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Good afternoon, ladies and gentlemen, and welcome to Extron's conference call regarding the Q2 2023 results. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Now I hand the floor over to Guido Pickert, VP Investor Relations at Extron, for opening remarks and introductions.

Thank you, Ms. Brunner. Welcome to Extron's presentation of our first half and second quarter 2023 results. I'd like to welcome our CEO, Dr. Felix Grabert, and our CFO, Dr. Christian Danninger. As the operator indicated, this call is being recorded by Extron and is considered copyright material. As such, it cannot be recorded or rebroadcast without permission. Your participation in this call implies your consent to this recording. Please take note of our safe harbor statement, which can be found on page two of our results presentation slide deck, as it applies throughout the conference call. This call is not being immediately presented via webcast or any other medium. However, we will place an audio file of the recording or transcript on our website at some point after the call. I would now like to hand you over to our CEO for opening remarks.

Felix? Thank you, Guido. Let me also welcome you all to our results presentation. I will start with an overview of the highlights of the quarter and then hand over to Christian for more details on our financial figures. Finally, I will give you an update on the development of our business and our full year guidance. Let me now give you an overview of our operating highlights in Q2 23 on slide two. Demand for our equipment remains very strong with an order intake of 178 million euros, up 17% year on year. Orders were again driven by strong demand for wide bandgap power electronics based on gallium nitride and silicon carbide. The majority of orders in Q223 were for our G10-6 system. Customers are ordering equipment for large projects to build high volume manufacturing capacity. Our Q223 revenues of $174 million were up 69% year on year, reflecting the consistent high demand for our systems and were positively affected by the fact that a large portion of the export licenses outstanding in the previous quarter have now been issued. More than 50 million euros out of the roughly 70 million euros in systems waiting for shipment at the end of Q1 have been shipped by now and have turned into revenues. This is great news and confirms our expectations that the whole situation around export licenses is now moving back to normal. As a result of that, we can report a very strong order backlog of 412 million euros, up 31% year-on-year. Now, I will hand over to our CFO, Christian Dunninger. He will take you through the Q2 23 financials. Christian?

Thanks, Felix, and hello to everyone. Let me start with the financial highlights of our income statement on slide three. As Felix mentioned, orders in the quarter continued to be strong and our backlog was up, driven by the mentioned strength in demand. Revenues at 174 million were up 69% compared to 102 million euros last year, and more than doubled compared to the previous quarter. As Felix mentioned, this was due to the strong demand, but also due to a significant number of export licenses having been granted, which allowed us to ship the respective tools and turn those shipments into revenues within this quarter. Shipments based on further export licenses, which have been granted, will take place in the current and the coming quarters. Gross profit in Q2 23 was at 74 million euros, up 94% year-on-year. EBIT for the quarter was at 45 million, and net profit was at 40 million euros, both more than doubled year-on-year and were up substantially on a sequential basis. Gross margin was at 42 percent compared to 37 percent the year before. OPEX in the quarter went up to 29 million euros, predominantly driven by higher R&D spending and higher personal expenses, resulting from a higher headcount compared to the previous year. Now to our balance sheet on slide four. Inventories increased from €224 million at the end of 2022 to €333 million at the end of June, which is mainly due to the preparation for the very high expected business volumes in the upcoming quarters. As mentioned before, we are very carefully managing our inventories to enable us to offer acceptable delivery times to our customers. and our balanced approach has allowed us to ship to our customers supporting the capacity expansion plans. Trade receivables at the end of June were 115 million compared to 120 million euros at the end of 2022, mainly being a result of the business volumes in the second quarter of this year compared to the fourth quarter of 2022. The advance payments received from customers at quarter end were 139 million euros, representing about 34% of our order backlog. Our cash balance, including other financial assets, as of June 30th, decreased to 210 million euros from 325 million as of December 31st, 2022. This was mainly due to our inventory buildup in combination with our dividend payment of 35 million euros. Out of our quarter end cash balance, 133 million were invested into funds following a very conservative diversification strategy. Just a quick word on our free cash flow on the next slide before I turn back to Felix. Free cash flow in the first six months was at negative 80 million euros compared to positive 28 million euros last year, mainly due to the previously mentioned buildup of inventories to prepare for the strong second half of this year. With that, let me hand you back over to Felix. Felix? Thank you, Christian.

