Sensirion Holding AG (SENS) Earnings Call Transcript & Summary

Good morning. Welcome [indiscernible] Thanks a lot for joining the Sensirion Analyst and Media Conference of the Financial Results 2023. My name is Lars Dünnhaupt, I'm the Director of Investor Relations and I'm your host today. And on the Sensirion side, the main presenters are Marc von Waldkirch, our CEO; and Matthias Gantner, our CFO. And please note that the event will be recorded, so you can go back to the session and see it again at your own convenience. And when we look at the agenda for today, we have 3 sessions. Marc von Waldkirch, our CEO, will start touching with the full year 2023 business highlights, then he will hand over to Matthias Gantner, who will walk you through the 2023 financials, and at the end, Marc will conclude with his view on the outlook 2024 and our Sensirion's strategic force. [Operator Instructions] with that, I would like to hand it over to Marc.

Thank you, Lars, and warm welcome [indiscernible] but also all our virtual [indiscernible]. Today, it's pleasant for me to present the figures of last year and also thank you for your interest in Sensirion. So let's start first with a short executive summary. All points I will raise again afterwards in more details in the slides to come. First of all, and I think this is already a pretty well known 2023 was a pretty challenging year for Sensirion. This after 3 years with exactly opposite conditions means we actually benefited from extremely strong tailwinds in the last 3 years with a significant growth in only 3 years. And now back to '23, we had the change of the winds and had a strong tailwinds. In parallel, we intentionally decided to continue our path to expand R&D and sales in order to work on all the innovation pipeline, short-term, mid and the long term we have in the pipeline; and secondly, also, we are convinced about. And this combination of low top line combined with higher sales and R&D costs actually ended up in a significantly lower profitability for 2023. The profitability was actually impacted by this decision. On the other hand, we are strengthening our longer, but also in the short-term prospects for the future. I think it's already important here to highlight that the strategy we are following since many, many years, it's fully on track. Also the execution of strategy, we are fully on track. I will come back to this point later on. And we're also still benefiting from all these secular megatrends like climate protection and also energy efficiency and health. I will also come back to a very concrete example later in my presentation. Coming shortly to the figures. The revenue recorded CHF 233 million. This is a down of 27% all in all percent. If we figure out more details, we have 15% down in the organic part. We have additionally 8.8% coming from the one-off of 2022 of the CPAP business, which was already that time clear that this will disappear again. And last not least, it was also unfortunately due to the fact we have located in Switzerland, down of 3% due to FX changes. Gross margin declined to 52%. And we'll also comment this topic later in my presentation. And EBITDA at the end CHF 4.3 million. A short look to the future. Also there, I will spend more time later on. So we are -- on the one hand side, we are pretty confident that we can come back to growth this year, thanks to the new project. We are still somehow cautious about the existing business, how fast the existing business will recover due to the disruption situation. And on the other hand, in terms of profitability, 2024 will be a kind of a transitional year. And not yet -- we are not yet back on the past, we actually expect to be in terms of profitability. It bring me to the next slide. So to comment the top line, I think we should actually zoom out somehow and not to focus too much on 2022, 2023 because at the end of the day, it was a significant setback in our story of growth. And if you're looking back the 3 years before and not just due to one but also due to the core we had significant growth, and now we have the significant setback afterwards. We know the reason for that. There are actually mainly 3 reasons for the setback in the top line. On the one hand side that it was the determination of this one-off slightly less than CHF 30 million in 2023. This was expected. This was also already reflected in the guidance we gave at the beginning of the year. The second part was kind of the overconsumption, which was pandemically driven in the air quality, in air purifying and all this stuff. And there, I have openly to admit that we have underestimated this effect beginning of last year. It's not just we underestimated it, but also our customers in the respective fields. And the problem there is actually there is no baseline because this is a new category of products, especially for our company because we started all these environmental essentials in 2029 -- sorry, 2019. So immediately before the pandemic, this was a lucky good timing. And afterwards, we recorded a significant deduction in the markets, which, as it turned out now, was significantly leveraged by the pandemic. We were already aware of that there is a kind of pandemic effect, which leverages the sales, but it will not estimated to be on the level we have now recorded. This is the very same as we have also discussed with our customers. Also they admitted that they have actually underestimated the effect of this pandemic-driven overconsumption. This was combined. And I think this -- it's pretty hard to figure out which comes from overconsumption and which comes from destocking because at the end of the day, all our customers did the very same. So they were pretty confident about the future of air purifier and air quality devices. So they ordered a lot of additional components. In our company, we were pretty lucky and also we had pretty craft of delivering all these products even during the allocation. So there was no backup at all at the beginning 2023. And now they all face a lot of stock in their supply chain, not just the stock of our modules and sensors in our customers inventory. But also downstream, there was a lot of air purifiers and air quality devices anywhere in the retail choice between of our customers supply chain industry. This is now ongoing to be solved. And it's not that easy to figure out how much of this CHF 60 million down core business is coming from overconsumption, how much is coming from destocking. What we see is that in some parts of the market, we see now kind of a tipping point. It's not yet in a way that we have a significant recovery already recorded in our figures. We see at least there was a tipping point. So at least the downturn trend is actually came to an end. Additionally, there was a third effect. I have already mentioned it in my executive summary. This was CHF 10 million come from FX changes compared to Swiss franc. I think it's important also to highlight here again. And I gave already the same statement last summer in the half year result presentation that all these setbacks comes not from the fact that we have lost any customers or even product channels or whatever. So all the customers are still with us. There is also not even in a project, which was actually canceled the major project. The fact is just that they all -- especially in the appliance markets and in the consumer markets, they just ordered less than before due to all these effects as I have explained. Some words about the gross margin. Also, the gross margins indicated here is the blue line. There, we have also to keep in mind that the gross margin of the last 3 years was inflated by the fact that we actually faced a significant and also pretty demanding overload of our operations. Now we are in a kind of There, I'd like to also to point out that new component manufacturing, we have a lot of fixed costs in a way that we have a lot of capacity installed equipments, very expensive equipments and a very dedicated engineers to support the line. It means for it to give you an example, humidity, if you produce less, there is pretty hard to reduce costs because at the end of the day, there are a lot of operating to naturally reduce. There are lot of dedicated processes and you need that even [indiscernible] not because it has not stopped the line. This is also influencing the gross profit rates. So in the last years, there was an inflation situation because it was actually with the very same start even more, and now and going up to 100% or even more than 100%, which is 2024 operations and now we are in kind of situation, which is reflected also in the gross profits margin. This brings me to the next slide. So what -- how do we react on the situation we are facing? What we have decided to do, and this is not a new information, is actually kind of a twofold approach. On the one hand side, it's by innovation. It used to be driven by innovation in that growth for more than 25 years since our very first day of foundation. And for the fact also what we are convinced about is the fact that we have a good pipeline in short term, mid-term and long term and we like actually to work on these projects. Therefore, we actively invest into R&D in order to be ready now also to ramp up new products. We have probably to look back in 2019. 2019 was in the history of Sensirion not a good year. There, we had also a handful dramatic setback, but also a short setback in top line, but also then we decided to continue to invest into R&D and this was the base, the foundation in order to have to be ready for all of these full years of 2020 up to 2022 without investing into all these environmental sensors in 2019. We have no chance to serve all these markets during the last 3 years. The exact same strategy is actually applied today that we like to focus on the products we are convinced about that they will come to market in order to react on the situation by growth. And this is what we are doing today as well. On the other hand, definitely, there is also homework to do in terms of efficiency, productivity and capacity adjustments. I reflect it before I pointed out before the component manufacturing. On the other hand, we have also module manufacturing, which is more based on operators is actually in Hungary and China. In all the 3 operation sites, we have already started to reduce significantly our operator capacity starting already in Q2 of last year. So this is an ongoing process. In parallel, we have also initiated a lot of initiatives in order to optimize and to increase the efficiency in administration, in sales, but also in R&D. So there's an ongoing process also in order to review our projects. Innovation always links to risks, but we'd like to increase the efficiency and the effectiveness of our innovation pipeline even more. This is all what is ongoing, not started yesterday. It has already started last year, but it's ongoing in for this year. This brings me to the next slide. So shortly, looking into the 4 markets, we are reporting automotive. This was the only market which can record growth last year. So the revenue went up by 11%. This was mainly driven by new projects in -- as component manufacturer, but also in the module manufacturing side. So just as kind of reminder, we have 2 different automotive business. On the on hand side, Tier 1 business, where we are typically shipping modules to our old And second, we have achieved the legacy Tier 2 business, which is based on components and the customers there are main with module manufacturers based -- their models are based for our component of humidity or gas or gas flow sensors. We have also recorded here pretty resilient demand of the existing business. So the growth comes from [indiscernible] pretty resilient, despite all the headwinds in the markets. Medical, tis is significantly more turbulent. On the one hand side, namely the CPAP base one-off last year disappeared completely. We recorded a pretty good first half of the year. I can remember that we have a lot of discussions with you as investors about the significant increase of medical revenue in the core business of Q1 -- H1 '23 compared to H1 '22. And also there, I highlight that this can also be a kind of a special effect because there was an additional demand for medical products in China in the first half of the year. What happened now in the second half of the year, this was -- is mainly driven by destocking. So in the CPAP market, there was this to grab a lot of opportunities due to the replacement situation -- quality-driven replacement situation in Philips and all the other competitors as well, they actually tried to do their very best in order to grab additional market due to the weakness of Philips. Now they turned out for all that -- for them, they have actually significant high inventories. They have actually to work -- to execute on now also in this market. This market is not impacted by end consumer weakness because medical is extremely robust in terms of end consumer market, but the demand, the problem here is definitely by this opportunity only. But this will also last another 6 to 12 months before this destocking. Here, especially, the CPAP market came -- did come to an end. Industrial, Industrial is of different applications. So on the one hand side, dominant role [indiscernible] plays appliances but also HVAC application. Second, we have also the classical industrial application widely spread in applications, but again [indiscernible] is part of our industrial market. Here, we have a significant drop of 34% compared to 2022. It was mainly into this market. At this highly diversified market, we see that this was mainly coming from appliances. These are air purifiers and all other kinds of [indiscernible] and secondly, from HVAC in a significantly lower part, which was running pretty good was gas metering, which is linked to the economic situation because this market is mainly formed by governmental decisions in order to roll out the new kind of smart meters or tenders, typically placed in the market side the utilities. They are very close to government. So this part run pretty well and robust, but appliances spending HVAC [indiscernible] that already before mentioned, weakness is due to destocking, but also the overconsumption due to the pandemic. And last but not least, some words about consumer. There, the situation is more or less the same. The only difference is there is no stabilizing and contribution from other markets because it fully focused on these kinds of air quality devices base and all this stuff. Also there, we see a significant reduction by 44% compared to 2022. Also here that main explanation is this combination of our consumption, but also of destocking in that respective markets. Also here, again, to highlight, there is no customers they have been lost. It's even in contrast situation of all these customers, they are still confident also to bring up and to come up with new products in [indiscernible] not bad. It's just a step back from as it turned out now from a situation down to a more conservative view of the future of air quality devices. With these slides, I'd like to hand over to Matthias, and I will come back to comment the outlook of 2024.

