Suss Microtec Se

Dear participants, we warmly welcome you to today's conference call of the SUSE Microtech SE following the publication of the nine-month results of 2025 earlier this morning. SUSE is represented by the CEO, Burkhard Frick, CFO, Dr. Cornelia Baywieser, and COO, Dr. Thomas Rohr. The Management Board will speak shortly and guide us through the presentation, followed by a Q&A session. But before we start the presentation, let me hand over to Sven Kapsel from Investor Relations.

Thank you, Sarah. Yeah, and many thanks. Welcome to our Q3 conference call. As you probably know from earlier calls, this call is again being recorded and considered as copyright material. It cannot be recorded or rebroadcast without permission, and participating in this call implies your consent to this procedure. Please be aware of our safe harbor statement on page two of the slide deck. It applies throughout the conference call. And now I hand over to our CEO, Burkhard, for some opening remarks, followed by our CFO, Dr. Cornelia Balvisa, presenting the financial development. Burkhard, please.

Ben, many thanks, and welcome, everyone, to this call. I will go a bit faster over the next few slides to have more time to focus on the margin analysis you guys are all interested in, I'm sure. We showed the next page. We showed exactly this page already nine days ago in the extraordinary call. So nothing new here. There are no changes to the figures since then. We also mentioned the low level of 70 million in orders received in Q3. After various customer meetings in Korea and Taiwan last week, I'm very happy to report that activities are picking up in the fourth quarter. Orders exceeding 100 million euros are likely. We do see quite some momentum here. We already communicated last week about the pressure on margins and the fact that we have to adjust our guidance for the gross profit and EBIT margins once again. I will go into details of margin development in a moment. However, I would like to state that the current margin pressure does not impact our 2030 ambitions. We will present our new midterm expectations at our CMD on November 17th. Last week, the development of our two segments was not yet included, so I'd like to highlight a few things here. First, advanced backend solutions. The order intake remains strong for coders, but this was not quite enough to offset the decline for bonders. The demand for our UV scanners remained intact. Imaging and coding systems showed year-on-year sales growth of larger than 50% each, bonders still showing slight growth after nine months. Gross profit margins significantly impacted, more on this shortly. Photomath Solutions, we have a very low order intake again. Orders from China now down 32 million versus previous year. But more significant orders expected in this Q4. Still high year-on-year sales growth, but Q3 sales was lower than expected. Unfavorable product mix is the main reason for low gross profit margin of 31.7%. Now, we have prepared three pages where we compare our initial 2025 guidance for sales, gross profit margin, and EBIT margin with the actual year-to-date nine-month figures. Firstly, on sales. After three quarters, we reached 384 million, or 78% of the midpoint of our sales forecast, and therefore are on track. and achieved what we expected to do. Q3 sales as expected with 118 million lower than previous quarters. Reason here, lower order intake in the first half of 2025. In the fourth quarter, we need sales of 85 to 125 million to meet our forecast. 105 million would therefore leads to the midpoint, which is 490 million. The product mix is different as planned at the beginning of the year, with more coders and fewer bonders, based on orders received in the first half of the year. The recent postponement of two high-margin projects to 2026 will have a negative impact on gross profit margin in Q4. Now we'd like to provide more transparency on our negative gross profit development. Let me first explain the methodology we applied here. The table on the left shows our actual figures for the first three quarters. These are the left columns. And a projection of what our gross profit would have been if actual sales had a gross profit margin of 40%, which is the midpoint of our original forecast of 39% to 41%. Our analysis shows we have a gap of 16 million euros, which we like to explain. On the right-hand side, we allocate these 16 million to special effects, quantify them, specify the timing, and if these effects can be considered as one-offs or not. From top to bottom, first the UV scam in Taiwan, the ramp we performed there in the first half of the year, we had expenses for training and supply chain efforts amounting to 3.2 million euros, and that's a one-off. Secondly, we had a write-down on discontinued technology projects amounting to 2.2 million euros that affected Q2. Also, that is a one-off. Expenses for our new site in Subei, 1.2 million for double-rent relocation and utilities, they affected us only from Q3 onwards, and this will have an impact on expenses in Q4 as well as in Q1 2026. Rework during assembly and customer ramp-up support, amounting to 2.4 million since Q1, were necessary to support customers to improve performance of recently installed multiple lines and maximize the output and availability of these in the field. This was really important and is an ongoing effort and also will open the door for follow-up business, which we are, of course, looking forward to expect. The last point is the unexpected product and customer mix changes, which we often use also to explain deviations in our margin. This is for more coders, less bonders, many low-margin photo mask tools for key customers, and that results in also lower fixed-cost coverage due to lower sales and overall business activity. That amounts to 7 million euros in Q3. In total, 16 million, of which slightly less than half, can be characterized as one-offs. Now, on this page, we focus on the EBIT. We applied the same methodology. Left column shows the actual development of first three quarters. Right column, the projection with midpoints of initial gross profit and EBIT margin targets, which was 15% to 17%. The gap here is 7.2 million, which means that more than half of the gross profit gap of 16 million was offset by stricter cost management and a positive balance in other operating income expenses. According to the original guidance, we allowed for OPEX of 92.3 million euros after three quarters and would still be on track to achieve the original EBIT margin targets. The actual OPEX, that is expenditure on R&D, sales and administration, amounted to 86.8 million. This shows our short-term cost-cutting measures are having an effect, savings of more than 5 million compared to Q2. In Q4, OPEX is expected to be below 30 million. However, most likely above Q2 level, based on increased expenses on IT and digitalization projects, as well as rising R&D costs, also to support scheduled product launches. I think I said above Q2, I should have said above Q3, right? What type of them? Yeah. We will correct this and you'll see it also in the tables. Now, after all these numbers, Here are a few impressions from last week's opening of our new site in Tsubei, Taiwan. It was an amazing day with a great atmosphere. We welcomed over 100 guests, including Taiwan's Vice Minister of Economic Affairs, a C-level representation from a leading HBM manufacturer, and management from the top foundry in Taiwan. We got a broad confirmation that it is important to increase our presence close to the heart of the semi-industry sector. We introduced our large clean rooms and made it clear that we are set for future growth. First modules and tools are already being built in Subey and will be delivered to our customers in early 2026. Leases for all old locations will terminate by the end of Q1 2026. The financial double burden will also end at this point. And with this, I'd like to hand over to Cornelia, to provide some more insights on our financial performance.

