Melexis Nv Ieper

Welcome everyone joining us today for the Melexis second quarter 2026 earnings call. I'm Philip Ludwig, Investor Relations Director, and with us today are CEO Marc Biron and CFO Karen Van Griensven. 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 questions. starting with Marc Biron. Marc, the floor is yours.

Thank you, Philip. Hello everyone and welcome to this earnings call. Let me share some brief performance highlights before handing over to Karen for the financial overview and outlook. To start, I'm pleased to see that Q2 sales has developed well and came in ahead of our outlook. We have seen customer orders increasing as we have progressed through the quarter. We are seeing good growth, particularly in position sensors, a core Melexis strength, where we are able to address demanding automotive requirements such as steering and braking with both magnetic and inductive sensors. Those products are also gaining traction with robotic customers. We see also growth in motor drivers for thermal management applications, in cabins and under the hood, but also in robotic joints. Next to improving top line, we grew margin and we are in line with our first half 26 outlook. Melexis continues to bring innovations to the market with three new products in Q2, designed to address automotive customer needs. In automotive lighting, We have launched a chip with a DC-DC converter. This product architecture reduces the cost of the module of our customer and improves the module robustness against electromagnetic disturbances. We have also launched a world premiere switch for contactless detection of up to 4 positions. It can be used for example in seat track positioning, allowing a more accurate inflation of the airbag to protect the passenger. It therefore contributes to the better safety. And we release a digital sensor, a digital current sensor, to ensure signal integrity in demanding noisy environments. It is particularly important because electrified powertrains evolve towards faster switching technologies such as silicon carbide and gallium nitride. Also in power electronics, I am happy to see the strong interest we are receiving for our snubber. This is a great example of our innovation team bringing solutions to customer challenges. And we will continue to invest in R&D to ensure that our product pipeline continues to grow. I will now hand it over to our CFO, Karen Van Griensven, to provide more details on our financial results and outlook.

Thank you Marc. So sales for the second quarter of 2026 were 217.3 million euros. an increase of 3% compared to the same quarter at the previous year and an increase of 7% compared to the previous quarter. The EURUSD exchange rate evolution had a negative impact of 1% on sales compared to the same quarter of last year and no impact on sales compared to the previous quarter. The gross result was 87.9 million euro or 40.5% of sales, an increase of 6% compared to the same quarter of last year, and an increase of 9% compared to the previous quarter. R&D expenses were 13.8% of sales, G&A was at 6.7% of sales, and selling was at 2.2% of sales. The operating result was €38.6 million or 17.8% of sales, an increase of 8% compared to the same quarter of last year and an increase of 16% compared to the previous quarter. The net result was €30.8 million or €0.76 per share. a decrease of 19% compared to 37.8 million euro or 0.94 euro per share in the second quarter of 2025 and an increase of 33% compared to the previous quarter. With regards to the dividends, the board of directors decided to pay out an interim dividend of 1.3 euro gross per share and the Melexis shares will start trading ex-coupon on October 13, 26, opening of the market. And the second, the record date is October 14, 26. And then turning to our outlook, Melexis expects sales in the third quarter of 2026 to be in the range of 220 to 225 million euro. and for the second half of 2026, Melexis expects sales to be between 445 and 455 million euro, with a gross profit margin around 41% and an operating margin around 18%, all taking into account a euro-US dollar exchange rate of 1.15 for the remainder of the year. and for the full year 2026, Melexis expects CAPEX to be around 40 million euros. This concludes our remarks and we can now take your questions.

Thank you, Marc and Karen. For the Q&A, please ask one question and one follow-up at a time. And if you have more questions, you can rejoin the queue to pose those questions. Operator, can you give the instructions please?

Good morning. Ladies and gentlemen, if you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The first question is coming from Alexander Petrich from Bernstein. Your line is now open. Please go ahead.

Good morning and thank you for taking my question. I just have a first question on guidance and then I'll have a follow-up. So on guidance, we see the second half guide that is nicely ahead of consensus of both sales and gross profit, but less so at the EBIT level. So I'm just trying to understand if there's something in the OPEX block that is holding back profitability expansion at this stage. That would be just my first question and then the follow-up. Thank you.

Yeah, the gross margin is improving, operating margin is also improving, but yeah, we have some inflation to reckon with, certainly in the wage inflation that is impacting the overall leverage possibilities, yes. But nevertheless, we are further working on our roadmap for growth and EBIT margin improvement So we will see that further expand also moving ahead into next year.