Yes. Thank you, Marc. Ladies and gentlemen, also a warm welcome from my side the audience here and to all those who have dialed in this morning. In addition to Marc's comments on the course of business and the KPIs, of course, this year, a little bit more extensive than in previous periods. I look forward to putting a little bit more color on the set of financials over the last -- over -- for the next few minutes. So as in previous years, the figures presented are reported according to [indiscernible] and all the report has been audited by our auditors [indiscernible]. After 2 years with this tailwind mentioned by Marc, even during the pandemic period, so 2023, of course, also in terms of setting up the financials, a very challenging one. The picture that we got reflected from the market, of course, is also the completely reflected in the figures just from top line to bottom down. But first things first. So let's start with the development of the revenue and the bridging from the successful 2022 to the more weak year -- fiscal year 2023 coming down from CHF 321 million turnover to the CHF 233 million turnover in fiscal year 2023. I think the bridge is built with the 3 components, 2 of those Marc already mentioned is this fading out of the one-off business of CHF 28 million that we definitely had in 2022. And then, of course, we have this CHF 50 million definitely decline in sales volumes, price, et cetera, that we read as the organic one. And of course, also a strong impact and heavily hurts us is the FX portion. We have a like-for-like comparison with the 2022 thing. Here, we're placing the FX effect with around CHF 10 million. Of course, the strong rates in the U.S. dollar and euro. And because this is coming along with a higher ratio of exports that we have in our sales and with that, of course, associated the invoicing in these main currencies. So we are definitely heavily exposed to the strong Swiss francs on the top line. So in addition, but especially for this year, we see also for the Asian currencies down of up to minus 10%. So also here, we have a bigger impact than in previous years when we talk about Korean won, Japanese yen and Chinese yuan. So all in all, this definitely sums up to CHF 10 million, which is then in percent, the 3% impact from the FX effects in our top line. So here on this slide, I summarized composition of the sales 2023. According to markets, Marc elaborated on that, we have the growth portion in automotive. And out of that, of course, in -- the automotive stands now in 2023 for close to 1/3 of our total sales. If we look at the region, then in turn of this additional Tier 1 module business that was mentioned, of course, we see a stronger quota of sales in the EMEA. And this is, of course, also driven by this automotive Tier 1 business. Next slide, please. So again, here this view on the development of the gross margin. I think definitely the top line here is suffering from this enormous economies of scales and leverages we have with a given cost structure, low portion of variable costs, high portion of fixed costs. Marc explained with an example of humidity sensors. So here with this underutilization of our capacities, definitely, we have is down to overall 52.2%. But again, as we've already mentioned also, we have a little bit -- if you look on the long-term bandwidth where we see profitability for this year, we definitely have to fill out this extraordinary good years '21 and '22. Also had one-offs as we do this on the top line. In addition to all these effects about underutilization of our capacities, of course, the second thing is this change in our product mix with more weight on the modules. Look at the overhead costs development on the lower part of this chart. It shows that we are burned in the 2023 figures with a recruited staff that we build up in R&D and SG&A now for the full year. I think this burn effect and this full pay in of this additional personnel costs definitely applies for SG&A and R&D and this underlines also that we are still confident that there is growth that we are now at a kind of turn key point. And we are very confident that with the new initiatives and the new projects to come, but Marc will elaborate on that in the outlook section later. That is the right setup really to continuously look that we have the right resources in place and given to our -- the nature of our business. Of course, we have to do a lot of invest in advance with a high R&D value-added that we have in our company and in our sales. If you look at a little bit more detail in R&D, we can state that also given to the fact that we are working definitely or that we worked a lot in 2023 on the [indiscernible] And then, of course, we also have the approach to capitalize a certain portion of these R&D expenses. We have to state that we did this with a little bit higher volumes in 2023. But clearly stated, it is not a change of our methodology. It's given to the fact that with a A2L projects that we drove that we brought to maturity that it allows us and that it's following. They are close to materialize sales in 2024. We will see this in the outlook session also from Marc that we here strictly follow our ruling, and it's not a progressive approach. Now it's still following our quite conservative approach in capitalizing R&D activities. But anyway, it's more or less 5.8 million higher, if you refer to the reference year 2022. Not bearing any additional risk as we judge it. So talking about the operating result that is definitely as a result of all these cost blocks we saw. Of course, with CHF 10.1 million at absolutely unsatisfactory level, we see this as a turning point in terms of how we want to get things moving in the right direction again in the coming periods. So -- but for that, be with us for a few moments, and Marc will give -- put some more color on that, how our initiatives are there and how the outlook will be. So the top line bottomed down, down to profit or loss after tax, profit after tax result in minus CHF 6.6 million on the bottom line. So below EBIT, we see a quite big financial result. That is the outcome of definitely realized and unrealized losses on our accounts in the balance sheet with foreign currencies. So this results in [ minus 5.8 ] net financial result. Some words on asset positions on net working capital. So here in 2023, we consequently followed the idea to build up stocks as a safety buffer stock to be prepared for future deteriorations in the supply chain. So definitely, we built up our inventory up to CHF 78 million. We recorded CHF 26 million receivables as per the end of the year. So this is not by but it's definitely the full strategic approach. We have made the decision to be prepared when the buffer stocks for crisis that we all hope might not come, but we see this as an insurance and have definitely spend the money and taking the cash out to have these buffers ready. With this buffers, it's not any risk of obsolete stock that is clearly under control by us and also in terms of risks. Also for the CHF 26 million of receivables outstanding as per the end of the year, we can clearly stay and once more state that we see no risk here in terms of bad debts. Talking about CapEx, I think we strictly followed here also our plan to increase and to invest mainly in infrastructure, mainly in Switzerland, a certain portion also in Hungary to finish the preparation and the finalization of the fab there. But the really main portion is in Switzerland, is in Stäfa. Here, we are working on this project, having a second clean room, which is asked by needed capacity, but also is a topic of risk mitigation. We have 2 separate clean rooms in Stäfa ready in terms of mitigate the risk of production stops or fire events or whatever we can. That is clearly a carryout of close to CHF 28 million for PPE and gives, of course, a high burden also for our cash flow. I look at the balance sheet overall. Even when I reduced cash position coming down with CHF 50 million from CHF 120 million to CHF 73 million as per end of June, we still interpret this as a good balance sheet structure, which gives us sufficient freedom of action. So we are still free for any decisions that are to be done and it don't hinder us to follow our growth strategy and to follow our growth ideas. The equity ratio with 88.8% is still a very good one. So here, this comfort of the strong balance sheet even after the weak period 2023 is still an asset for our companies. Finally, I will look at the cash flow. As a consequence of the operating result presented here and the CapEx of CHF 36 million, this all supplements the total cash outflow of around CHF 50 million, which is not, of course, a strategy that we want to follow that we definitely have this cash out over years. It definitely is also a turning point that we want to generate and have this cash ratio or this cash conversion rate back to a solid level in the future. With that, I'll conclude my remarks, and I would like now to hand over back to Marc for strategic focus on trends and outlook.

