Ams Osram Ag Unsp/Adr

Good morning. This is Juergen speaking. I would like to welcome you to our second quarter 2024 earnings call for investors and analysts. With me are Aldo Camper, CEO, and Rainer Early, CFO. Aldo will comment on business and strategy. Rainer will comment on financials. After our introductory remarks, we are happy to answer your questions. Aldo and Rainer will refer to the earnings call presentation that you find on our website. For further information, we also provide a full slide deck that you can find on the website as well. Aldo, please share with us your thoughts on second quarter business and strategy development.

Thank you, Juergen, and good morning to everyone from my side as well. We are happy with our solid results in the second quarter in an environment in which uncertainties are increasing. Let us take a look at slide number two. Q2 group revenues decreased slightly as guided. quarter-over-quarter and came in at 890 million euro, a 28 million euro seasonal decline compared to the first quarter. We landed at the mid-pond of our guided range. The seasonality is entirely due to the lamps and systems business, as the semiconductor business actually upped 3 percent quarter-over-quarter. We come to details later. Comparing year-over-year on a like-for-like basis, we stood at 839 million euro, excluding divestment in the lamps and systems segment. The currency impact then at around 2 million euro. like for like, and on a constant currency basis, our revenue therefore slightly decreased by 3% year over year. Despite seasonally lower revenues, we improved our profitability. Adjusted EBITDA came in at 16.5%, or 135 million euro, after 124 million euro in the first quarter. Adjusted EBITDA landed almost at the top end of our guided range. That is 9% higher than in the first quarter. We see the effect of better factory loading and materializing structural savings when we reestablish the base program. On top, some tailwind from IPCC funding catch-ups also helped. On the other hand, within that number, there's also a seasonal reduction from LEMS and systems. For comparison, you see a chart of adjusted EBIT on the right-hand side. The adjusted EBIT margin came in at 6.8% after 5.2% in the first quarter. In actual terms, adjusted EBIT stood at €12 million higher than in Q1, namely at €56 million, an increase of 28%. Let's now look at the financial performance of the business segments. The lamp and system segment is shown on page number 3. The business continued to perform well in line with the expected seasonality. Revenues stood at €233 million, resulting in a 17% quarter-over-quarter seasonal decline. As I explained in previous calls, Q4 and Q1 are always the strong quarters in the year, as most land replacements happen during wintertime in the US and Europe. The second quarter is always the softest quarter in the yearly aftermarket business cycle. We expect aftermarket sales to pick up again in September. The specialty land business for industrial and entertainment applications, however, remained at a low level of around €40 million. They're still high inventories, especially at our semi-equipment customers. The adjusted EBITDA margin for the segment stood at 17.6% or €39 million in absolute terms. This compares to 22%, 22.5% in the first quarter, or €60 million. Besides the decline from seasonality, we had some positive one-time inventory revaluation in Q1, which exaggerates a bit the quarter-over-quarter contractions. Turning our attention to the semiconductor segment now on slide 4. You find the opto-semiconductor business, always in brief, on the left-hand side. This is our semiconductor business with emitters, that is, LEDs and lasers. Revenues improved to €372 million, driven by automotive and some application industrial, such as horticulture and professional lighting. This compares to €345 million in the first quarter, an 8% quarter-over-quarter increase. Adjusted EBDA increased by €17 million to €84 million. This makes an adjusted EBDA margin of around 23% after 19% in the first quarter. You see the effect of higher loading here. However, high research and development expenses still weigh on profitability, though we have fully adjusted the micro-edity strategy along the lines outlined last time. NIPC funding catch-up impact also gave some tilt. On the right-hand side, you see the financial performance of our semiconductor segment CMOS sensors and ASICs, or CSA in short. Revenues declined quarter-over-quarter by €9 million, and stood at €224 million compared to €233 million in the first quarter. While some industrial business stabilized on a low level and sensor Android-based smartphones were in high demand, some legacy sockets for consumer handheld devices continued their ramp down, leading to the quarter-over-quarter reduction. Adjusted EBITDA for CSA