Melexis NV (MELE) Earnings Call Transcript & Summary

Hello, and welcome to the Melexis Q1 2023 Results Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions]. I will now hand you over to your host, Marc Biron, the CEO, to begin today's conference. Thank you.

Thank you. Hello, everyone. It's a pleasure to welcome you again to the earnings call related to our Q1 results. Today, as usual, we are 2 speakers, Karen Van Griensven, our CFO; and myself. Let's cover some top line and financial background first, after which Karen and myself will be happy to answer any questions you may have. Our revenue in Q1 increased by 24% compared to 1 year ago, and it increased by 2% if we compare to the previous quarter. Supply bottlenecks continued to exist for our portfolio addressing innovative applications linked to electrification, while in other areas, we experienced a healthier supply/demand balance. Those trends are also visible in the outperforming product lines. Our current sensors and embedded driver product line have almost increased the revenue by a factor 2. The current sensor success is related to high demand in inverters, onboard charging and DC-DC converter application of electric vehicles. The increase of driver products is driven first by the thermal management application in the electric vehicle, but also by the success of our products used in interior lighting applications. The steady growth of our magnetic products has also been confirmed during this quarter. For example, we observed increasing sensor content for new applications driven by steer-by-wire or by brake-by-wire programs, which are more and more popular given the increase of autonomous level of the car. For 2023, we anticipate the continuation of supply chain constraint for the innovative applications that are used in electric, but also in high-end cars. As mentioned before, the electrification of the vehicle, which comes with a lot of comfort and safety applications, will ensure a robust demand for our product in the long term. The demand in the future is also driven by the increase of the ADAS level towards Level 2 and Level 3. To be able to respond to this demand, we will carry out advance payment for capacity reservation to our main wafer supplier. The majority of those payments will be performed in Q2 this year. I'm now giving the floor to Karen for more financial results.

Thank you, Marc, and hello, everybody. So a bit more light on the financial part. Yes, I will repeat what Marc already mentioned, that sales came out in Q1 at EUR 228.6 million, an increase of 24% compared to the same quarter of the previous year and 2% compared to the previous quarter. The Euro/U.S. dollar exchange rate evolution had a positive effect on sales of 2% compared to the same quarter of last year and a negative impact on sales of 2% compared to the previous quarter. The gross results was EUR 102.8 million or 45% of sales, an increase of 24% compared to the same quarter of last year and an increase of 3% compared to the previous quarter. R&D expenses were 10.8% of sales, G&A was at 5.3% of sales, and selling was at 2.2% of sales. The operating result was EUR 61.1 million or 26.7% of sales, an increase of 22% compared to the same quarter of last year and an increase of 6% compared to the previous quarter. The net result was EUR 50.9 million or EUR 1.26 per share, an increase of 5% compared to EUR 48.6 million or EUR 1.2 per share in the first quarter of 2022 and a decrease of 2% compared to the previous quarter. The outlook. So Melexis expects sales in the second quarter of '23 to be in the range of EUR 233 million to EUR 238 million. For the full year '23, Melexis expects a sales growth between 11% and 16% with a gross profit margin of around 45% and an operating margin of around 26% at the midpoint of the sales guidance, all taking into account a Euro/U.S. dollar exchange rate of 1.09. I would like to now conclude the introduction and open the Q&A session. So operator, please go ahead.

[Operator Instructions] We'll take our first question from Francois at UBS.

The first one is -- maybe Marc, you talked about the supply bottleneck that continues to exist in innovative application and the other areas more healthy supply/demand. Can you quantify how much of your production is driven by innovative products and how much is more healthier today?

Yes. Yes, all the innovative product, as I mentioned, is indeed electrification and all the comfort and safety. We consider that what is pure ICE and what is pure combustion engine is 25%, let's say, of the product portfolio. All the rest is either not supply chain-related or it is agnostic to the type of drivetrain.

Okay. So is this right to understand, is 25% of your portfolio is still tight and the other part is still okay. I mean it's much better supply/demand. Is that right?

No.

The other way around.

Exactly.

Adjacent is obviously also not in [ concerned ].

Yes, indeed, Karen, it's good that you complement. My question was indeed focused on the automotive, but the adjacent is for sure relaxing. I think it's the case of all our peers, let's say. And indeed, it gives us some opportunity to redirect material from adjacent to automotive.