Thank you, Matthias. And now to focus more on the future rather on the cost. So please go to the next slide. So first of all, in which environment are we at the moment? I think we have won all negative context impact on the one-hand side, the megatrends sensor industry are still extremely robust and strong. That means we are benefiting and I come back to this point later. We are benefiting by these megatrends like energy efficiency like climate. Actually, it is coming more and more, also in the field of sensors as a good additional market fields. And on the other hand, we are expecting that the destocking is not yet over. So in the industrial or to be more precise in appliances, but also consumers, we expect that destocking will last another 6 months. In medical, we expect that it lasts even 12 months and is also reflected in our guidance. So that's also the reason why we are somehow cautious about the existing business because of the destocking effect. On the other hand, as we all know, there are a lot of geopolitical and there's macroeconomic uncertainties all around the globe. What are the focus of the company for 2024? On the one hand side, as explained already at the very beginning, it's our full commitment to come back to growth this year. And we are also confident to be successful in doing so. And the third one is on mainly 2 new projects. They are scheduled in this year, we expect in the second half of the year. On the one hand side, we have very interesting project with an OEM in Germany and on automotive modules. To be precise, it's on particulate matter sensors and they are planning to ramp up in mid of this year. And secondly, it's all about it's called A2L refrigerant leakage business, and I will spend another slide to explain it in more detail. Secondly, I have also explained that in advance already, cost management will be a topic this year and not just in operations where we have already adjusted the capacity to be aligned with the demand, but also in administration and sales and R&D. In R&D and sales, it's more the focus to have this review of projects and definitely not to jeopardize our innovation pipeline, which is strong and should also be working. And last but not least, we like to focus to execute further our strategy. And there is no change in view that we have a good strategic radar, and we like actually to work on this. This brings me to the next slide to give you more light about our new innovation products to come up soon on the market. So a lot of them will kick in and will contribute significantly this year. To be very precise, it's more in order to give you more light about what is in our pipeline. First of all, it's about our environment sensor portfolio. We have already in the Market Capital Day, 3 years ago, we have the dream or the vision that we can actually bring down CO2, particulate matter and formaldehyde beyond, which is already objected to bring these 3 parameter downwards to chip or to at least fully integrated solution. We are now very close to that, thanks to all what we have invested in the last 2, 3 years. So carbon dioxides, as you know, we have already a second generation in the market. So the first generation is probably not fully at scale here on the slide. The first generation has the size of the business card. The second generation has the size of a sugar cube. And the third generation, which is actually going to launch during 2024, is object only. So we are talking then about type 2 really more or less, probably -- by 4 million, but it's definitely chip only. And to be very clear on that, this will not automatically -- immediately contribute top line because it's an OEM business, it means, first of all, our customers, they need time in order to evaluate this new chip, but also in order to design it into their devices. But that will support the trend at the top line in the next years to come. Particular matter, they are very same. So the existing first generation, which is this green box, on the slide, has a size of probably 5, 6 centimeters. So it's a pretty bulky module. And now with RHT, we have integrated all these functionalities into chip only beyond which cannot be integrated this effect. So at the end of the day, what is highlighted here is just a chip. Besides that, we need also a factory because you have to actually actively bring this air to the sensor in order to have precise measures. And last one but not least is also formaldehyde, which is a very good business in China, but also with active manufacturers in Europe. And there also, we have the ambitions to bring it downwards to the chip level. The first 2 candidates, they will be launched this year. The third will be launched in early 2025. Secondly, we have these 2 -- if you -- we can actually -- say actually more generally, we are working on kind of a leakage product, which is not monitoring the air quality, but is monitoring any kinds of gas leakages. Just to highlight 2 candidates, one of them is about methane leakage, which is combined the sensor as a service business, I will come back later in the strategic view. And secondly, we have this gas leakage for HVAC applications. The next slide will bring more light into this topic, which is definitely contributing this year already. And last but not least, we see additional business, which is not for this year, but for the midterm view. And on the one hand side about battery management -- also in battery management, one of the topics there is actually to detect chance of leakage of gases. So gas, they shouldn't be there. And when they are there, it's an indication that the battery is either at risk or is at least indicate going down on quality, it's either. And secondly, it's about the autonomous driving. Definitely, we are not going to fit or exist in -- for autonomous driving, but we see a lot of additional functionalities in central level, we can support these autonomous driving functionality in future. So what about this A2L, which is beyond these particulate matter sensors on automotive, the second contributor to this year's growth. As you might know, there is a very strong market driver in the market in the U.S. So U.S. and Environmental Protection Agency, they have decided also [indiscernible] that U.S. probably is more stronger. They have decided to stop any kinds of old-fashioned refrigerants to HVAC systems from January 2025. The alternative is the category so-called A2L refrigerants. This is a refrigerant class, which is significantly less harmful for the climate. So the so-called global warming potential is significantly lower. On the other hand, it's significantly more flammable. And this combination brings in the need of a gas leakage sensor in order to warn or at least change the functionality of the HVAC system in case of a leakage. The same change also has already taken place in Europe, but the European authorities have said that Asian authorities, they have not decided to go with the leakage sensor, but to do without leakage sensor, but the change -- the transformation is the same. But in U.S. and in Canada, there is an obligation for a gas leakage sensor, at least for those HVAC systems, they have this dedicated amount of refrigerants inside. And this brings in our technology. So we have a very well-proven technology of thermal conductivity. And based on this very fully integrated functional -- technology on chip, we can serve this market perfectly. In the meantime, we have worked on customer-specific volumes. So we are not going to shift with chip only. We are going to shift the full volume to the HVAC manufactures directly. In the meantime, we are working with 4 -- 5 out of 6 of the largest HVAC manufacturers in the U.S. or even located in other countries, but serving the U.S. markets. It's important also to highlight