Thank you, Burkhard. After we've already discussed Q3 in detail, I will just summarize some additional developments on the next slides. We already talked about the slow order intake, which leaves us with an order book of 276.1 million euros as of end of September. This is 35.9% below the level of the first nine months of last year. Tool orders worth roughly 140 million euros are scheduled for delivery in 26. The visibility for 26 is improving. Our free cash flow from continuing operations came in at minus 0.7 million euros in the third quarter, with operating cash flow of 5.9 million euros and cash flow from investing of minus 6.6 million euros. After three quarters, free cash flow is now at minus 28.2 million euros. For the full year, we still see potential to generate around 28 million euro of free cash flow so that we could end up at end 25 in slightly positive territory. Total capex for the nine months is 70.8 million euros, mainly driven by our new FAB in Taiwan. At the end of the year, we expect to land at CapEx level of 25 million euros. In 26, we will return to a level of clearly below 20 million. Without additional projects, the level will be approximately at 10 million euros. On this slide, you see the development of our most important key performance indicators for the last seven quarters. You can very clearly see the margin development, especially in the last quarter due to the effects we already talked about today. On this slide, you see the two segments. In the advanced back-end solution segment, margins in the third quarter were roughly at the same level as in the previous quarter. Burkhardt already mentioned the most important drivers. In photomask solutions, the margin level is in the first two quarters of the year higher. Overall, we're still at 38.4% gross profit margin for the nine-month period. However, the third quarter was weak, mainly due to an unfavorable customer mix as already explained. Here you see our order intake by segment and regions. The book to bill ratio continued to remain at a very low level of 0.62 for the nine month period. This is, of course, far too low for a company with growth ambitions as we do have. But as already discussed, we expect increasing orders in Q4. Demand from China continues to be very low. The China share of total order intake in the first nine months of 25 is now 18.5%. In 24, also after the third quarter, the share was at roughly 30%. But generally speaking, we do not have major shifts in the order intake by region. Finally, let's go over the main developments of the balance sheet. Total assets increased by €22 million for the non-current assets. The main driver was the Taiwan expansion with the right of use asset for the site and further installations at the site, as well as capex in Germany, which we already showed in our half-year report. Current assets will have a decrease by 29 million euros to a total volume of 413.3 million. Inventories declined and are now 12.9 million euros below the value of end of December 24. Contract assets and trade receivables increased by 22.7 million. Cash and cash equivalent decreased by 41.8 million euros due to free cash flow in total of minus 31.5 euro. And the dividend payment as well as repayments of financial debt, including the leasing liabilities. On the liability side, the main changes are also happened in the first half of the year. with the inclusion of the leasing liability from the Taiwan side. In non-current liabilities, the major driver in the nine-month period was also the inclusion of the lease liability for the Shubai side, which already happened in the second quarter. Current liabilities decreased. Here, the major drivers are still lower advance payments from our customers, who supported last year's ramps and less orders from customers which have prepayments. After the nine months, the equity ratio is at 58.2%, which means we improved the equity ratio while we had our ambitious investments. So, and... Thank you.