That's great. Thank you. And as a follow up, could you help us understand what's going on in terms of pricing? We saw competition raising prices earlier in the year. Melexis had the seasonal decrease in prices at the beginning of the year. So how do you see pricing evolving from here? Do you have any prospects, you as well, to raise any prices at all, or is it just flat from here on into the year end? Thank you.

Yeah, we did not increase our price indeed earlier in 26. We are now just starting the price negotiation with our customer, and yeah, it's about price and volume, and we want to give clarity to volume. But for the time being, yeah, before the end of 26, we don't plan to increase the price because we want to honor our engagement with the customer and we value, let's say, the long-term relationship.

Thank you very much.

The next question is coming from Janardhan Menon from Jefferies. Your line is now open. Please go ahead.

Hi, morning. Thanks for taking the question. When I look at your guidance for the full year, it's still relatively low growth compared to some of your peers, what they're reporting in their automotive business. It's still only around 3%, and even by Q4, you're guiding only at about 6% year-on-year growth. However, your tone has clearly become more bullish in this set of results than in previous quarters. I'm just wondering, do you think that you're just starting your engines a bit late in terms of your recovery from the inventory correction? And do you see this momentum continuing to build as you go through? and like many of your peers, yesterday NXP reported 17% year-on-year growth on automotive. Do you think you can, as you recover from an inventory correction, you could hit higher numbers in coming periods? And I will follow up.

As you mentioned, indeed, the momentum of 26 is better, let's say. We have, I would say, less headwind now than in the past. The inventory headwind has played away. We have a better cost of yield, a smaller cost of yield, and we have a better cost of the product. I think we are also gaining new business. clearly on the position sensor in automotive, in the position sensor for the steering and braking. I do believe that in the near future we will also gain new business on the lighting product and on the driver's product. As you mentioned, we are more optimistic now than six months ago.

Okay, let me ask another question.

Go ahead.

No, is the order momentum strengthening every month? Or has it strengthened and sort of staying at a higher level right now?

I would say the visibility of the order did not improve. It stayed there for five months. But we see also more dynamic in the order. For example, we don't see any push out. We see more pushing. Pull in, sorry, then push out. Then from this perspective, let's say the order dynamic is more positive.

Understood.

And the cycles don't always run at the same time. We usually tend to get out of a cycle later than our peers. So that is also correct.

Understood. And then on the humanoid robotics side, you've made some very encouraging comments on your first half sales and your second half order trend. Given your design wins and the fact that some of these companies are finally placing, you know, converting those designs into orders right now and revenue, do you think robotics could become a meaningful product Contributor to Revenue next year. When I say meaningful, let us say at least 10 million euros of revenue as a starting point. Do you think that's a possibility looking at the current trajectory?

For sure, since Q2 we have now real business, we have real order. As you mentioned, the opportunity is translating in design wind and now the design wind are translating in real revenue. This is fact. We see that Q3 in terms of order Q3 is higher than Q2 and I think the positive movement is ongoing. Now when you say 10 million in 2027, I would say it is a bit early to say. But for sure, it is moving up.

Understood. Thank you very much.

The next question is coming from Ruben Devos from Kepler Shubro. Your line is now open. Please go ahead.

Yeah, thank you. I just had one on what you're sort of seeing from the distributors in the tier 1s. What are they sort of actually consuming versus what they're ordering from you? Yeah, how wide is that gap right now? I think we've seen a bit of a sector recovery because of restocking rather than very strong end demand. So the question really is, how do you see the sell-in versus the sell-through at this point?

From what we see from the distributor is that the inventory is quite flat. There is no increase of inventory. The inventory is low and flat.

And the same is true for our direct customers.

Okay. All right. Regarding inventories, I guess these came down to 270 million from 300 million at the end of last year. I think in April you were quite clear that you expected inventory to build in volume terms to 26. Because I thought you mentioned you were competing for some test and assembly capacity because of AI server demand. So yeah, with inventories down, curious what has sort of changed? Was there, you know, did some of the demand take up some of the stock or that capacity where it has faded? Like, yeah, what changed?

The inventory went a bit down for two reasons. The first reason is we have adapted the inventory to the wafer price. And the second reason is indeed we had a bit more order than expected and we have consumed the inventory. I would say for the reduction of inventory, half is due to the consumption and half is due to the to the adaptation of the re-evaluation of the inventory. And for the future, we will probably re-increase the inventory to come back to the previous level.

Okay and just a final question regarding China. Can you just give us a sense of how the region performed year over year in the second quarter and whether the volatility you talked about earlier this year has now still down a bit?

Yeah Q2 was Quite good in China, even very good in China. From what we see in Q3, it will be even higher than Q2, even probably a record level in China for Q3. What is for me important to note is that the increase in our China business is mainly, if not only, For Chinese customers, then those are really the local customers that are driven the growth in China.

