Barco Nv

Good morning, ladies and gentlemen. I am Willem Franszoo, I'm Director of Investor Relations at Barco. We welcome you today to this conference call on the results of the second quarter of the year and the half-year results, 2023. Today with me here on stage are Ann Stegen, Co-CEO of Barco, and also Anders Sender, CFO of Barco. Co-CEO Charles Baudouin is currently on medical leave and would like to be excused for this call. On Stegen and on the sender will now walk us through the half-year results. And the update under the heading 10% sales growth fueled by strong performance of entertainment, step up in profitability with EBITDA margin at 12.5%. They will provide extra color on the results using the earnings presentation, which is available on our website since this morning. And that's it for the introduction. We'll take it from slide three onwards in the executive summary. Anstegen, the floor is yours.

So we reached a top line sales of 521 million, which is a 10% year-over-year growth. And also for Barco, this means an all-time high for the first semester. This growth was mainly fueled by a very strong performance in the entertainment business unit. We also saw 60% of our revenue coming from eco-labeled products, and that was mainly driven by the enterprise division, where we have now a complete portfolio of click share eco-labeled, and also the new LED series that we brought on the market are eco-labeled. We have a positive book-to-bill, larger than one, and that results in a solid order book of 506 million. EBDA landed at 65 million. That represents an EBDA margin of 12.5%, up 2.7 percentage points year over year. That was mainly related due to a very good product mix, also higher gross profit margins. because we clearly see an eased supply chain situation, and that then offsets, of course, the impact from higher inflation rates and our continued investments. Net earnings, net income, we landed at 33 million, which represents 6.4% of our sales. So for the outlook, we are reconfirming a sustainable, profitable growth. We expect now a high single-digit sales growth year over year because of a tempered top-line growth in China, where we see the post-COVID recovery slower than expected. EBDA accretion is maintained, and we reconfirm an EBDA margin of larger than 14% for the full year 2023.

