Elmos Semiconductor Ag

Let me now turn the floor over to your host, Dr. Arne Schneider, CEO.

Good morning, ladies and gentlemen. I would like to welcome all of you to our conference call for the second quarter 2024. Thank you very much for your participation and your interest in our company. All relevant figures can be found in our investor presentation, which is available on the Elmos website. And of course, you have the opportunity to ask questions at the end of my presentations. Ladies and gentlemen, Elmos was able to continue its positive financial performance in the second quarter despite ongoing challenging market conditions, and we are on track for another successful year. Let me start with a short update about the current market environment. The effects of the normalization phase in the automotive semiconductor markets are ongoing, and inventory corrections by some of our direct customers are still visible. The destocking period will most likely extend into the second half, but the level of inventory reductions has decelerated in the last three months. Some of our customers have already achieved their desired inventory target, and we are shipping to them based on their real demands. Other customers are continuing to adjust their orders temporarily and still focus on working capital optimizations. So we have overall a quite diverse picture here, which differs from a regional and a customer perspective. This is a typical phenomenon after the end of a high-growth allocation period. As you know, it's also a short-term temporary supply chain effect, and order levels will return more and more to real production demand. The new forecast for the global automotive market has been adjusted slightly, and 2024 production volumes are now expected at around 89 million units compared to 19 million units last year. More important, the structural growth trend for automotive semiconductors remains intact. More intelligent electronics in modern cars combined with our innovative product portfolio offer for us an excellent basis for future growth. Beyond that, we received great news from the German Stock Exchange in June. Elmofed's advanced to the TechDux Index, making our company one of the 30 largest listed technology companies in Germany based on free-slope market capitalization. Of course, you all know that. What you may not know, we are also very proud that Elmhoff's investor relations activities are highly recognized by investors and analysts, and our head of IR, Ralf Hoppe, was the third place out of 70 companies in the category Best IR Work of an IR Professional in the S-Dux. at the German Investor Relations Award 2024. So I would like to congratulate Ralf and his team for their outstanding work. The promotion to the TechDocs and the IR Award confirmed the successful development of Elmos on the capital market and at the same time are for us a motivation to continue to improve the high standard of our IR communication and to further increase the enterprise value of our company. Let me now present the financial highlights of the second quarter. Hermos continued its positive business performance in the second quarter of 2024, generating group sales of €142 million. This is a solid growth of 4.4% year-over-year, despite ongoing inventory adjustments by our customers. The Q2 gross margin was 45.2%, also in line with our expectations. Please remember that the gross margin in Q2 2023, which was actually 48.9%, was positively impacted by one-time effects such as the energy price compensations by the German government. EBIT further increased to €35 million in Q2 2024 compared to €33.1 million last year. Despite the lower gross margin, the EBIT margin increased slightly year-over-year to 25.3% due to lower R&D and SG&A expenses. After the high investments in the course of 2023, the CapEx ratio in Q2-24 was further reduced to 10.1% of sales, in line with our guided CapEx levels. We have initiated various projects to reduce our CapEx, and as the optimization of testing, machine utilization, and machine uptimes increased, as well as improved testing times. Although the cash flow from operations improved year-over-year as well as sequentially, it is still influenced by higher working capital. Including investments, we achieved a positive adjusted free cash flow of €1.7 million in the second quarter of 2024. Ladies and gentlemen, let me finish my presentation with the outlook for the running year. The latest global light vehicle production forecast by S&P shows a total number of 88.7 million new cars, slightly lower compared to the previous forecast and also down by minus 2% versus 2023 volumes. The adjusted forecast reflects the longer than originally expected the stocking and business cycle effects. Based on the solid financial performance in the first six months, we are confirming our guidance for fiscal year 2024, published in February. We expect full-year sales in 2024 of €605 million plus or minus €25 million. We want to maintain our strong profitability and expect an operating EBIT margin of 25% plus or minus 2 percentage points for the full year 2024. Just as a reminder, the expected operating EBIT margin does not include any effect from the closing of the sale of the Elmos wafer FAB to LittleFuse, which, as you know, will be very positive. We also continue to expect lower CapEx in 2024 compared to the previous year. We are forecasting capital expenditures of around 12% plus or minus 2 percentage points of sales compared to the 20% CapEx ratio in 2023. And we also expect a better cash generation and projected positive operating adjusted free cash flow in fiscal year 24 without effects from the closing of the sale of the wafer fab, which will, of course, add to cash flow. Ladies and gentlemen, the positive performance in the second quarter and the first six months of 2024 is reflecting our commitment to operational excellence and profitable growth. The temporary inventory reduction by our customers will most likely take a little bit longer than expected. but we are more and more shifting towards the real demand. The solid growth rate, despite these challenging market and also geopolitical conditions, underlines the high potential of our innovative product portfolio. Thank you very much. I'm now opening the floor for questions.

Ladies and gentlemen, if you would like to ask a question, please press 9 star on your telephone keypad. In case you wish to withdraw your question, press 9 and star a second time. And the first question comes from Florian Saga. Please go ahead with your question.