Sensirion Holding AG (SENS) Earnings Call Transcript & Summary

So a warm welcome, everybody, here in the room and also online. And first of all, apologies for this delay even after 3 years of home office in corona times, it appears that we are still struggling with the technology despite we tried it an hour ago. But moreover, I thank you very much for bearing with us. And I welcome you to our conference call on the full year results of Sensirion's 2021 year. Today with me, we have Marc von Waldkirch, our CEO; and next to him Mr. Matthias Gantner, our CFO; and myself, I am Heiko Komaromi. I'm the Director of Investor Relations. There will be a presentation first, which we will highlight and Marc will run through it, followed by a question-and-answer session. So please note your answers -- questions now. And at the end of the session, we will address all the questions here in the room and also online. Please write them down in the chat, and I will make sure that your questions will be answered. Please note that the presentation will be recorded. And you can also access this presentation, which can be found on our website online. With this, without further ado, I'd like to hand over to Marc. And...

And so a warm welcome from my side. It's a great pleasure to have you here in person after 2 years, and at least some of the attending people. To have a physical meeting is always better than just all this virtual world. Well, I'd like to start with a short review of the business last year and then hand over to Matthias for the financial details. Well, starting first with the business. So I think we are looking for -- back to a very successful, but on the other hand, also pretty challenging year 2021. I think we can condense the full year into 4 headlines. First of all, we experienced a significant post-pandemic recovery in all the markets, also in the existing all the markets like humidity and flow. And this was additionally supported by all the new products, like CO2, PM2.5, formaldehyde all products, they have been launched 1 year ago or probably 2 years ago. And also they benefitted from a very strong demand in the market. Secondly, we had these challenges with the supply chain situation. This was a pretty tough situation and it's still ongoing. So it's not yet solved fully. And I'd like also to note already here that these supply chain issues are not limited to semiconductor chips only. I have noted the very same already in the August our earnings call that the supply chain turbulences are -- has started with semicon products. Now we see shortages also for kinds of in fact molding parts, from chemicals, from other electronic parts, they are also important to build up a full electronic component. Semiconductor is definitely in the center of the problem, but it's not limited to that. I think if we are looking back to 2021, we were on the sunny side of this allocation situation. So we had longer lead times than usual. But we -- our lead-times were significantly shorter than all the competitors' lead times. This was definitely a good position on the market. And this was in the like to -- also to express my sincere thanks to all the people at Sensirion. They have supported this hard fight to be able to ship our product with reasonable lead times. This was a very hard time for our purchasing team, but also for operations teams to either organize all these raw materials or on the other hand also to manufacture all the products they were demanded by our customers. And some words about the prices. Definitely, we also see a newer phase with a significant price increase in the raw materials, especially for semiconductor products in that respect. We were also able to -- or we had also to increase some prices on the customer side to hand over some of these increased raw material prices. And the fourth headline is about our longer-term view. So we were able last year to acquire 3 strategic acquisitions. So we started in March with a company in the Netherlands. They are focusing on gas analyzers. Secondly, we closed the full acquisition were already manually handled before. But then we closed in May, the full acquisition of IRsweep, the company in Switzerland, also start-up. And last but not least in September, we acquire a very interesting company in Berlin. They are handling -- or they are focusing on condition monitoring and on the new business model. We like strategically to go through about Sensirion's service. And I'd like to come back to this strategic view at the very end of my presentation today. But I think these are all acquisitions, they are symbolizing our long-term view of strategically developing the company, not just for the next 2 or 3 years, all of them, they are not contributing significantly inorganically to lost revenue. They are all small startups. But what is important is actually that we see a very promising technology coming with these companies, bringing us into a position where we can make more out of these technologies. Thanks to the fact that we have the experience of industrialization, the mark-to-market access, so it's a very good provision for both companies, for the small company to get the support of Sensirion in terms of manufacturability, in terms of industrialization. And on the other hand, we get -- or we got a promising technology to speed up our growth for the next couple of years. But it's not the question for this year or last year, it's more for 5 years, 6 years, 7 years from now. Coming to the financials very shortly, you have already seen the revenue top line with an increase of 13%. Included there is also this one-off effect of COVID-19. The COVID effect leveled off from CHF 70 million in 2020 downwards to CHF 22 million last year 2021. So if we adjust that the top line by this one-off, then we recorded a significantly higher growth rate of 46% last year reflecting all that I have explained before. EBITDA margin was on an extremely high level. I'd like also to note here, and that's extremely important for me also to be very transparent to you as investors and analysts. This is an EBITDA level, which is not sustainable for the company. These was highly driven by short-term economies of scale effect. So we have actually squeezed out our operational department last year with 24 hours, 7 days and just to serve our customers on shorter term. This is possible, but this is not long-term sustainable. And on the other hand, I think this is also part of Sensirion's culture. We'd like also to reinvest in an entrepreneurial spirit. We like to reinvest the money to generate our innovation to support R&D. And this has not been done, because it has some delays in hiring people, in finding them, good talents. And also at the very end, it hits your P&L because this is sometimes a delay of more than 1 year. So this is all not reflecting in the EBITDA levels. Therefore, we are on a significantly higher level than normal. Coming to the outlook, I'd like to spend some more time on the outlook at the very end of the presentation. But what you see already there, and this is a good link to what I have explained before, we