Now let's turn... The outlook for 2025 as a whole. First, here is a page that was already shown last week with the reduced guidance ranges for gross profit margin and EBIT margin. Everything stays the same as communicated last week. Last week, we already explained that we are discussing possible measures to sustainably improve the cost structure. However, I ask for your understanding that all decisions will be carefully considered I do not currently expect that we will be able to communicate these possible measures already in 2025. For now, our full attention lies on Q4 to bring in the anticipated new business and set the stage for 2026. We are now opening the floor for your questions. Thank you.

Thank you so much for your presentation. So ladies and gentlemen, we are happy to take your questions. And if you would like to speak directly to the management, just raise up your virtual hand. And if you have dialed in by phone, you can use the key combination star key 9 to enter the queue, followed by star key 6 if I unmute you. And for sure, you can also submit your questions in our chat box. And we will start with the first raised hand. with Janadine Menon. So please go ahead and ask your questions.

Hi, good afternoon. Thanks for taking my question. I just want to go back to the order increase that you're expecting in Q4. Nine days ago, you had said that you would see an increase in orders. You said above 100 million is possible. But at that point in time, you'd also commented that your Q4 is always typically quite strong. You've seen a very healthy double-digit increase in orders. quote-unquote on your Q4 orders in both 2024 and 2023. So my question is, This increase that you are expecting in Q4, is it purely a seasonal thing or do you see an underlying trend of improving orders amongst your customer base? And especially you've been seeing quite low orders on the temporary bonding side. And one of your big customers looks like they're getting qualified or have got qualified, who knows. And so... you know, is there a clear upswing that you see in that market? Also on the UV scanner, are you seeing an upswing? What I'm trying to get at is the sustainability of this order. I mean, it may not be huge, but is, you know, it does Q3 mark the bottom and then more than the seasonal, are we getting a more, you know, improvement into next year? Whatever your current thoughts are. Second question is just on the margin. I just want to piece together the whole thing. you'll end up at about 36% gross margin this year based on your guidance. Do you think that as some of those one-offs go away in the first couple of quarters of next year, you're likely to get to a higher margin than that? Any kind of color on where we could expect based on current expectations where you could assume your sales are down in line with consensus for next year? Where would your gross margin end up for next year? Any thoughts there would be great. Thanks.

Yeah, of course, we have to be careful in forward guidance, but let me start with the order intake. Yes, there have been some seasonality in the past years, but, of course, customers order when they really have demand, and so, therefore, I would not really call it seasonality at all. I would rather see it as a consequence of activity in the ai space picking up again and that has been of course communicated uh you know for for the front line ai players already a quarter earlier um but it takes a while until this uh this this goes through the entire um equipment chain and also leads leads to orders so there's not an immediate effect at the moment uh you know a big memory supplier gets qualified or posts their future plans, it will not immediately trigger orders. This is more a question of how utilized are your lines, how much throughput can you get on the existing lines, and when is the next window to increase. And that seems to now nearer than before. And that's also why we are confident that we get AI related orders in the first quarter. And especially after those discussions we had with our lead customers. Now, this will be a mix, of course, so there will be, of course, HPM-related orders, but also co-ops or packaging-related orders requiring multiple systems, but we see a clear upward trend. How big this one is, you know, as I said, well, I feel confident that it will be larger than 100 million, that I stick to that number. How large, we have to see, because we also have to make sure we can also deliver and build these machines on short notice, because the demand is required on short notice. On the second question, on the margin expectations, I can hand over to Cornelia. But of course, we want to improve our margin performance. There's no doubt in that. But even in line of potentially declining top line, we have to make sure that we do this with good sense.