more than quadrupled to €21 million, or 9% adjusted EBITDA margin. Whilst the utilization charges from weak industrial medical business are still high, you also see the structural savings from our reestablished base program taking gradual effect, shown here on the right track. Let us switch to slide number five, looking at the dynamics in the end markets in detail. On the very left, you see the revenues of both semiconductor segments combined for comparison purposes. Year over year, revenues reduced slightly by 1%, which is purely a consequence of the non-core portfolio, which still blurs the numbers and is in some parts declining due to ramp-downs of some legacy consumer designs. Automotive revenues came in still strong despite increasing clouds on the horizon, as you hear from all corners of the industry now. Our content for vehicle expansion continues, and we could again show structural growth, especially in our emitter business, which ended up with a 6% year-over-year growth. Overall, industrial and market remain weak for the time being. However, in detail, the picture is more diverse. On the positive, professional lighting saw relatively solid demand. Horticultural grew nicely based on design wins. Having the best product in the market always helps. On top, our new blue laser diode for material treatment sold even better than planned. On the negative side, we see no end yet to the inventory correction when it comes to capital goods and medical markets. Likewise, the mass market in Europe does not seem to rebound. Mass markets in China and the US are doing, relatively speaking, fine in contrast. But overall, the mood in the industrial market is pretty muted. Consumer business continues to improve compared to a year ago. when it comes to sensor products for Android smartphones. We had a very strong quarter here. We are benefiting from our leading market position in spectral sensing. However, the overall year-over-year and quarter-over-quarter decline is a result of legacy designs gradually approaching the end of their lifecycle. Switching now to slide number six. In line with our solid operational performance in the second quarter, we also continue to be very successful in securing new business to support our mid- to long-term structural growth ambitions. First, we need to speak again about our blockbuster product Evios. A 25,000 pixel forward lighting solution is a feature hardly anyone wants to miss, and consequently more than 100 million euros of lifetime value in terms of new winds were added. We will look at Evios in some more detail on the next slide. Second, our high precision temperature and position sensing products can convince more and more customers, and we can mention 50 million euro of design wins, showing again that our content per vehicle expansion is broad-based. Third, while suffering from inventory corrections, our differentiated technology for sensor interface in industrial space is helping customers designing better products. We could win designs of accumulated €100 million during the quarter. The key win relates to an HVAC application worth more than half of that cumulative number. Fourth, professional lighting. The segment was one of the few areas industrially that did well. We could also win significant new business worth more than €100 million over a lifetime. Last but not least, our leading position in ambient light sensing and proximity sensing in the Android space is continuously being reinforced. We saw around 100 million design years in Q2. Our sensor technology makes photos taken by smartphones simply better, more natural, as confirmed again by the latest DxO ranking. We feature in almost every premium smartphone in the market. I would like to share a few more details about the ramp-up of our market-leading eVaios forward lighting solution. We are now on slide number seven. As publicly known, the first adopter was the Volkswagen brand with its two models, Touareg and the Tiguan. In 2024, we're now in full ramp with further car models. We're very happy that E-Vios ramps both in Europe and in China. In China, leading EVs will be equipped with E-Vios. As we go along, more and more models will ramp, being a key element of our structural growth path in automotive. On the right-hand side, you see the latest market estimate for adaptive matrix LED headlights. Do not be confused by the terms mini and micro LED, as they basically designate the path towards smaller pixel dimensions. However, it is not to be confused with the super small pixel that we have been pursuing with our cornerstone project for novel displays. Of course, the smaller the pixel gets, the trickier the physical effects are. For this, we decided to redeploy some of our display micro LED resources to the high pixelated automotive headlamp development. Looking at the market forecast, By trend