All right. That's it for me.

Thank you. We see really the results of what we call the China strategy, where we optimize our support to the Chinese customer. We localize our supply chain in China. We see that this is bringing results.

Also in design, right?

The next question is coming from Amelia Banks from Bank of America. Your line is now open, please go ahead.

Hi, thank you for taking my question. My first question is just on the competitive dynamic. How would you say In the quarter and how you're seeing it for the rest of the year, the competitive dynamics have been within a few of your peers acquiring some sensing portfolios in the past 12 months. Are you seeing any impact on that and how is it impacting your outlook as well?

From a competition perspective, I don't see Big change, I mean, if we compare the competitive aspect versus six months ago, it did not change, I would say. As we mentioned, I mean, the main new competition is in China, as I just answered, and we see good results in China. As Karen mentioned, good design win level. I mean, we are following the expectation for the design win in China. We will probably reach a target. Q2 was good, Q3 will be good. And from a competition perspective, I don't see a big change.

OK, amazing. Thank you. And then just secondly, on terms of the cost of yield, I was wondering if you could quantify how much benefit you saw in the quarter and how much is implied in the second half guide. And just how much of that do we still have to work through with the inventory and sort of roughly how long you feel it will take to work through the impact of the cost of yield.

Well the big increase or the big move up was in Q1 and we are benefiting from this throughout the full year in the first place. And there is still potential to further improve our cost of yield in the next year so we are continuously working on that. But what we guide for now is what we have already reached. So it's not really at risk. With what we know today, this is the result.

Amazing. Thank you so much. Does that answer your question? Yes, perfect. Thank you.

The next question is coming from Francois Bovigny from UBS. Your line is now open. Please go ahead.

Thank you very much. I just wanted to come back on China, that you see strong momentum in Q3, Q4. Can you clarify a bit what products do you see particularly doing well in China? And when we look at the end demand in China, I mean the domestic Chinese car sales, whether you look at EVs or non-EVs, are done significantly in H1. Of course, you have these overseas exports doing well, but even if you combine both, it's barely growing. So how do you translate these strong China numbers with actually the end demand? Market share gain or refill of inventories because they were low. It seems very difficult to believe when we look at H1 end demand data. Does that make sense?

It makes sense. That's another question for sure. I confirm that indeed probably overall in China there is no growth. The exports compensate more or less, barely, the internal market. We see different aspects. We are gaining some market share in China. I have clearly some examples as position sensor that we have been able to increase since the beginning of the year. As I mentioned, I do believe that before the end of this year, we will also gain market share in lighting products and also in driver's products. Current sensor is also quite promising in China. It's also linked to the energy problem. We see a big growth in the solar panel business in China. You probably remember that we deliver current sensors for the solar panel business. Those are the different areas where we are growing in China.

The sales in China are much more built on the growth drivers. We have a much bigger share of our growth drivers in China. and in the rest of the world and obviously these growth drivers grow faster than the rest of the business so that helps a lot.

Great and how much of your China production is done in China actually today or maybe this year and next year? How much this China for China is actually happening?

We should separate the answer in two. There is first what we call the OSAT and the assembly and test. And for the assembly and test, we have more and more products that we assemble and test in China, mainly our lighting product and our latch and switch product. The second aspect is the wafer itself. For the wafer itself, we are much lower. We are using one wafer FAP in China and on this wafer FAP we have one current sensor which is now we are finalizing the qualification at the customer and at Melexis and we will launch it second half of this year after summer and for the time being actually I mean today The ratio is quite limited, especially for the wafers, but the idea is to grow it during the next years. It's a kind of journey, I would say.

So is it fair to say that the China for China will be more, the benefit will be more there for, you know, maybe next year and two years rather than now, because it's actually not happening yet?

Yeah, it's happening for the assembly and the test for the wafer. It's not yet happening. It will start to happen later this year. But as you mentioned, it will grow up year after year.

All right. Thank you.

But what is important for us is that our customers recognize that we are serious with our China strategy and that we are building up this China strategy concretely.

Makes sense. Thank you.

The next question is coming from Marc Hesseling from ING. Your line is now open. Please go ahead.

Yes, thank you. My first question is actually following up on the gross margin. I think for the long run you always have a target of around 45% gross margin. And now we just see the improvements on the yield and also a bit on the volumes and first benefits of China. How do you see the building blocks to get from the 41% in the second half of the year towards the 45% into the more longer term? What still needs to happen for you to get there?