In terms of margin, of course, our ambition is to have a better margin or to achieve a better cross margin in 2025. What I can say is it is probably lower as 2024. Currently, we are preparing our budget. And as you see and as explained, the margin depends on the customer and product mix. And we are working on this. And that's all I can say for the moment. Regarding your one-offs, yeah, there are, of course, one-offs that will not occur again in 2026. For example, the write-down of the discontinued technology project. Then our double rent relocation and utilities costs in Dubai, in Taiwan, will end end of the first quarter, 26. And, yeah, the rework, we will see. It depends how we can satisfy our customer or what is needed. But that's what I can say regarding the margin for the next year.

Understood. Thank you so much.

Thank you so much for your questions. So, and then we move on with weather taxes. So, please go ahead with your questions. I can see that you're unmuted, but unfortunately we cannot hear you.

Can you hear me now?

Yes.

Yeah, great, great. Sorry for the background noise. A few questions. On the order backlog, can you give a little bit the split in ABS segment? What is the COVOS, the scanner part in the order backlog? And then in the cleaning equipment market, what is the part of the China business in the PR segment? In the backlog, right? Not for the entry.

Yeah, we are not, you know, being specific on the individual products on our backlog. Please accept that because we do give this granularity. The China portion, of course, is declining, as already previously mentioned. We see it in both in sales but all our intake significantly. We have for China, for example, only 18.4% of the order intake are China-bound. For Taiwan, for example, in contrast, it's close to 40%. That's usually what we can disclose. In terms of further information on the backlog, We have, of course, also announced that 140 million of the current backlog is already bound for 2026. And we can also safely state that we have about 20 million in service and upgrade business also for 2026 already slated.

Okay. Maybe let me ask a little bit differently. On your covers, I think the scanner is a little bit older technology generation, right, if I understood that correctly. And the question would be, what are your lead times? I mean, when the customer places an order, which is scanner business, till you ship and final acceptance, what is the time like there for the scanner business?

Yeah, for scanners, of course, it's around six months. But, of course, as we stated also in previous calls, we tripled our output capability this year. That means also we are pretty full in that sense. So that's also why we concentrate on our main application field, which you rightly state is CoWASP. Now, of course, we also get inquiries, you know, how quickly can you top this up? And that's exactly the discussions we are currently having with those lead customers because they expect basically deliveries already as early as in Q1 next year. So right now we have very active engagements with these customers who also realize that our lead time is reduced, but I think they are waiting really until the last second how to place orders. And then we also have to make sure that we can react very quickly, and that keeps us busy. But that's also causing a bit of the positive momentum of the last days.

Okay. And would it be fair to assume that the gross margin, the product mix impact was also due to this high volume ramp in scanner business and that this is a little bit more service intense for you in order to have the machines up and running with your lead customer and that might change with the second generation of the scanner tool you are planning to introduce next year?

Yeah, it definitely will change with the next generation of scanners. But we need to distinguish between product margin and supporting efforts. So I think the supporting efforts for our scanner are not higher than other 2.5D or HPM type products. So you need to account for that. For some of our products, our support efforts were higher than anticipated, which I explained earlier, which caused the extra cost. But, I mean, you're absolutely right that the scanner is not our highest margin product.

Got it. And then final one, if you look at your product mix or backlog, what you have right now and the $140 million for 2026, do you expect that the share delivered from your Asia business will be substantially different from this year? I mean that you have much higher shipments in your Asia locations than here in Europe. And if so, what would be the incremental there, the incremental shipments?

You mean shipments from or to?

No, from your Asian manufacturing footprint, right? Your fabs in Asia.