that not all of them are going with a single source situation. So 5 out of 6 are working together with us. Some of them, they have also some competitors on board, not just our solution. So we are not going to win 100% of 5 out of 6, just to not to have to kind of misunderstanding here. There is still some uncertainties about the volumes. The problem there is actually that it's fully clear that the regulation comes in place next year -- beginning of next year 2025. It's not yet clear how many systems will be equipped beyond those that have to be equipped because it's easier for the manufacturers to equip all of that. So therefore, that full run rate volume in the global market is not yet fully clear because we are in the initiation phase. What is already clear is that in second half of this year, there will be the ramp up with all these HVAC manufacturers because they have to be ready by end of the year. And this will also contribute for the 2025 revenue because the ramp up will not be over by end of 2024, it just the beginning that -- it's expected at the moment that the ramp up will come to an end and the volumes will stabilize by end of 2025. So this will be a journey of more or less 18 months from starting in summer 2024. This brings me to the next slide. And I've always like to have a short review on the strategic achievements. As you know, we have divided our strategy since many years on 2 or 3 foci based on the fundamentals. So in the fundamentals, our only most valuable assets of the people, but also of our culture. There, I think we could renew again our award of being one of the top employers of Switzerland. We had also awarded -- we were awarded by Great Work Team prize last year to be under the top 10 employers in -- on an European scale. Secondly, we also celebrate our 25th anniversary with a lot of stakeholders, not just employees, but also a lot of neighbors and local authorities in Stäfa. Secondly, the focus 1. This is all about humidity and gas flow, our legacy products. They're still extremely important for the company, where we are dominating market position today. So there we can report that we could even increase our market position even far. And thanks also to the fact that one of our competitors, unfortunately not the strongest one, but at least a very important one, which STMicroelectronics they decided last year to give up the humidity sensors and to switch to our solutions. That means from summer last year, all the boards of STMicroelectronics, they have humidity sensors on board. This sensor is coming from us. So they are a very good sales channel for us in order to be more pressed at least in those markets, where we are probably not the direct contacts to our customers because the customers are indeed small, but they are just buying the humidity sensors, the kind of [indiscernible] type product, like the processes and all this stuff. Therefore, this sales channel is of high importance for us. We have launched 2 years ago the fourth generation of humidity to shrink down the form factor again and secondly, also to reduce costs. And this change, the transition from the second, third to the fourth generation is at full swing. And first of all, in consumer and appliance markets secondly, but also in automotive, typically, which is a longer adaption of time for automotive products. And as Matthias has already mentioned, I think that's important to highlight again. We have intentionally decided to increase our wafer inventory significantly because of all the geopolitical problems in Taiwan. The semiconductor industry is highly relying on Taiwan. And we like definitely to be a responsible supplier for all our customers, especially in those situations, as most of them, we are single-sourced suppliers in the globe. Definitely, we don't like to run any -- kinds of any risks not to be able to ship due to any crisis in the South Asian region. Focus 2, I have already explained about miniaturization, which is ongoing, which is very short to be launched. And also about the increasing and the standings we have with all the OEM manufacturers in terms of automotive, environmental monitoring of cost. And not but the least about third focus. And we are working on these new kind of leakage programs steadily, which is based on technology we have already in-house. I have already explained this is the most prominent candidate of A2L, but there are also the others to come, not this year, but next year. So there will be a new class of refrigerants in the next years to kick in, which is even lower in GWP. And we're also working on H2 leakage sensors. So this is also to support the energy transition from more fossil energies to more harmless technologies where H2 will be one of the most important candidates to store energy from summer to winter, for example. And thirdly, that we are still ongoing with our additional complementary business model of not chipping just hardware, but also serving with data the SaaS model, Software -- Sensor-as-a-Service, which is actually divided into 2 parts On the one hand side, it's methane leakage, which is progressing very well. And there, we also expected that it will contribute first time on the top line this or next year and this is coming more and more in messages. On the other hand we have this -- 2 years ago acquired business in Berlin, which is focusing on conditioner monitoring. There, we are still somehow not critical, but it's a tough business. So at least it takes longer than expected at the beginning to come into the market. The adoption rate is slower than we had anticipated at the beginning. That's also one of the reasons why we had in the [indiscernible] inherent to be on the safe side, on the conservative side due to the acquisition costs, which is in the theoretical goodwill according to Swiss GAAP FER. That brings me to the last slide I assume, yes, about figures of 2024. Again, I think the market condition will be challenging again this year due to geopolitical situation, but also because of the destocking, which is not yet at the end. And in terms of profitability, we expect to be in a transitional year 2024 coming off to expect and hopefully also to normal levels of profitability back in 2025. Medium-term outlook remains still important, but I hope actually also continue to be more likely with more confidence about what we're working on. In sales, we expect for 2024 with existing business that somehow a kind of recovery. On the other hand, we are still suffering from the destocking, especially in medical. That means we are somehow reluctant and [indiscernible] about the recovery strengths of the existing business in the growth, which is indicated by the supply that guidance is actually coming 90% from the new projects, mainly the automotive, but also in kinds of these leakage sensors. That brings also the challenge we are in for 2024 that this kind of product mix between the existing business, which is mainly based on the components, which is still somehow suffering from destocking, but also from the weak demand in the market, combined with the new projects, they are mainly based on modules, which are coming typically with lower gross margin. These are kind of a lower gross margin in 2024 and which is also reflected in the guidance for 2024. So this brings me to the figures, CHF 250 million up to CHF 280 million is our guidance for the top line. This is a growth of 7% up to 20% compared to 2023. But we are still suffering in terms of the profitability, gross margin, but also EBITDA margin wise. And due to that, also higher cost to ramp up all these products and the product mix, which is not very favorable this year due to the still weak demand in medical and also in the legacy products. That brings me to the end, and I'm very happy to answer your questions.

