INFICON Holding AG

It's half past nine by my watch, so good morning and welcome everyone. My name is Bernhard Schweitzer, investor relations contact at INFICON. I have the pleasure of hosting the webcast of our third quarter 2025 results conference. With us today are Oliver Wirsch, CEO of INFICON and Matthias Drönble, CFO of INFICON. The management team will first present the results and then take questions. During management's prepared remarks, online participants are kindly requested to turn off their microphones and cameras. During the following Q&A sessions, participants are then invited to switch their microphones and cameras on when asking questions. Participants can add themselves to the queue of people wanting to ask questions by clicking on the Arise My Hand icon. Alternatively, you can also use the chat function in MS Teams. You should have received by now a press release on the Q3 results, together with a link to the accompanying visuals for this web conference. All documents are available for download in the investor section of the Inficon website, inficon.com. I would also like to inform you that we record this web conference to archive the audio file later on the Inficon website. The oral statements made by INFICOM during these sessions may contain forward-looking statements that do not solely relate to historical or current facts. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial conditions. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Having said all that, I would like to hand over now to Oliver Wiersch. Oliver, please.

Thank you very much, Bernhard.

Welcome, everyone. Great for having you here today. Welcome to our news release in June. About the agenda, we have the usual agenda. First, I will tell you a bit more about the markets, the key messages, about the target markets developments and about our full year expectations. And then I will hand over to Matthias Freundli, our CFO, for more details on that. Two free results. So certainly stormy times these days, but at the same time, it's the time for making bold moves, we believe, and it's not the time for hunkering down. And we actually have quite a lot of optimism here, and I will tell you in the next couple of slides why we see it that way, even though, of course, it's also a bit rough going. Q3 results... We have an ongoing positive order trend with the third consecutive quarter with a book to build above one in a quite demarcated environment in all our markets. We show continuous resilience despite the market weaknesses and we have temporary profitability impacts due to the trade disputes ongoing. If you look at the orders, we can see that they're increased substantially year on year, and they're up in all end markets and all regions except Europe, with resilient sales year to date, roughly flat. The shipping these days is also a little bit disrupted at times through these trade disputes. So for us, we looked at this as a flat development. and also Q3 sales of 164. We look as a good results. We had a tough comparison with last year. We'll get back to that when we had large semi-orders out of China chip maker that we delivered. If you look at the segments briefly in our overview, we have growth of semiconductors in all regions offset by a weakened market in China. regarding sales resulting in a flat year to date, minus 1%. The broad ramp of the industry we believe is further delayed due to these disputes and negative investment developments where projects delay further on the timeline. They don't go away, but they move out further. So we believe ramp is rather second half 26 or even partially in 27. GenuVac, general vacuum is growing in 2025, with another good quarter, plus 7% year-to-date, plus 6% quarter-and-quarter. Solid QV, RSE auto results, I will talk more about that. Growth, even though the market is partially in consolidation, plus 4% year-to-date. Security and energy is in a useful cyclical position. downturn where we have government program timings mostly defining the cycles. We have, however, already received first larger orders again from the next program wave. If you look at operating results, operating margin at 14%. The key factors there are lingering temporary impact from the trade disputes. One key thing there is the capacity duplication. um i get back to that in a minute negative foreign exchange effects that's mainly the strong swiss francs versus the us dollars and tariff impact efficiency measures are in execution or around all that so regarding the Capacity duplication, what is that? As you know, in Q2, we showed how we move the production. This reconfiguration is largely concluded now, and we have adjusted to the new trade world in that sense. What we don't still have is we have capacity in the former production location that needs to be ramped down over time. If you want to look at that in a big picture, then you could say we have still too much capacity in the west as we have ramped up in a really fast pace in the east. Now it's about ramping down the capacities in the west that we do not need anymore because we supply our customers directly out of the east. Then when we look at the FX impacts, these affect part of our locations it's an effect we also working on ramping down it's basically similar measures right moving around head counts and capacity and tariffs I believe we have been able to reduce quite significantly versus the last quarter through these measures though there's some that still remain and some few ones will even stay for the foreseeable future. If I continue here, we will go into this, all these topics in more details through the presentation. Operating cash flow at the robust 27 million US dollars. And then when we look at organization, as I mentioned, the production reconfiguration is concluded. But of course, still some of this duplication needs to be managed, which we are with high priority working on. With this new setup, we avoid the substantial trade dispute impacts. This is barriers and tariffs, other factors that we are able to avoid like this. And I believe we are very well positioned now for future different scenarios. There's a little uncertainty, of course, and I believe you're positioned for all of these different scenarios. We continue to invest in leading-edge R&D with 8% of sales. I think this is a key point when we look at our orders. I'll get back to that also in a minute. When we look at CapEx, this is a little bit slower than before. I believe we have the CapEx. When we move production capacity, we typically don't need so much additional