Before giving you some more details on our increased outlook for the remainder of the year 2023, I would like to share with you some highlights on our market development. As stated at the very beginning, the order momentum in most of our address end markets remains very healthy. In the area of silicon carbide-based power electronics, the momentum has, in fact, accelerated. In fact, our G10 VIX system has taken a number one position in terms of orders in the second quarter of 2023. The demand for efficient power electronics based on silicon carbide is driven by the desire of automotive manufacturers to increase the range and charging speed of electric vehicles. This facilitates the overall transition to electric mobility. We expect strong demand for our products in these areas to continue over the coming years. The order momentum for gallium nitride epi tools also remains strong, with received orders in this area counting for the second largest demand driver in the quarter. This is driven by the increasing need for energy efficient solutions in a growing number of applications. Our customers steadily open up new applications and use cases in the field of GaN-based power electronics using our technology. We are confident that this will also translate into a sustainable demand for our tools going forward. With that, let me now give you the update on our increased full-year guidance for 2023 on slide six. We see the demand for our products remaining very strong. In addition, we expect that the granting of export licenses is now moving back to a normal pattern. Based on this, we have increased our 2023 guidance both for order intake and for revenues. We now expect total orders for the year in a range between 620 million and 700 million euros from 600 to 680 million euros previously. Our total revenues are expected to range between 600 and 660 million from previously 580 to 640 million. While we lifted the midpoint of the guidance, we have left the absolute range from low to high end of the guidance unchanged. This reflects the unpredictable factor of the exact timing of export licenses and also of some customer projects. We continue to expect a gross margin of around 45 percent and an EBIT margin in a range between 25 to 27 percent. We are excited to be able to increase our expectations based on the strong underlying demand in our address and market. With that, I'll pass it now back to Guido before we take questions.

Thank you, Felix. Thank you, Christian. Operator will now take questions, please.

Yes, thank you very much. So ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to withdraw your question, please press 9 and star again. Please press 9 and star to register for a question. And the first questioner is Adam Angeloff from the Bank of America. Over to you.

Hi there. Thanks for taking my questions. So firstly, I just wanted to discuss a little bit the trajectory for Silicon Carbide and Gann going forward. I think clearly both very strong now and at least for us from the outside, we can see there's, you know, constantly a lot of big announcements for sick capacity expansions to the end of the decade. But Gann is a little bit harder. It's a smaller revenue stream for a lot of the companies. So, yeah, I just wondered, you know, when you look at Maybe two to five years from now, how do you see the growth trajectory in both markets? That's my first one.

