revenue side. When we look at profitability, we've managed to have that nearly 16% profitability in Q3. We've also had a quite decent profitability in Q2 even though a higher turnover, and we've had that without any onetime effects like provision dissolutions and so on of any significant size. So the EBIT margin we can report year-to-date is around 9%. And as we've given the guidance for the rest of the year, if there's another Q3 coming, plus/minus, then we'll be around 10% and EUR 100 million revenue, the guidance is -- has a bit of a range around that, but that's basically where we would expect to come out in the end of the year. And reason for that is that the gross margins of our business are quite good because we have a lower volume of traded goods, especially in the Solar business, which has been significant in last year. We've also had more smaller orders, relatively speaking, and less of the large orders, which give a better gross margin to us. So that is 1 key reason, the better gross margin. Second key reason is that the cost reductions, which we've been putting in place fairly quickly after the pandemic was announcing itself and then spreading, helped us in Q2. It also helped us in Q3 with reducing the fixed costs. There is, however, no effect of that on any further investments into our future. Future products R&D [Technical Difficulty] or any of that. We hire anyone we need there. We spend the money we need there, no matter if there's a COVID crisis at the moment or not because that is the future for our product company. Altogether, and referring to what I just stated for our order intake and order situation as well as the sales situation compared to '19 in the respective sectors, we do expect a positive outlook on the sales side. And given the fact that the majority of our cost improvements will also be effective in the future, also on the profit side for 2021 and beyond. Looking briefly at cash flow. We expect a significant improvement in working capital in Q4. Investment in LIDE foundry is, of course, included. And for the free cash flow, we expect a neutral free cash flow for the full year -- full financial year 2020. Looking at the figures to segment and diving a bit deeper into the revenue and the business unit situation. We have a declining revenue in all business units but for slightly different reasons and with slightly different background and outlook to the future. In Electronics, we have a delay in projects, especially with the large customer, as Götz mentioned. In Q3, it's actually quite good because we were able to compensate the lower volume with the large customer with a higher volume in other growing business with a larger number of smaller orders from all type of customers. So that's quite good because it also increases the independence from large customers and given the fact that we continue to work on projects, on these shifted projects, which were to happen in Q4 this year, but which will happen in first half year of next year, we expect to happen there. That is additional opportunity growing the base business and gaining back some of the larger business from the customer, which has been turned during this year. Looking at Development. We are still negative versus last year when we look at the first 9 months. In the Q3, we are nearly back on the level of 2019, unfortunately lower than previous quarters. And 1 aspect here is quite interesting. In Development, we had the largest decline in China in the first 1, 2 quarters. But that business has actually come back nicely as China has come out of the COVID pandemic lockdown, shutdown of the country. So we are seeing similar levels to last year already with respective growth potential for coming quarters. Looking at Welding, there's also a significant volume with 1 large customer, which we expect next year instead of this year. The other industries, medical is quite on track, which is one of the key areas there. Automotive has a weaker order entry, basically since Q2 and subsequently lower sales than in Q3, Q4, which we just have to note, take note that many of these Tier 1, which is majority of our customers is Tier 1 suppliers of OEMs in the automotive area, they have shut down their business for 1 or 2 months typically in Q2, and that leads basically to a lower order entry also in the subsequent month, and we'll see how that recovers. We see that some of these customers place their orders as before when they really need product. All of them try to push until the very end. And in some areas where it's capacity driven, which is not the majority, but it's part of it, they also try to hold back the orders as long as they don't need the additional capacities. And based on that development, which basically starts with the lower order entry and funnel filling in Q2, in the automotive side, that will leave some effect. However, that effect, if I was to quantify that for the first 9 months is probably between 5% and 10% of sales, not more. In Solar, as mentioned before, we expected to get 1 project from a customer in -- from a customer for about EUR 10 million in Q4 2020. We expected to get the project in by Q1, Q2 originally. We have received the project. But instead of having received