capex because we're moving tools and so on. So we're looking at about 20, 25 million US dollars for capex. When we look at the overall pictures and also tie it together, why we push forward with leading edge R&D and are really optimistic there is, We're winning for three factors, really. And that's also why we can show orders different than many others in these industries where we have really interesting R&D pipeline where we're winning new business, we're opening up new applications that weren't possible to be sensorized before. There was no measurement possible before. So that's also harsher environments with all the leading edge logic, for instance, or leading edge memory. There's clear market share gain. And there is also a couple of interesting smaller markets that we focus on that we find are equally interesting as the semi-market. Good growth, good profitability, and they actually show strong resilience in this more difficult economic time. So, three good drivers for why our orders are up, and I believe this is the time for bold moves for Indicom to really move forward. and focus on the customer. So if we dive into the different perspectives here, worldwide markets and sales, we made one change for you, a little bit increased transparency in the sense we show now four regions. I think it's quite relevant to show these four regions. That's how we internally think. That's how we structure our innovation, organization, and also production and supply chain. So we're looking now at Asia Pacific, China, Europe, and Americas. If you look at the development there regarding sales, you can see two regions are down in Q3, two regions are up. All in all, you can see a positive trend, especially in Europe and Asia Pacific. And China and America is a bit slower. There's some reflection of the U.S. trade restrictions in that. If you then jump into the different target markets, starting with semiconductor and vacuum coating. We are in a very strong position. As I just mentioned, I believe now is the time where we really expand our footprint there in the market, opening up new application, gaining market share. And the innovation pipeline is on fire. I think it's also in the slower times the time where you can, with your customers, truly innovate on the next generation of products or the one after of their products. And that's really what we see these times. When we look at the general market developments, the broad industry ramp, as I mentioned earlier, we believe is delayed through the trade tension, which constrains the growth and delay the investments. That is a timing that we cannot influence. That's the industry. Some sub-segment, though, there are, of course, already ramping, but it's too narrow, specifically the one around AI, that is HPC and HPM. Certainly very interesting. That's a few players that and there's a few others that's trying to catch up. That's where CapEx investments happen on a larger scale and where we see an acceleration, but it is still too narrow when you are the other sub markets within the semiconductor market. There is everything from being really quite hot and ramping to slowing down again. And I think also what is interesting as opposed to maybe also other cycles is it's a bit back and forth. So we see things like last year in China, we had an acceleration in chip makers investment that you then also ship. That is also why our comparison year on year on the Q3 is tough because we ship that all in Q3. Then we saw a slowdown of this chipmaker business in China, but an acceleration of the toolmaker. In the first half of this year, we shipped that too, and now we see again that has slowed down, but a bit of an uptick again in China. So there is so much, this is an example, so much going back and forth, the visibility is really quite low. So when we look at... the market outlook for semiconductor, we look at this flat to slow. And the main reason for that is actually we are trending flat to last year. And I think if we had shipped everything, we could be even a little bit ahead. But the last year's Q4 quarter was really quite huge, an absolute record quarter because we shipped so much. And also for the chip makers, that 100 million to repeat that, that will be not so easy. It's possible, but that's why we are saying flat to slow on this. All in all, really optimistic about what's happening in the partnerships with our customers where we work on the next generation of our products. A lot of new wins across the board. Quite exciting technology updates and you will hear more about that in other formats as well. If you then jump into RSC Auto target market, I think also here we expand our already strong position. This is a market that overall is not growing necessarily, at least part of it, especially the EV part of it has just passed through rock bottom and is now picking up slowly. But we clearly gain market share there with our leading edge products. I think we're at least a generation ahead there. And we're also winning in the east, which is very important. That also shows how localized we can operate, innovation and manufacturing. So here we had a growth of, as you see in the chart on the right, of 30% in 2023, but we could sustain that level and grow ever since in 2024. And also this year we show growth, with year-to-date was 4%. So I think we expanded this market. Important next to auto and EV that, again, is past the rock bottom and seems to be slowly picking up in spite of all the headwinds from policy to consumption. Two other things are also important. One is the build of data centers is something where we profit from clearly, obviously, on the semiconductor end market, but we also profit from it here because of why the – Air conditioning market is a key supporter of these data centers. It's a very key ingredient to build large data centers, and that's where we see a really strong dynamic now emerging just over the last couple quarters. And the other one is a bit of a longer-term one, the new refrigerants due to the climate policy changes that drives our new sensor growth. That's also new innovations from us that are able to detect these new refrigerants. That drives that market as well. So all in all, a really strong R&D pipeline. I think ELT is strong, Stratos is strong. There's a couple of other strong products here. What also is a factor here is specifically for the handhelds, our competition is American. We were able to relatively quickly move now in Q2 our production out of China. Everybody in manufacturing is in China. And now we're supplying globally out of