Thank you very much. I think it's a good question. I think silicon carbide, as you said, the trend is very clear. The main use cases for silicon carbide, number one, is the electric drivetrain of e-vehicles. I think number two use case is the charging infrastructure for fast-charging poles. And then the number three use cases, the much broader and much more diverse industrial applications from large wind power plants, large solar power plants, large electric drives, industrials like high speed trains and whatever you take it. So, the number one and number two use cases are essentially driven by the global build-out of electromobility. And as you rightfully said, there's a very, very strong drive for several years to be seen as we expect the ramp-up of electric vehicles from now to 2030. I just read analyst reports around 2030 now. It's expected maybe even half or more than half of the global EV production may be based on silicon carbide already. So it's very, very clear. What does it mean for us? We see around the globe, in fact, it's a global trend, customers massively investing into silicon carbide fabs. We see that both in Europe, we see that in the U.S., but we also see that across Asia means we see it in Japan, we see it in Korea, in Taiwan, and in China. So it's really a global trend, and I would not say there's one region which is missing out on that one. Very strong momentum, very strong. I think that's very clear and very easy to capture and understand. The other one, I would say, is also very clear, even though it does not have this widespread perception, and that's the trend for gallium nitride power electronics. I think that gallium nitride took, so to say, or is about to roll out, I would say, in three phases, and we are just about to reach phase three. What do I mean by that? Phase one, it started off in consumer electronics and fast chargers. Why? Well, gallium nitride was very new as a material. Reliability was a challenge initially. And in consumer electronics, longevity, durability don't matter so much. You can take more risks. So the fast charger, the form factor, the small form factor was the first one. That was around, I would say, 2019-20. Phase two, which I would say was 21, 22 with gallium nitride going into high power, high efficiency premium applications. like data centers, server power supplies, telecom base stations, where essentially 24-7 big amounts of energy are being pumped through. And in this phase where gallium nitride was still relatively expensive, end customers could have a clear return of invest on that because they were having such big electricity bills that the higher expense for a more expensive GAN switch was paying off. I would say we have just started phase three, and this is what we see and what we get as a feedback from many of our customers, which is gallium nitride is displacing and replacing silicon MOSFET at scale. And that is silicon MOSFET in the low voltage range, for example, 40 volts, for example, on a PCB around the circuit of your notebook or your server, 100, 200 volts in solar applications, in your electric e-bike, in your electric power drill, battery-driven power drill that you may have at home. So to say these many, many applications of lower power or battery-driven applications And again, the same topic with silicon carbide in the e-vehicle, the battery lasts longer, also holds here. But then, of course, also in the large number of high-voltage applications like air conditioning devices, AC to DC power supplies, of course, the server industry continues. And the industry is now at a point where through dye size shrinks, GAN has gotten into competitiveness, and many of our customers take the strategy now on to display silicon in the mainstream and at volume. And that is driving a massive boost and a massive growth also in the gallium nitride. So the strong momentum that we have seen now in the first half of 23, we expect that to continue in the second half of 23, but also throughout the year 24, 5, and 6. This is not just a peak which then goes back, but this is a continuous trend. I hope I could outline a little bit what the drivers are for that.

Yeah, that's very clear. Thanks very much. So secondly, just on micro LEDs, Just wondered if you could provide us with an update there. I think there was some news flow of potential delays in the quarter, and then I guess your revenue in that line was a bit weak in Q2. So just if you could give the latest update there. And then just a very brief one after that. You gave us the revenue of export licenses that was recognized. of the deferred portion. Could you also provide the same for the previously deferred order amount, which I think was around 30 to 40 million? How much of that was recognized in the quarter?

Okay, so short update on micro-LED first. I think we all read the same news, right, about some projects getting delayed. The main driver for that one is the transfer, the mass transfer. Getting the pixels produced on a wafer is a mature process step. So it's not on us, the pressure right now. It's also not on the chip makers, the pressure. It's more on the panel makers who have to transfer the micro-LEDs. And also, I think we all read the same news, which is this is pushing out maybe towards 25, maybe to 26. Nobody knows exactly. Because again, it's not us who's directly involved in those projects, but another step of the value chain, which is gating this one. So nevertheless, at the same time, we see and we are working very closely with a large number of customers together. The projects, the development projects are continuing. All the efforts of the roadmap also continue, be it dye size shrinks, be it topics of increasing the brightness of LEDs. And we see in the industry there's a very clear consensus It's not a topic whether the micro-LED comes or whether it maybe not comes. It will come. It's only a timing question. I think that's what I would like to give you as an update. So micro-LED is still on the agenda. It's just a timing topic when exactly the wave hits. Now, on our side, as mentioned, we continue to supply tools to customers. We have some customers building our pilot lines. We have other customers starting to build smaller lines for the first high-end applications, which will start with micro LEDs. I don't have the exact numbers. I think it may be around 10% of the order intake this quarter, something around that. So it goes on. And then, and help me again, I think I did not get your last question around export licenses. Could you repeat that, please?