I'm sure there we are. Good morning to everybody and thanks for the introduction. Taking over with some figures and then I'll give the mic back to you for the color on the different divisions, etc. Starting here on slide four with the overview of the financial KPIs and in comparison with the first semester of last year, you will see that the change or the equation is all in the green, which we of course all like. Double digit sales growth, you will see later on also we have an increase in sales in all of our regions, some lower in APAC, 5%, so they are not the double digits, and this including the lower sales growth in China. Order book at 506 million, which is compared to the beginning of the year, 9 million higher. EBITDA margin really fueled by the extra on gross profit margins which we did, so on average we sold our margins at better gross profit margins, but also different actions we did on our costs which also helped on this gross margin. We see an increase in gross profit margins compared to the first semester of last year with three percentage points up, but also one percentage point up compared to the second semester of last year. So we really see a steady improving in that area. OPEX has been contained, there is an increase linked to a half inflation and then also further investing both on product roadmap and commercial activities. Free cash flow we landed at minus 24 million, including in there a step up of our capital expenditures, more on that later on. Our ROCE landed at 18%, net income as indicated at 33 million, which is about 11 million higher than last year. Taking it over to slide 5, there we see a comparison of our sales versus the first semester of last year and then the splits by division and the split in the different regions. Last year you might remember that when we came out at this point on our sales of the first semester, that there was a material impact of supply shortages, which was primarily hampering at that time entertainment. That was to the tune of about 40 million we at that time also included in our figures and results outlook. This has been fully solved towards the end of the mid-year last year and was largely resolved in the second semester and is out of the door and no issue anymore in the first semester which really helped to deliver on the big order book which entertainment had and with that a very very solid growth year over year in entertainment and this in both business units underneath. Enterprise landing close to last year, which is a high single-digit growth of MX and a lower growth of large video walls. And healthcare, more on that than later on, the impact that it had landed at 10% lower top line than last year. All in all, bringing that to 10% growth. Looking to the different regions, then EMEA, the highest, plus 15% year-over-year. Americas, 8% year-over-year. And APEC, 5% year-over-year. Some extra, then, little footnote we added on that. If we look to the impact of the currencies in this first semester, then that has a neutral impact. So call it no help, neither an excuse, I would say. But that's neither needed. Moving over to the typical bridge which we each time share with you on our operational results comparing the EBITDA of the first six months of last year to this year and this is then the shape of a P&L which we all like to see, the one of profitable growth. So the increase of operating results really helped by our sales improvement extra volumes which we sold at better margins and then OPEX which has been contained with the impact of inflation which is about the half of the amount which you see there, the half of the 20 million and that the other half is investments done in product portfolio and commercialization. landing with that at an EBITDA of 12.5%. The EBITDA of the different division lands at 10% and higher. Net income, some words on that, starting from our EBITDA accretion, then the other lines between EBITDA and net income. Depreciations and amortizations are a little lower than last year. We do have a restructuring cost. We booked this first semester to the tune of 6.6 million, which is containing or is linked to the strategic review we did on large video holds and more on that a little later. Taxes and our effective tax rate remains at 18%, which is the same as last year and also the guidance for the full year. And with that, we land at our net income of 33 million, 11 million higher than last year. Moving over to free cash flow and our balance sheet, which remains very strong as you know it. The investments or the negative free cash flow includes an increased gross operating cash flow. It includes an uptake in our capital expenditures and the 21 million, about 10 million is related to the cinema as a service contract and half relating to what we call manufacturing investments and manufacturing footprint. The working capital is still high and too high and is a focus point to, as we announced before, to get that down. That started to get down and primarily we are talking here about inventories as of the second quarter, but compared to the beginning of the year, not yet. These are good inventories, as we then also call them, so they do not trigger extra write-offs on it. So in that sense, that's a temporary thing to secure the supply, last time buys, which are in their service inventories, etc. And also linked, of course, to the uptake of our sales, then in particular in entertainment. Our ROCE landed at 18%, which is a very nice increase compared to last year, and our net cash ended above 200 million, 203 million, which is 61 million lower than the beginning of the year, including the free cash flow, but actually the capex expenditures, which we did, and also in a full cash dividend we paid to our shareholders. On sustainability KPIs, the first one Ann already indicated. So half year, 60% of the products of our revenues is including products which has an equal label A or better. Last year this was 50% and the target for the full year is 70%. We see an improvement across the different divisions, so that's very nice. If you look to the new product introductions, which we did in the first half of this year, they all have an eco-label A or better, so that's also really on track over there. If you look to another one, the net promoter score on our customers in the field of communities, then also there we see a nice increase, 48%. Target is 50% for the full year, so working to get there, but a very nice improvement over there. And there we see this also across the regions and across the divisions. And with that, the pleasure to give it back to Anne for more color on the division.