the project, we have received a frame order, which is more or less twice the volume of what we originally expected for the coming 1.5, 2 years, depends. So what we basically see is that we will deliver these orders in the first half year of next year, but that unfortunately hurts the revenues of 2020. We have no significant deliveries we expect in the fourth quarter. That is actually due to the timing of the customers when they expect certain projects to be delivered into their factory. Looking at the profitability by segment. I think the key is, as mentioned before, is that we are able to reach about EUR 6.8 million EBIT in the first 9 months with the EUR 75 million revenue. That is not a great result, but it's a decent profitability given the situation. In all business units, we have enhanced the profitability by cost savings since Q2. Just to comment a bit there, we will not go further in these cost savings than what we think is reasonable for the business. We are not fighting to survive. We are taking the opportunity to save money where it makes sense, especially where it makes sense, not only in the short-term but also in the long term. And we continue to invest and strengthen the areas we will want to be strong tomorrow. That's R&D, that's sales, business development, but that's also things like digitalization, which helps us in the efficiency of tomorrow. Looking at the different business units, just to give some additional flavor on where -- what effects are getting in there. In Electronics, lower revenue but fewer larger orders, so a better structure of the orders is what's basically driving profitability there. In Development, it's slightly lower volume. Profitability is not too different. Earnings are here relatively stable. Welding is purely driven by the lower volume. And Welding has no chance to get to any positive results this year. That is volume-driven. We expect a very different development here next year, but we have to accept that for this year. However, we fight as much as we can, reasonably can and want to, to be as good as we can. Solar, it's lower revenue, but it's less of the traded components, a higher -- a large degree of the lower revenues from a lower volume of traded components with a very small markup. Thereby, the effect of the Solar profit is not nearly as large as one would expect from the lower turnover in segment. And as mentioned, we are working on costs in all areas. Looking at cash flow, which is the next slide. I will try to give the next slide to you, yes. Looking at free cash flow. We have year-to-date free cash flow of minus EUR 13.2 million. Much of that is driven by working capital movements since the beginning of the year. And that is also where we expect very most of the improvements towards year-end. Inventory is all already back on track as expected. We've had a higher inventory figures for Q1 and Q2 due to an intentionally higher inventory on the first wave of the COVID-19 pandemic. We will not do that again. We don't need to do that again because we now know that our supply chain is well controlled and does not need these extra buffers. We expect some further reductions in Q4 and afterwards step-by-step as planned and as expected. On the receivable side, we are significantly higher than we were -- then we want to be at the end of the quarter. We expect a significant reduction there and know who, where and why. So that is a rather temporary situation. The advance payments are lower mainly due to the fact that we have less Solar orders in the book because these are the most significant ones with the advance payments. We do expect some improvement here by new orders we are receiving from our customers throughout Q4. That will not go back to the level of 2019, but that will improve significantly when we get these orders and the respective down payment. Investments includes our LIDE foundry, which we are in the last steps basically before starting to produce there, some last technical issues and then the cleaning and then getting into work and actually starting step by step the production in there. Last but not least, there are some other smaller items like higher provisions we had last year for the -- for bonuses. We have very few provisions for bonuses this year. Of course, that works on the cash flow as well. Looking at the guidance we have issued. Of course, we still have some uncertainties on the COVID-19 pandemic. But let's say, within a reasonable frame of expectations, we expect for 2020 between EUR 96 million and EUR 102 million of group sales with an EBIT margin of about 8% to 12%. The reason why the margin range is still relatively high is basically the range of the group sales being relatively high for last quarter. For 2024, our anticipation, our guidance and our path is basically unchanged. We expect group sales of more than EUR 360 million and an EBIT margin above 25%. And we've verified the key elements of the LIDE growth path in September in a general revision. And as Götz said, we've confirmed the numbers as well as that the progress is confirming our path to get there. Well, that's from my side. I would hand back. Thanks very much for your attention, and we would open for questions then.

