Melexis Nv Ieper

Welcome, everyone, joining us today for the Melexis fourth quarter and full year 2025 earnings call. I'm Philip Ludwig, Investor Relations Director at Melexis, and I'm joined today by our CEO, Marc Biron, and CFO, Garen van Heeringsveen. Earlier today, we published our press release and presentation, which can be found on our website. We will start with some brief remarks on the business and financials before taking your questions, starting with Marc Biron. Marc, the floor is yours.

Thank you, Philippe. Hello, everyone, and welcome to this earnings call. Let me start by sharing some perspective on the full year of 2025 and how we see 2026 as of today. Then we will discuss the last quarter of 2025. Looking back at 2025, at the beginning of the year, we had entered a phase of customer inventory correction later than our peers. We are now in a period with more geopolitical uncertainties and more short-term volatility in demand. The period of customer inventory correction was largely completed by the summer. As a result, our sales were stable or grew sequentially as the year has progressed. High in-quarter ordering has started in Q2, which we could serve from our strategic inventory. Still in 2025, sales in our largest region, APAC, has increased as a percentage of group sales. China has followed an alternating pattern of very strong sales in one quarter, lower the next quarter, and strong again the following quarter, as it was in Q4 when we recorded our highest ever sales in China. Now, looking ahead to 2026, we remain in the recovery phase of the automotive demand cycle. We expect that these fails will not be linear, given all the uncertainties and the late ordering behavior of our customers. Following the very strong Q4, sales in China continue their alternating pattern in Q1, also influenced by Chinese New Year mid-February. We are also facing the expected volatility in our non-automotive business, such as digital health application. Finally, we have to factor in the impact of the annual pricing agreement that we have closed at the end of 2025. Those effects translate to a similar level of sales in the first half of 26 in comparison to 25. We expect growth in the second half of 26 with a similar dynamic as in 25. Now turning to the last quarter of 25, sales of 214.5 million euro means that we return to a year-on-year growth of 9%. China posted its highest ever sales and the rest of Asia was also strong. Total APAC sales were up double digit year-on-year and sequentially. while Europe and the Americas were lower sequentially. On the innovation front, we leverage our technology leadership with strong design wins and an expanded pipeline of opportunities across China, Europe, and South Korea. This trend is also valid in robotics, with the pipe of opportunities up by a factor of five in Q4 versus the previous year. We have launched 90 new products targeting structural growth trends in automotive and robotics. In the last quarter, this included a game-changing inductive sensor for steel-by-wire application that simplifies design and reduces cost, paving the way for the next generation of electrified and autonomous vehicles. We have launched also a code-free driver for automotive ambient lighting. which streamlines the development cycle and reduces the cost of our customers. We also see the high potential in power electronics, and we are extremely proud to offer a world-premier protective device called a snubber. This unique solution protects and enhances power density of silicon carbide power modules. All major power electronics manufacturers have shown interest in our products. A great example is Leeper Semiconductor, a Chinese manufacturer of advanced power modules, incorporating our snubbers in their next generation of modules. Our new protective device family will continue to expand to meet the evolving needs of power modules and emerging power applications. We have been growing faster than many peers in China over the past five years. with our broad offering on high-performance and high-quality products, and our strong local team to support customers. From my side, I came back from China two weeks ago. I'm really impressed how hybrid is gaining traction and how content-rich are reaching mid-range cars much more heavily than in Europe. To continue our trajectory in China, we are accelerating the implementation of our China strategy, including localization of our supply chain. A key step is to have local wafer supply, and we are fully on track to start shipping product this summer based on the 12-inch wafers from our local partner. We also established a dedicated robotic team in China to respond to the stronger interest with more than 60 projects currently. currently underway. As part of our strategy to win in faster-growing markets, we are increasing our effort in India, where we enjoy strong double-digit growth. India presents great opportunities in automotive as well as in alternative mobility, playing to our strengths. We are finalizing the setup of a Melexis entity in India to show our commitment to serve customers locally and further develop in this attractive and growing market. I will now hand it over to our CFO, Karen Van Grisven, to provide more detail on our financial result and outlook.

Thank you, Marc. Sales for the full year 2025 were €839.6 million, a decrease of 10% compared to the previous year. The EURUSD exchange rate evolution had a negative impact of 2% on sales, compared to 2024, and the gross result was €324 million, or 38.6% of sales, a decrease of 19% compared to last year. R&D expenses were 13.8% of sales. Q&A was at 6.5% of sales, and selling was at 2.4% of sales. The operating result was €134 million or 16% of sales, a decrease of 39% compared to €219.9 million in 2024. The net result was €112.5 million or €2.78 per share, a decrease of 34% compared to €171.4 million or €4.24 per share in 2024. Sales for the fourth quarter of 2024 were 214.5 million euro, an increase of 9% compared to the same quarter of the previous year, and stable compared to the previous quarter. The Euro-US dollar exchange rate evolution had a negative impact of 3% on sales compared to the same quarter of last year, and no impact on sales compared to the previous quarter. The gross result was 82.3 million euro, or 38.4% of sales, an increase of 6% compared to the same quarter of last year, and a decrease of 1% compared to the previous quarter. R&D expenses were 14.5% of sales, G&E was at 6.7% of sales, and selling was at 2.5% of sales. The operating result was €31.5 million, or 14.7% of sales, an increase of 14% compared to the same quarter of last year, and a decrease of 17% compared to the previous quarter. The net result was €22.6 million, or €0.56 per share, an increase of 24% compared to €18.3 million, or €0.45 per share in the fourth quarter of 2024, and a decrease of 18% compared to the previous quarter. Now, turning to the dividends, the Melexis Board of Directors approved on February 2, 26, to propose to the annual shareholders meeting to pay out over the result of 25, a final dividend of 2.4 euro per share, which will be payable after approval of the annual shareholders meeting. This brings the total dividend to 3.7 gross per share, including the interim dividend of 1.3 euro per share which was paid in October 2025. Now for our outlook, here Menexis expects sales in the first quarter and first half of 2026 to be around the same levels as the previous years. Sales in the second half of 2026 are expected to grow compared to the first half of 2026. For the first half of 2026, Manexis expects a gross profit margin around 40% and an operating margin around 17%, all taking into account a Euro-US dollar exchange rate of 1.17. And for the full year 2026, Manexis expects CAPEX to be around 14 million euro. Our outlook includes the first benefits of our cost action taken in 2025. such as improvement in the cost of yields. We remain disciplined in executing our cost improvement roadmap, for example, a shift in some operations to be closer to customers in Asia, and this to keep moving towards our long-term smarting objectives. This concludes our remarks. We can now take your questions.