So let me take you a little bit deeper on our three divisions, and I'll start with health care. So in health care, we saw a decline in orders of 14% and a decline in sales of about 10%, mainly in the Americas region. This basically is related to, that relates and that lands an EBDA margin of 10% related to a lower top line and also our continued investments in product R&D and manufacturing and the ramp up of our factories in Suzhou and Serono. When you look at the two business units in diagnostic imaging, we saw strong performance in radiology and also in digital pathology. Especially in the Americas, we saw slower order intake because we see the customers going back to normal investment levels after a period of high spend due to government funding right after COVID. And also, of course, some uncertainties in the market, high interest rates, slowing down the orders. Surgical and modality had a slower start of the year. Sales decline there is mainly related to phasing out and phasing in and the gap between phasing out and phasing in new contracts, also especially in the Americas. Here we see definitely a lot of promise on the longer term. We basically see confirmed contracts coming in that should kick in towards 2024. For enterprise, so we are winning momentum and gaining share with collect share. We see project delays in large video walls due to, again, an uncertain investment climate. Overall, orders pick up in enterprise 4% and a small sales decline of 2%. EBDA margin landed at 15.7%, that's down 2.7 percentage points, and that's mainly driven by higher spending in product roadmaps and R&D. When we look at meeting experience, we see actually hybrid meetings are there to stay. We also see a slight market slowdown because companies are at this moment rethinking the way they will organize their office space and their meeting rooms. Now we see click share gaining a lot of momentum here. Click share being simple, being very flexible, agnostic. This basically is a big advantage compared to in this new way of hybrid working in a flexible environment. We have today in Solbase of 1.2%. 2 million meeting rooms that is up from 1 million last year we also see our click share conference product now being 70% of the total of the revenue income in click share We also launched a new product. It was very successfully launched in the market in the first semester. That is our CX50 Next Generation with new features, basically enabling flexible switching, also a 20x9 format and dual display. Now, in large video walls, we see order grow driven by a strong demand in Europe and the Middle East. Sales was hampered by slower project implementation, so delays in project implementation. Also, lower government-supported investments, uncertainty in the market basically hampered also our sales in large video walls. We're still loss-making in the first half of the year on large video walls, and we completed our strategic review, and I'll get back to that in a minute. But here, the focus is going to be more investments into software, and that will basically accelerate our path to profitable growth in large video walls. In entertainment, yeah, strong demand across all our markets, despite a weaker performance in China, slower post-COVID recoveries there. That, of course, helped our operating leverage and our margin accretion in both business units. So we see orders going up 24%. We see sales going up 43% year over year. And that resulted in an EBDA margin of 12%. The EBDA margin, again, operating leverage as well. The fact that we do not longer see supply chain constraints, less brokerage costs, less logistical costs. So that helped, of course, in bringing up our EBDA margin. In cinema, clearly the lamp to laser replacement wave is in full gear. This was paused in 2019 because of COVID, but we see this ramping up at full speed right now. We have an install base of 35,000 laser projectors right now, and that is about 25% to 30% of the total install base in cinema theaters. So there is still a lot to go there in the replacement wave. For immersive experience, we actually also saw a very solid double-digit grow. We see uptake actually in all our markets, especially in events and simulation, but also in fixed install. We saw also growth that was mainly led by EMEA, and there especially also Middle East, and also closely followed by the Americas. Softer in APEC due to, of course, slower recovery rates in China. So this brings me to an update on our large video wall strategic review. And here it's good to say that when you look at the control room market, we see changing dynamics in the control room market, which much more focus on operating workflows, hybrid remote collaboration, and also distributed working in a secure and sustainable way. Barco has a long history in this market and is very committed to basically perform in this market. When you look at the market, you see many verticals in this market, and then basically where Barco was positioned for a long time is in the display, so in the hardware, and then content management, so the firmware for the hardware. With the dynamics changing in this market, we are going to step up to operator workflows and also customized operation for the specific verticals, and that's mainly focusing then on software. So for our strategic review, what will we focus on? Well, there are three clear pillars that we are going to focus on. The first one is focus on profitable products and markets. This means that we're going to focus on control rooms and we will have less focus on broadcasting and corporate markets. We will also accelerate our investment in software and in dedicated workload solutions. The target industry verticals are the ones that we're very familiar with. So that's energy and utilities, the public sector and transportation. But we also are expanding now in horizontal opportunities. And these are these network operating centers and security operating centers where we have with our new Barco control product, a product that we launched recently. earlier this year, basically a very good platform to also feed the NOC and SOC markets. For geographies, we're focusing on EMEA and Americas and Middle East and also Southeast Asia. which means that we're going to rebalance our R&D portfolio with more investments in software and workflow solutions, our Barco control, so our new platform is there, the ideal starting base. We continue in hardware to optimize our rare projection cubes and LCD display portfolio. For LED, we have an up-to-date, state-of-the-art portfolio today, and towards the future, we will focus on image processing. We basically have also a future-proof organization, which means that we need to make sure that the supporting sales and marketing activities are also gearing now towards software and workflows. And we also basically changed leadership in our large video walls, and we promoted or we appointed our former CDIO, Tom Siss, to be the new executive vice president for large video walls. He has a long history in software developments. This leaves me with the outlook and the closing. So sales and EBITDA margin are expected to be higher in the second half of the year compared to the first half of the year. We are expecting tempered top line growth due to China, resulting in an expected sales growth for the full year in the high single digit range. EBDA accretion will be maintained. The impact of the lower sales is offset by gross margin improvements and favorable product mix. So management again reconfirms its expectation for an EBDA margin above 14% for the full year. We also reconfirm our long-term guidance for high single-digit sales growth and an EBDA margin in the range of 14% to 18%. Back to you, Will.