Thank you very much, Christian. I take over again. [Operator Instructions] I can see the first question here. It comes from Florian Pfeilschifter. I think Mr. Pfeilschifter, you have to unmute yourself because I can't unmute by myself. Mr. Pfeilschifter, can you unmute yourself?

Now it works. For some reason, it's always the same problem between the 2 of us. I have a few questions. I would take them 1 by 1. And maybe on the Electronics segment, you said that you have a higher customer diversification now that lead -- led to the improvement in margins. Could you give us maybe a directional guidance on the directional guidance how the margins differ between the larger orders, larger, smaller -- between large and smaller customers? And also what the share between those kind of customers currently is? And how you would expect this to differ into the next year?

Okay. We may not be able to answer everything you are asking. But starting about the relationship, I'll start saying with the relationship between 1, 2 but especially 1 large customer and then others, that share has -- I mean it is weighted more heavily to the broad set of customers this year. Now there's -- you can't -- it's not 1 dimensional, obviously, the margin development. But generally, this would have contributed to a slightly higher margin -- gross margin than -- rather than the opposite. That said, within Electronics, there's business lines from stencil laser to depaneling to multipurpose machines to AMP module. So within those and within regions, you also have margin dependency. So it's not as simple as that of saying well but generally, as you can imagine, if you order 10 or 20 or 50 machines from us, you -- that are identical, you might have a better chance of getting a slightly lower price from us, not different from any other company.

And just to give you an order of magnitude, if last year in that segment, we had a share of more than 40% with 1 customer, then this year, the share would be below 20%, just to give you an order of magnitude, what that means. And when you want to look into margins, look at the gross margins of the group average, for normal Electronics customer, the deal, the gross margins would be slightly above, slightly better than the group average for a large, but still attractive order where you receive orders of the size of EUR 3 million, EUR 5 million, EUR 7 million, EUR 10 million, you will have to give a double-digit discount. That is clear, as Götz said. However, the business is still interesting. It's still profitable. It's still interesting [Technical Difficulty] for us.

I mean, Electronics EBIT would be smaller than on gross margin obviously.

Just to avoid any thoughts that would be -- we would be taking business or we would have taken business in the last 2 years just to make volume. We've not done that. But if you give a 10%, 20%, 30% discount, then you will see that in the margins, if it start to order.

Okay. Understood. And you said 40% were coming from 1 big customer, how do you expect this to develop into the next year, maybe somewhere in between this year and 2019?

That would be my expectation.

Okay. Understood. Perfect. Another question regarding the foundry. You already talked a little bit about that LIDE is progressing well. But at the CMD, you said that the foundry is set to be finished within the next couple of weeks and should start production by -- or towards the end of the year. So how is this progressing? And do you already get some orders for the foundry? And if not, when could we expect first orders and sales in the foundry?

Right. So what I said was that the building is finished in a couple of weeks because -- and it is. And now the finishing touches, I would almost say, of the outfitting are being done. So we do expect to -- we still expect to plan to commence production this quarter, before the end of the year. So that hasn't changed. In terms of production, some of the production of small volumes, engineering samples, we would obviously start doing inside the foundry from day 1. For real high volume production, especially since this is our first production facility, we can't really get it certified from customers until it's actually there and operating. So can't expect and we don't expect to have firm orders in large volume from day 1, and that was something we always knew. But we do expect it to fill progressively as time goes on throughout next year. And we are already considering what we would need to do to expand it as fast as we can, commencing at some trigger events.

Okay. Great. I'm very, very clear here. My last question would be on the cost savings. You already talked about in the last call that you think you can sustain quite a significant share. Do you still commit to that comment you gave back then? And maybe you can quantify how much you hope to sustain in the post COVID environment?

Yes, Christian, why don't you answer this? Yes.

Yes, we still do. There is no change. And there's not too much of a change between Q2 and Q3, just that some of the measures didn't fully kick in, in Q2 but are now in Q3. Our estimate is that more than half of the cost-saving measures will have a long-lasting effect.

And to the extent that the cost savings are operational performance improvements, of course, that would stay. And in fact, that needs to be explained. I mean, let's be real. We are not standing and we can't stand still. Corona or no corona, we have to continue to become better. Just because we are already quite a bit better than we were maybe a year or 2 ago, doesn't mean we're necessarily world class or we certainly haven't reached the limit, let's put it this way. So that's an ongoing program that we have maybe accelerated a little bit in this year, but I expect that performance improvement where we become leaner, faster, more agile with respect to our customers and generally higher-performing and then things like this cost that really work on the gross margin, that I also expect to continue. So this is an ongoing journey.

And digitalization is something where we're working on the company, where we started at the relatively low level. And one can say that's bad. I'd rather say that's an opportunity to get better because that's things where we can improve. And we are doing that. We're working on those. So within the next year, 1.5 years, we should see some significant improvements there.

The next question comes from Lukas Spang.

2 questions from my side. You both talked about some projects for the first half of next year. So how good is your visibility you have right now for the first 2 quarters at all for the next year?