Thank you. First of all, our regional mix will not change except what we explained, the decline of the China portion. In terms of the products we manufacture out of Asia, they're the same products we are currently manufacturing. But, of course, this can change if we are introducing new products. As you know, we are launching up to five new products next year, and we have to see also where we will produce those products. So there's a fair assessment, a fair judgment there. the amount of products will increase, which we are going to produce in Asia.

But you cannot quantify, like, 50 million more sales from your China-Asia footprint versus this year. It's not possible right now from your backlog.

No, perhaps I can answer this. We use both sides really pretty flexible in terms of where we do have which capacity. So we try to leverage our load of the factories in both sides, as well as in Asia, as well as in Germany. Thank you very much.

Thank you so much for your questions. So by now we have four participants left who raised their hands. So please be patient. And the next one who's able to ask a question is Michael Kuhn. So please go ahead.

Hi, thanks for taking my questions. I'll start with one on the guidance once more. If I just use the midpoint of your sales and gross margin guidance and then combine it with the midpoint of your EBIT margin guidance, I'm ending up at Q4 OPEX of 34 million, which is clearly above the less than 30 million you're envisaging for the final quarter. So, let's assume you do midpoint sales, midpoint gross margin. Is it fair to assume that you would rather end up at the upper end of the even margin range, excluding, obviously, any one of you might book in the fourth quarter?

We calculated various scenarios over the last past days, and if we achieve the cross-profit margin in the middle of the range, let's say 36%, it is likely that the EBIT margin will end up above the middle. Yes, could be.

That is good to hear. Thank you. Then one more in the context of OPEX. So we are obviously in the upper 20s run rate-wise right now. This is still including some double costs. At the same time, I guess IT costs will rise into next year. From today's point of view, what would you think is a realistic OPEX run rate to assume for next year, maybe from the second quarter onwards when you don't incur the double cost in Taiwan anymore?

Yeah, good question. Our ambition is that we have a run rate, let's say, 30 million.

around 30 okay um and last but least um you mentioned uh product launches already obviously those um include new products in the photo mask area including the the mid-range product um Do you think part of the softness you see from Chinese customers right now is due to those customers waiting for those products? And that said, is there a chance of, let's say, a little China revival at some point next year once the new product range is available for orders?

China revival sounds like the Rolling Stones on concert. But obviously the mid-end range of the mask cleaner is really geared for nodes between 30 and 90 nanometers, which are the predominant nodes China is running on. In the past years, they bought very high-end equipment, which was basically over-specced. because they don't have EUV equipment in China. So the mid-end range is a better fit for the Chinese market. So yes, we do expect that that business will pick up once that system is in mass production. And we already have several reservations and quite some are out of China. But also, of course, this mid-end product is interesting to replace the aging fleet of old mid and mass cleaners. Therefore, there is also quite some replacement need lining up. That's good. Okay, I'll continue to hope for the revival.

Thank you.

Thank you so much. And then we will move on with Madeleine Jenkins. So please go ahead with your questions, Madeleine.

Hi, thank you for taking my question. I just have one clarification. The customer that was is pushing for kind of expedited deliveries in Q1, I think you said. Is that memory or logic?

It's fair to say both. It's not a single customer who's pushing.

Okay. And then in terms of on the kind of HPM side specifically, are you still running it like underutilization at your big Korean customer or is that kind of back to the levels where you'd expect incremental orders.

I think we have two out of three HBM players and one is really running at full swing and then of course that's also the one which kind of further scales up. The other one of course is just about to accelerate again and they still have I would say, you know, headroom left. So we don't see short-term exit business coming up there because I think they're not running at peak utilization.

Okay. So the kind of Q4 orders isn't necessarily driven out of career.

Correct.

Okay. Thank you. And then you've got a high N.A., cleaning tool, photomask cleaning tool coming out. Could you give us a sense of kind of when you're, you know, when you're expected to use first orders for that and also what sort of ASP up list versus the low NA version? Thank you.

Yeah, Madeline, you're referring to the MassTrack smart cleaning platform, which is launching pretty much as we speak. So we are working with some lead customers who want to position this system. It's more than just evaluation. It's kind of an early production estate. So we do expect that we get the first orders still this quarter, you know, for this first system. But we are, of course, in the middle of the negotiations, and it's important that we get this first volume customer order for that system. But we anticipate it this quarter.