Tobias Fahrenholz from Stifel. Could you comment a little bit on at least the transaction risks? So what has been the negative EBIT margins last year? How those look like with sales and costs in Swiss franc continuing there in the future?

Yes, we definitely bring it to the facts of the EBITDA effect for 2023, we calculated around CHF 4 million on the borderline there. Then definitely, how is the scenario? I think if you look at our cost structure with R&D portion given and most of -- or almost all of our R&D resources definitely situated in Switzerland, this is definitely in terms of personnel costs, the biggest portion of cost is in Swiss franc. So now what is our policy? Our policy is on the firsthand, not doing any hedging business or not working with derivates. That's a clear philosophy. That is in our manuals. So we are reduced to natural hedge. And here, of course, we are doing all what we can. Of course, we have procurement market with a portions of wafers coming in U.S. dollar. And then there is a second important currency here in terms of procurement is euro. So at the end, if you balance this and set off with the sales, I think, we have around 50% sales in U.S. dollar, we have 20% sales in euro and the rest is the diverse currencies on the sales. So all in all, I think we are quite limited in playing this natural hedge. Of course, we are improving that with having more volumes in the fab in Hungary, where we have the more or less leakage than to the European currencies outside Switzerland. Of course, also with A2L, there will be some more added value in the U.S. region. So then also having more cost in U.S. dollars. So this mitigates to a certain extent. But at the end, we will be definitely ongoing having a quite huge exposure with a strong Swiss franc.

Yes. Michail Paraskevopoulos. First question on the cost side, on the operating expenses directly [Technical Difficulty] expect to increase OpEx in 2024 and in 2025. Do you expect to already be back in the mid-term target range for EBITDA margin in the high 10s?

Well, to your first question, Michail, yes, this is true that we are planning not to increase further our OpEx because this also reflects the project pipeline. A2L is very close to be ramped up. There is now actually the job of operations to take over R&D and sales. And typically, in our company, it's always sales and R&D together. The R&D only doesn't make sense because at the end of the day, we have to acquire the customer first in order to work on the specific solutions and the applications. And these people, they are now getting free. They can actually work on the next candidates in our pipeline. So OpEx should actually be same this year. This is our plan. For 2025, your second question, we are not going to have a guidance for 2025. Honestly, it's already in this pretty turbulent times we are in, it's already challenging to give a full year guidance, but we don't like actually to look to 2025. What I can say to you again, and I have mentioned it already before is that it's our intention definitely to come back to normal levels we anticipate, but it is not an official guidance. It's just our ambitions. And this is also depending on growth. We are confident also about growth in 2025, but it's too early to already to name it by figures.

And second question on the A2L market. Could you maybe elaborate the potential that you see maybe in 2025 and what could be kicking in? And what competitive situation looks like if your solution is sort of the prime solution? Or are there any other approaches to that solving that, eager to know?

Well, first of all, the competitive landscape, there are actually 3 different technologies. They can measure A2L in leakage situation. One is an optical solution, which is supported by some of the competitors. Honestly, this solution is very robust, but on the other hand, pretty expensive. Secondly, it's a metal oxide technology, which is -- we have also this kind of technology in our house. We are fully confident that this is actually not the right technology to work on. This is more kind of a legacy technology for leakage in the Japanese market. And the problem with metal oxide is always stability of the sensor longer term. Therefore, also the customers, they are not that happy about this technology. And the third, which is not just supported by us, but also another competitor, they -- is the thermal connectivity, which is technology, which is pretty robust because it's kind of a physical measurement. It's just based on physics, combined with the fact it's easily shrinkable downwards to a chip, which brings actually good scalability, but also a good cost portion. What we have to keep in mind is that it's technology or the way how to measure it well is actually on the chip. This is the heart of the solution. But at the end of the day, you have also to work on the module on [Technical Difficulty] significantly lower compared to the technology to be applied to measure the A2L. So I think we are very well positioned, but we're not the only one. About volumes in 2025, again, it's not yet clear. It's changing every day. What our the longer term, means 2024 -- not long term, but midterm view on the volumes, what we expect that there will be a Phase I, which is in 2024 and 2025, where all the manufacturers are fully focused on making this transition and successful because they don't have just to design in the leakage sensor, they have also to change the refrigerants in their systems. So there's a huge challenge for a type of manufacturers, they are not that used to change every year the way their way of how to manufacture HVAC systems. They are pretty conservative industry. And therefore, this is a huge challenge for them. There will be another phase probably starting in 2026, where we have also to work on adding more value to the sensors because there will also be a kind of a consolidation phase. But 2024, 2025, more focused on make it possible. And afterwards, there will be also a kind of which technology is the more convincing one in order to consolidate the portfolio. And for 2025 to give you some kind of indications, we expect to be in the mid-range of the 2-digit million revenue contribution. So it's not about CHF 100 million, it's not about CHF 10 million. Michael?