Okay. Great. And what changed in the portfolio that is healthier in terms of supply/demand? I mean it was still fairly tight in the last few quarters and all of a sudden is getting healthier. It's difficult to imagine supply going up significantly in 1 quarter as such, because it takes time with things. So did something happen to the demand? I mean to go back to more balanced and healthier situation? I'm just trying to understand if you saw anything on the demand side that could make the situation healthier from the supply/demand perspective?

Yes. For the adjacent part of the business, for sure, the demand has decreased. For the automotive part. I think the -- yes, the demand was a bit skyrocketing in the past, and now the demand is more balanced, I would say.

Did you see any cancellation or pushouts of this kind or?

For the adjacent?

No, for automotive, principally, for the year.

No. No.

Okay. So now when we look at a bit ahead, I mean, your guidance implies 9% growth year-over-year versus 18% in H1. So a fairly healthy slowdown with tough comps. How do you expect the inventories to be in your products specifically? Do you expect any correction at some point, because we know that the inventory seems to increase significantly, not only for finished goods, but potentially semis as well. Of course, data is difficult to catch. So that's why I'm asking you. Should we expect some correction of inventories after a strong build in the last few quarters within the automotive? So how should we think about the inventories?

Yes, we monitor the inventory at the distributor, but also at some key direct customers. Yes, we have seen that the inventory has increased, let's say, 6 months ago, yes 6 months ago. But since then, the levels are quite constant, and we -- it looks like that, I can repeat, in some months, the inventory level are constant, does not increase anymore. It looks like there is a kind of equilibrium or a stable situation on this aspect.

And is it -- the level? Is it higher than history? Or is it in line with history?

It is in line with history. It's higher than 1 year ago -- I'm thinking of '22 for sure -- those inventory levels were very low. And now it's -- I would say it's healthier, to give [ your popular word for this ].

And your guidance suggests -- I imagine doesn't imply a correction whatsoever, right? I mean, in the second half of the year, you expect this inventory to remain constant. Is that right?

The guidance is based in this, on the orders that we receive and our market knowledge, yes.

And the supply, that's a very important element still.

Yes. We could also add that indeed we have also some -- we still have some backlog in the inventory, let's say, and the backlog is also an important aspect to take into account.

How much is your backlog versus your revenues today? Or what's the value of your backlog, if you prefer? Can you provide?

It's still huge, but the quality is also still not so easy to assess. But overall, it's still huge. And like we said, we see -- we have limited pushouts and so on. So yes, overall, still undersupply versus demand is still the main bottleneck for us to grow more than what we have given as guidance today.

We will now move on to our next question from Sandeep at JPMorgan.

I'm not sure I understood exactly what you're saying on supply. So are you saying that the supply is constrained on the 25% or on the -- or on the rest of the autos market?

Mostly on the autos market, not in all products in automotive, but in a big portion of the automotive, we have major supply constraints, and that is not going to be solved this year.

And this is to do with those EV-related autos which you mentioned in 25%, or this is non-EV related autos?

The supply is constrained on the EV application and what you call the high-voltage process node for the EV. This is the process node which is supply constrained. And I mentioned that 25% of the revenue is linked to combustion engine, which is not constrained.

Understood. Okay. So that 25% is combustion engine. My next question is, I mean, based on what we are hearing from the semiconductor foundries in various parts of the world, utilization has rapidly dropped and I mean they see a lot of capacity available. So why is it different here in this market? Is it a particular foundry that you're going to who can't supply you? Or is it that there is something specific about this process?

Our main supplier is mostly supplying automotive, and that's exactly the market that remains strong.

But what about the process itself? Is there anything specific about the process? Is it a digital process, analog process, power process, what kind of process is it?

Okay. So it's an analog process which is called SOI technology process, meaning that it's a quite specific analog process, high voltage. And indeed, this process is in ramp-up in the wafer fab, and the capacity increase of the wafer fab is, let's say, lower than the demand increase or slower than the demand increase. And this capacity increase is impacted because, yes, the suppliers do not receive some equipment or the equipment are delayed, and it's why we have this capacity constraint.

Okay. And my final question is, if, for instance, you did not have this capacity constraint, what would be your guidance in terms of the full year?

Difficult to say, but for sure higher, substantially.

But I mean to what extent are you constrained in the sense, is it 5% of revenues or 10% of your current revenues? How far -- how much is the constraint?

Difficult to say, but it's substantial, I would say. It's a bit -- it's been a substantial part of our business that is well constrained. World demand is still 50% higher than what we can supply today.

Indeed on the part of the business.

We'll now move on to our next question from Matthias at Kepler Cheuvreux.