force, you can see why we believe this is a beneficial investment. The market for advanced high pixelated LED solutions is expected to grow to €1 billion by 2028. And we have the best starting position with having won the majority of assisting designs. Again, this is exemplified by more than €450 million of design wins. We believe this is just the beginning, and for this we redeployed the resources from the previous micro LED display project. Let us dwell a little longer in the automotive segment, turning to slide 8 here. I reported about our design interaction with our laser diodes and LiDAR modules not long ago. It's another example of our content per vehicle expansion across the board when it comes to optoelectronics in cars. It's an important team-up with the leaders in emerging technologies. For this, we are very proud of being recognized by RoboSense, a leading Chinese tier in the LiDAR space, as one of the key partners. Focus and slider solutions feature already 25 vehicles on the road, and their design wind tally stands at 65 models. In a few years, the laser diode market for automotive lidar should grow above €100 million annually. Let us switch now to slide number 9. Last year, we could record a total design wind volume of more than €5 billion lifetime value. We talked about this early February when announcing the VU 2023 figures. We are on track to repeat this outstanding achievement. With a strong acceleration in the second quarter, our year-to-date design wins for the first half of 2024 stand at around 2.5 billion euros. Design wins are across the board, but by nature with an overweight to automotive. This design win base clearly underpins our future growth ambitions. So far, we have been talking about improving the top line. Now let us switch to the view towards the bottom line. And now on slide 10. Exactly a year ago, we announced our strategic efficiency program, re-established the base. We said that most of our product lines are structurally healthy, but the overall performance is hampered by non-core businesses, primarily in some consumer applications. We also said that we target structural run rate savings of about €75 million by the end of 2024 and of around €150 million at the end of 2025. Today, one year later, I'm glad to report that we're fully on track with the program when it comes to the realization of those savings. To date, we've already realized about €60 million structural cost savings. The fall through in the results is also evident by the strongly improving EBITDA in the business unit CSA. In terms of non-core portfolio cleanup, we have addressed the most burning issues, that is the passive optical components and the CMOS image sensor business. As announced, the key assets of the passive optical component business are being sold to Focus Light for about €45 million in cash. We expect the deal to close in the third quarter. And as communicated three months ago, we are restructuring the CMOS image sensor business to a profitable core in primary medical applications. Key adjustment of the structure, especially in the U.S., are already implemented. The remaining 200 million euros or so for non-core businesses are being dealt with in the coming quarters. Various solutions for the promised exit are on the table, and we're assessing which option will be the best given the various boundary conditions we have. For clarity, this means that our starting base for our mid-term operating growth model in 2023 is around €3.15 billion. This is the level we measure ourselves against when it comes to the growth of the core business. As we mentioned regularly, our mid-term target operating model has three elements for improving profitability towards the target level. First, we establish a base, which we just talked about. Second, the ramp of new products and design wins. We've talked about the example of your BIOS as a key element earlier. And third, overall market normalization or market recovery, if you think of industrial and medical end markets, or the overall impact of car units being built. Let me also comment on the adjustment of our microalgae strategy that we laid out three months ago. With regards to development activities, we have terminated no longer needed contract workers. We've also strengthened the core automotive development in high pixelated forward lighting by the transfer of key employees. The reduction of factory personnel has started as well. With regards to the HH factory, we have said that this is a process that will take some time, despite the significant interest we had immediately received. The process started, the interested parties will be handing in their bids, and we are on our anticipated timeline. And with this overview, I now hand over to Reiner to provide you with some more details on liquidity, cash flow, and financials in general.