Michael Inauen from Zürcher. Just two questions. First of all, you mentioned that you are checking a little bit more on your R&D projects. Could you maybe give us a couple of examples what kind of products or projects you're actually questioning going forward? And the second question is you mentioned that you -- if I understood it correctly that you took an impairment in your -- in the equity program. This is an indication, as you said, it's not the AiSight that is not doing so well. My question would be what are the milestones going forward? There must be a point in time where you have to take a decision if you stop it completely or if there's a real chance to get to a certain revenue and then you need to tell the investors probably what that means? So I'm just trying to understand where are we in this situation on the AiSight?

Well, the first question about -- general about projects. We can probably differentiate between projects that are very close to the ramp up. They are just to be done. There are full commitments to customers. There is no question about it. Would I more address with my statement about the real project is more the long-term projects, where we have also a lot of innovation projects. Honestly, all typically with pretty a low resource allocation. So probably 3, 4, 5 people are working sales and R&D combined, are working on these innovation projects. And these projects are not coming to contribute to the top line in the next 2, 3 years. This is exactly the one of the assets of the company also to have this long-term view. Most of what we have talked about today and also the booming years of 2020 to 2022 is actually based on initiatives we started already 5, 6, 7 years ago. And -- but all these longer-term innovation have also kinds of intrinsic risks. And this is exactly where we are looking into a game and to say, okay, which are of them are of high value. We are still -- this is an ongoing process, honestly, also in good years. We are doing this. This has to be done in a company where you are dealing with a lot of higher risks innovation projects at our -- what we are doing now is actually just to be more picky in terms of what is the ratio between chances, either short, mid or long term and the risks in [Technical Difficulty]. I cannot give you a kind of a list, first of all, because this is an ongoing process. Secondly, most of these projects are not yet well known because we don't like actually to wake up our competitors, especially if not for those projects we like definitely to work on farther. But we have also to be sure about that. We are not talking about projects. It's 50, 60, 80 people on board. It's more this kind of a lot of smaller projects. They are also laying the foundation for longer-term growth. We are looking into. About AiSight, as I have explained that already in the summer, we discussed about that is there was kind of a readjustment of the adoption rate in the market. What we see is the market is here. This is a good point. Secondly, we see also there is a demand for this kind of condition monitoring systems. What we have underestimated is the way that it's not that the customers are evaluating the solution first. They are hopefully getting convinced about the solution and then they decide to roll it out into all their fabs or factories. This is not the way how it works. And this is actually new what we have learned in the last 2 years. This is not a disruptive learning from December or January this year. It's actually more learning, we have learned over the time that it takes significantly longer in order after the evaluation to come into one, second and the third one. This also led to a kind of a readjustment of our business plans and of the cash flow situation of the respective business, and this triggered this kind of theoretical goodwill adjustments. About the milestones, definitely, what we have there in place is a kind of a regular and this is what we are doing with all these new adventures all the time, also with the methane leakage sensors, by the way also with the A2L at very early stages that we have on regular base, we have a kind of a review and internal review of can we reach the milestone we have actually anticipated and also what has changed in the longer-term view about milestones and about business plans and then we take decision. The last review was in November last year, which also stated this way of saying, "Okay, we have actually to adjust the business plans, but we are still believing in this kind of markets to be evolved."

I am interested in another question there, and I know everything you'll answer to that. But I still would like to ask you. I mean how much does it cost on the EBITDA line to fine and to fund this AiSight business? I know everything you'll answer, but I think it's...

So thank you for answering your own question. No, I think we are not going into specific project because at the end of the day, it's actually -- it's the acquisition. Therefore, it's also reflected in the kind of the direction or the theoretical goodwill. But at the end of the day, it's one of the projects we are running. And honestly, there are more expensive projects than the one links to AISight in Berlin, but it's just one of more than one. And therefore, I don't like actually to deeply dive into this topic, but it's -- at least it's affordable for the company.

This is [ Erik Bindslev ]. I've been impressed into the mention that you got with the responsible supply chain. You mentioned you are covering by multi-sourcing though you have the risk. Now last year, you mentioned that on your Scope 3 emission, you have hired a consulting company to basically set your baseline. Do you mind touching upon what has happened to that project and given the performance, how much of the priority it has become?

Sorry, can you repeat the question. I missed, which project? Scope 3, It's the focus -- and which project?

And you mentioned last year that you had hired consultancy to help you with the baseline of that Scope 3 of the emission.

I was completely on the wrong table, sorry. I translated your Scope 3 to Focus 3 strategy, but you are talking about Scope 3 ESG.

Yes.

Yes, sorry about that. Yes, what we have done is kind of an internal -- or together with an engineering office. So this was how it is called the South Pole consulting company. We did a kind of an investigation about our Scope 3 emission rate. Honestly, I'm not already pretty happy about the outcome. Not about the level, but I don't believe on what they have calculated. So we have actually to go through to the study again because also South Pole is a very well-known firm on part is not that familiar with kinds for semiconductor businesses. And the main contribution for Scope 3 is actually the manufacturing of wafers in Taiwan. Therefore, we have now initiated also to be very close to our suppliers in Taiwan, but also the other ones that we are working to better in order to learn more from them because I think we are more precise. At the end, Scope 3 will -- it will turn out that if you like, actually to bring down Scope 3 emissions, then you have actually to work not we, but also our suppliers have actually to work on the emissions of all these -- on the filter rates of all these gases they need for not CO2, it's other ones like SF6 or something like that and to work on those they need to edge the wafers. But at the end of the day, we are also there at kind of an edge of technology, how much filter rate can be achieved today with existing technologies. And this is exactly what we are also coping with our Scope 1 and Scope 2. Also in our Scope 1, which is indicated in the annual report this year, I think it's even more than 50% of our emissions is actually coming from our own fab and the limited filtering rate capability of existing filters today. And this is actually where we have to work on. There are other parts of Scope 3. For example, travel, where we are already compensating all our business travels. We're also working together with Swiss and Lufthansa Group in order to some extent both to support their initiatives for soft fuel. That means sustainable aviation fuel, which is significantly more costly, but also to compensate emissions. But from a scientific point of view, they significantly more convinced and they adjust to compensate with any kinds of offset businesses anywhere in the world with aviation fuel, which is sustainable, you can actually reduce the CO2 emissions sustainably and not just by offset business. This is also what we are investing, and we have also kind of a partnership with Swiss and Lufthansa in that terms. But our main goal at the moment in ESG is actually to do our own homework, with Scope 1 and Scope 2. This is definitely the main focus because there we have also no excuse. So there, we can actually work on reducing emissions, and we don't have just to influence our suppliers to do so.