Malaysia, and we see market gains there, too, because of this really fast reaction. Yes, it costs us. We've got a big thing, right? We see it in the operation income, but we also see the benefits on it already now emerging in this range. Okay, then we move on to the next target market, general vacuum. uh quite excited about that i think we show continued sales growth after 2024 was slower and remember 2023 was covered opening and shipping of all the backlogs or a bit of an outlier but now in 2025 you see continued growth and you see here today the plus seven year on the year significantly up quarter and quarter up I think this shows also the strong position that we further expand. This is a bucket of many smaller markets, maybe 20 or so, that we carefully select regarding our position, what we can contribute, the growth potential, the profitability potential, And I think now is also the time of this smaller industrial, advanced industrial markets, or also big science markets, or life science markets, which show strength, where we can further expand our position, but they also grow. One thing is missing still is the solar market, which is an interesting part of this basket of markets. We believe this is still in consolidation. There's a lot of overcapacity specifically in China. And it's very likely that the recovery really only comes end of 26 or even slips partially into 27. Nonetheless, I think there's a lot of reason for optimism, as we also here build out our strong positions across the sub-markets. The last market, security and energy, as I mentioned, we have number one products here, but this is driven by these large government programs, big ones in the US, but also across NATO and also in the East. We have been rolling out A couple of programs over the last couple of years, you see the massive growth that we've shown from 22 to 24. This year was expected to be slower, but we have already seen good order entry again. So the first pieces are coming. This is not a full new cycle. I think we are still working on the new programs, and they will come in. But it's a good sign of how dynamic this is. And, of course, with the security situation, defense budgets go up all around, specifically in Europe. Plus, specifically the new headset generation is able to go into a number of new applications, explosives, narcotics, environment testing. These are all additional sub-markets that we are adding over time. Remember here, the qualification period is really multiple years. So this all takes a lot of time. I think we show good progress, but until you truly see it in the numbers for these new markets, that will still take some time. But we have first really interesting wins. And then when we move to the expectations 2025, I think there's reason for optimism for us regarding our market position, how we expanded our order situation, and also the market outlook. Orders remain strong. They're the third consecutive quarters that they're above one, quite significantly above last year. Year-to-date across multiple dimensions. What is difficult is Still, the outlook, I described it before with the example of China, but that goes across different submarkets, different geographies. It's a back and forth. It's murky. It's changing quick. It's volatile. I think for us it's key that we're well positioned, that we expand our position, and then whatever submarket then will start to ramp, we're part of the game. And we can show that already now, I believe, and we'll continue to do so. So the uncertainties are there, but we also have prepared ourselves over Q2 in particular, but also Q3 to be positioned with our global footprint for innovation, for manufacturing, to be really close to the customer, react fast, and supply product, but also innovate together in all four regions, which I'm very optimistic about for the future, no matter what exactly the impacts can be. Efficiency measures, though, are required, right? I told you about broadly it's a ramp down in the west and a ramp up in the east, but that doesn't go entirely different. That goes a little bit in parallel, right? So that's the time where we are in, where there's inefficiencies. So when we look at the full-year guidance, we narrowed it to $660 to $680 million of sales and an operating income to 16% to 17%. I think this gap to 2020 is our benchmark. 20% is where we're going to go back to. Our business model is 20% plus and we have a path beyond that. There's three major factors if you look at the full year. One is this duplicated capacity that we are rapidly reducing one is fx which is largely swiss bank which we are also addressing addressing but it will probably not go fully away but we are addressing it with also moving and then the first third one is tariffs and tariffs we have already halved from the last And we further work on this as we optimize the stream of the goods across the Inficon world. And with that, I finish with our typical picture here. Follow us if you want to have more insight what's going on at Inficon on different dimensions. I think there's two or three interesting most recent posts that we made. One is the expansion of the clean room in Longmont. Exciting new expansion for our American customers and to supply them more closely and faster and ramp there. That's a product that we do there that ramps real quick actually as part of the new market gains that we make. Malaysia, you know about that, but you can also see that we are investing into further global service. Always stay close to the customer, especially in difficult stormy times. That's when you gain. So we expand global service and repair capacities, especially also in these times. So we continue to invest in that. And you also see leading-edge technology. Product development across the board from big science, like they are close to Chicago in Fermilab. I actually personally know this experiment quite well. It's a super exciting experiment where they challenge the standard model of physics. And then also, of course, in a more broader sector where we lead the thinking around how smart manufacturing needs to look in semiconductor fabs, where we're taking over the lead of the global semi-orgs. a special industry group that develops the future vision of that. So across the board, I think really interesting news. Well, yes, it's also been a difficult part, a lot of extra work, impacts on the bottom line, but I think the optimism is well justified. So with this, I want to close and move over to our CFO, Matthias Trendley, who will give you a few more details on the financials.