are guiding the profitability levels on a lower level than 2021, despite the fact that we are expecting further growth next year. But this is exactly reflecting what I have explained that we are now in the process of hiring a lot of people to make the operations department more sustainable again with this higher level of output. And secondly, also to hire more R&D guys and salespeople to support our innovation ideas, not just in the fields, we have acquired the company, but definitely also industry. Well the green piece to the end of this very short business review. At the beginning, I'd like now to spend some words about the markets, mark-by-market. Starting with automotive first. And in automotive, what we have seen last year is actually a robust, but moderate growth in both parts we are running in the company. On the one hand side, we are running all the business of Tier 2. That means, all the components and smaller modules, we are shipping to the module manufacturers like Continental, Hella, Valeo. These are companies. They are taking our components to make a larger model out of it, with more functionalities in just what our sensor can do. And they are shifting their modules to the OEMs, to the car manufacturers. So this is called Tier 2 business. And we are running this business for many, many years already. And this was -- this suffered in 2020. Now, it has recovered last year. Thanks to the fact that the car manufacturer industry had no further lockdowns or shutdowns of the factors. On the other hand, since 2017, we launched the business with -- as a Tier 1 supplier. That means we are manufacturing the modules with all the functionality inside. And we are shipping these products directly to the car manufacturers. This was started 5 years ago on the base of the acquisition of AIC in Korea and China. What we have seen in last year's -- even in the year of 2020 that we had a robust growth every year and also this growth has supported last year to the automotive result. There especially with some products or projects they have ramped up in the European area, in the European industry. In medical, I have already spent some words about the medical situation. That we see the one-off leveled off from CHF 70 million to CHF 22 million. It was expected because this was one big wave of demand in 2020, which came to an end at the very first half of 2021. I'd like also to be very clear that even in case we have additional waves of COVID in 2022, we do not expect any further extra business with the ventilators demand, because I think that the whole world is actually very good equipped with ventilator equipment now. So even there are some new variants or waves coming up in the next couple of months, even in this case, I think there is enough supply in the market. So from this year, we are expecting to run the ventilator business on normal level as we were experienced to have before the pandemic. If we are adjusting these one-off effects, then we see a moderate growth of 4% in medical, driven by all the customers in all the other applications from anesthesia up to CPAP. What I'd like to highlight already here is that we are expecting this year -- this is also part of the guidance. We are expecting another one-off, which is driven by a special effect in the CPAP market. But this is also what should happen only for this year. And therefore, we like us to be transparent to carve it out in also in our guidance for 2022. And its fully unlinked to the pandemic. Industrial. Industrial is definitely one of the most dynamic markets last year. So anyway industrial is a highly diversified market. We are compromising there HVAC, heating, ventilation, air conditioner business, but also all kinds of industrial applications in industry. And last but not least, also, the appliance, white goods markets. And especially the HVAC, but also in white goods, we saw last year a very strong demand for our new products. So CO2 it was driven and supported by the higher sensitivity against indoor air quality. So CO2 is an excellent parameter to monitor the air quality in indoor rooms and to get the warning for risks of aerosol exchange. So especially in our company, we have -- all our rooms are equipped with CO2 sensors. And you get a good indication whether you should open a window, for example or if you should turn on the automatic ventilation system in case you have one. What you have on your seats here for those, they are present here in Zurich, you have a small gadget for you. This is our new CO2 sensor on an USB stick, so you can actually plug it into any kinds of USB plugs. And then you get an indication by light, red, yellow or green whether the air quality is fine enough, otherwise, you should open the window. There is also an app by the way, and you can download the app, then you get all the detailed information, you get also historical data. So it's a very nice device or gadget to play with. Well, beyond CO2, we have also seen a strong demand for PM2.5 for formaldehydes sensors and also for a combo module, which is consisting of all parameters from humidity, temperature, PM2.5, particulate matter, formaldehyde, but also gas quality within one specific housing. And this demand was mainly driven by air purifier companies. So this is also one of the explanation for the very strong growth in the industrial market. And -- now, I lost that. Last but not least about consumer. Consumer in our definition is all what you can actually add and consumers can buy online, so all the gadgets, table-based gadgets, mobile, IoT devices. This is all what we are defining as consumer markets. Also, this market benefited from a strong demand. There was a lot of new gadgets. They were launched by Chinese, by U.S., but also European companies in order to give you as end consumer a good chance to get any information about indoor air quality. So also this market was highly supported by this pandemic higher -- or pandemic-driven higher sensitivity of indoor air quality interest. Beyond that, we had also -- we see more and more anyway a highly fragmented market. We see that we can penetrate even more and more into all these highly fragmented smaller companies with our humidity solutions. So also there, we can -- step-by-step, we can increase our market share in there, anyway just for us dominating the humidity market. Well that brings me to the last slide before I hand over to Matthias, so this is more for your reference, the historical development of the top line and gross margin in the last more than 10 years. So you see a steady growth of the company, definitely if you swing there are years with higher growth rates, years with lower growth rates, so I think that's natural. But all in all, we are still on the track as we are expecting. And also the gross margin that is extremely important is definitely oscillating somehow, but it's in a range of 52% up to 60% normally, and what you see is that we also there we are now on the historical level, which is not sustainable in long-term. Well, that brings me to the end. And I'd like to hand over to Matthias for all the details.