You can give the mic to... There we go.

Good. Thank you, Ann and Am, for the presentation today. We are now ready to move into Q&A, and I'd like to repeat some house-rolling rules. So you can queue in the conferencing system virtually, and an operator will bring you in the spotlight and be asked to limit to two questions at a time. If you have more questions, you can always queue again. And I would like to ask the operator to bring the first question in the spotlight.

There's a question.

Good morning. Can you hear me?

Yes, we can. Yes.

Perfect. Thank you for this explanation on the H1 results. I have a couple of questions, but I will stick to two indeed. The first one, actually, not regarding the results we've seen and the outlook, but regarding the steering of the company. Could you share with us the actual situation of Mr. Baudouin and Baudouin? what the outcome will be on the steering of the group, because we haven't heard any formal news on that. And, of course, linked to that as well, we've had a great impression on, for example, Mr. Adam Soyal, who was the head of immersive as he has left. I presume that's not an issue for this division, or could you give us some comment on that? Thank you.

Yes, sure. So indeed, Charles is on medical leave. We do not expect him back before the end of summer. We are definitely in touch with Charles. He is up to date of what's going on at Barco, but he is at this moment not daily involved in the activities at Barco. So temporarily, I took over full responsibility to guarantee continuity of the business and also decision-making. And that's how we have performed over the last couple of weeks. Regarding Erdem, indeed, Erdem left us in May. We actually appointed very recently the global head of sales of the Immersive Experience business units. That's Talun Gam. He is very familiar with our Immersive Experience strategy, markets, go-to markets, product portfolio. And he is taking over from Erdem. So here again, continuity is guaranteed.

Okay, thank you. And then my second question is linked to cinema as a service, but also to the working capital in general. How should we see the buildup of that cinema as a service in terms of free cash outflow? Because, of course, we had a strong health year now in this segment, logically explaining that jump. but how should we see it a bit going forward? Is this something we can model? And then secondly, of course, linked to the working capital as such, we saw it was quite high in H1. It should have come down normally, indeed, as previously guided. So to what extent should it normalize in the coming quarters? Thank you.

Yeah, I will take that one, and thank you for the question, Chris. On the cinema as a service, the 10 million which we had as CAPEX in the first semester, that is not to be extrapolated to a full year. On the other hand, yeah, you can, if on your modeling, then type of, it was a little bit more in the first semester than in the second semester that we have the contract, and AMC is the bigger one, as you know. So, but overall, yeah, we included, yeah, you can say around 15 million for the full year over there, with some more, I would say, shipments in the first semester. On working capital, yeah, we knew, and then the guidance was to bring that down. We did guide that that would take, yeah, I would say then the full year. This being said, I would have loved to have it already more come down. Yeah, take some time. Okay. That takes some time. The most important there is that these are good inventories and it does not trigger at any point inventory write-offs. Towards the end of the year, we are guiding on a full working capital on sales to get towards the 10% back.

Towards the 10%?

Yes.

Slightly higher, but in that range. Yes, correct. Okay, thank you.

Thank you, Chris. Good morning, Mark.

Yes, good morning. Can you hear me? Yes, Mark. Thanks. Actually, two questions. So my first question is on the entertainment order intake in the second quarter. Over the first half of the year, it was still very strong, but maybe a bit of a dip in the second quarter. And the second question is on the restructuring of the large video walls. Can you give a little bit of a feeling like how much loss making it was in the first half of the year? How quickly you expect that to repair? And yeah, so what kind of profitability levels in the second half into next year would be normal for large video walls?