I'm just on the SP. Sorry. Thank you.

Sorry. Say again.

Just on the ASP, is it a significant uplift versus the last generation?

It is somewhat more expensive than a MassTrack Pro, but as you know, it highly depends on the configuration. So this is a tool which can be configured to a large extent and therefore would be also more expensive than the existing platform.

Perfect. Thank you.

Thank you so much for your questions. And then we move on with the questions from Johannes Ries. So please go ahead.

Yes, good afternoon. Also some follow-on questions to the cost side first. Maybe first, the leasing cost for the old production site, which will fall away at the end of Q1, how high is this maybe regarding to the full year or for the remaining nine months? So what is maybe the positive impact? Then maybe... On the bonders, if the bonders recover, will they have the same margin like in the past, or there have been maybe some special high prices regarding the shortage or maybe the urgency at the customer side to cut the products in the past? Are you achieving the same pricing at the temporary bonding site like in the past? And on the quotas, is anything possible also to increase some margins there? Because it seems that they have comparable low margins. I know there's more competition from Booker Electrum, for example, but maybe also an update there. And we talked a little bit now on MAST. How is the ramp for all the new products with better margins to scanners? I have also something like you have a new code coming on the market for next year. That's maybe all impacting a little bit the cost and the margins. Therefore, I took all these questions in one.

Yeah, thanks Johannes. That's a load of questions. Let me try to start taking them down one by one. So the bond orders, of course, we had at the very early phase of the REM. They did have somewhat better margins because these were rush orders. We had to expedite things. So once we got into real volume phase, Also, we had more volume prices applied to that. So the initial systems were more profitable than the volume systems. But this has stabilized now, so we don't anticipate unusual swings there. So they are above average compared to the rest of the portfolio. On coders, we keep getting stable repeat orders from existing OSAT customers, and that is a very stable business, and also this customer continues to place these orders. That was also one of the customers. I visited early last week. So we can also expect good, solid business there. You are absolutely right. The competitive situation is very strong. But when you're a tool of record, you at least can retain your seat. But you have to price competitively. And that's why quotas usually are more on the average spectrum of our margin. For the Photomasker tools we are launching, so the new systems, they are completely redesigned. They do have a different margin structure, but you cannot just increase margin without offering new features. So it's always a mix of both. Then I think you had a question on the rental cost, right? Yeah.

Yes, the impact of the additional rental cost for the old side rental cost that turns out in a positive impact next year is 600,000 euros per quarter.

Per quarter, okay. And when will the scanners be launched, this new scanner generation? Will it happen in the first half next year?

No, I think that's a bit too early, but we will deliver the first system around mid next year to the first customer. And that's, of course, we get more feedback. The broad launch of the system is more towards the end of next year.

Okay, super. And also, maybe there's definitely much more to go into much details. So it's a waiver cleaning product will also not launched next year, or will it come over the year next year?

That will launch next year and we get the first hardware at the turn of the year and then of course we need to refine the processes. We have one lead customer who will start evaluating. And then we will have not only the volume tool, because the first one is a 200-millimeter wafer cleaner, a low volume. There will be high-volume tools coming shortly after. And we have, since we kind of got quite some customer traction, we have now 300-millimeter customers interested in that tool as well. So we are also now checking how fast can we launch a 300-millimeter tool. So wafer cleaning will be a family of tools, the first one coming next year.

Super, great. Maybe also on our calculation for next year, you mentioned you have on top of the 140 million in product backlog for next year, you have also 20 point something on service and spare parts. What is the normal number for service and spare parts for the whole year? I think it's more than 20 million.

Yeah, Johannes, usually it's about 15% of the total revenue. I think the numbers I think we stated before were, of course, the first nine months and then the portion of 26 out of those first nine months. But I think you can roughly assume 15% of the total revenue is the service-related part.

Only maybe a follow-on, you mentioned it already in the comments. So recovery, you see maybe in the pipeline coming, maybe it's a whole backend market and also driven also partly by the strong businesses AI. It's not only the OEMs, it's also the OSAPs you see a recovery.