Andreas [indiscernible] Capital. I'm interested in the CO2 sensor business. What's the situation here? How far are you working with? I could imagine there are certain hurdles that not everybody is really interested in introducing the sensor because that to reduce business volume in the HVAC industries. Is that idea reservable or what's the situation here?

I think we can probably categorize CO2 business into 3 different types. First of all, is that those applications we are all familiar with since the pandemic. That means this kind of table-based indicators or if the CO2 level is too high, you should actually open the window or go out of the room. This is a business which is still valid, but this came down from this high during the pandemic. The second part is about HVAC, where you have to measure or you can measure CO2 in order to optimize the ventilation system in industrial building less in residential buildings. And the main focus there is to guarantee a good air quality combined with lower energy efficiency. So the driver there is not in first priority to air quality, but more the energy efficiency because more and more buildings -- industrial buildings are also qualified according to reset all these certificates in order to guarantee in the air quality, but this is a given baseline. And now we can actually work by keeping this baseline to reduce energy consumption, and this can be done by measuring CO2. This is ongoing, but the HVAC industry is not the fastest one. That means they take some time, they have also not a new product line every year in order to design that. What is done there is actually to measure CO2 in order to change the mixture between fresh air, which is cost in terms of energy and the recirculated air in room, which is cheap in terms of energy in a way in order to have the good balance between low energy and good air quality. And this can only be done if you have kind of an indicator, and this is typically based on CO2. And the third category is about our automotive. Automotive we see [Technical Difficulty] all of the existing business, two ways. On the one hand side, it's all about CO2 levels in a car because at the end of the day, CO2 -- and leverage CO2 level can also make you tiring. So this is a danger for the driver. On the other hand, it's all about the heat pumps. So more and more -- especially heat cars are equipped with heat pumps in order to reduce the energy efficiency or -- to increase the energy efficiency or reduce energy consumption. And these heat pumps in cars are in Europe based on CO2. CO2 is not harmful or toxic, but it's definitely harmful if the concentration is too high. Therefore, in the case of leakage, you have to warn the driver. And if you build in a CO2-based heat pump, you have also to work -- to design in a CO2 leakage sensor. Then it's CO2 leakage and not CO2 monitoring. But at the end of the day, it's the same technology unlike technology, but this is future work -- or future projects we are working on, the last category.

So the HVAC sensor business, is that taking off, so this is implemented in your appliance in the...

It's taking off, but it's not a kind of a fighter -- army fighter. It's more an Airbus 380. That means HVAC industry is -- the only change is now with A2L because this is driven by regulation, they have to do it. But all in other applications, it's step by step from year to year, contributing more and more, but it's not that prominent that we can highlight it in a way of this is to contribute to number one to growth next year. And this is also not happening in the next couple of years because it's an ongoing increase.

[indiscernible]. I would like a question concerning the capitalization of R&D. You said it's only a CHF 5.9 million increase, but from the release I think of below CHF 2 million. So what exactly has changed in order for you to do that now and what will it be in the future? I mean do you have that much leeway? I thought there would be very specific balance -- ways to measure it and to allow you to do it or not to do it.

We have actually the policy to be very conservative in R&D and capitalization. Our guideline is the way to have, okay, on the one hand side, whenever we have production equipment, which is designed internally, we have to activate to capitalize the R&D efforts in order to be on a like-for-like comparison with those equipments we are buying over the counter. And in our case, we have a lot of equipment, which is either come from scratch internally or is at least significantly modified based on over-the-counter equipment. And all these are capitalized. Secondly, it's -- this is a product which is in place already for many, many years. Whenever it comes very close to the production, then we have some R&D efforts, they are capitalized. What has changed now in 2023 is not the policy, but we have now this big programs of PM2.5, but also especially A2L, which is very close to production. And this is actually triggered that on the one hand side. In this business, you have also to work on kinds of equipment, which is not just over-the-counter business. It's not a kind of a standard men's equipment, which can be bought. We have actually do a lot of these equipments internally. And secondly, it's about the fact that we are very close to the ramp up now of these new projects. So as I have indicated before, the ramp up is actually scheduled for summer this year. So already now, a lot of equipment is already installed because you have actually to run pilot runs and all this stuff to go through all the qualifications in this executive phase we are needing now. And therefore, a lot of efforts had to be capitalized last year.

So eventually, that will go down -- this CHF 8.5 million will go down a bit in the future in the respects of those...

This is very likely to happen. Probably, this year will still be some kinds of additional work to be capitalized. But then definitely, if the ramp up has been placed at least for A2L, this comes down again.

Can I just ask another question concerning the semi kind of safety stocks that you build in order to compensate or mitigate the risk of Taiwan and is there no other way to do that since those Taiwan purchases are kind of single source?

Well, so -- to keep in mind, semiconductor industry is actually relying with -- I think 70% of all semiconductor products coming from this very tiny island, Taiwan. So it's not that easy to go out of Taiwan. Definitely, we're also working on this kind of second sourcing, but we have also to keep in mind that second sourcing wafers is always a huge challenge. You cannot actually take your wafer, go to another fab and say, okay, please start. So there is a kind of a project in order to make this kind of fab transfer because all fabs are slightly different. So it's not that easy to switch. And afterwards, whenever you are going with another one, you have a kind of a second sourcing situation, which is fine in terms of resilience and robust supply chain. On the other hand, it's also a split to volumes, which is also not probably just favorable in terms of efficiency. You can do that, and we're also working on this kind of mitigation, which takes longer than just a kind of an inventory increase. And but it can only be done with the high-volume products where we have a lot of wafers. And because for all the smaller products, and this is a number of wafers, not number of products. Today, we have humidity, which is definitely a 1 million unit business. But -- also there, we have 1 wafer. In the latest generation, we have 70,000 humidity sensors on 1 wafer. So the number of wafers is decreasing at the moment compared to the previous year, not due to the fact because humidity is decreasing, but the number of chips on the wafer is significantly increased. It's more than a factor of 2 compared to the third generation. And therefore, it's not that easy just to mitigate the full risks by double sourcing situation because of the effort, but also because of the number of wafers. And secondly, always in the new fab we can reach that U.S. is heavily working on bringing fabs to U.S. I'd like to comment that shortly. This is not beneficial for us because we are on 8-inch wafers. All what you can be read in the newspapers is 12-inch. And these are the latest nodes of CMOS. So there, we are talking about 13 nanometers, 20 nanometers on these very large wafers. Our central technology is based on 8-inch to smaller ones. They are typically 90 nanometers or even higher than 100 nanometers. Therefore, we can adapt the technology also to the latest CMOS nodes, but this is not makes -- it doesn't make sense for the company because at the end of the day, we have a sensor on it. So you pay more for that wafer. And at the end of the day, most of it, we cannot benefit from the shrinking effect because at the end of the day, we have a sensor on the chip. So it's -- to go to these latest nodes is not of benefit for the company. There we stick more on the legacy wafer technologies, which is from a point of cost significantly more interesting for our business, but cannot be mitigated to U.S. in terms of this governmental-driven onshoring of fab technologies to U.S.