We have visibility, but I would separate that out a little bit. We see business coming in for Q1. While some of the orders we are still -- we are getting at the moment are still for Q4, some are ready for Q1. So we see a trend there, which in some areas doesn't look that badly. In some areas, we know that they're specific projects which customers intend to execute in the first half year. So that is things -- that's areas where we do have visibility. And the general business and orders to be received for Q2. I think the specific visibility at the moment is naturally relatively low. So far, what we can see is the trending on Q1 and some particular projects, which we know about. And those are, as we said, slightly encouraging.

And 1 thing that I've written somewhere, I think, in last quarter's letter. One thing we noticed is that the lead time throughout the business units tends to decrease. Obviously, Solar is still the longest, Development is still the shortest. Development has practically no lead time below the business, Electronics and Welding in between. But in each of these, the average lead time between order placement and delivery is decreasing. And I'm not sure that's temporary. This might be permanent. And in fact, I think our ability to do that for our customers is actually a competitive advantage or at least it avoids a competitive disadvantage, as the case may be. So it's something we have to do. Customers expect it. And they've been doing a lot of necessity in the pandemic, but I believe they will continue to do it next year and the years after as well, where they want the maximum flexibility. I mean, B2B becomes always a little bit more like B2C just like we like to have a next-day delivery for everything. Well, it won't be next day for a complex machine, but it will no longer be 6 to 9 months. They expect it at 3 to 5 months, maybe. And that's not trivial for custom-build machinery. But in many cases, it's necessary. We are learning how to do it. We have learned in many cases, how to do it this year, and that's a good thing. Of course, what it will mean that relative to revenue, we might, in 2, 3, 4 years, have generally slightly lower trending order books than we have now, which requires more of the 2 of us to really have a good judgment and feel confident about the future because order entry as an indicator points less far into the future than it maybe did a year ago.

Okay. And then the question would be at the beginning of the year, you had the target for 2020 to reduce your working capital compared to 2019. So if I hear you are targeting for neutral free cash flow for the complete year, is this still a realistic target or would you expect a little bit higher net working capital at the end of the year compared to last year?

We would expect a similar level. We'll see -- as mentioned, receivables is where we are much higher than we will be at the end of the year and we know why. There are some reductions in inventory. We'll see some effects in the advancement payments -- advance payment and freight payables, and that should put us into a more or less similar position like last year. Relatively speaking, the target to have somewhere below 10% working capital ratio in terms of sales remains and is absolutely realistic.

Okay. So probably Q1 2021 cash flow would be then very good?

You mean Q4 '20 would be very good?

Yes. But also, if you say receivables will stay at a higher level?

No, the receivables will go down. Receivables will go down. Clearly, we know where, why and how. And that is 1 key reason why the cash flow in Q4 2020 will be quite decent, and we'll assure that we get more or less to a neutral cash flow of financial year 2020. It's just far too high at the moment. I mean if you look at the figures, that's pretty clear.

Yes. So the working capital driver, if we look at a relative factor will be the inventory?

You mean long-term or short term?

No, no. For 2021 -- 2020, sorry.

Can you explain? I don't understand the question.

The relative higher net working capital to 2019 will be the inventory?

It will mostly be the advanced payments. Because there, in 2019, we had relatively full order book from Solar. And the full Solar order book has a relatively high ratio of advanced payments compared to other orders. And this year, we will have a lower number of -- lower amount of euros in the order book by the end of the year than we had last year in Solar, and that translates into a lower amount of advanced payments received. It won't be as low as today, but it would not be as high as it was in the end of '19. And I can't quantify that to the million now, but that is absolutely and relatively speaking, the highest [Audio Gap].

The next question comes from Lello Della Ragione.

I've actually only 1 on CapEx. And linked to the statement that you made before and the fact -- and the figure that you show in the press release regarding the LIDE facility. You mentioned the EUR 2.5 million. Just wondering if you spend entire amount or you're willing to -- or you are expecting to spend more going into Q4 on this? And linking to the comment that you made before in terms of potential timeline that you or faster CapEx on the LIDE side, what is really -- how can the timeline evolve? And how big it can be in terms of size compared to the initial investment?