Oliver?

Good morning, everyone. Welcome to our Q3 conference call. As usual, I will guide you briefly through the financials and also comment the guidance. So let me first start with the highlights for Q3. In Q3, the book-to-bill ratio was above one, the third time in a row, which is very good. And we also saw a substantial order increase year over year and in all end markets. Our sales showed a slight decrease with 4.9% versus Q3 last year. The gross margin, just addressed by, implemented by Oliver, dropped nearly to 43%, hit by temporary impacts from trade-related disputes and reached 43%. As a consequence, operating income reached $22.9 million, or 14% of sales. From a balance sheet point of view, investments and capital expenditures reached $6.1 million, slightly higher than last year and also slightly higher than in the previous quarter. The cash flow ended with solid $26.7 million, driving the cash to a level of $60.5 million, which is $9 million higher than Q3 last year, and the equity ratio increased by 4 percentage points and reached strong 60%. Now let me go a little bit more into the details. As you have seen and as commented, we reached sales of $163.9 million compared to Q3 last year, which represents a slight reduction of 4.9%. Compared to previous quarter, this is slightly lower by 2.1%. Oliver did already comment the end market developments. Compared to Q3 last year, sales to the general vacuum market increased for the third time in a row and did grow by 20%. Refrigeration, air conditioning and automotive sales developed well with a plus of 9%. The simian vector encoding declined by 14% versus the strong and actually the second best quarter last year and sales to the security and energy market dropped by 52%. When we take a look to the regional performance, which we have expanded and modified, and we did break down Asia into Asia-Pacific and China, and we'll do this also for the future, we see the Asia-Pacific surge by 23%. where sales to most markets did grow strongly. China decreased 22%, mainly due to slower semiconductor business. Europe increased by 4%, and Americas were slow due to weaker security in energy business. Let's go to the operating expense. The cost did decrease by 5.3%, driven by some efficiency gains and while we still continue to focus on our development activities and the related investments. The SG&A cost did increase by 4.8%, but this increase is mainly driven by foreign currency impacts and cost stayed tightly managed. Now turning to the margin situation. Q3 margins have been under pressure and declined. The gross profit margin reached 43%, basically the same level as Q2, and decreased by 4.4 percentage points versus last year Q3. The operating profit for the third quarter reached 14% compared to 20.3% last year, a reduction of 6.3 percentage points. But what were the main reasons for that? We had several temporary negative impacts, direct or indirect, related from trade disputes, which were tariff impacts due to increased base tariff levels, which is mostly related to shipments from Asia to the US, as well as from Europe to the US. These are the main drivers. Cost due to strategic duplication efforts, reconfiguration of the production. Then we had negative impacts on the gross margin and operating expense from persistent strong headwinds from the exchange rates. Main drivers here, as Oliver mentioned, the euro and the Swiss franc against the US dollar. And on top, we had, of course, some other efficiency measures we had to implement, which did drive this down. All impacts together did account for around 6%, 6 percentage points. Let's go to the income tax. Income tax for the third quarter was at $7.1 million, which represents a tax rate of 24.7% compared to 21.2% in Q3 last year. The net income reached $17.3 million, or 10.6%. This is due to the lower operating income and somewhat higher tax rate. Now, let's move on to the balance sheet highlights. Our net cash reached $60.5 million, which is about $14 million lower than end of last year, but about $9 million higher than last year Q3. Returns for inventory developed stable with 2.4, and the DSO ratio reached 48 days, a good and comparable level to Q4 last year. Our working capital, which consists of accounts receivables, inventory, minus accounts payables, closed at $224 million, or 34.2% of sales, and with that ended about $9 million higher than end of last year, and about $4 million lower than previous quarter Q2. The increase is mainly driven by the change in inventory for the working capital, which is also impacted to a certain degree by some unfavorable currency movements. Our operating cash flow reached a solid level of $26.7 million, improved against previous quarter by $8 million, and slightly lower than Q4 last year. And the balance sheet, as already mentioned, had a strong equity ratio of 69%. So those were my comments on the balance sheet and Q3 result. Just let me finish with the guidance. As you can see here, we show revenues and operating income or sales and operating income. We are positive on the order situation and in general with the assessment of our various end markets which we serve. Certain risks and uncertainties, definitely. connected to the results and the ongoing trade disputes and the unfavorable FX impacts might remain. Based on that, we updated and narrowed our guidance for the full year of 2025 and expect revenues of 660 to 680 million dollar with an operating income margin of 16 to 17%. With that, I would like to close the presentation. The next events are our analyst day here in Ballstrasse Liechtenstein on November 20th. And then we see us again in March with Q4 and the full year results for 2024. And now we are ready for the paper questions.

Thank you, gentlemen. The first questions will come from Jörn Ifrit. Jörn, please.

Thank you very much. Good morning. Thanks for taking my questions. I would take or I would have three questions and I would go back in the queue. The first one is similar to Q2. The margins were maybe a little bit short of market expectations. Can you give us a margin bridge? What exactly was the duplication cost? Tariffs you mentioned was around 100 basis points. And what was ethics? And what is the path out of this? When do we expect margins, cross-profit margins, to go back to this 46, 47 percentage points? This is the first question, please.