We are actually further executing our roadmap that we also presented on the capital market day. We will see some further results in 2027, for instance Moving our footprint east is adding cost in 26, but we will see the benefit of this move, the financial benefit, in 27. Cost of yield is another parameter we continue to work on. The product mix is also gradually helping to improve our gross margin. So year after year, we expect some further improvement in gross margin based on all the activities we are working on. And then, of course, some operating leverage as we grow will help as well.

OK, that's clear. And the second question is on the difference that you see in inventories at your customers, depending on the drive train. Is there major differences given what we see in end markets?

At least not visible to me. I don't see the difference indeed from a drive train perspective.

Okay, thanks.

The next question is coming from Guy Sips from KBC Securities. Your line is now open. Please go ahead.

Yes, thank you. Most of my questions were answered. I have three small add-ons. First is on your order book. Do you yourself have the feeling that your visibility is improving and can you give us an indication to what extent? And the second question was on one of the previous questions. You mentioned design wins on lighting. Do you mean interior lighting or also exterior lighting? And the third question is on robotics. You mentioned specifically substantial growth in both China and the US. I think first time you mentioned US here. Can you elaborate a little bit on this? Thank you.

On the first question about the visibility, I would say the visibility does not improve. It's still four or five months. We don't have full visibility until the end of the year. No real change on this. It's still very short term.

We also don't have allocation issues like some of our peers. So from that perspective, we don't see yet ordered behavior changing very much.

On the lighting, on the design win or the market share increase, it is interior lighting. No, it's only interior lighting, I would say. And on robotics, indeed, and the opportunity and the design win and the sales, it's China and U.S. and the real increase that we see in Q2 and Q3 is even more coming from the US, which is I think one of the first design win that we have received one year ago, I would say. It was last September last year. It is for a humanoid robot coming from the US. And this is mainly This is mainly on this aspect, this design wing that I refer to, it's a position sensor for the joint. And we know that in the humanoid robot there is a huge multiplication factor because there are a lot of joints in the robot. Then we benefit from a big multiplication. And this is for this product. But we see also growing the drivers for the joint because the joint must be actuated and We provide driver to activate the joint. We have also some business going for these drivers. And now finishing with the tactile sensor to give the sense of touch of the robot. We are still in opportunity and design win phase. And we have different maturity level, let's say, in the pipe. The position sensor and the drivers, we are at design win phase. Status and Revenue. For the tactile sensor, we are more one step behind. Opportunity increase and redesign. Does it answer the question?

Okay. Yes, thank you.

The next question is coming from Michael Rook from DeGroof Peterham. Your line is now open. Please go ahead.

Good morning. First question is a follow-up on the inventories question from Ruben. Did I understand correctly that there was a 10 million inventory write-down in the second quarter?

Inventory write-down? No. I don't know where you... There is an evaluation, but that's not an inventory write-down. So, revaluation at new prices.

okay but is that meaning that waivers were originally at a certain price in your inventory and then later on at a different price and that is a 10 million difference exactly indeed yes okay that's clear good now that just wanted to clarify that the second question I have your even your receivables went up in q2 by almost 20 million it looks it suggests perhaps that the second quarter sales were stronger towards the end of the quarter than at the start of the quarter and if that indeed has quite a nice exit if that would indeed be a nice exit rate then then I'm a bit puzzled by your modest growth in Q3

Yeah, we have gradual ramp up. June was particularly strong, but that also has to do with holidays and so on. Q3, we have quite some, yeah, there is seasonality a bit. Yeah, it's not always spread equally month from month, I would say.

Okay, so it's just... Monthly swings that cannot be extrapolated in terms of growth for Q3, apparently. Is that the case?

We will continue growth quarter after quarter. That's how strong that will be exactly. We've given a range.

Yeah, no, that's clear. No, it's just that I thought, well, with the receivables trending up, that maybe there's some sort of an interesting exit rate. But, well, yeah, you alluded that it was indeed swings from time to time. That's it from my side. Thank you.

The next question is coming from Nigel van Putten from Morgan Stanley. Your line is now open. Please go ahead.

Hi, good morning. I have a quick follow up on pricing. I think you said that you're not raising prices this year because you want to honor agreements with the direct channel. Correct me if I'm wrong, 30 to 35% of your revenue is still going to the distribution channel. I think others in the sector have said that it's easier to push through price increases in this channel. Can you maybe provide a little bit of color if that's something you do intend to do or if there's other factors to take into account. Thank you.

It's something that we did not do. As I mentioned, we are in this pricing negotiation and volume discussion that we are just starting. We will wait the end of all those negotiations and discussions to decide. For the time being, no decision has been taken.