Yeah, sure. So I think previously you said that there was about 30 to 40 million of orders that couldn't be recognized because of outstanding export licenses. So presumably some of that could have been recognized. So just if you could provide the value that was recognized in the quarter.

I think, ah, now I get it. Okay. So I think the amount of orders that could be recognized from the past quarter, yeah, now in the Q2, and the amount of new orders flowing in in Q2 that we have not recognized are about on a balanced level.

I see. Okay. Thank you.

Next up is Olivia Honeychurch from TechRace. Over to you.

Thanks a lot. Good afternoon, everyone. Two from me, if that's all right. So firstly, on silicon carbide, I'd just like to understand a little bit more about your market share. One of your competitors this week announced that it had won a major new European customer. How does that fit in with your growth expectations for this side of your business? Do you still see Europe as a key source of growth in SICK? And I guess in relation to that, where do you see your overall share in silicon carbide reaching by the end of this year, given that your competitor is clearly winning share as well? I think you had previously said 50%, but wondering if that has changed. I have a follow-up, but I'll ask afterwards. Thank you.

Thank you. I think what we see in silicon carbide at this point in time is that all the customers are looking at the 200-millimeter wafer size for tool selections in the market. And that means that the established vendors that made the party in 150 millimeters with the same need to defend their positions, it means that new opportunities for new entrants or for new vendors are opening up. And we at Extron exploiting these opportunities at scale, as you see from our strong order momentum. So I think that news from a competitor doesn't surprise us. And we are on the same train as you can see in our number.

And any update on the market share target that you previously put at about 50%, I think, for 2023?

Clearly 50% plus.

Okay, great. Thank you. And then maybe on the licences again, how should we think about the impact from those delays going forward? Obviously, you say the majority of them have dropped through into Q2. Is there a risk that those build up again and we start to see more of a lumpy revenue profile for iXtron going forward as a result, not only over the next couple of quarters, but into 2024 as well?

No, we don't see that. So as I said, right, that delay, that inventory that was sitting couldn't be shipped, so to say, is now a large amount. 50 out of the 70 has left us, yeah, and is gone out. We see now export licenses trickling in one by one coming. We see a much more steady, much more pattern. We still see that the times are long. Yes, that's in fact so. But we do not see any blockage or pilage piling up of inventory or so. We see that it comes again into a steady rolling and moving pattern. That's how I would think about it.

Okay, that's really helpful.

Thanks, Felix. The next question comes from Andrew Gardiner from Citi.

Good afternoon. Thank you for taking the question. Just perhaps a follow-up on the market share question. In previous calls, you've indicated to us when you've signed one major, a new major customer. You talk in the release today about supporting several major customers. Can you say whether there's been any movement in terms of significant wins in the quarter that is going to help support that market share ambition? Thank you.

Thanks. Good question. I think we see overall that the market for silicon carbide in terms of customer base is broadening significantly. We see at this point in time a relatively large group of customers with strong volume ambitions in the market, not only the top five. and we are engaged with a relatively large share of those guys who have a larger scale and volume ambition. I think when you study the industry and follow the news flow, you may have ideas which guys who's making each of them a $1 billion plus investment into fabs, yeah, and typically one-third of that goes into epi equipment just for you to take the number, yeah, so to say we are talking about here.

Thanks very much.

Next up is Gustav Froberg from Berenberg.

Good afternoon. Thank you for taking mine also. I have two, please. First is on new customers in silicon carbide as well. I mean, you've talked a lot about there being a lot of movement in the industry, a lot of potential customers and existing customers have a lot of ambition in terms of ramping up their silicon carbon capacity. But what do you say is the main hindrance or the main barrier for these companies to make a decision on their equipment supplier today? And what is your view on the timeline there? That's my first question.