Matthias Maenhaut, Kepler Cheuvreux. A couple of questions from my end, maybe some follow-ups first. On the backlog, could you maybe elaborate on how this historically has amounted to in a percentage of revenue or value, and how we should interpret this comment that it is huge. Is that then 6 months, 8 months of orders? Or is it way less? That was my first question.

Yes, I think first of all, we don't give precise number of the backlog aspect, and I think we will not do it today. And it's also true that, as Karen mentioned, first of all, yes, we should check, let's say, the validity of the backlog. And on top of that, as we mentioned in the previous call, the customers, given the constraint or given the chip shortage of the past, now that the customer give order with a much more longer time frame or longer time period, then it's -- even if you would give the value of the backlog, I'm not even sure that this is full valuable, let's say, for all those reasons.

But historically, your lead times have been like 16 weeks, if I recall correctly. Would that then be a reasonable assumption of a normal backlog? Or is this not necessarily the case?

Yes, 16 weeks, it really depends on the type of product. And I must say today, for the popular products, given the chip shortage, it's much more than 16 weeks. And anyway, the backlog is bigger than that.

Okay. Good. Second question was maybe on the visibility you have on your supply growth -- of supply growth at your foundry. I see you've decided to prefinance part of the working capital. Is this related to volume? Or is there like liquid volumes? Or is this in any way money you will prefinance and not necessarily have, I would say, supply in return? And would you also maybe elaborate if there is like an additional financial incentive to do this besides the supply certainty, I would say?

Yes, we did -- the prefinance is based on volume of wafers for 3 years, depending on the technology, '23, '24, '25 or '24, '25, '26, but it's 3 years. And yes, we have reserved a volume of wafers -- a yearly volume of wafers.

So it's an operational advance. We don't have a financial benefit from this prepayment.

Yes. So it's only the supply certainty. Okay. Good. And then the third question is actually more structural, more long term. If you now look at your pure ICE, pure combustion exposure, in general, more stringent emission norms have been quite beneficial to the content growth also in this segment of your end markets. Going forward, how does that outlook look? There's some new emission norms that have recently been announced, will this still be a growth factor, or will it ease going forward?

For the ICE, for the combustion engine, indeed, there is more and more norm to minimize the CO2 emission and all those norms comes with new electronics. And I think we should not focus only on Europe, but indeed in the other region of the world, those norms have become more and more stringent, meaning that for Melexis, it is good because, yes, we have the right product in order to reduce those CO2 emissions. And I think on this ICE aspect, this is a positive trend. It's always good news when the CO2 emission regulations are becoming more and more stringent. And the first part of your question, I mean, moving from ICE to electric powertrain, it's also coming together with a more modern platform, and those more modern platforms contain much more electronic because of the comfort and the safety features that are coming with, meaning that also moving from ICE to electric cars is also in the long-term beneficial for Melexis, because it's always with more electronic content.

Yes. What if you look now, pure ICE, would you say do you see content growth still accelerating in that end market, or it's going to remain pretty stable overall?

I think it will remain pretty stable. I think you see that the OEMs, they do not develop new, let's say, new features for the ICE engine, except when the regulations force them, but it's clear that all the development people from the OEM are focusing on the electric drivetrain.

We'll now move on to our next question from Janardan at Jefferies.

I just want to start off on this the LTA agreement with X-FAB. So you said that the EUR 189 million that you will pay them over this period of time is 15% of your reserved capacity. So your total reserve capacity is about EUR 1.26 billion. Is that the way to think about it?

Yes.

And that is for over how many years? Is that a 4-year period starting from now?

Three years.

Three years, okay. And so do you have an estimate of how much is that of your expected revenue? I mean over 3-year period, assuming you do somewhere in the EUR 2.5 billion, EUR 3 billion, are you assuming that this is about 30% of your expected revenue that you're reserving capacity? Is that roughly a way to think about it?

It's a big portion of the capacity reservation, it's for most of our business.

Yes, we have -- you know that we are using different technologies, let's say. The old technology is not under LTA and the modern technology are under LTA.

So it's maybe 10%, 15% that is not under LTA.

Yes.

Okay. So almost 85% is under LTA.

Yes, yes.

Got it. And -- but you -- by paying 15%, you are able to book the entire -- like, by paying EUR 189 million you were able to book the entire -- contractually, they are obliged to give you the full EUR 1.26 billion basically. That's the way to understand it.

Yes.

Okay. And the pricing, is that fixed already for that 3-year period or the pricing will be negotiated year-by-year?

No, the volume and the price are fixed.