No decision, but let's say you take a decision. Would it be fair to say that the direct channel is more of an annual first quarter cycle, while distribution can be a little bit more tactical? So it's more on your end to make a decision and push it through? Or again, am I just misinterpreting something here? Thank you.

Yeah, we can indeed. I agree with you that for the distributor we are a bit more in the driving seat but at the end of the day we need also to have volume and then at the end there is also end customer after the distributor and we want to grow our volume and we want to be market competitive to grow volume but yes we have a bit more We are a bit more in the driving seat, as I mentioned, but there is always an end customer who needs to accept to pay.

Right, of course. Maybe a quick one. Again, pricing, I think last quarter you came out and sort of talked about pricing and lighting being a bit of a headwind. Is that something you expect to continue in the second half and into next year, just because of maybe comps might have to do with that revaluation of inventory, etc.? ? any color there would would be helpful.

So your question is on the headwind that we don't have more leverage or?

Well yeah sorry maybe the pricing in terms of the lighting products I think last quarter and you know increasingly it seems like that is maybe you know a more difficult spot in the portfolio in terms of Price Competition. So I just wondered if there's any relation to that revaluation of inventory and if we should expect headwinds to continue in this particular part of the revenue base.

There is no relationship between the revaluation of the inventory and the pricing of the lighting. The revaluation of the inventory is really re-evaluation given the new wafer price. For the lighting product, indeed, there is competition. If we come back on the competition, there is competition. But we are also proposing now a product with a better cost structure, because we have designed a new product. If you can refer to the product launch that we have made recently. We have launched some new products in those domains with a better cost structure and with those products we are gaining market share.

Yeah, that's also where the comment is coming from that our product mix will also help moving up the growth margin because we launch products with a margin for lighting.

Understood. Thank you very much.

The next question is coming from Martin Marangon from OdoBHF. Your line is now open. Please go ahead.

Hello, Martin.

Yes, sorry, I was on mute. Hi, everyone. Thanks for taking my question. My first question is on capacity. Do you feel that your customers are more worried about some tightness in the automotive segment because power AI is taking some capacity away? And how do you think you are positioned with XFAB as your main shipmaker if, let's say, AI creates more tightness in the industry and have a float?

We have indeed some questions from customers about our capacity, because indeed some of our peers have some difficulties, I would say. It's indeed an increasing concern, but we are very well positioned with Xapp, because Xapp is mainly an automotive supplier. We have, if you remember, we have finance capacity increase with ICSAP some years ago. Then we have some capacity available at ICSAP in the different technology, I would say. Then there is, from Melexis' perspective, no concern about the wafer capacity. About the assembly, it's a bit more tight, but we have also good We give good forecasts with our assembly partners. We have good relationships and also we have paid attention to move our own inventory after assembly to make sure that we have enough product and we have enough headroom, let's say, related to this assembly.

Our strategically high inventory is definitely also an asset. So capacity, wafer capacity together with and Strategic Inventory is definitely helping us a lot today.

Yeah, when we have heard four months ago, six months ago, when we have heard the first warning signal from the Assembly House, we have paid attention to move all our inventory after this bottleneck.

And that's also why we expect our inventory to increase if there was a drop now, but strategically we want to keep it at high levels, higher than what we have today.

OK, thank you. And my second question is on the data center opportunity. Could you maybe give a bit more spoiler on how meaningful the opportunity for current sensors for power application in SICK and GAN is? Is it, for instance, materially more meaningful than the opportunity for fan drivers for cooling, for instance?

We are launching many products for the data center. In Q1, we have launched a smart driver for the data center. In Q2, we have launched a pressure sensor for the data center, and this pressure sensor will be used or can be used in all the water cooling or liquid cooling, thermal management. In Q2, we have also launched another drivers for the data center for the thermal management. Those are for data center, what we call 12 volts, meaning the traditional data center. and beginning of next year we will launch a driver 48V which more fits the AI data center and I should not forget the snubber because we have also a lot of traction for the snubber in automotive but also for the AI data center and I do believe the snubber will be also an important piece for the data center in the future And in terms of opportunity, it is meaningful. In terms of revenue, not yet, but we are working on it.

Okay, very helpful. Thank you.

There are no further questions at this time, so I hand the conference back to Marc Biron for any closing remarks.

Thank you, Operator. To summarize, we are seeing good momentum in 26, with positive trend in customer demand and share gains. We see growing opportunities in automotive and in robotics, and we are making progress on our cost roadmap. We look forward to updating you on our next result to be published on October 28. Thank you for joining the call and goodbye.

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