Yeah, thank you, Aldo. Welcome, everybody. And we are on page 11. Operating cash flow came in again at 55 million euros, as you can see in the chart on the left. Just as a reminder, in line with the market practice, net interest payments are now included in the definition of operating cash flow, and thus also in free cash flow. The payments of 50 million of interest due got pushed into the second quarter as the due date fell on a bank holiday end of March. As such, Q1 operating cash flow was higher and Q2 lower than according to the underlying business. The next chart to the right shows cash flows related to CapEx. It stood at minus 176 million euro, around 90 million euro lower than a year ago. Now, this 176 also includes the payment for a lot of construction bills that we received still late last year with long payment terms that we paid now. It is obviously still elevated compared to our 10% capex-to-cells target as it contains a meaningful amount of micro-LED-related equipment or construction. It was not always possible to cancel those machines, but we did renegotiate successfully in many instances, which brings our total transformation cost down to the current estimate of €680 million, a bit lower than the €700 million we set before, including the significant impairment. inflows from divestments were negligible in Q2. The next meaningful inflow will be from the sale of assets of the passive optical components business to focus light. We expect the transaction to close in the third quarter. As a result, pre-cash flow, including the interest payments, came in with minus 190 million euro, making it the worst quarter of the year. It will become significantly better in the second half with lower capex and higher operating cash flow from higher revenues. Now, coming to slide 12. We had 900 million euro cash on hand end of Q2, a reduction by 176 million euro compared to end of March. In Q2, we paid the dividend to the minority investors of Oslo and Liecht AG, and as I said, that was the carryover effect from last year. We also paid back a 100 million euro maturing bilateral loan end of June, while drawing another one to replace it. We expect liquidity to rather go up than down in the second half of the year. Bilateral bank facilities, including promissory notes, amount to 346 million euro, this light reduction compared to end of March. Of those, we have already paid back the maturing promissory notes of 51 million euro early July. It indicated that when we spoke last time. There are no changes in the maturity profile relating to the 25 or 27 converts, nor to the 29 senior unsecured notes. The sale on Leaseback in Malaysia stood at €401 million. That's always a bit of quarter-to-quarter increase from the quarterly accrual of the catch-up interest payment at maturity. Technically, according to IFS, it's not that, but I think you would agree with us that we consider it as debt internally. We are working on the exit of the CERN leaseback in close alignment with the investors for transferring it to a new lessee as part of the divestment. A process that is well on track but takes some time, as Aldo explained. That would take away the 400 million euro debt-like liability, strengthening our balance sheet and reduce leverage. it would also take away the 35 million Euro interest expense each year. For completeness, the outstanding minority put options amount to 605 million Euro of 14 percent of shares outstanding. In Q2, put options worth around 5 million Euro were executed. We have the revolving credit facility of 800 million Euro, which is in principle reserved for the unlikely event of a more by kind of exercise of the minority options. We believe that scenario is unlikely, but it's still kind of the headroom in the revolvers, $200 million on top of that. And also, we have another $106 million of undrawn bilateral bank facilities. In summary, we continue to stand with a strong available liquidity of $1.8 billion at the end of the same quarter. On the right, you find the familiar maturity table of our outstanding debtors. And now on page 13, looking at gross profit and OPEX. Adjusted gross profit came in at 244 million euro in the second quarter, two million euro higher than in Q1. Adjusted gross margins stood at almost 30%, more than 1.5% higher than in Q1. The cost improvements from re-established to base, particularly in the business units, CSA are clearly visible. The adjusted R&D expenses decreased by 12 percent quarter-over-quarter to 100 million euro from 140 million in Q1. Now, there is a catch-up payment of IPSE funding in there that is positive, but also with the end of that micro-LED project, the capitalization of R&D has come down, which is kind of negative. Adjusted SG&A expenses came in essentially flat at 94 million euro in the second quarter. Now on page 14, the net financing result in the first quarter stood at minus 55 million euro compared to the second compared to the 57 million euro in Q1. No material changes here. Adjusted net results came in at minus 1 million euro and the back on only 2 million euro tax expenses. For the entire year 24, you can assume around 50 million euro net tax expenses for modeling purposes. As such, you need to see the first and second quarter together adding to around 23 million euro tax expenses. Consequently, the adjusted diluted earnings per share came in at zero euro cents, significantly above the minus four euro cents in the last quarter. The clean alpha ads reported net result was minus 41 million euro in Q2, resulting in minus four euro cents per share in Q3. And now let's take a look at page 15. Q3, we expect the beginning of the seasonal rebound in the auto lamps aftermarket business. In semiconductors, we expect the amount of automotive products to weaken in line with the reduced car unit forecast by HS. However, we will see a good revenue contribution from ramping new sensor products for smartphone applications. We also see an uptick in the horticulture business. The inventory corrections in some industrial and medical markets will continue. In summary, the revenues are expected to come in between 830 and 930 million euros. On the back of stronger sales and progressing implementation of a re-established base program, we expect the adjusted EBITDA to improve quite a bit, coming in between 17% and 20% in the third quarter. Thereby, we assume a euro-to-US dollar exchange rate of 110%. Looking at the remainder of 24 as a whole, the targeted 75 million euro front-rate savings from real estate with the base are on track. When it comes to CapEx for the full year, the guidance was 450 million euro last quarter, and that included the carryover effect and so on. But we might end up a bit higher, 500 to 550 million euro, as we have included some capital grants, some significant capital grants to come in end of this year, and they might slip into next year, which is just a timing effect. And then if it comes in higher this year, then obviously the 25 capex would be lower by that same amount. With spring cash flow now standing at minus 179 million euro in the first six months, it will be certainly much stronger in the second half as we continue to target positive pre-cash flow excluding interest payments this year. And with that outlook and the summary, I would hand back to Aldo.