Okay. I'll take the first, you take the second. Okay, fine. Yeah, okay. Go ahead. Yeah. On entertainment, in the first quarters, there was a very big order included relating to cinema as a service. So in that sense, you don't have that in every quarter. That doesn't mean that their order book is less healthy or has come down to the contrary, actually, on cinema. But that just fully explains, I would say, the extra uptake which we had on orders in the first quarter.

And on LVX, yeah, we don't disclose numbers per business unit, but in general what we saw in the first semester in LVX is in the Americas a slowdown of order intake because of uncertainties in the market. The interest rates were at a certain moment very high, so that delayed decision-making in the Americas. There, we basically see that this is getting better, and we expect actually that a lot of orders are going to land in the second semester for the Americas. In sales, there again, some delays. These are typically in LVX very long projects for implementation, and although our supply chain is now completely resolved, that doesn't mean that others' supply chains are already fully recovered. So this means that the integrator, there are still delays. And that is still one of the things that we suffered from in LVX in the first semester. Now, for the longer outlook there with the revised strategy as we have, the plan is to break even on this business unit for this year and in the longer term to get it to similar profitability levels as the rest of the group.

Okay, so one small follow-up maybe. Break-even, is that then for the second half break-even or break-even for the full year?

No, no, for the full year. This is for the full year, yes.

Okay, clear. Thanks.

Thank you, Mark. Next questions. Good morning. Nikos from Kampen.

Yeah, good morning all. Thanks for taking my question. So, yeah, in the press release it is mentioned that there is a slow decision-making process with regards to the upgrade cycle in the meeting rooms. Can you elaborate a bit on that and talk about the demand dynamics in this particular end market?

Yes, of course. Shall I answer or you have more questions? No, okay, so I'll answer this one, sorry. So, yes, so what's happening since after COVID is that, first of all, we see hybrid meetings there to stay. Also we see companies now trying to deal with how they will organize their workforce and their meeting room space and their office space with this new trend that they see. So what we see, and that takes some time for companies to basically reorganize their office space this way, but the trend that we see is that people will come to the office to meet, and if they have individual work to do, they stay at home, which actually in the long term is a very positive trend because there is going to be more meeting room capacity used in the offices. The other trend that we see is also that these meeting spaces will be much more flexible in the future. They need to be able to rearrange that according to the type of meeting that you're going to have there. And there, of course, when you think click share, it is simple. One click on the button, it's agnostic, flexible. So it works with any virtual meeting conference platform, with any periphery device in your meeting room. It is also basically very agnostic towards using any type of portable mobile device. It allows visitors to basically call in. So in general, a very flexible conferencing solution. And that's where we see the momentum of ClickShare gaining momentum. So we had a high single-digit grow in ClickShare, despite the fact that there is maybe some slower and decision-making processes in the market, because clearly the bring-your-own-device type of solution is gaining momentum.

Okay, thanks. And maybe one more follow-up. So what implications does it have to your markets under the Glickser business, both compared to the agnostic segment, but also compared to the non-agnostic solutions out there?

Yeah, so clearly there are two solutions out there for meeting room solutions. So one is the proprietary rooms and then you have the agnostic solutions. Both solutions will grow, but we see more and more that that flexibility component is important. And there, of course, agnostic conferencing solutions have an advantage The new ClickShare that we launched actually in the first semester has what we call this flexible switch, which even allows one meeting room to switch from a proprietary setup to a wireless BYOD setup. And that is a very well-received feature actually in meeting rooms because, again, to bring in that flexibility element.

Thank you. Thank you, Nikos. next question there's no other questions at this stage so if you have questions you can raise your hand virtually in the system and then we can put you in the spotlight right away yeah I think there is one coming in Good morning, Sébastien.

Yeah, hi. Good morning. Just a question. Video wall. Can you update on the margin benefit at the division? what kind of payback, basically, you were expected on, and how long, basically, that would take. I'm pretty sure there's some delivery of existing order, but at one point it should be inflexible. So that would be the first question. Second one, there's a lot of debate on China, given that you are barcoing China with China for China. Can you update us, basically, and try to to give us like information from the ground to see if we can expect inflection done by H2, which is not so much into the consensus. Thanks.