Yes. And they, of course, they are somewhat connected. Because, you know, the 2.5D players, they are closely linked to OSAT as well. And you have all these new sites evolving, you know, based, driven by Chip Act projects, which are also starting ramping. I mean, all the big news were, of course, for the front-end fabs, but, you know, you also need the back-end operations, you know, somewhat close by, and that's starting to evolve as we speak.

Okay. Okay. Thanks a lot. All other questions in one and a half weeks at the capital market space.

Thank you.

Thank you so much for your questions. So before we move over to Martin Maradon, who is waiting for such a long time in the queue, please be reminded that it's still possible to ask questions if you may have. And with this, Martin, please go ahead with your questions.

hi sorry uh thanks for for taking my question um the the first one is on temporary bundles um as was wondering there if you know you you mentioned you know the the the ai demand uh picking up there is also the qualification of one of your customers but i was wondering if the transition to hbm4 is already a factor here because we know that the number of layers are increasing the average number of layers, so it should demand more equipment. So do you think it has started now or will we see these effects maybe a bit later and have some follow-ups?

That's a good question. Of course, at least one of our lead customers is in active pursuit of also planning the ramp for HBM4. And we received the good news last week that we are qualified with our temporary bonder for the HBM4 process. And that is good news because the ramp of that will start from late Q1 or starting Q2 next year onwards.

Okay, that's very clear. And maybe still on temporary bundles, I mean, Johannes mentioned some competition with Tokyo Electron, but I was wondering about new entrants as well, so like EVG, for instance, if that's something that you see at some point, multisourcing in that market, or you do not see it at the moment?

Yeah, we do see, of course, our competition. There are no new entrants. They are the same. They have been the same in the past years. And, indeed, EVG and TEL are our main contenders there. And, yes, they are actively pursuing our base. Yeah, so this is happening to some extent, but I think for now we have the majority of our equipment at those existing customers of ours.

Okay, that's clear. And the last one is on the EBIT margin for next year. I mean, I know it's too soon to give a guidance, but I'm just wondering, you know, with the backlog that we see at the moment, it probably implies a down year next year, and you have the consensus down by about 15%. And I'm just wondering, in that context, let's say of a double digit decrease of sales, how much space do you have to reduce cost on the OPEC side next year? Do you think that, for instance, mid-single digit could be a credible scenario if you have such a down year, or is it too aggressive?

You mean mid single digit? For what?

For decrease of OPEX.

Yeah. I think that's a reasonable assumption. I think we need to stay below 30 million. I think this was mentioned before. You know, we also said that we will not reach gross margins of the heydays like 24. So we will be also there, I think,

you know definitely below 40 percent um but but above the numbers we are currently seeing so because we have to compensate this with a lower top top line okay that's your platform thank you thank you for your questions and now we have a further virtual hand from a person who started with the phone ending 847 so you can unmute yourself by pressing star key things I can see that you're unmuted, but unfortunately we cannot hear you.

Can you hear me now?

Yes, now we can hear you, so thank you for introducing yourself to us.

This question is a follow-up to the former question related to Chinese Chinese are waiting for the new tools and the enlivenment of the demand. I would broaden that to the overall customer base. Do you see it potentially among other customers kind of holding back because you're about to introduce new product generations? I mean, you've indicated a pickup in activity and in the pipeline, but do you see generally some customers holding back in light of the upcoming product workovers, or is that not really the case?

That's very hard to say because we cannot judge if they're waiting for new products. Some of these new products are only launching late next year. So if there is a demand and we don't have the right product, I'm pretty sure customers will order elsewhere. So if they wait, of course, good for us. But we... where we see a kind of more weight behavior that's on the other, on the mid and cleaner, because that is, is the right tool for, for that market. There we get a lot of inquiries, but of course we have to, get the first tool out first before we can be bullish about that. But other than that, we, I think, see customers simply wait to the last moment until the order, and then they are rushing, and then we have to see how we can, even with our reduced lead time, to make it happen. That's the current discussions we have also among our sites. Okay.

Then on the rework on some tools that impacted the gross margin. What caused that, basically? I mean, this happens from time to time, but what caused it this time? Was it kind of a design flaw? Was it new customer demands? Was it the extreme, potentially the extreme ramp? And how Do you think that you more or less sorted these out? I mean, you indicated that this is kind of mixed effect, so might reoccur next year. So maybe you can expand a little bit more on that topic.