Thank you, Rainer. I'll switch now to slide 16. We'll summarize today's key takeaways. We delivered solid revenues in an increasingly difficult environment in the second quarter. Probability came in at the upper end of the guided range. The structural growth in automotive semiconductors continued with 6 percent year over year. We continue to win significant new business in our core semi-business, year-to-date within a €2.5 billion lifetime value for new business. Implementation of reestablish a basis fully on track for delivering this year's and next year's targeted savings. The key elements of the non-core portfolio are addressed. Restruction of the micro-ID activities has started. Key resources have been transferred to the automotive core development in high-pixel forward lighting that has a very promising prospect. The process for finding a new lessee for the 18 factories is on track. And overall, we now look at Q3 with improving revenue and improving profitability, despite a more and more difficult market environment. This concludes our introductory remarks, and we're now happy to take your questions.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. For the first round, please restrict yourself to two questions only. Anyone who has a question may press star followed by one at this time. One moment for the first question, please.

and the first question comes from sebastian slavovic from kepler chef please go ahead yeah hello everyone and thanks for taking my question the first one is on the industrial market could you please comment a little bit on the level of inventory that you are seeing right now on this specific market and when do you believe this inventory collection could be completed. And the second one is that your comment on the automotive market that is currently weakening. Is it a matter of some inventory build in the market or it is just due to weaker than expected global car production volume? And if there is some inventory building up, where it is really happening right now? Thank you.

Yeah, Sébastien, happy to take those questions. On initial markets, I mean, at least on the sensor side, we continue to see low demand. We had hoped that our customers would work through their inventories that were still high, that were very high starting this year in the aftermath of the semiconductor shortages that they faced, and they wanted to be well prepared to avoid that for the future. They had a lot of NCRA type of orders that we then also delivered on late last year. And we were hoping that they would work through that inventory in the first two quarters or so. And they are, but at, unfortunately, a very slow pace. So they still have significant inventories on their side, and it will take still a number of quarters, is our belief, before that is then digested. And then we will start to see a real demand again at the moment. It is quite minimal. On the LED side, industrial markets are a bit better, like I outlined also, both professional lighting as well as horticulture lighting. We're actually doing quite well in the second quarter, and also we look at Horti especially also getting stronger in the third quarter. That's the normal seasonal pattern, and given the strength of our product portfolio here, we are also benefiting from the market rebound in Horti. On the outdoor side, it is really about the overall weakening of Horti. the car production. Still, we look at inventory levels as being healthy and, in that sense, not worrisome. But, yeah, we just see that our customers are getting more cautious pretty much across the board. And, yeah, we have to take that into account now into our forecast.

Thank you. You're welcome. And the next question comes from Janadan Menon from Jefferies. Please go ahead.