So the total investment -- the total cash out, let's put it that way, the total cash out we expect during this year from that first phase of investment is between EUR 4 million and EUR 5 million, EUR 4.5 million plus/minus is what we expect it to be. And so we'll have a significant number of final payments in Q4. There will not be much more investment in the first quarter of next year. First phase is finished, we might move in another machine or something like that. But that is not the most significant numbers we would see there.

And if you link to the comment that you made before about the possibility of investing in factory going into the next year looking for future order, nothing really satisfying with that, but just trying to understand how this figure and what can be a reasonable time line for that investment?

Okay. With the capacity we have there, I think we are good to start. If we ramp up the investment to the full -- to a, let's say, EUR 15 million to EUR 20 million per year volume in that first phase, that would take another plus/minus EUR 3 million, EUR 3.5 million in investment, but that will not happen in a day, that will happen over a year or 2.

And the biggest -- the 1 thing that we don't know and we cannot know is which customers will fill the foundry exactly at what time and the sequencing. Just like we didn't really know which was the sequencing, which of the different leads we had would be, for example, the first semiconductor machine we sold. It ended with somebody who we didn't expect to be first, and who expect it to be first turned out not to be first. This is in a way similar. And so the speed this first phase will fill depends, is it going to be a number of moderate sized deals, if you will, that fill the fab or there's also potential for 1 or 2 applications to fill this relatively quickly, but who comes first is somewhat hard to tell. I mean we do have an idea, of course, but not to the point where we already commit to any investment at a later time. We just -- we keep the options just like with our customers. So we keep our options open as much as we can so that we can be as flexible and as fast when we act.

And the main investment, which we will put in there in the next years is further light machines so the machines we produce ourselves. That will be the major part of the investment. There will be a second etching tool at some point in time and maybe some tools for special treatments if needed by the customer like metalization or [ signature ] or things like that. So that is the type of equipment we discussed here. But the major part of machinery will be light machines themselves.

The next question comes from Robert-Jan van der Horst.

So most of my questions have already been answered, fortunately. There are still 2 smaller questions. So the 1 is on Solar. Just in case that we will see further or increasing travel restrictions in China because right now, no one knows really what 2021 will look like, would that be a problem? Will you need a lot of LPKF employees on-site to install those laser scribers? Or that's mostly like contractors within China? And the second question would be on the foundries and especially about the audits you mentioned. Can you maybe give me some idea of how long a typical audit of this site will take so that I can't get an idea of how fast you could ramp up the capacity potentially, at least?

Yes. So Solar, we have learned to be pretty good at getting people to places where it's hard to get to. We have gotten technicians -- well, I mean, this is -- I see a smart question, but this is -- I don't have a better way to explain it. I mean, we have been able to get people creatively but legally, Let's be clear what I mean by that, to the United States in June and July, even though there is a travel ban. They spent 2 weeks in Croatia. And then the flew via Istanbul and they were in the United States. And then they went 2 weeks into quarantine there. Then they went to the customer. This was, of course, not for a 1 day install. This was for something that in itself took a few weeks. We've had people go to Malaysia and be in quarantine there. We have people who are motivated, who are enjoying what they do enough that they accept to do this. Obviously, not something that we hope to be doing for years. Even into China, there are ways to get people in with special permissions. It's something that we can do if we absolutely have to. That said, we also are learning to do installs of any kind of machines with much fewer, and in many cases, without our own staff. Now the Solar machines are not exactly plug-in place to put it badly. So I would expect that we do need a lot of support. However, in China, we also have our own stuff. We have our own service technicians in our LPKF China organization. So we are expanding the range of things we can do with our staff that is actually in China and our specialists on the German side on some sort of live stream video. So I don't necessarily know exactly what the best approach will be, but we are confident that we will be able to install machines in China even if travel restrictions remain more or less where they are right now.

Okay. But that would mean that the people who deliver the other parts of the Solar production line would need an equal level of creativity to bring their people in to install their parts probably. So there might be some risk not to the order itself, but to the delivery starting in Q2, if travel restrictions get more strict again?

I mean, in theory, this is possible, but I can assure you that when we send it -- when we are successful in sending somebody, the customer will explain in no uncertain terms that they expect others to do that too. That has, in fact, happened a few times where people say, hey, if the LPKF people can come, just call them and have them teach you how to do it because you need to also come. And that's happened. So I mean, yes, "if the world comes to an end" I mean, we don't know what this pandemic does to us. But I think if it comes to the point that we won't be able to install, I would submit that at that point, the world has much bigger problems. Oh, yes, you had another question. You had a following question on the qualification. Christian, do you want to go at that?