Then this CHF 78 million after CHF 60 million the year before of inventory build up, I mean, how should we kind of think of it for the future in '24? One would see a similar increase? Or is those CHF 78 million now is the new run rate kind of depending on the sales level...

To give you an indication, more or less CHF 20 million comes from a wafer inventory and this CHF 20 million is our intention to keep it stable. Definitely, the business with wafers is significantly increasing. We have also to adapt this level, but this is not today or tomorrow because of the [Technical Difficulty] contributors to growth this year. Therefore, we expect to keep that stable. Then secondly, we have the non-wafer inventory where we are still working on reducing inventory. That's our ambitions. On the third, we have to keep in mind the ramp ups of the new businesses. That means the PM2.5, but also the A2L, which also has a kind of a front-loading situation. So our ambition is actually to keep inventory more or less stable all in all.

Are there any additional questions from the room? No, then let's also have a look there are any online questions. Okay. A2L sensors for air conditioning systems in the U.S.A., how much annual revenue do you expect in 2025? Is there a chance that Europeans and Asians will also use the A2L sensors one day perhaps after an accident? And yes, maybe that's the first part.

Perhaps after an accident. So the first question was already answered. The second part about Europe, we do not expect that Europe or Asia will implement kind of a guideline for the heat exchanger for A2L because they are already -- they have already done their transition more or less. By the way, in Europe, it's typically called R32. Then the refrigerant and somehow you see this is labeled on air conditioner systems today here also in Switzerland. And -- but looking forward, longer term down the road, there will be the transition from the so-called A2L category to A3 category. This will not happen in the next 2, 3 years, but it will happen probably in the next 4 to 5 years. and A3 is a category, which is even worse in terms of flammability or even explosive situations, but on the other hand, completely harmless for the environment. This transition will happen, not today, not tomorrow, but in 5 years from now on. And there, it's very, very likely also Europe and Asia, they have actually to design in leakage sensors because the A3 category is even more flammable or more explosive compared to A2L. So A3, for example, is propane, which is pretty well known. But...

And this brings to the next question. Heat pumps in Europe. The new generation also use a gas that is good for the environment, that scares people. Are you also developing propane sensors for these?

We are working on -- this is one of the projects in the pipeline to be ready for this kind of transition and how it happens.

Marc, maybe a question to you. How have your competitive environment and your market shares for carbon dioxide and particulate matter and formaldehyde sensors developed worldwide?

This is still a transition phase. First of all, it's emerging CO2 and formaldehyde. Secondly, it was affected by all these ups and downs with the COVID. So at the moment, I think not even for the experts, it's clear how large is actually the market in a stable situation, ignoring all this kind of adjusted by all these positive and negative effects of destocking of COVID-driven overconsumption. And I think what I can say is, at the moment, my perception is the way that there are actually 2 big players in the market for CO2, but also formaldehyde, especially CO2. One is Sensirion and the other one is still the very same, it means Cubic in China. They have good products. They are fully focused on modules only. So they have no support by components. And we are -- these 2 companies Sensirion and also Cubic, they are in a competing situation more or less on the same level in terms of market shares for CO2, but also particulate matter. Our strategy is actually to shrink it downwards to chip because this is actually a way they cannot do. What their advantage is the fact that module business is the core technology in China. So they are really good in doing a fast design, also a cheap design and also to produce this chip. So they're in price and in time to market, they are really good. We have to respect them fully. In terms of integration into chips, they are definitely not the expert.

The next question is on the guidance. Can you please break down full year '24 guidance between declining existing business and growth in new business -- and what is the contribution expected from the new business in 2024?

Well, what I have indicated before, it's not a declining of the existing business, but just to be a cautious situation in the existing business that indicates that, at the moment, we expect to be more or less flat in the existing business. We are not anticipating a further decline. If you zoom into the markets, still in medical, it's taking longer, and it started later the destocking situation that means there it's likely to be in a declining situation. In other markets, I also have indicated that we see already kind of tipping point. So there, we have also some growth existing. But all in all, I think it's a flat situation in the existing business. The indicated growth on the top line is mainly coming from growth projects.

So another online question on automotive. Given the automotive inventories are rising currently, do you see any risk in the automotive segment for 2024?

Also there, we have to divide the growth projects compared to that existing business. In automotive, we are somehow also there. We are reluctant. Last year, we recorded 11% plus in the automotive sector [indiscernible] there will be some kinds of inventory corrections ongoing. And therefore, we are somehow cautious about that, not in a tremendous way, but at least not in kind of -- we are not reflecting and we are not seeing the kind of an increasing existing business in automotive this year. The growth also in automotive comes from these additional projects I have highlighted before.

And then a question on Sensirion share. Since 2019, Swiss shares cannot be traded at stock exchanges in the EU. Do you have any plans to bring Sensirion shares to an European stock exchange? This would increase the number of potential shareholders in support of internationalization of Sensirion.

No, there are no plans at all. I think we are fully fine with the Swiss stock exchange. And I think Zurich is a very good place to be. There are even an Austrian chip manufacturer, which is actually listed here in Switzerland. I think there is also a good way in order to trade stock equities on the Swiss Stock Exchange despite of all these regulation from the EU. There are a lot of other way of workarounds in order to do so. Therefore, we have no plans, neither to go to a European stock exchange nor to the Wall Street because we are just too small for that. It doesn't make sense for us Sensirion.

Good. So there are no more online questions. So with that, I think we should conclude the session here in the room. Thanks a lot, and we meet outside for refreshments. So then please leave the room and let's go outside. Thanks a lot.

Thank you for coming.

Thank you.

And also thank you for dialing in.