Hi. Good morning. Thanks for taking the question, and congratulations on a good set of results. My first question is also on automotive. Yes, all your peers have also flagged the weakness in automotive into the second half of the year. But for the last 12 months or so, you have been talking about some strong design wins, a ramping in automotive in the second half of the year, alongside also the consumer design win. It appears that the consumer design is coming through quite nicely and ramping up your revenues quite nicely into the third quarter, but the automotive doesn't seem to be coming through. Is it because the weakness is more than compensating for those ramps, or is it there's any delay in those ramps, any color on that? I'm also trying to really get a feel for how your revenues will progress into Q4 this I know you don't want to give any guidance for Q4 at this stage, but just qualitatively, if auto stays weak on the production side into Q4, is there some upside from new designs ramping into Q4 as well? I'm also trying to get at it.

Thanks. No, I mean, of course, the new design wins ramping helps. And overall, that is still happening. We do see it at some of our customers. that are kind of reshuffling their portfolio at the moment between EV and non-EV, especially in Europe, and there is some disturbances, if you will, out of that. But overall, given the content per vehicle improvements that we continue to see, that will kind of dampen the impact. So, yes, of course, we are not immune to lower vehicle bills, but you will see a lessened impact because we have a compensating effect in the improved content per vehicle. So before, we were hoping that fairly stable build following the second half would then lead to rising revenues in the automotive segment, given that the vehicle improvement. But now, given the weakness in the second half, that will be probably more flattish.

Understood. And then on the cost reduction, you seem to be making very good progress there, and you're already at $60 million out of the – sort of targeted 75 million run rate. Does that mean that there could be some upside over there? Could you continue to see, you know, the sort of first half run rate in the second half and exceed that 75 million?

Well, I think what it is signaling is that we're making good progress, and I would say that the speed of implementation is higher than anticipated. I would at the moment still say that overall goal of 150 is still the one that we're shooting for. But yeah, we continue to push hard to make these things happen as quickly as possible. Understood. Thanks.

You're welcome. And the next question comes from Robert Sanders from Deutsche Bank. Please go ahead.

Yeah, hi. Thanks for taking my question. I was just interested in asking about pricing as you look into next year. You know, the pricing, particularly in automotive, has been quite benign for the last three years owing to the chip shortage. But I was just interested to know if you saw any pressure from Tier 1s and OEMs to squeeze pricing into next year, given that they're now facing quite severe margin pressure. Thanks.

Obviously, our car makers and Tier 1s are – Seeing that pressure themselves, it's a competitive space out there, especially on the V-side in China. There's a real price war going on. And also globally, as the overall demand is weakening, of course, the car makers are also responding with more attractive pricing to the end customer. And, yes, they are trying to push that on to the supply base as well. You have to kind of keep in mind, though, that we – We didn't abuse the price increase spiral of the last year that some of the other semi-makers perhaps have gone through. So, in that sense, also the expectation of us now giving price is also much lower. We've been very reasonable and very logical in our price management over the last years, and with that backdrop, We, of course, respond adequately to the price pressure, but it is still in a reasonable range. But, yeah, that being said, pricing does have a bit more pressure now. I mean, overall, a lot of the input materials are back to normal, and people do expect, like in normal times, that semiconductors get better and cheaper every year. And we are basically now returning to the long-term trend again. And as long as we accompany it also with progress on the cost side, also with mixed improvements, then we can usually handle that price pressure. But, yes, it is increasing a bit versus where we were the last years, no question.

And just a question for Rainer. Could you just talk about your gross margin impact from underutilization? I mean, what would have been your gross margin if you'd had 100% utilization rate? and what is it now, your utilization? Thanks.

Yeah, Rob, I mean, I'm sure we would both not assume that you can ever run a company of our size with 100% utilization, right? But the underutilization costs are, in that way, hundreds of millions. And the upside that you have when you improve the utilization are significant. On the other hand, obviously, it's also very important to kind of keep those costs under control so that kind of in a weaker, in times of a bit weaker market, it doesn't hurt you too much. But, you know, if the utilization improves, there's a very significant upside in the margin, certainly.

So what utilization do you assume in your 15% plan, just so I understand? Thanks.

Yeah, no, look, there's certainly when in the kind of in the target model, there is an improved utilization and that is both from additional design winds are coming and where we have capacity for, but it is also from insourcing of certain manufacturing that's currently out. Got it.