Okay, let's do it one by one then. I'll start and then Matthias can add a little bit. So for Q3 specifically, it moves around maybe as a first comment, right? So Q1 is very different from Q2 and Q3 again is very different from Q2 and Q4 will also be different. So this is all moving around. So what is exactly happening? So in Q3, we have the tariffs at about one percentage point And they're talking now operating income margin. And then two and a half percent is this capacity duplication. And then about two percentage points is the FX impact. And then there's a few more smaller items, smaller than one percentage points for the restructuring, right? There's severance and there's things like that when you are moving around your organization. So when you look at the full year, we would say that we end up with about three equal shares, and probably the capacity duplication could be still a bit bigger than the other ones, but the three shares will roughly be the tariffs, the capacity duplication and the FX. And there's a few other things still for the reorganization that will be those smaller. And if you look at Q3 over Q2, I think that's also an important factor. In Q2, we said we have about two percentage points tariffs. That went down to one, so that shows we're working through this at a very accelerated rate through this reconfiguration, and it's all bureaucracy in place, and I tell you also, bureaucracy is complicated. These times, nobody has clear answers, so there's a lot of back and forth, but we're working forward and have made really good progress, so we halved that. And the capacity duplication you could hardly see in Q2 yet, obviously, because we did it during the Q2, so that was about half percentage points at the time. And the FX was about one and a half in Q2 and decreased a bit. I think it works itself through the system. um you know also when we look at next year um one scenario is could be exciting in the second half a nice ramp in semi and a couple other markets ramping one scenario the other scenario is we end up in a stagflation maybe in u.s and other places inflation goes up growth slows down because of hesitation for investments um so there might be more on that um we will see So, but to kind of roughly bridge you from Q2 to Q3 to full year, that helps you maybe in the open. I think maybe, Matthias, if you want to give a few more points.

Yeah, not much to add, yeah. But actually, the tariffs, we... The impact of Travis tariffs is going down in comparison to Q2. This is, on the one hand side, a little bit driven by this escalation period in April-May, so the tariffs have been high in Q2, in April-May especially, but we also worked on many items and, of course, we implemented certain structures which developed to minimize it to a one percentage point level. and the biggest swing basically is in FX and capacity. Duplication, as Oliver mentioned, FX was 1.5 roughly in Q2, now we see a more 2 percentage point level. Was the impact foreseeable? Yes, I would say, but the level and the actual scale of the impact was a little bit higher than what we expected, actually, in Q3, I must say, for FX. And then, yeah, we had a set of different other measures which roughly account for 4.5%. So in total, about 6% from a year-to-date point of view will be 6%.

uh comparison is uh in the range of three and a half plus minus a little bit so so year-to-date impact is in that area of 3.5 percent maybe a general word because you also asked where are we going from there so well we're not giving guidance for next year of course but we are the 20 plus operating income company and the system hasn't changed this for me is it sounds uh Maybe you're too optimistic to you, but I'll explain you why. This is noise in the system for me because we are moving now and making gains, but we have to go and do it quick. I think it's the time where we do the bold moves and not hunker down and protect our margin. I think now is the time where we can actually really make these moves with customers, which I tried to outline. And now it's also a bit more in the system still, right? We're ready for a ramp, actually, in different markets, not only semi. But it isn't coming yet. It isn't broad enough. But when it comes, we will be ready for it. And this will lift the whole system up. So I have no... a real particular reason for pessimism or we don't on our profitability either. But I think where I truly get excited is what can you achieve in these stormy times, in these difficult times with agility. And that's what we really try to play. And that's also the reason for our optimism, I think. Let's see what happens in a year from now, how far we get with this. I think it's quite exciting. But we'll see. Whatever scenario it is, if it's a ramp, it's clear, it's fun, it's like strapping, like always when you have a semiconductor ramp. If not, we'll play this game where we go and gain market share, where we R&D a lot, and then push forward like this. I hope this answers your question.

Thank you. And I would move on maybe with the next two questions. I will take them together. The second question is on China. Semiconductor business was down. You explained there's some lumpiness. But did auto accelerate already? And have you monitored any changes on market shares? Have you lost some market shares, for example? And the third question would be the leading indicators, like the memory chip prices, I mean, going through the roof. This usually would indicate that supply is tight. You are saying the opposite. Your vacuum peers are saying the opposite. But how do you explain then the materially increasing chip price at the end of the day when supply is too much?