I think there is no hindrance. They continue to make decisions on a regular basis. And we get selected also on a regular basis. And this is moving very strongly at this point in time.

Okay, super. And then a question on G10 GAN, please. Could you give us an update on the launch of that tool, please, and what you think that might mean in terms of customer demand for your next generation GAN tool? Thank you very much.

We launched in the third quarter of the year, and we have gone through a very successful qualification with several of our beta customers. One of the beta customers was Texas Instruments. Together with them, we've done a press release. They've given us for this tool and for the strong collaboration their 2022 supplier award because they gave us the feedback that they said, look, this tool has really brought to gallium nitride power electronics the maturity that is needed and that is the requirement to go and to drive into really big volume installations. And gallium nitride is at this point in time going through the wafer size change from six inch to eight inch. I would say 50% of the customers have already changed. The other 50% is just changing from six to eight inch. And we see that on the 200 millimeter wafer size, the G10 gun is going to be the tool of record for the industry. And we expect for next year already, based on the customer feedback that we get, based on the pre-discussions with customers, already in 2024, we expect more than 50% of our gallium nitride revenue to be derived from the G10 GAN as compared to the G5+. Which I think for a tool, again, launching in the Q3, for then in the five consecutive quarters, already taking more than 50% segment share, that speaks for the value and the benefit of the product itself.

Thank you very much. And reading into that a little bit, it sounds like you might be winning some new customers for this tool. Do you think that there are any customers today waiting for the G10 to be launched before placing orders with you?

We had, in fact, customers who had placed orders for the older generation of tools and came back to us and said, you know what, given that the new generation is now just coming, can we switch? And in some selective cases, we have made arrangements with our customers.

Amazing. Thank you.

The next question comes from Michael Kuhn from Deutsche Bank. Over to you.

Good afternoon. Thanks for taking the questions. Firstly, on your guidance, you obviously increased your sales guidance. At the same time, gross margin guidance and also the corridor for the EBIT guidance is left unchanged. Should we read anything into that regarding, let's say, a little more cost inflation than anticipated, or would you rather say let's say there is probably an element of cautiousness reflected in that guidance.

My question here, both not really. First of all, the increase in the midpoint was really only a small relative change, which had only a small effect on the overall numbers. And secondly, as you know, there's always a strong mix effect in our business and with the broad ranges. difficult to really estimate. And therefore, we believe that the bandwidth that we've given still gives a very good indication. So it is not that we are sent begging here.

All right. And in relation to that, what trends do you currently see, both on the inflation side and on your ability to increase prices? So how do customers currently... and what our direction on, let's say, proposed price increases or, let's say, proposed passing of inflationary pressure.

I think the inflationary topic was especially a topic of the last year. And I think we overall see now that going forward, we expect the inflationary pressures to reduce a bit, especially as we see in the Euro space. I think looking towards 2024 already, there may be more space and room at our suppliers. So we don't expect such a pressure again. I think that is more a topic of the last two years to really make that clear. And what we have done in the last two years is that we've been working closely with our customers to make price increases affordable through productivity gains. And that was an acceptable need for them, and that is why, so to say, we've been able to go through this period of time by, so to say, without any hit on gross margins. I think going forward, as indicated, we're expecting rather the environment to ease. And I think going forward, we'd rather expect cost reductions from our suppliers as the overall economy is cooling off a little bit. And I think we are changing and going into a new type of environment now going forward.

Excellent. And then one more also in that context. Your headcount obviously moved up and you invested in expanding resources. production capacity is probably debottlenecking as well. With your current production footprint, let's say, how much more can you grow before you have to make a further move? Or is there still, let's say, enough capacity without, let's say, getting a major headache? Yeah.

So I think the expansion under this space, under this point, we've been able to say by fully utilizing the existing footprint and taking some efficiencies on the operations model. I think for further expansions, it will be going into two and three shift models, but we see further opportunity to do so.