Thanks a lot.

And the next question comes from Sandeep Deshpand from JP Morgan.

Please go ahead. Yeah, hi. Thank you for letting me on. My question is, clearly you've got strong design wins in the consumer space in the second half of the year, which is helping. the revenue ramp up into the second half of the year. I mean, I think at the midpoint, it's about 60 million euros that you're seeing an improvement. Is this all mostly driven by the consumer side with autos being soft and industrial being soft? That's my first question. And my second question is regarding your facilities in Malaysia. Where are you at this point in terms of resolution on those facilities that the micro-led facility in Malaysia and what are the plans there? Thank you.

Perhaps take the second question first. As we said, we are in the process of selling that facility or finding a new LSE for the sale and leaseback contract, wherever you want to look at that. We've got good interest in the FAB. It is geopolitically still an attractive place to go for a lot of other semiplayers. And we're having good discussions and now a quite broad process that we're going through to optimize the value of the asset in this sales process. So it will take a bit of time, but we continue to be confident that we will find a good solution here that gives us good value for the investment that we've made and that we unfortunately don't need anymore. On the overall upswing in the second half year, Yes, you're right. On the one hand, the consumer ramp has a meaningful impact, but it is not only that. It's about, I would say, half or so is out of that, and the other half will come out of both the The semi-business like Horti, for example, is getting stronger in the third quarter. But also the lamp assistance segment also gets usually already a slight uptick in the third quarter. September is the load-in month for the lighting season. So it will be a combination of things that help us in the third quarter get better.

Just a quick follow-up to that first one. Is there any potential that this equipment that you're being forced to take, which you cannot cancel, has any other home that you can sell this equipment into?

Sure. I mean, that depends a bit on who is buying the factory. And then, of course, we are also having the excess equipment on sale. And we are hoping that we either can motivate the buyer of the facility to take some of that, or we'll also look for other homes outside of that. But, of course, it's also an active process to try to make best use of those equipments A few of them we've taken ourselves and are using to kind of get to productivity gains quicker by using the latest and greatest in our other facilities. But wherever that is not possible or not meaningful, we, of course, try to monetize it differently.

Thank you.

You're welcome.

As a reminder, anyone who wishes to ask a question may press star followed by one. And the next question comes from Jürgen Wagner from Stiefel. Please go ahead.

Good morning. Thank you for taking my question. On China, where you have been historically very strong, how do you see the competitive environment currently evolving as we read a lot about local sourcing in China? Thank you.

That's definitely a topic. Fortunately, we have been building our relationships here now since decades, and they go very deep, and that is very helpful. Secondly, it is still about innovation. A lot of the car makers in China want to showcase that they're really up to snuff and they're using the latest and greatest. And on the latest and greatest, it is not the Chinese that we're competing with. It is the usual one or two Western companies that have, if at all, a similar product. That does protect us on the innovation side, and that's, of course, where we keep pushing very hard. On the more established products, yes, people are looking at alternatives, but it is not that different from the kind of pressures we have had over the last decades from other players in other markets. We had the Taiwanese for a while really pushing hard, and with the Koreans pushing really hard for some time. And the automotive space still is a bit resilient on that because it's really about The quality levels, it's about long-term availability. It's more than just the price and the current performance of the product. And we continue to see that people value that. It is a bit of a similar exercise we're seeing right now than in earlier times where people tried the alternatives for some smaller programs, oftentimes were disappointed with the performance, oftentimes were disappointed that, for example, also changes are made to the product without being informed. things like that, and then they tend to come back. So, yes, we see the pressure is there, and people are, of course, our customers are also looking at alternatives, but I think given the specifics of the automotive market, we have a fair chance of defending our position there.

Okay, that's clear.

Thank you. You're welcome.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Jürgen Rehbel for any closing remarks.

Thanks, everyone, for joining our Q2 24 call. With that, we'd like to conclude today's session. For any further information, please refer to our website. We have further material. Examples are the full investor relations deck, and you can reach out to us Thanks a lot, and have a good summer break. Goodbye.