Yes. Thank you, Marc. Ladies and gentlemen, also a warm welcome from my side to the audience here, but also to all who follow us online this morning. I'm very pleased to be able to comment on the strong set of financial figures for this reporting period '21. So the consolidated key financials really looks very impressive. Marc has already commented on the top line -- overall top line with this -- despite all these special economies from COVID-19 in the previous year 2020 in this context. So we could even overcompensate this with this 13% growth on this top line overall. About the profitability, we could benefit from strong economies of scale, bringing up this temporarily very high gross profit margin. And last, but not least, as finance representative here, of course, also looking on the cash situation, I think the ongoing and even stronger cash conversion situation that we had during these last 12 months in the reporting period also rounds up this very impressive picture about our set of financial key data in '21. So looking a little bit on the split-up of the growth path '20 to '21 here in this chart, definitely extracting this special economies in '21. So with this reference point of this CHF 183 million in sales for 2020. There is calculating this plus 46.5% organic growth. Where does this organic growth mainly comes from? It comes definitely from the very good running ramp-up with the new products that we launched during this period or even earlier, but that materialized now mainly in '21. Here, we talk about CO2 sensor, we talk about formaldehyde sensors and we talk about particulate matter modules. Looking back now on our portion of total sales that is covered with this new products. We can register it's close to 25%. So this brings an enormous renewal of our portfolio, a refreshing of our portfolio in this product family of the environmental node, there is not that much weight anymore on humidity and temperature sensing. So also, as mentioned by Marc, in '21, we had also this special economy by COVID, but reduced down to CHF 22 million. The new companies -- the new acquired companies, IRsweep, Qmicro and AiSight, they only contribute with a marginal portion to our growth here with in total CHF 2 million. And as Marc already mentioned too, this will last another few periods until here we see material contributions. Talking about the FX effects, in '21, it calculates up to minus CHF 5.6 million. Here, the main contribution is from slightly less or weaker U.S. dollar in our annual comparison. Looking on the split of our revenue in terms of markets, that was Marc has already commented market-by-market. Here, the complete picture, we see this shift from this heavyweight medical to industrial, our strongest and biggest market in '21. And if we keep in mind that this -- what we allocate to industrial market is this basket of a variety of applications. Here, we talk about HVAC, heating, ventilation, air conditioning. We talk about white goods. We talk about gas metering solutions. So this, of course, also gives us a very much better balance overall our business in terms of the product, in terms of the market and at the end down even to our customer base. So if we talk today about our top 10 customers, they are distributed all over our 3 main markets: automotive, medical and industrial. So with this renewal, there is much more balance in the company market-wise. So overall, we can say even if we expect here the special economy of COVID, all markets grow, yes, medical is only growing with a small number of plus 4%. But overall, there is a very positive picture on our growth by market. Talking about profitability, we see that '21 with high economies of scale with somehow extraordinary gross profit margin with above 60%. And talking about the overhead costs, we see that we have a quite stable picture in the R&D area. This is coming from the situation that we were not that fast, and we had some delay in recruiting additional staff to empower our innovation teams in the organization. But we are with full power working on this to improve, to minimize the latency of this, supporting the innovation part. In administration, we see some more higher cost or SG&A block. We see some more higher costs coming from the start-up period of our new production site in Hungary and also with a start-up that we bought. There is some overhead costs just due to the running costs of such a starting company, but also some special portions of initial acquisition costs that is allocated there. So also here, it's not tremendously high, but it's yes, this plus CHF 6.4 million in SG&A costs compared to previous year. Talking about EBITDA. I think we're going to downwards calculated EBITDA with about CHF 90 million and this EBITDA ratio of 31.7%. Although here, this is extremely high, very positive. With this advantages taking out of the economies of scale, as mentioned, down to the profit margin and in the overhead costs, yes, definitely there is this kind of delay in bringing in additional staff really to support all the projects that are waiting because this project funnel that is very full when it comes to new ideas and new technologies, where we want to invest in. But the labor market is also a reality. It is definitely in the main focus of the whole management team of the group, to improve the situation there about recruiting people and find the right talents with a fit to our Sensirion culture of course. That is a presumption for that. This chart showing a top-down view on the P&L in a condensed format. So worth here to mention that we have only a marginal contribution for the earnings out of the financial results. There is some minor package of negative interest here. But this is quite marginal overall and then the profit after-tax ending up with close to CHF 66 million. Talking a little bit about asset positions and the track record here. I think we have a clear picture on the inventory. Of course, following here, also the market situation with all the problems that we had in supply chain. We try to build up some safety stocks wherever possible. But here, the net working capital is mainly driven also by high inventory of finished goods at the year-end. The receivables -- account receivables are stable compared to the previous year. And this brings up even to an improvement of our DSO down to 35 days. So the cash conversion here in terms of collecting the money works very good. And overall, we can say, we have a continued very, very mitigated risk in accounts receivables. The CapEx of the last year totaled up to CHF 12.2 million in production equipment, and also some patents that we bought. So here with CHF 12.2 million, it's a little bit below than in previous presentations announced bandwidth of 6% to 8% of our turnover. Here also turnover and top line is running a little bit away. And the extra effect is also that we, from the procurement side, feel some delays in getting the new production equipment in time. So there we have to live by little bit with that and bringing this in the numbers of '22. So we have ordered a lot of more equipment, but delivery times have been extended and extended. So the CapEx accounting-wise is a little bit lower than we expected there. Talking about the balance sheet. I think this is in a very continuous way, very strong. We see the increased cash position, cash and cash equivalents there with CHF 112 million. We see also here in comparison '20 to '21, the stable situation about the trade receivables and the increase in inventory. What is here worth to mention when we address the 3 acquisitions that we made is that all the goodwill according to Swiss fair accounting rules whereby an option offset with the equity. So you don't see here the increase in intangible assets. So all the goodwill is out of the asset side and had been offset with equity. That is the conservative way that we do that we want to expand our balance sheet and not to show any assets from that projects coming out. And after balance, last topic here, cash flow. I think here to read the cash flow the right way and to read it with a reclassification of this CHF 30 million cash equivalents, here, we talk about a deposit of 6 months that has been reclassified '21 to '20. So overall, if we calculate it down, then we have a strong operating cash flow with CHF 73 million, we have CapEx spending of CHF 73 million, we had spending cash out for M&As of CHF 35 million, which totals then in cash flow for investments of CHF 50.2 million. And as mentioned, the final cash position is with CHF 112 million. Here, illustrated this development of the cash flow and the split up, again here calculated with the final free cash flow before merger and acquisitions totaling in close to CHF 56 million. Also, you can see here strong disposable cash position at the year-end. And the cash conversion even improved up to CHF 60 million this year, with a very strict collection of receivables and cash conversion overall in the company. I think that's a very comfortable situation for us. And it has its base in long-term customer relationships in scenarios where we are a single supplier with most of our top customers also. And that of course here helped and supports to takeaway all the troubles with the cash and cash conversion. With that, I'm concluded with my remarks. And so I would hand back to Marc for some words on -- more prospective words on the future and the outlook.