Excellent. And then last point on your sales split recent quarter and looking into H2, it was obviously very much dominated by power electronics. Do you see a certain recovery in optoelectronics? And should we expect, let's say, anything on the micro-LED side in H2? It didn't sound like that. And also into 24, just to get a better feeling on your expected sales mix over the next, let's say, 12 months or so?

So I think for the whole 2023, we'll see a strong power electronics dominated year. I would guess maybe power electronics, I don't know, three quarters, maybe a little more than three quarters of the total revenue. Let's see. For 2024, it's still too early to comment.

Excellent. Thank you very much.

And the next question comes from Lee Simpson from Morgan Stanley. Over to you.

Great, thanks for fitting me in. Maybe just a quick one on R&D. It looks as though the OPEX is going up and I think credit where it's due, there's been some good investment in a new design centre from what I understand, but obviously some personnel costs in over the top. So I guess what I'm trying to ask is where we think the run rates in OPEX could be as we exit this year? And maybe additional to that, if we look at that design centre development, Are we seeing the customer's customer coming down to the building, perhaps vehicle OEMs looking to perhaps sanction the buying of your G10s, for instance?

Well, I take the first question on expected run rate on OPEX and R&D. As we've indicated before, we are moving We did very decisively invest into R&D and the development of the next generation tools and so on and increase our R&D spend in the range now 75 to 80 million. That's unchanged. What came on top was the investment in the R&D center, but that will not have a major impact on the OPEX in next year. And really, I mean, we are driving these, you know, the R&D spend is driven by the projects, yeah, by very clear ROI evaluation of the opportunities that we have. And here we see so much opportunity that this R&D spend is required at these levels to materialize all of these potentials. I did not fully get the other question on the Innovation Center, Felix.

Yeah, sorry, I should maybe clarify that. So really, when we look at silicon carbide, It seems a lot of the work being done by device makers is being watched over the shoulder by end OEMs. And I just wondered, when it came to making the decision to buy tool sets, buying the G10 over whatever LPE has, etc., that the customer's customer was making part of that decision on their behalf.

No, we don't see that. We don't see that. We don't see that OEMs are getting into the point of, so to say, selecting tools. That's not what we see. We see that OEMs may be bypassing the tier ones in the industry, starting, so to say, to acquire system know-how on the level how to make an efficient inverter or how to bring the inverter together with a battery architecture and so on, yeah, but we don't see them going onto the trip level. I have not seen that at least.

Perfect, thanks. Maybe just a quick clarification. I think you mentioned earlier you've unwound 50 of the 70 from the export license carrying value, but equally it sounds as though that carrying value went up with new, I guess, GAN power orders coming in. Is that the right way to look at this?

No, honestly, really the message is that things are really moving back to normal. I mean, have not fully normalized yet, but moving back to normal. It's not that we have now new orders, new tools now piling up, waiting for shipment. It's not the case.

Okay. Thank you very much.

The next question comes from Jürgen Wagner from Stifel.

Yeah, good afternoon. Thank you for taking my question and follow up on micro-ADD. What sales level do you have in your full year guidance? And second one on gallium nitride. I remember two, three years ago when the cycle started, you predicted the market would need about 50 tools from you per year. How has that changed now and what would be your Best guess how we should model that going forward. Thank you.

So I think for the sales level at this point, I said around maybe 10%. So it would be 50, 60 million, maybe something like that. Yeah, just for this year. And again, this is just to say to continue that R&D level plus those early pilot lines or those early high value applications. And much more to come, of course. The second part, tool demand, honestly, what I'm currently getting from our customers, they all say, and said, Felix, our marketing departments have been wrong. The only thing we see that the roadmaps are getting pulled in, some say get pulled in by two years, some say get pulled in by three years. Honestly, there is currently no good number existing in the market. Everybody just knows it's much, much more than has been anticipated before. Maybe in two or three quarters, I can give you a better and a harder number.