Good question, Jörn. I think this time around in this cycle, it's just a little bit harder to understand what these signals mean. And some of the signals are there, but you don't see the effects of it. And I think it's because they're stacked... other factors on top or around it that blur the whole effect. I mean, again, if you take Liberation Day out and run that scenario, there wouldn't have been a Liberation Day. In Q1, we saw the signals that there would be a ramp in the second half for SEMI. Yet, it isn't here. And it came and went in some pieces, and I think the only one that is continuously growing is this narrow AI ramp around HPC and HPM. which is a few key players, I think we all know them, and a bunch that want to catch up. And then there's a whole other hub that, or more, that doesn't really participate and has a big back and forth. The other factor that is also in there, and I think it's important that you guys know that we're starting to participate in that market too, is the Fablist market, which is obviously only software, because there's no real hardware unless they're mandating a certain hardware from their founders. But when you really look at the semiconductor market, the revenues increase mainly in the Fabless sector. So Fabless has not so much to do with building manufacturing, unless you go and sell software, of course. So there's also this trend that maybe is important to outline. Now you asked also about China. China is back and forth and more than before volatility. I tried to describe this earlier in the call as an example. Yes, the orders are up again. They've been up and down and up depending on different sectors, different players. I also know the warehouses, they're well-filled. Not everything is installed. Hard to read these times. I can only say that we are really close to these customs in China. It's very dynamic. It's exciting. The R&D is also exciting there. But the outlook, the visibility is difficult. I think what we've seen is that there's also no reason for complete boom on the Chinese economy. even though there's a lot of overcapacity. And also, I think there's a little bit of a hoarding going on on some points of the time that we've seen the last one or two years. But there is also a reason for moderate optimism there across the board in China. I mean, we show also now actually interesting growth. I think it's probably a bit more market share growth than market growth that we show. And it's a bit more dynamic in the market that are not semi, to be honest. It's just now in this most recent quarter. But generally, as we stated, all orders are up across all end markets. So different variabilities. Some really made a jump versus last year, and some a little bit more moderately. Yeah, I think hopefully that helps. And I answer both of your question there, Jan.

Thank you. I go back to the queue. Thank you, Jörn.

Thank you, Jörn. The next questions come from Nez Lauritsch. Nez, please.

Hello, good morning. Thank you for taking my questions. I would have two on the first one. So this year you have book to bill above one. Last year you had probably a much higher backlog. And when we look at this major order you got in security and energy, could you maybe give us an indication of how big this order is? And if we adjust for that, would the book to bill still be above one?

Yeah, yeah, clearly. This is just one factor. I think this is not actually the biggest piece in it at all. Honestly, the biggest pieces are, as I mentioned, in RSE Auto and GenVac across multiple markets in there where we really see a nice continued growth. especially in this year. SME goes through this trough because of the stacking of the programs. It's a bit hard at times to deliver. They have really these massive cycles. And that is just the first nice step. So we're talking a single-digit, higher single-digit something. So it comes in pieces also, as always. What is exciting is also it comes from new places. So this is interesting. because we are, or we launched this product with the idea to go address more markets, right? I think the defense market, chemical warfare detection, we squarely are the leader, but then there's other markets that are related to this and are very similar organizations, and we see now that we're making inroads there. But again, this is really an early indicator. and this will go over time. But how you receive these orders, the timing of it is a little hard to predict. This is about approval levels moving through and so on. No, but I mean, important for you to know is that the main drivers are actually the other marks, and I would also want to stress also semi is up. It's not massively up, but it's up. So, we couldn't ship everything that came in with the orders. You need to know Q2 was really busy with moving products around, supply chains reorganization. When you move a product from one region to the other, you have to rebuild the whole supply chain, meaning you go for every piece or every part of your product. You go out there in the market, you try to find a new supplier, you need to qualify it. There's a little bit of quality issues back and forth. We have high tolerance as always, high accuracy. So, this is all a lot of work that we've done. So, there's noise in the system, right? But like I stated in the beginning, now it's not about hunkering down and protecting the margin. That's what we believe. I think now is the time to move fast, bold, and go right in there, because we see already the first effect. Specifically, I mentioned this move from Shanghai to Kuala Lumpur. of the handheld leak detectors where we now play full on this advantage in the market that we can supply from a different place and the supply chain is up. I hope this explains a little bit, gives a good color of what happens behind the scenes. So I think we could show really good sales for that we have actually a lot of new production sites with new people and new suppliers and everything, right? So if you look at how you ramp up a location, That is extreme speed. I'm extremely proud of how the team navigated this and built this up. I mean, some other players in the field right now are calling up places to find a plot of land to maybe build a factory in the new region. We're there. It's running. It's a little noise. Okay. But we're doing it. And the customer really appreciates it. Through this crisis or storm, we have been always right there with them. There's no supply delay. There's solutions. We do pain sharing. We find innovation solutions. We just push right through. So I think that's where my optimism is coming from.

All right, thank you very much. And then maybe on my second question, unfortunately it's about the margin, but congrats on the book to build. So let's assume the operating part goes away. Maybe you get up to 18%. But there's also the mix factor, right? I mean, in China, historically, I'm assuming you've had better than average margins, or at least this has been the story. And this seems to be going down, and you have general vacuum and other segments that are outgrowing. So you are at 20% EBIT margin, but looking forward, is that really sustainable, assuming this muted outlook persists in SEMI?