So thank you, Matthias. On this slide, we typically summarize our progress on strategic level. I'd like to refer to our strategic slides, we have had reviewed on the Capital Market Day last March -- March 2021. They are also available on our internet pages. So if you are interested in our strategic view and our program for the next couple of years, please take this slide for your reference. And I think I'd like especially to highlight the fundamentals, again, because I think the fundamentals for our company, since our foundation more than 22 years ago, is our entrepreneurial culture we have in the company, which is also adopted by all our employees. And I think this was especially last year, one of the main success factors for the results we are now sitting here and can present to you. So in a year as last year, but also 2021, when we had -- we were faced this tremendous demand for ventilator sensors, this can only be done with people. They are entrepreneurial thinking. They have the spirit of run, do the sprint whenever they see that is very important to do so and to serve our customers and also to work very closely together in order to manage these challenges we are in, in these 2 years of extraordinary situation. And I think especially last year, we could again see that these cultural elements are not just cusp words. They are real values for a company in extraordinary times. And this is the fundamentals for what we have now to present to you in the past. But this is also the fundamentals for generation of tomorrow because innovation cannot be done by processes, it can only be done by culture and therefore the fundamentals are that important for the company of Sensirion. Based on these fundamentals, we have the strategic refocus as they are unchanged compared to what we have presented 1 year ago. I think in all these focuses, we could make some progress. We have, as already mentioned most of them. So I'd like just to add one story. I have not yet mentioned. This is our new operation site in Hungary. So also there, we are increasing the capacity to manufacture flow and humidity products. And this gives us also a geographically broader ability to manage -- to manufacture our products close to customers. And we could start this operation site on time, by the way, despite all the turbulences and limitations of travel bans during the pandemic. And on the focus 3, I'd like to mention again the 3 acquisitions. I think it's important also to share our reason of increasing the business model of Sensirion from OEM business only, what we are doing and definitely also continue to do in future to fields -- as we have presented in the Capital Markets Day to fields of sensor as a service. And our newly launched Sensirion Connected Solutions for 100% growth of the holding is definitely focusing on that. For example, with the company, we have acquired in Berlin, which is focusing on condition monitoring. These kinds of I think you have one review, small node with vibration sensor inside, temperature sensor inside and so and they can be plugged on any kinds of rotating equipment. And they are directly connected to the cloud. And on the cloud, with all these very complex data gathered from the sensors, they are extremely hard to interpret it, but algorithms on the cloud, on our cloud can interpret them and they can provide an information on the condition of the equipment in a very early phase to our customers and that means, they can prevent any unplanned failures of their equipment later on. This is one of the new business fields. We are at the very, very beginning. They are not contributing to revenue to-date. They are definitely contributing in cost, but not in the top line to date. But this is one of the new fields we like to enter in the next couple of years, but it will definitely take time. But strategically, highly important point. And also I'm pleased to say some words about outlook. I think it's not very surprising to you. We are in pretty complex type. On the one hand side, we have all the macroeconomic challenges like inflation, the reaction of the central banks they are not yet clear and foreseeable how they react on the inflation situation. Now on top of that, we have all the geopolitical aspects, the tragic war in the Ukraine, but also the situation in China, which is not clear how it's going forward. And based on that, they all might affect the economy worldwide. This is not foreseeable at the moment. Based on the economy as we see it today, and also based on the assumption that all the exchange rates are more or less stable in the next couple of months, we expect again a road of growth in 2022 with CHF 325 million up to CHF 365 million. And what you see and I have already mentioned is that we are expecting to come downwards with profitability level based on the fact that we are hiring new talents in all the departments, from operations up to sales and R&D to drive innovation. That brings me to the end. I'd like to -- yes, give it back to Heiko.