Okay. And I'm sorry to follow up on micro-LED. Should we read it in a way that your initial project is a bit frozen currently and R&D projects are making it up? Because 50, 60 million is still a solid number.

I mean, there was not one project. So to say we are engaged with, I would say, almost all the customers in the industry globally. I think it's also to note there is some work in the US, there is some work in Europe, there is some work in Taiwan, some work in China and Korea also strongly. So to say it's a global topic. I would really say the market, think of the market as a pyramid. And it is starting. If you go, for example, to the SID conference or if you go to the Touch Taiwan conference, you'll see that everything is just full of micro LEDs. That's the whole topic that moves the industry. And as always, it starts with a high-end application. Today, you can buy a television based out of micro LED. You just have to put down $100,000 for one television. I think not many people do that. But the market does exist. So to say... And then customers are now planning the next generation of television which will only cost $20,000 to $30,000, so much more affordable. And there will also soon be revealed the first micro LED watches. Again, maybe $2,000 to $3,000 for a micro LED-based watch. So the market is really starting now. And then, of course, it's clear at such price points, the volume, the unit numbers are not that large. It only is now the yield, especially in the transfer step, is getting up. Today, the cost and the prices that I mentioned are mostly driven by huge yield losses. 80%, 90% of the micro LEDs cannot be used. The yield is very low. But then as the yield goes up, the price point goes down. As price point goes down, the unit shipments go up. And that is then, so to say, driving further revenue. This is how I would think about this market.

Okay. Thank you.

And now we have Olivia Honeychurch from Jefferies again in the line. Over to you.

Hi, thanks for letting me on again. Just one on your growth margin. You've obviously kept the guidance for the four-year the same as it was at 45%. Although in H1, I think your average for the half was about 42%, which I assume is partly being driven down by higher shipments to China. That means that you'll need to make quite a big uplift in your margin in H2, maybe around 47%, 48%. How are you going to achieve that, particularly if there are still going to be more tools going into China? And will that higher level of gross margins be sustainable going onwards? I guess I'm asking sort of into the medium term, could we see those going closer to the 50% type of level?

The last point you've made, I was not on the right yet. But the first point, I think you're spot on. We've simulated this through and, of course, expect a significantly higher gross margin in H2 based on the order book and the tools we're going to ship. We'll see an improved product mix, especially G10 family of products now taking a higher share and that driving up the gross margin. And beyond this year, we need to see how things develop.

Okay, thank you.

Thank you. And now we have Martin Marandon from AutoBHF in the line.

Hi. Thanks for taking my question. Just coming back to the export licenses, just a clarification would be helpful. How much of the export licenses that were missing in Q1 are included in Q2 earnings? Is it all of it? The majority or minority?

Martin, can you please repeat? This is on the export license issue.

Yes. I was asking of how much the export license is included in Q2.

Is it or should

Martin, you have a very spotty connection. It looks like you're on a very bad and noisy line. Honestly, we don't understand you. Is there maybe a way that you can send a question by email or so? Then we can read it aloud or after the call, whatever. No chance to understand. Sorry.

Sure, sure. Sorry for that. I will send an email.

All right.

Thank you.

And now we have Gianmarco Bonaccina from Equita in the line. The floor is yours.

Yes, good afternoon. A few questions for me. The first one is just a clarification on the increase in the guidance. We can say that this was just driven by the, let's say, better clarity on the, let's say, export licenses, or there was also, let's say, an underlying improvement in The second one is on, let's say, the customer diversification in silicon carbide, because to my understanding, unlike the other segments here, you are a little bit more concentrated. So if you would say that going into 2024, there is a high probability that you have new customers, and so you can grow faster than, let's say, the market, and maybe you The run rate we are seeing currently between 140 and 160 million of order per quarter can then increase. And then the last one, if you can comment on the recent news about the potential ban on export on gallium from China, which potentially could be, let's say, a headwind for you in the future. We see some of your customers probably giving some some comments, but it would be great if you can also give some color on this. Thank you.