With still potential -- inflation can still influence, but there is a mechanism defined.

Understood.

And the same mechanism is also on the customer side.

Yes, we have a back-to-back because you're in a [indiscernible] we have LTA with customer, and we have a back-to-back mechanism between the 2 type of LTAs.

So -- but is there a mechanism -- suppose the customer, let's say, is under severe price pressure, as is happening in the EV market today, and wants to or in some shape or form ask you for lower pricing, which you end up giving it to him in 1 or 2 years' time, that will then be able to reflect on the supply agreement as well?

Yes, it will be a business discussion. I think we want to find the right balance between the revenue and the GPM or the EBIT, and it will be a business discussion, and with the customer and with the supplier.

Got it. And just last question on the LTA side, which is the product that is moving to 110-nanometer?

Yes, we have -- it's the -- the 0.11, the 110-nanometer in SOI. This is a process which fits very well the high-voltage product and the drivers basically, meaning that we will move some driver products. Because it's also with this technology that we can leverage, let's say, the cost aspect of those technologies. And it will be the high [indiscernible].

Okay. Understood. And then just moving on to the main business itself. So there's been a lot of turmoil in the Chinese automotive market in terms of competition, price pressure, and you saw some weakness in sales coming through, et cetera. Are you seeing any change in your customer behavior in China on the back of that?

Not -- I would say not directly, no. I don't know what kind of change you have in mind, but I would say no in general.

Okay. I was just thinking from a top-down view if the car maker's under severe price pressure. Is there a risk that there will be some de-specing of cars in China to try and find a way for the carmaker to support his profitability under these severe price pressure. Is that something that you think could happen in the next few quarters?

Yes. In terms of de-specing, we did not have any such discussion, I must say. And if you have in mind also the cost discussion, I would say today, and especially in China because it's a lot of electric, yes, the discussion is still more about the supply than about the price.

Understood. And last question is just on the supply. Can you give an idea of how much your supplier will be increasing supply, say, into the second half of this year and into next year. My question is really directed more sort of when do you expect the supply constraints to ease entirely? Is that something that, given your current order levels, you can expect before the end of this year, or is that something that probably will happen only into subsequent years?

I think this year will remain for sure difficult. I think, yes, the remaining part of the '23 will be similar than the beginning of '23 on this aspect. Yes, we are working together with the suppliers to improve the situation for '24. But yes, indeed, it's a question of demand, not a question of supply. And for sure, the supply will increase in '24. Yes, the question is will the demand increase at the same pace or not?

Okay. So the supply is -- will see a bigger jump into '24 than into the second half of '23. Would that be -- I mean, leaving the demand out of the picture, just on the supply side.

I think the supply is increasing quarter-after-quarter.

[Operator Instructions] We will now move on to our next question from Marc Hesselink at ING.

First, maybe a follow-up on the last point. That improved situation in '24. Is there a number you [indiscernible] at how much extra supply you expect in '24 versus '23?

No, I think it's too early to give the -- we are indeed working on it, but it's too early to give an accurate answer.

Okay. Okay. Great. And coming back on the prepayments. How do you intend to finance that? And maybe it's also an element to that that you -- now that you are paying prepayments to your supplier, that you can ask for prepayments from their clients.

Yes, how will we finance? Well, the prepayments we will do now. We have credit lines for that. We have at least EUR 300 million today available in credit lines, so it is -- plus we also still generate cash. That's also why we did not request from our customers to also prefinance part of their business.

Okay. You said it will be phasing over the [ battery sales ] on the coming year, but the majority will be in the second quarter. Can you give maybe a bit of indication how that split is going to be?

In Q2, well, we said EUR 189 million in total. In Q2, it will be around EUR 140 million. So it's a big portion of the total amount. There will be some more still expected this year and a small part still in '24.

Okay. And then Karen, just your thinking around -- your invested capital will go up because of this. And you're not asking your clients for the prepayments. So can you then make up sort of the higher invested capital by getting a little bit more out of the margin? Or is it simply something that you have to do to keep the process running with the long-term agreements?

It is indeed in more long term, from the long-term perspective that we -- and it was also, I mean, it was negotiated -- the full package was negotiated, so not only volume, but also pricing was all included in the same deal.

It is very much linked, your deal with your suppliers, can you deal with your client as sort of a one package deal. That's the way to think about it.

Yes.

We'll move on to our next question from Johannes Ries of Apus Capital.