Thank you, Marc. Thank you, Matthias. So with that, we have finished our review of the year of 2021. As highlighted before, I'd like to welcome you to ask your questions. If there are any here in the room, but also online. For the people online, I'll give you the opportunity to either raise your hand in the go to meeting app or you can also type your message and I will read it out and address it in that way. In order to give the people online a little bit of time, maybe we start with the people in the room. Yes, with Inauen.

Maybe you can elaborate a little on the auto part. The way it looks H2 was not as strong as H1 was. So I'm just trying understand is the product of the -- will it depend on what kinds of cars we're seeing produced, because we saw other companies were more -- EVs, for example, they've got stronger growth, so that would be the first one. And then you take the second one together with just about the outlook. Is CPAP effect that you were mentioning, to just that fact number -- understand what's the one-time effect here. And on your guidance, I mean, it's pretty low on the revenue. Maybe just give the lower end -- what's your basis for the lower end, for upper end and then how much price increases do you take into your revenue forecast?

Thank you very much. Let me first maybe repeat the questions also for the online audience. So the first question from Mr. Inauen was about the automotive market and how the revenues were divided across 2021? As it seems second half of 2021 was weaker, and what are our comments on the automotive market development? Let's start with that question.

Yes, absolutely. So, I think there are 2 effects. On the one hand side, in the first half of 2020 to the first half of 2021, we also benefited from a very weak base because 2021, especially between March and June, we faced many factory shutdowns here in Europe and this was a complete stop of car manufacturing. On the other hand, automotive business is typically in the way that they are stopping orders immediately because they are presenting any inventories. This is also one of the problems for the allocation today. By the way, but so this was an effect this is more a base effect of the first half of 2020 compared to 2021, which is simple [ addition ] brings the 2021 results in first half to natural levels. On the other hand, what we have seen in 2021 is back in the second half is also that there are not shutdowns driven by COVID, but shutdowns of factories due to the shortage of electronic components, not due to our components, but due to some other components and that this is still ongoing. So there are a lot of factories they cannot produce at full speed because some shortages are happening still to date. And this also might affect the business there. Okay. The second question was about the CPAP business and about the onetime contribution, whether we can quantify it a little bit more. And it's hard to say, because, as always, in a onetime effect, it's not -- it doesn't have any kinds of experience with the historical data. But we expect to be on a one-off effect between up to CHF 20 million up to CHF 25 million. That's also the reason why we have not -- the guidance is not also adjusted by carving out the COVID effect of 2021 as our base for 2022, because it's in the same order of magnitude as the one-off contribution of COVID of CHF 22 million last year. And now we expect more or less the same amount of extra business driven by CPAP. But this is exactly one-off, also and bringing me probably to the third question which is about the broadness of our guidance. This is definitely one of the reasons that this one-off is not fully clear at the moment. The second reason why we are pretty broad in our guidance is just reflecting this very turbulent time. In any way, it's extremely hard to give any guidance today because the world looks completely different at 4 weeks ago, and we do not know how the world looks like in 4 weeks from now on. So we are in very complex times economically wise -- the economy-wise bust also political-wise. And we'd like actually to reflect these uncertainties on the markets.

And then Marc on the pricing?

Sorry. The pricing, I cannot disclose you the price levels we have with customer because this is customer by customer, it's different. It's just a part of the raw material prices we are facing on the other hand. There, we are talking about significant increases, especially for semiconductor products. But it's a part they -- our customers are supporting us, but it's not the main contributor to the growth next year or next year, this year.

I think we addressed all the questions from Michael. Any more questions from room? Yes, please [ Thomas ].

The first half of [indiscernible] during your presentation a couple of times that you gained some market share. If you could elaborate more why this was the case. Was it mostly because of the better supplier component on your side versus competitors? Can you just give us a how easy it is for your customers to exchange [indiscernible]? And did you also able to see that some customers or new customers that -- their equipment deals that are associated market condition and the market share is sustainable? And the second question is on the water quality sensors. As you mentioned during your Investor Day last year, can you just give us an update here, how big the sales product and how big is actually this market? And the third question is also bit similar to say on [indiscernible] Can you talk a bit also on the -- we see it as more strongly due to all this energy efficiency initiatives into European Union and obviously the regulatory landscape this year, -- how [indiscernible]?

So let me repeat. The first question was about our insights, how we gained market share with our products and whether or not our newly acquired customers or also the other customers, how easily our products are interchangeable with competitor sensors? I think that was the first question.