Thanks a lot. So let's take the questions. So first question on the guidance, key drivers, of course, the export license topic, but also, as you see, a very strong order momentum. I think it's a combination thereof. It's simply our current most realistic and best guess, so to say, where we end up in the year. Just not more than that. Yeah. The second one on the customer diversification, I would say for us in silicon carbide, I don't know, maybe we have 20, maybe 30, maybe 35 customers. I think we have in silicon carbide a very, very broad and a very diversified customer base, both in terms of geographic split and in terms of concentration or non-concentration. So I think we are well set here in terms of diversification. As for the run rate, as you know, we only guide Enxtron for one year. We don't guide further out into the future. So I think the total order intake guidance that we have given out for the year implies that in the second half, we will see at least, no or not, even more, so to say, order intake per quarter. I think you can do the math, right? It's very clear. But we discussed in this call also the growth drivers into the future, and I hope we've given you an indication that both in silicon carbide and in gallium nitride, and at some point a bit later in micro-LED, there is more to come. I think also qualitatively you can take those statements which we have discussed here in the last, I don't know, 30 minutes or so. So lastly, let me come to the ban on gallium, this topic. I think first of all, let's note this is only the requirement coming from China that an export license is needed of those materials from China. I think there was no announcement that they would not export that anymore. We have of course checked very diligently with our own suppliers for gallium supply with suppliers of our customers and for gallium supply also for germanium which is being used in some photo detectors and high specialty Vixel topics. There is not expected to be a shortage. I think you all may have seen those statements that have been issued by Western-based suppliers of these materials, such as Freiberger, a wafer maker, or Umicore out of Belgium, a material supplier. We have seen the same from our customers. Many of them have issued statements, and also our own suppliers that we've been working with have given clear indication that this is a non-issue. So I think you don't have to worry about that. And if there is, let's say, the Chinese guys falling out, the Western supply comes. And even if there's prices increasing for that on the cost of an individual wafer, In the Max case, we might see a few low single-digit percentage points increase, so the overall trend for gallium nitride power electronics by far is not affected. It might rather be that the value of a very efficient equipment, such as Extron is providing, is even further increasing. So for us, that's not a big topic.

Thank you. Just a quick follow-up on the SICK customer base question. I mean, I understand you have a good diversification, but my understanding is that there are still, let's say, some large customers that are not ordering from you simply because, as you say, there was an incumbent working on, let's say, the previous technology. So in 2024, it would be fair to assume that you can get on top of the market growth some more customers. So in terms of the pipeline, I mean... You think this is visible or is something more for the mid-term? Thank you.

I think you have exactly outlined our strategy. Thank you.

Thank you.

There are no further questions.

This is Guido Pickard. I would read out the question of Martin that has arrived. First of all, he asked a question about export licenses. How much of the export licenses that were missing in Q1 are included in Q2 earnings? Is it almost all of it, the majority, or less than 50%?

Yes. As we've said before, out of the 70 million that we have reported in Q1, about a little more than 50 million have been granted and shipped.

And then also a follow-up on the 2023 guidance. We have not upgraded our EBIT margin guidance. Is this more driven by more R&D, or you said it before, or does it reflect a better expected mid-term outlook than previously expected?

No, with that I refer to what I said before on Michael's question. There's not too much to read into that. It was a small increase, relatively small increase, and relatively high uncertainty on product mix in the remainder of the year. So there's no overall change in our cost expectations. OK.

That's it. Thank you very much for this. We will conclude today's call in which we were able to talk about the strong underlying demand continuing fueling our growth, future growth. Have a great rest of the summer, everyone. Some of you we will see soon on the upcoming conferences or roadshows. And with that, bye-bye and thank you.

The conference is no longer being recorded.