The first one we did a book on restructuring costs relating to LVX, which you see on our P&L, 6.6 million, which are in full layoff costs, so reduction in force, so no impairments there. When we guide for the EBITDA breakeven by the end of the year, that's excluding that amount. And then for the payback, this is done within the next years. So in that sense, it should not take too long.

Yeah, and regarding your question in China, you read it.

Just a little bit on the margin benefit at the group level, which is expected, given the cost restructuring for the world plus software mix.

Can you give like a... I sympathize with your trial, Sebastian, but we don't give figures on a BU level. So in that sense, that's why I did not go into this. But it's a creative, of course. Yeah, of course. Yeah.

So then maybe let me answer your question on China. So you read it everywhere. So today the economic recovery in China is going much slower than anticipated post-pandemic. That's a fact. We see slower investment and slower demand and slower investment in general, not only in our markets there. What's happening is that because of high interest rates but also the debt of the local governments, that of course slows down the whole demand and order intake. Now for us, especially in entertainment and healthcare, typically the local governments are quite important stakeholders in our business in China for China. Now, we see the situation is going to improve. We see here and there already tax incentives coming in, more favorable terms on loans. But when exactly the recovery is going to kick in is, of course, something that we will have to see. But that's what's going on in China. Meanwhile, for our factories, so we have our focused factory approach where we have factories as well in Suzhou and soon enough in Wuxi and then also Kortrijk and Saronno. So there we are typically volume products will go to China, specialized products to Belgium and Italy, but they're flexible lines. So we basically can exchange products between those lines when needed.

Thank you, Celestia, for these questions. We have another question from Chris.

Yes, good morning. Another question from my side indeed. You were quite vocal some months ago on what to do with the balance sheet regarding add-on or even larger M&A. Given the current market conditions, higher interest rates, perhaps some peers in jeopardy or let's say having some difficulty with the hiccups, in the markets. Do you see any opportunities that Parker could look at more interestingly now than, let's say, six months ago, or will you have more of an internal focus right now? Thank you.

No, thank you for the question. No, so we are actively looking at potential targets. As we've always said, it needs to be a strategic fit for Barco. It needs to be, like we always say, a one plus one is three story. And for us, we're looking, actually, there are multiple opportunities that there are. There may be weaker competitors, but there is opportunity. expansion in the value chain of a particular market that we could do. We could go and increase our portfolio, our TAM, our total addressable market by increasing our portfolio in certain vertical market segments. So we're actively looking into that and we'll keep you up to date of the evolution there.

Maybe to complement on your specific question, Chris, you didn't hold any of the projects which we are working on, actually, so in that sense, to your point on internal focus, it's not that we are going towards an internal focus.

It's all steady as we... Yeah, yeah, internally, of course, we have a full agenda, and we keep on working on a full agenda internally, too. But it's not only internally. No, no, correct.

Thank you for the question. Thank you, Chris. We have a question from .

Good morning. Thanks for taking my question. I wanted to elaborate a bit on Sebastian's question on China. Just ask, can you add some color to why the Chinese recovery is going slower than anticipated? And you remain firm believers in China, Can you add some timing to that belief, maybe? When are you anticipating a pickup in the pace in the market? Thank you.

Yes, so I think a little bit more color is, of course, during the COVID period in China, the local governments have spent a lot on health care. And they basically have now debts built up, and they need to find a way to repay those debts. So that is the situation that's going on at local government level. When we see this pick up again, well, we hear about these initiatives, as I just mentioned, when they will truly kick in also in our markets and how our markets are prioritized is something that we will have to see.

remain positive on it?

On the long term we absolutely remain positive on China. It is a big market for us and as again we mentioned there we have a big manufacturing capability there but on the long term we remain very positive about Barco's potential in China for sure.