Well, I think we have to differentiate between our -- the business that we have already, a pretty large market share as in flow and humidity. And on the other hand, our new product markets like CO2 and formaldehyde, we are starting or we have started for 3 years ago. In humidity, especially, there definitely, we are dominating the market. We have the market share of more than 50% of the worldwide market. And there, we have gained additional focus last year. Thanks to our more favorable lead times compared to competitors. So there were some customers they have switched on short notice to our solutions just to get the component. It's now our challenge to make this business also sustainable. We are pretty optimistic about that. But we can look back into year probably and it's more clear about that. And the very same works for flow. So especially during COVID, we have seen that some ventilator manufacturers, they are not -- they were not yet based on our solutions for flow sensing, they switched to our solutions because our 2 competitors in the ventilator business, for example, they are U.S. based. And these times it's not fully clear whether Mr. Trump at this time and is blocking the U.S. suppliers to serve any customers that are non-U.S. So just to mitigate any risk, they changed their power solutions because we are a Swiss-based company. And in these cases, we see up to now that we can transform this extra business to sustainable business after the pandemic crisis. And all the other markets, like CO2, PM2.5 and so on, and anyway, we are gaining market shares due to the fact that we can convince more and more customers, not just to switch from other solutions to ours, also that happens, but also this is a vastly growing market. So there are a lot of new customers, they are starting now to integrate and design in CO2 and/or PM2.5 functionalities. Or for example, probably the best-known case is a air purifier by Dyson. Dyson has -- on the one hand side, they have switched to our PM2.5 solution, so this was more of a replacement of competitor solutions. And on the other hand, they have integrated additionally our formaldehyde sensors, this is what new business also for Dyson. A new series of Dyson, they are now equipped with formaldehyde sensors and this was not the case in the previous version, so both happens in that case.

Thank you, Marc. The second question was about updates on the water quality sensors?

Well, water quality, we are still working hard on technical issues, that's always if you are entering new fields with innovation with a completely new innovative idea of how to measure water quality. And we are progressing pretty well. So, also our lead customers they have already now samples at pretty products close or similar samples, but they are still on the level of samples. And we get a lot of new feedback from them, but launch or the official launch of the product is -- anyway this was already our plan 1 year ago, is not planned or not scheduled for 2022. It will be 2023 or even at the very beginning of 2024, but we are fully on plan there.

Thank you, Marc. And the third one was?

Hydrogen.

Yes, hydrogen.

Well, about hydrogen, this is -- we can probably talk 2 hours about that. So, hydrogen definitely gaining more and more traction on the market. And there are 2 different applications. On the one hand side, it's about the H2 flow measurements. There, we see that our gas metering solutions, they are gaining interest from a lot of the new customers. Thanks to the fact that our solution, which is typically measuring methane, so natural gas, is also compliant to measure 100% hydrogen, which is not the case for some of the competing technologies. And this is not yet a business to measure a 100% H2. But all these players, all the gas utilities, they are interested in taking technologies for the future, they are also able to switch to hydrogen in the next couple of years in case this might happen. So -- and I think this also symbolizes the market at the moment, so all are looking into H2 applications. They are not yet business today, but all are expecting that they are gaining importance in the next couple of years. On the other hand, H2 is also about H2 leakage, because H2 is explosive and flammable. And there are some products they are at the moment ramping up in automotive, or especially one is ramping up at the moment about H2 leakage based in our sensor technologies. This also happens, but also there, you ask me about the potential for the future, it is extremely hard to say. Just before the pandemic, I traveled to Japan to learn more about hydrogen-driven cars, because Japan is one of the pioneer countries in this context. And I got all the answers from -- this will be the future up to this will be no business because the batteries are progressing so well that they will be replaced by battery-driven cars and H2 is just then a transition phase. So I don't know to be very honest to you. And we are definitely serving and supporting our customers to their interest, because our technology is ready and we can do it. And whether it's a sustainable larger business and grow in the next 10 years, we will see.

Thank you. I hope we've addressed your questions. Okay. Yes, please. Next one.

As a question concerning your new employees that you want to hire, because it looks like, if you could look back, you would have hired more last year. You have to think in growth rate, so what growth rate for next year or this year and the next few years, do you expect for [indiscernible] and does that need any organizational changes?

In terms of organizational changes, this is always the case in our company as a growing company though we have always think about how to scale up the organization, how to scale up the processes. So this is actually more ongoing challenge we're in. And about your question 2021 for hiring more people, definitely. Whenever you see that there are new chances on the market, you like actually to have the people to support this innovation ideas immediately. On the other hand, definitely, this is not realistic. And secondly, it's also extremely important to get the right people. And so that means people they are fitting -- as Matthias mentioned before, they are fitting for our culture. And secondly, they have also the potential to grow with us in the next couple of years. And therefore, we are somehow selective which people -- who is actually hired at the very end of the process. And this takes some time and we like also to take the time because at the end of the day, it's by far back to have the right people and not just immediately on short notice to have enough people. About the growth rate of the next years, so we also there, as we are running the whole business is that we are in a very agile way how we do it. We're not running the company by [ branches ], so we have got a clear picture of what we are hiring this year, but we are reviewing that the course of business all the time. And based on the business, we are also adjusting our -- and based on the ideas we have in our innovation pipeline, we adjust the need and the number of positions we are looking for good talents. So I can't say a growth rate for this year or next year, we will see that the end of the next year depending on how it's going forward and how much ideas are turning more and more to get concrete in the next couple of months. And then you need more people. If you see that one of the good chances are felling and this also happens in an innovation-driven company, then don't need an additional people for that, so this is also affecting the growth rate.