Maybe one or two follow-on questions. First, on your own pricing situation, have you been able to increase prices further for your products, given the whole inflationary environment we have? And how much maybe this contract with X-FAB mentioned is also based on higher prices compared maybe to the last 12 months or versus last year?

Yes. During the last -- the previous earning calls, we indeed mentioned that in '23, we have increased the price to our customers. Since then, we did not increase any more, let's say. And we have also mentioned that since the beginning of the inflation, our strategy is to, let's say, to transfer the price increase -- or the cost increase that we receive from our supplier to the customer.

Like you mentioned, on both sides in your contracts going forward. I know...

Yes.

And is the full impact of these price increases from U.S. given to your customers -- or they negotiated with our customers. On the other side, even [ X-FAB ] maybe negotiated with you. It's -- it's now coming step by step over the year. Second question on your own, maybe, business, which is maybe driven by design wins, how much maybe new products are ramping during this year, which also could be, maybe in this year, especially in next year, drivers of growth? And how is the design win situation maybe in the last 6 months or so? How active are your customers?

Yes. In terms of product launch, we have -- in '22, we have launched 16 new products, which was in line with the year before. Then we have indeed 16 new products to address new applications. In terms of design win in '22, we have really reached a peak level in design wins at the end of '22. '21 was already very high, and we have assumed that the '21 was very high because of the chip shortage situation and because -- and that the customer wanted to secure additional opportunity, but in '22, it was even more -- it was even higher than '21, and '22 was extremely higher in terms of design win record. And now in '23 after the first quarter, I would say we are in line with '22. I mean the trend is similar to the trend in '22. It's also true that it's -- I mean it's only after Q1, and we see that the design win trend is increasing quarter after quarter, meaning we are -- after 1 quarter, we are still at the very beginning of the result of the end of the year.

Okay. Okay. And as design wins get really revenue in 2 or 3 years in the automobile business, also it secures maybe the future growth in some regard.

Yes. Right to say that there is 2, 3 years delay between the design win and the real revenue increase.

We'll take our next question from Guy Sips of KBC Securities.

Also on these design wins, are they more in electrification or in comfort and safety, or is it evenly spread?

It's evenly spread, I would say. But we clearly see a big increase of design wins related to electrification.

And yes, on your CapEx, can you -- do you reiterate or can you reiterate the guidance that you were giving before of EUR 70 million for this year? Or is it...?

Yes, the guidance is indeed EUR 70 million. We are at EUR 19 million in Q1. It could be that -- well, it's still too early to know what we will get for the full year, whether we will indeed make the EUR 70 million or even slightly higher. It depends a bit on how fast the investments run. For the moment, everything for instance, in Malaysia, it's running on time. It might be a bit higher than the EUR 70 million.

But the idea is to complete the investment in Kuching by the end of 2024, and that will be also a EUR 70 million investment over the next 5 years. Is that correct?

Yes. The building as such is around EUR 35 million. It is around half of that investment. But that's a longer-term investment. But the EUR 70 million you refer to is longer term for Kuching, the EUR 35 million, the building is happening now in '23 and '24, but most still probably falling in this year, in '23.

And the last question, again, sorry, on the LTA. Is it evenly spread over the 3 years? Or is it more back-end loaded?

From the volume reservation, you mean?

Yes, indeed.

No, it's increasing year after year.

We'll take our next question from Herman Ohlsson at Colei Global AB.

I guess, going back to the capacity going forward in the next coming years and with this new long-term supply agreement, I was just wondering, if we assume prices to be flat, how much volume could you be adding in the coming years, just pure volume? And then I have a follow-up.

You mean the -- when you refer -- when you say volume, do you refer to the demand or to the supply?

The volume growth expectation, I believe, if prices were. Yes, it's difficult to -- like we mentioned, we don't want to guide beyond '23 today. But overall, we plan -- I mean, the market is growing double digits. And so Melexis wants to do as well.

Right. And then my follow-up, how much of capacity is sourced from X-FAB now after this long-term supply agreement? And then I have a question on how are you working on that internally, on diversifying the supplier base and not be too reliant on one supplier.

Yes. For the time being, indeed, the X-FAB supplies the vast majority of the volume, more than 90% of the volume is coming from mix. It's correct that now some other wafer [ fabs ] have some capacity because of the adjacent drop, let's say, then it gives also some opportunity for Melexis to assess if there is some opportunity in other fab. It was not the case 2 years ago, because 2 years ago, all the fabs were fully loaded, and we're not interested to get more business. Now this has changed, and we are indeed in -- we are assessing, let's say, if there is some opportunities for other fabs, mainly for the technology that does not exist in X-FAB [ platform ].