My mother Thomas speaking here so the the question cannot be easily answered to be honest because it's a lot of facts which really come into this point here on the one side for sure our Customers are also very demanding with the request for support there because they also ramped up in a pretty short time and really they already have this by themselves a very demanding customer and So the support was really requested by customers to be there on site, sometimes even 24-7 to support this ramp up of our customers and this was really only partially anticipated, and we were really a little bit overwhelmed by the requests and also the hard requests from customers. Nevertheless, we supported them pretty good, I guess, and this is also why we still have very good relations with these customers, because they are taking us into account also for our next generation, HPM4, as Bogard already said. And also, if you go really in this deep ramp up, you see sometimes also some topics which we did not see if we use our tools in a normal way or two-shift way. So this is some, let's say, improvements which we also did, also because customers changed the process chemistry partially, but we also had some learnings together with our customers. And this

is these are the main reasons why we had to support more than we anticipated before okay and the reason why you indicated that it is mixed a mixed effect that you think you're not not fully through so that might reoccur

I don't think that it might really occur. We learned a lot, and we learned together with customers, and they let us learn together with them. So from their point of view, the learning curve also for us should go down so that we really reduce it. It will not go away completely, but it should really be reduced significantly.

Yeah, that's enough. Okay, thanks.

Thank you so much. And we have further virtual hand from Nicole Winkler. So you can unmute yourself, Nicole.

Yes, thank you for taking my question. So basically I have one left regarding operating cash flow development. So basically in Q3 you turned positive again. Can you give us an indication what we should expect for Q4 and where we could end up for the year 2025? Thank you.

Yes. As you said, in Q3, we turned in terms of operating cash flow into a positive number. And we think that there is a good chance that we can end up at 25 in a positive territory. So this means in Q4, we we'll have or there are good chance to have the 28 million cash inflow that we need to get in a positive number.

That's for free cash flow, Cornelia, right?

Free cash flow, yes.

And for operating cash flow, for sure, this would mean that this number should be a bit higher because we also still have CapEx ongoing.

Yes, that's right. Thank you, Anastasia. It's around, yeah, I would say 30, 35 million we need in terms of operating cash flow.

All right. Thank you.

Thank you for your question, Nicole. And then we have a follow-up from Weiser. So you should be able to speak now, Weiser.

Yeah, hey, a brief question on your next generation scanner tool. If I remember correctly from the previous calls, this is also enabling panel level packaging, right? If so, can you give a little bit color? around, I mean, what we hear panel level packaging could bring cost advantages to GSMC, et cetera, well above 30%. So the technology seems to make sense. But then can you elaborate a little bit? Are you covering different parts of the manufacturing process? And can you give a little bit of color on the competition part of the business? So are you working with one lead customer and you're exclusive there or are other companies in the qualification process as well? A little bit of color would be great.

yeah thanks for the question i mean obviously yeah this is this is really for pedal level packaging um this new um uv scanner can handle both wafers and and panel level package applications There will be several versions of that also with a path to one micron resolution, so it's also a more accurate system. But this will not be launched from the get-go. The first focus is indeed panel-level packaging for that one lead customer whom we developed this closely together. So this is the launching process. This will be applied in similar applications as the current ones, but we have access to more layers and more process layers than before. And also it will open the door for more other customers because this is a very interesting field to be. So we will be able to broaden our exposure there.

And competition part?

Well, competition is the same as we have now, which are iLine steppers and scanners you have already in the market. But we currently have a lead over them in cost of ownership and throughput. And we, of course, want to maintain that lead.

Thank you.

Thank you so much for your follow-up question. And in view of the time, we will come to the end of today's earnings call. So thank you to the management board for your presentation and the time you took, and also to you, dear participants, for joining and your shown interest. So should further questions arise, yes, Venkapsa from Investor Relations would be happy to assist you. And on that point, it was – Yeah, it was a pleasure to be your host. And Sven, final sentence belongs to you.

Yeah, thank you so much. Just one remark, you know that we are going to have this CMD on Monday, the 17th of November. If you have not registered yet, or if you aren't sure, maybe please just contact me or Florian Mangold as soon as possible. We are still accepting registrations. So take care. Goodbye.