If I can add another question. If you have new engineers coming fresh from ETH, and just so, on take after they are productive directly productive?

It's very highly depending on which department, for example, packaging. So this is the task of how to protect your silicon from the outer world, with all the plastics around. This is a topic and the skill you can't learn at ETH and in other universities. So we have actually to take or hire talented people based on physics or electric engineers and so on and we have to train them. And then it takes definitely 2 or 3 years to be fully trained in packaging. And some other fields like, for example, at ASIC design, we have also the chance to hire people that have probably spent 4 years in PhD to design ASICs and then they are definitely foster in coming into this job because it's more or less the same as they have done already before. So this is highly depending. But at the end of the day, we are more focused on potential of people and lot of the skills they bring with them. Because if the people have talent and they have potential, they can learn quickly. If they bring just the skills, we are happy for the first 4 months. But then we might change their topics and then they are the wrong people because they are probably not talented. So definitely the best situation is to have both definitely. But if you have a tradeoff then we are focusing on talents and we are more interested in training them in-house and we have the skills in-house. Check on online.

Yes, so far. So thank you for your questions. You can continue. Online, I don't see any questions yet. More questions? Okay. Continuing forward to meeting. Okay. There was one question. Can you simplify the effect of the strong Swiss franc on your business?

Yes, of course. We see the strong Swiss franc and looking at our cost structure with the actual setup of the organization, it definitely is though that we have a strong cost block deal with all the personnel costs. And yes, when we see about -- or when we look ahead, what is coming with our budgeting and our -- or not budgeting, but our planning, and our forecasting, we still calculate that in relation to the Swiss franc, the U.S. dollar in this range where it actually is. So of course, we see this volatility and all. What we can do when it comes then to hedging, then we focus very much on the natural hedge. We hope that we can bring some positive effects now with the capacity load in our production site in Hungary. That will be one contribution from that perspective. The other one thing is that in more split up also on the geographical map, with a substance in Berlin in the Eurozone. So I think it relative a little bit. But of course, yes, we can handle it, but of course, it's a challenge on the margin definitely. But it's too early for us to say in this early stage of the year what the impact is for '22.

Thank you, Matthias. Maybe we continue with another online question. Given our significant revenue scale, we are seeing why will the gross margin not remain as high as we've seen in 2021 in our outlook?

Compared to -- you mean, yes, the new ones or the new guidance?

That's how I read that question, a significant revenue scale we see in our forecast. So why are we expecting the gross margin not to be as higher than it was?

Well, that's a good question to explain in more detail. So again, I think last year's gross margin was highly affected by the fact that we've squeezed out our operations department. So with the very same equipment, because new equipment was not deliverable in short notice. We had actually to work 24 hours, 7 days with 5 fleets just to bring out whatever we can to serve our customers. This is definitely good in terms of gross margin because you have invest they are already highly or on a larger scale already depreciated and you squeezed it out fully. What we are doing now is this partly is not sustainable. On the one hand side, we like to go forward. And secondly also, whenever you have any kinds of events in production, we cannot catch up again because we are fully loaded at more than 100% utilization. This is not healthy. So what we have already done at the very beginning of 2021 is actually to order more equipment. Most of them are not yet shipped to us because the lead-times typically are longer than 1 year at the moment. And this -- then we start the gain with some depreciations, and we have a larger invested equipment. On the other hand, we have also to hire new people to make the full operation more sustainable and this all affects the gross margin at the very end of the day. So the gross margin now benefited significantly from this squeezed out effect.

Okay. Then, we have another, I think question. If we would now exclude the CHF 20 million - CHF 22 million revenues from the extra ventilator related -- CPAP-related -- COVID-related from 2021, then our full year 2022 growth is even higher than our implied growth. So the question is, is this driven by new products mainly? Or is it existing business also growing? So if you would compare the 2021 without greater ventilators to our guidance, where does the growth come from?

I think it's more or less the same picture as between 2021 to -- 2020. That means it's driven on the one hand side by our -- all the business of humidity and flow, where we are still are in an interesting ramp-up of new products driving our humidity demand and then flow demand. And on the other hand, and this is definitely more dominant about all the new products like PM2.5 combo sensors and formaldehyde. They have started to contribute last year or sometime over 2020, and that's ongoing. So we expect that we also disclosed the 25% of the revenue is now actually coming from the new fields. We expect that this ratio will increase even following the next -- this year 2022. So it's dominantly also driven by that. The contribution of our even new business like the acquired businesses in Berlin, for example, Connected Solutions that I mentioned before, this is not significant in 2022. So it's mainly driven by all the products we have talked about.

Okay. Thank you, Marc. Then, a mandatory question. Do you see customers stockpiling device, chips and is there risk of double ordering?