I mean, the ramp will come, that is sure. Now the question is when it comes, and that we cannot influence, but I can assure you when it happens in one of the sub-segments, as we described also last year, we are entrenched in most of these segments, quite deeply. So then we will go and profit from it. Regarding mix, I would not worry so much about China. China can have good margins and bad margins. It depends very much on the customer there. Let's say maybe how mature they are. Early days, it's a lot about price. This is the same thing. This is an RGA. This is an RGA. Who is cheaper? And then when you really try to push up the yield, and that just is still actually happening. Yields are not as high there at all in the fabs. When you really want to push it up, then it comes down to the actual capabilities of these sensors. So, we have both. I wouldn't worry about this, frankly. I'm more worried about, honestly, the inflation coming next year and then we'll have to work through that, which will be a lot of wasted time. Again, where we renegotiate all the prices with suppliers and customers. But about the overall margin that we go back to 20, that I'm not worried about. Because I know how the mechanics work, how the pricing works, how our outstanding market position is. And again, That's how we can price, right? When we have true innovation that stands out versus competition, then you can price it the same or better as in the past. I believe we're making actually really strong progress on most of these innovations with our customers. Especially these days, you need to remember in slower years, there's more capacity, more tool time to go and test out things. And most companies, even the ones that are really suffering a bit, they're actually making these investments on the next generation products. So we do have all these R&D projects ongoing, especially now at a higher pace. Hope that helps, Nish.

Yeah, thank you very much.

Sure. The next questions come from Craig Abbott. Craig, please.

Yes, good morning, gentlemen. Hi there. Good morning. Yeah, I appreciate, you know, you still feel very confident about the business model, mid-term getting back to 20% plus. That's very encouraging. But if we just look real short-term for a moment, the midpoint of your new guidance range for this year implies actually a pretty steep increase in Q4 sequentially, both for the top line as well as for the operating profit margin. You've talked us through the bridge factors. Thank you for that. But I'm just wondering how much visibility you have at this stage, given all the moving parts in your end markets. How much visibility do you have that you really will, excuse me, will really be able to achieve that new margin guidance for this year? Thank you.

Yeah. Thank you, Craig. Look, I have to say visibility is much lower than in prior times. So, there's upside potential, there's downside potential. That's probably what I can say. But we have solid models of how we work through this. We have orders in-house. We know margins. So, we can build out a lot of these different scenarios and understand what happens. I think at this point, the way we see it is this three, four percentage points on the bottom line come from these three areas to almost equal parts, right? It affects the duplication, the tariffs. And I think that's roughly what the different models showed us. So we have, I think, a pretty strong confidence, but I have to say the visibility is much lower. There's a lot of unforeseen problems. impacts out there in the market and in the supply chain. That is difficult. One other thing we didn't talk about, by the way, is in Q3 at the back end, we also had the Moon Festival and the typhoon, which was not a great combination because then the ports were closed for some time right at the end of the quarter. A little bit of revenue also got stuck in China and Asia because of that. That's just one example that comes on top of the other things. Typhoons happen every year and the revenue is going to come just a quarter later. But it is many things these times that are unforeseen, I have to say. It's a different world somehow that we live in. It was really fully predictable, but it's more difficult this year, very much in particular. Maybe if you have some more comments, Matthias, on the margin.

Yeah, when we take a look to Q4, I think, and then to compare what we guided, the Q4 should be a pretty good quarter from a top-line perspective, and also a better quarter than than Q3 from a profitability point of view. About visibility, I think it's I would say as usual, right? So we don't have nine months of backlog and we feel safe and secure on the top line, but the backlog is at a normal level since quite some time. But yeah, we do the forecast to the best of our knowledge with our salespeople and customers and production facilities. So of course there's a range in there. what we can achieve potentially, but we also know, as Oliver said, that there are risks also on the output side, so what can we deliver when, and so that's one question mark, of course, but we have a range in there, and it could be very good water, and that's what we're planning for, actually, and you can calculate it back when you want. and then you see that it should be very good, and yeah, it includes certain risks, but also some opportunities.

Yeah, the problem is not actually sales and orders, I think it's about execution, and for sales maybe uh but but it is about these additional factors that just work itself through the system and we work on all of them to reduce them dramatically and as you've seen in tariffs we have half them in a quarter but but the that is not entirely predictable the bureaucracy isn't even predictable right so so yeah craig i would like to have more And we normally don't give a range, right? You see it in that too, this point of time in the year. But that's a little bit reflecting of where we think they're going to be landing. One more word on Q3. Again, I would stress that last year Q3 was a very strong quarter. So I think Q3, given the seasonality, I see this as a good sales quarter, even though a few things got stuck because of supply chain and typhoon and moon festival and so on. So there's no reason to think that Q4 should be particularly bad. Q4 is always a strong quarter. Internally, we joke around sometimes and call it the Hollywood finish. It's really got the back end of it. With good planning together with the customer, it swoops all out. There's a lot of trucks going from our factories always in December.

Okay. I appreciate that, Ken, and this gentleman. Thank you very much. Thank you, Craig.

Michael Inouye has the next questions for us. Michael, please. Yes, good morning, everyone.