And we'll take our last question from [indiscernible].

Got a question about the capacity constraints. Can you explain the financial consequences? I assume that you are unable to fill some delivery obligations. So are there extra costs in any way? Or will you be able to reclaim some of these extra costs from X-FAB -- from your supplier?

Yes, we did not -- first of all, we have LTA with our customers. On those LTAs, there is indeed a penalty if we don't deliver. But yes, we are able to follow our LTA guidance, let's say, then yes, we don't receive any cost because we are not able to supply.

Okay. So no surprise in this respect in the coming quarters?

I don't think so, no.

We have no further questions in the queue currently. [Operator Instructions]. We've got another one. A follow-up question from Janardan at Jefferies.

So this is just a question on the adjacencies and the growth prospects there from a capacity point of view. Obviously, you -- in the past, you've had ambitions of growing that business, but because of the capacity constraints on automotive, you probably have not been able to expand that sufficiently and now you're feel -- finding some demand weakness as well on the adjacent side, so that revenue is somewhat lackluster. But in these capacity agreements that you're signing, is it -- are you catering for a bigger portion of the adjacent products? And as a result, will the -- will you be able to take up the adjacent revenue towards the 20% mark as you've alluded to in the past, or is most of these capacity reservations on the automotive side?

Yes. Our objective is indeed still to reach 20% of adjacent business, I mean, and we are still developing products in order to have the right products to meet these objectives. But you are right that today the priority when we allocate wafer is given to the automotive, and I'm afraid that given the high demand in the automotive for the next years, it will remain the same. And I think we will -- this objective is a long-term objective, but I'm afraid that for the next 3 years, it will be difficult to move a lot the needle toward the 20%.

So I'm assuming by your answer that most of the capacity reservation at X-FAB on the back of your agreement today is automotive, but what prevents you from going to TSMC or Global Foundries on the adjacent markets? Surely those products could also be done there and you could get capacity probably easier, more easy than you can get at X-FAB in this environment?

Yes. I answered just before the question saying that indeed, we are assessing some opportunity in other fab [indiscernible].

We'll take our next question from Robert Sanders at Deutsche Bank.

I just had 3 questions. The first one was to do with the LTAs. When we talk to X-FAB, they are talking about a 10% wafer price increase under LTA in 2024, so presumably on that, given back-to-back deals, you're going to see another 10% price bump next year. So that would be my first question, just to clarify that. The second question would be Sensata talked on their call yesterday about China moving to in-house solutions -- sorry, domestic solutions, sorry, from Chinese players -- from Chinese Tier 1s. So how is your relationship with those domestic Chinese Tier 1s? Is there a risk to your business, or is it fine because you have a good relationship with those companies? And the last question would just be on at 300-millimeter. if X-FAB was to ramp a 300-millimeter fab, would that mean that you would end up doing more prepayments on top of what you've already announced today? Just interested in that.

Yes. And you have asked 3 questions, in fact. But the first one is about the '24 price. I mean, we don't have guidance or any input for the '24 price.

Not more than what we said earlier of LTAs, which is pricing and just a mechanism.

Yes. The price from X-FAB is fixed for '23, '24, '25. For the -- our collaboration with the Tier 1s in China, I think, yes, since a while, Chinese OEM, but also Chinese Tier 1, are a bit on the -- on front of the pack at electrification. It's why, yes, since a long time, let's say, we have a good relationship with the Tier 1 in China. And I think we will be able to leverage this good relationship in the next years because indeed we really see that for electrification they are leading the pack.

And on the 300-millimeter fab?

Yes. Yes, there is no discussion for the time being on this aspect with X-FAB.

We'll take our question from Matthias again from Kepler Cheuvreux.

Just a short clarification question from my end. I might have missed it, but the EUR 70 million of CapEx guidance, I noted it was not restated in the press release. Is this an amount you still aim to spend this year? Or will it be less?

It will be -- we will for sure spend it, yes. and maybe even a little bit more. If the execution of the building project continues as it is today, then it might be even a bit more.

Yes, okay. But that's not a reflection of a higher cost of investment, no? It's just phasing that is running faster than originally anticipated.

Yes, indeed.

Thank you. There are no further questions in queue. I will now hand it back to Marc for closing remarks. Thank you.

Thank you, and thank you everyone for the different questions. I think it's always good and energizing, let's say, to ask -- to have those questions. And I think we are all looking forward to see you next quarter for the earning call after Q2.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.