No, no. I wanted to just add 1 comment on Robert's question on Solar. Look, in fact, what we've seen in 2020 is that we had some delays when the customer wanted to receive machine in China, and we had a delay in the -- in installation in the U.S. that took longer than we thought to get there. And what it cost us basically was that some of the -- some additional order we expected for modernization, for improvements, for installing additional, let's say, tools to increase the efficiency of the factory and of the cells, that these tools will have a delay of a couple of months. So unfortunately, that's another EUR 2 million, which went into 2021 instead of 2020. so that is the type of delays we've seen. What we have not seen in that is any delays in the delivery of machinery, for example, to the U.S. that was scheduled for the main delivery for June 29 and was delivered on June 29 as planned. So in general, the reliability with our customers on our side and on the customer side is very high with the U.S. side of the customers, it's decent with the Chinese side. It just had a bit more trouble with COVID in the beginning of the year and that were the most difficult situations we had, these installations. Everything else was easier than these 2 installations. We've made it and we've made it to the clear satisfaction of the customer.

Okay. Perfect. My second question was on the foundry on what do you expect? How long the audit process per customer will take? And what would be a best case scenario to utilize the capacity that you are now building, I mean, without extensions?

The critical part is not the certification, the critical part is getting the orders. Customer certification, it depends -- I mean, it's not like ISO, where there's a standard process. Each customer has their own rules. It could be days, a week, could be a few weeks, it depends on -- sometimes it's more papers. Sometimes people actually want to come and look or at least they would if it wasn't for the pandemic. So it varies.

The next question and probably the last question for today comes from Alina Koehler.

You said earlier that LIDE is progressing very well. I just wanted to see if you could give us more color there. Like how is the sale of engineering samples developing? Is the pace increasing? And how many customer projects do you have currently?

Yes. So in fact, you're absolutely right, Alina, in assuming or asking about the pace of the engineering samples. That is one of the indicators we use. And -- so 1 of the things we asked to ourselves in February, March is what will happen to that. And other than a short bump when they were really shut downs everywhere in March, maybe early April, we have seen this not just resume, but resume the growth curve that we have seen before. And that's one of the reasons why I made the statement I made. Without that, I would have had hard time making that statement. In terms of the number of projects, I don't believe we are actually sharing that as an absolute number, Christian, correct me if I'm wrong, [Audio Gap] is growing as well, and it's growing in the different stages. I mean we have -- we look at if customers who have an initial interest, maybe get a free sample or 2. Then you have customers who place the first paid order, and then we have customers who come back for repeated orders over time of engineering samples. And within each of these categories, I mean, obviously, 1 grows from one to the next to the next. So overall, there is a growth in each of those buckets, which obviously goes hand in hand with the fact that the number of engineering samples grows. So that is essentially -- that's 1 side, that's the sort of very countable, if you will, side. And then in addition, we look at some key projects, individual projects as they are progressing from where we interact with our customer to where the customer interacts with their customers, and then we usually know about this because the customers that -- I mean, the customers' customers will have questions that then go back to us. So we are generally rather well informed on how these projects are progressing. And that is also going, I would say, at pace, in some cases, maybe even faster than we would have anticipated and typically not much lower. So that makes us confident that whatever slowdown and project time line slips we see in our mature business, as Christian had described, the LIDE part is very different because it's not driven by volume invest next quarter or the quarter after, but it's really driven by the desire and the need for innovation that our customers and their customers feel. Maybe one more thing to add that I've mentioned before, but it's worth repeating here. It helps, of course, that when you switch from whatever you're using now to LIDE, whenever there is a switch, you're typically not just getting a higher performance, but you're getting it at a considerably lower price point. That helps in not slowing it down because you don't end up having a harder time to find whatever money that pays for the additional value because the actual -- the additional value, sorry, comes at a lower price, not at a higher price, unlike a number of other innovations.

And there are no further questions at the moment. So I think we can finish here. And I would like to thank you all very much for joining this call. The next regular conference call will take place on March 24, 2021, at the release of our annual report. Thank you very much, and goodbye.

Thank you, Bettina. Thank you, everybody. Take care.