Thank you Ben for this question. There is a question in the chat from Vsips. When do you expect we will see the impact on top line and EBITDA margin in enterprise after the restructuring in large video walls?

That's the same question of Sebastian, but no issue. Maybe to add on then to it, and then we'll be helpful for Steve as well. So we did 12.5% EBITDA margin in the first semester. We are guiding above 14% for the full year. So you can count for yourself what that will require for the second semester. The uptake in EBITDA margin is also in enterprise for sure. So in that sense, maybe to complement today. Thank you.

And then another question from Patrick Millicom. Do you consider buying back your shares? No.

We have too many projects at hand and too much interesting targets which we are reviewing to spend our money and to really invest with a very good ROI. Okay. Thank you.

Those were the questions from the chat. Okay. Okay. I'm looking if there is more questions in this waiting room. There's another question from Ben, is that correct? Ben? Ben Serure from the TED.

Do you have another question?

No, I only had one question. You had one question. Okay, thank you.

Good. So if you would have more questions, you can still raise your hand now before we close the session. We can do that virtually or in the chat. And if no more questions are coming, then I would like to thank you for your attention today and for the questions. And of course, the recording of this session will also become available on our website around noon today. There is one more question. We have Trion from Berenberg. Hello, Trion.

Hello, William. Sorry, I was muted.

Good morning.

Just on the enterprise margin, which was down year on year, can you sort of elaborate more on why that was? Was that purely coming from the large video walls sort of being loss making, or was there a decline in the margin for click share as well?

No, it was also because in click share, we are investing heavily actually in the next generation of click share portfolio. And that is definitely also an investment that we're making at this moment. So in that sense, it was also related to click share. But truly investment in the product roadmap and the portfolio. Thank you.

So that will probably limit the margin expansion in the second half as well? Is this a sort of longer term investment? Can you give a bit more detail there?

Yes, again, but then the second half is higher sales, of course, than the first half. So roadmap developments take, of course, some time. The project development is there.

The uptake and the, so correct, more sales will also trigger more margin. And in that sense, it's not that we further step up the R&D investments. No, no, not further. So in that sense, that's your question, Trine.

No, that we're not doing, no.

Thank you.

Thank you, Trion. And we have another question from Mark Hesseling, ENG.

Yes, thanks. Maybe on the healthcare segment. So you lost an OEM contract there. I believe that you already won a few new ones, but those... Maybe talk a little bit about the facing on when you see that business growing again in healthcare.

Yeah, so typically when you look at, especially in surgical and modality, when you look at, they are typically project-based. For the business we do, there is project-based. They're large contracts. They're long-year contracts also, but they're also smaller contracts. And in a typical cycle, these leverage each other, and that's how we create growth in the surgical and modality business. What happened now in the Americas is that, indeed, we ended a large contract at the end of last year. That was expected, but it was a very large contract. So to compensate for that contract, it takes us a little bit longer, and there is a gap between phasing that out and phasing in new contracts. But the mid-term outlook there is very positive. We are basically signing up a lot of new agreements, and they should kick in towards 2024. Thanks.

And maybe I should follow up on the margin, because I think actually the margin, given the revenue levels, So what are the moving parts there and how will that evolve in the second half of the year?

Yeah, so also their supply chain constraints were relieved, so we don't see those anymore, but also value and cost engineering on the products itself and in general as any good household OPEX management. So that's basically the mix we worked on for OPEX. for healthcare.

The double costs type of which we had with the move towards SUGIO, these are fading out, so that's a positive one, as they get up to speed over there, actually, when we did the shifts. There were higher investments also in product portfolio compared to the previous years on diagnostics. But that will also be the case in the second semester, but not a further increase. So also there we do foresee for healthcare an increase in our EBITDA margin in the second half versus the first half.

Okay, very clear. Thanks. Thank you, Mark.

Are there any further questions? You can raise your hand in the system and we'll put you in the spotlight or the chat. Okay, if no further questions, we'd like to close the session today. Thank you for your attention. And, of course, you can always contact Investor Relations for any further questions. Thank you very much.

Thank you. Bye-bye.