So about stockpiling, yes. I think so we don't see it, but this is more the effect of the business today that you cannot ask your customer, you can -- definitely, you cannot ask them about their inventories, but you don't get a right answer because nobody would disclose your inventory levels today, because whenever you tell anybody that you have some inventory, you are immediately reduced in what you get. So all the players in the markets they are playing tactical at the moment. But our impression, also, if we see the market, if we feel the market, there will be definitely some demand. They are more stockpiling rather than for the immediate manufacturing of their products. But we cannot quantify it because nobody is actually disclosing any figures about that. The second one about double ordering, I think that's less important in our business, mainly we have direct relationships with our customers and we are anyway a single-sourced with them. So they have no chance to order the humidity sensors at Sensirion, but also at the second source because they have no second source. They have just Sensirion. So this double ordering, I think, is less important to our business. But stockpiling is definitely one of the issues and we are also addressing that in the guidance, but also in the reflections of the figures of 2021. It's definitely one of the contributors at the moment. And how long does this continue is fully unclear.

Yes. We mentioned that 25% of our revenues, already 21 are related to environmental field, as you mentioned in our press release. So which sensors, does it compromised? Does this number include the humidity and temperature sensors? Or is it just probably the new portfolio?

No, it's just a new portfolio. Humidity and temperature is not counted. That means it's about PM2.5, it's about formaldehyde, it's about volatile organic compound sensor and it's about CO2 to be very precise and definitely all the combinations of that, but without humidity as a component. That will be significantly higher.

Yes, exactly. All right. Then a question on the conflict in Ukraine, how does the conflict affect our business? And how much of sales Sensirion generates in Russia and Ukraine?

Well, so we have minor business in Russia. We have no business in Ukraine. So directly, we are not affected. Indirectly, definitely what we see already today is actually some additional logistical turbulences because of the fact that all the air traffic has to prevent the Russian area. And this might trigger additional logistical turbulences in the market, especially in business with Japan. But this is also minor. I think that a major effect we might be affected is about the economy. Nobody knows at the moment, how this war is going forward. That means also how it affects the global economy and definitely we are part of global economy. And there we are definitely affected and this is not reflected in our guidance, because it's just a lottery at the moment, we cannot say anything about what's going on in this war. But the direct business with Russia and Ukraine is really insignificant.

Thank you, Marc. I think the second question was also replied. Which are the impacts to Sensirion coming from the sanctions versus Russia, I think you explained in detail why. Then the next question is about CO2 sensors. To what degree do you counter the high volumes of 2021 to be one-off revenues and to what degree you just accelerated diffusion? So the question was about the -- how sustainable CO2 sensor sales, so, whether it's a one-off effect the CO2 business in 2021 or not?

I don't think so. So definitely, it's driven by this year to be impacted by indoor air quality, and this has definitely supported the CO2 demand last year. There might also be a kind of a bounce -- rebound effect now after the pandemic, now, hopefully after the pandemic. But I think the longer-term CO2 is definitely one of the most interesting parameters, not just to get an information about the air quality, but also to optimize the automatic ventilation systems in order to save energy. So it's also driven by other megatrends, not just by the pandemic, but also by energy saving and issues. So I expect personally that CO2 will have a pretty good potential in the next couple of years worldwide. And it might be the case that last year it was accelerated slightly too fast. And it might reduce in speed for this year to recover from this. But longer term, it will have a great potential as market driven by energy issues, but also by air quality concerns. As we can see our light turn yellow, exactly.

So it means the CO2, actually the concentration doubled. If it's -- goes yellow, this is what you've got in your little presence there, so even in this large room. All right. Then last question. Can you elaborate your ESG strategy in 2022?

Certainly, we are also -- in the annual report that we have disclosed today this morning that we have increased our disclosures of ESG topics, especially also environmental topics. This is a high interest for the company. We have also a working group internally. As a company, which is technically driven, we are more interested in taking matters rather than reporting about it. That means we are doing significantly more as we are reporting and that means there, we have also some room for improvements, and we are working on that in terms of reporting. But I'd like to remind you about what we are doing directly. So in our production sites in Switzerland since more than 10 years we have a very special energy-saving systems where we have 260,000 liters tanks of water, which is savings the heat -- the excess energy of all the equipment. And we can storage in these water tanks in order to heat the building in other times and the very same works also with the kind of a heating pump system with more than 20 heat -- to heat that building in a very ecological way. And the very same now was also applied in our operation site in Hungary which is completely new for Hungarian people, but that also there, we like actually to run the business on a very ecological level. And this is just one of the examples. There are a lot of others there. But I'd like to repeat it again. We are fully aware that we have actually to improve our way how to report on that. And we like also to make it. We have already done significant steps if you compare the annual report we have disclosed today compared to the one of last year, and we are going to make another step for 2022.

All right. So far what I can tell was the last question online, right? Thank you. Are there any more questions from the attendees in this room? It seems like you gave a good speech. Thank you very much. And I think with this, we can close the online webcast. I thank everybody for your attendance and for your high-quality questions, and looking forward to see you soon again. Thank you very much.

Thank you for coming.

Thank you.

Bye, bye.