Hope you can hear me. Good morning. Cameras should come online any moment. Yeah, here I go. I had just a couple of questions. Actually, three. Two around Semi and one is around more the RAC market. And on the Semi side, I'm sure you're not giving me an answer, but I'm just wondering if the Semi book to be is also above one in Q3 or not. And then the second, it's pretty simple and the market starts to be really cautious on China. I mean, starts has been already before. Maybe it's now easing a little bit even. But China wave fabrication equipment 2026 is seeming down. I was just wondering what would be the impact for you? This is mostly probably also Western OEMs that struggle. I mean, we heard it from Len yesterday. So I would like to understand what impact that would have on your business in China if weight fabrication equipment spending would be down. And the third one, I was pretty surprised now positively hearing about, I think you were talking about A2L refrigerants in the US and regulation. I remember I asked you about it a couple of quarters ago and you were a bit hesitant on that, but I was just wondering where do you see there Inficom play a role? Because what we have seen in the recent quarters is a ramp up, particularly on the sensor side included in the HVAC systems in the US. So I was wondering where is your role in that business and where do you see that potential? Thank you very much.

That's quite the number of questions. Let me go one by one. Semi, yes, all end markets are up. So, yes, also semi. But the most exciting up right now, year-to-date, is RSEO2 and GenLab. So, semi is back and forth. It's what I described. And actually, when you look under the hood, there's five to ten sub-markets there, they're all moving around, and the only one that's consistent is HPC, HPM, for a couple of key players, and we know them mainly in Asia, in two particular places. So, yes, I hope I answered that one, just otherwise get back to me. So, the China, no, you maybe need to give me some clarification, because you're asking... about China slowing down or are you asking about trade barriers that our US customers would have and if you can still keep the market then?

I mean, it's actually a bit of a combination, yes, because wafer fabrication equipment overall is seeing down. Also, let's move the let's move the restriction aside. Overall, the wafer fabrication equipment spending is seeing down for China 2026. If that was the case, how would that actually impact your business? Do you think you can still grow in China with the Chinese OEMs, although the overall business would be down?

Yeah, I mean, what we've seen a shift over the last two, three years is that the China business moves to Chinese OEMs. But we are as entrenched there as in the U.S. For us, we are in China for 30 years. We manufacture there, we innovate there. So, hey... I think the American customers are fantastic partners and it's great to work with them. But we can also work with OEMs in China and the future is that way that you need to work with them too. They have good innovations. They grow really fast. And this year was the year of the toolmakers in China. It's a bit unclear how it's going to go from here on out because the first half of the year was really dynamic, positively. But I mentioned earlier, there's no reason to have real pessimism, but it is obviously over, the times when China has just plowed ahead. These tech sectors we're in though, they always have a bit better dynamic than the rest of the market. So different tech sectors, I'm not only talking about semi-sub-markets, I'm talking about others too, right? Yeah. So there's a mix. So we're optimistic there. I mean, in the end, we ship it to the U.S. or to China. In the end, honestly, it all ends up anyway in China, and even U.S. customers, you don't ship to the U.S. You ship actually also to Asia for their manufacturing there. Fair point.

Thank you.

All right. So now you had a last question about the refrigerator, right, Michael?

Yes.

Correct. So, yeah, I think maybe we had this discussion already a year, one and a half ago.

Yes, we did.

Then you put me on the spot, and at the time I wasn't exactly sure how much it is a driver already. We saw the regulations, we monitored them, but now I think it has really developed in a good tailwind across the board. But the new thing now is the data centers that come on top, and we couldn't see it either. I think I remember just about a year ago, it's like, Do we participate or are we not? And at the beginning, you know, why it's hard is it goes through channel partners. So we would also supply an OEM typically, and then it goes somewhere else. So you need to have these conversations with them. when you map out the future business together and innovation roadmap, what do you need and where are you selling this to and so on. And then over time it materializes for us. But we first see the positive dynamics. So the refrigerants have broadened and you asked what are those. I think one key factor, but it's not the only one, is certainly the handheld leak detectors that are growing. actually steadily quarter over quarter, I think probably for eight quarters. So don't take me up on this exactly, but right, Matthias, I mean, they have just been plowing through and building up. And interesting enough, these guys have been very affected by these tariffs and trade barriers. We moved around the production, and now we're really ahead of the competition because we can supply and they can't, or with difficult trade barriers and tariffs on top of massive extent. So I'm actually quite optimistic there, too, for future, because of this move, specifically.

All good? Michael, all answered?

Yeah. Thank you very much, guys. Thank you for that. Take care.

There are no further questions at this moment. So may I invite you, Oliver, to share your closing remarks with us?

Absolutely. Thank you very much, everybody, for the interest, for showing up, for coming here. It's great to always have such a big crowd. Good questions. You are big supporters of us, also give us good impulses in these discussions. I would just close with this. Yes, we have some noise in the system. We don't like it at all. We go back to this 20% plus, but I think the bigger picture here is important. In a storm, you can do bold moves and really move forward. And I think we are. And we'll show you. Over the next quarters, we'll show you what happened. It doesn't matter what scenario happens. We all want to run. If it happens a little bit later, also okay for us. So with that, please take the width with a little bit of optimism in this complicated stormy times. And then we meet again soon for full year next year. when we will then tell you about the full story of the year. And with that, big thanks, have a wonderful day and talk soon. Thank you.