Earnings call: Melexis projects €1 billion in 2024 sales amid growth

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Earnings call: Melexis projects €1 billion in 2024 sales amid growth
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Melexis (Euronext: MELE), a global microelectronics engineering company, has reported a positive start to the first quarter of 2024, with sales reaching €242 million, marking a 6% increase from the same period last year. The company's focus on innovative products for the automotive sector, including electric vehicles (EVs) and internal combustion engine (ICE (NYSE: ICE )) powertrains, has been a key factor in its performance.

With the launch of new products like the Triphibian high-pressure sensor and the Induxis inductive switch, Melexis is poised for continued growth, projecting sales between €242 million and €247 million for Q2 and aiming for a full-year revenue of €1 billion. Despite this, the company has not provided specific guidance on revenue growth acceleration but remains committed to maintaining a gross profit margin above 44% and an operating margin above 25%.

Key Takeaways

  • Melexis reports a 6% increase in Q1 sales year-over-year, with €242 million in revenue.
  • The company launched Triphibian technology and Induxis, targeting EV thermal management and robust switch applications.
  • Melexis anticipates Q2 sales between €242 million and €247 million and aims for €1 billion in full-year sales.
  • Gross profit margin is projected to remain above 44%, and operating margin above 25%.
  • A significant dividend payout is expected to increase the company's debt position in the next quarter, with plans to reduce it later in the year.
  • The company is diversifying its supply chain and maintaining commitments to X-Fab wafers.
  • No price discussions for the 2024 situation with customers have been initiated.

Company Outlook

  • Sales projections for Q2 2024 are estimated to range from €242 million to €247 million.
  • Full-year sales are anticipated to reach the €1 billion mark.
  • The company expects to maintain a gross profit margin above 44% and an operating margin above 25% for the year.
  • A capital expenditure (CapEx) of around €70 million is planned for 2024.

Bearish Highlights

  • The company is preparing for price discussions with OEMs in 2025, which could impact margins.
  • An increase in debt position is expected due to a significant dividend payout.

Bullish Highlights

  • Melexis has launched innovative products such as the Triphibian and Induxis, which are expected to provide competitive advantages and higher margins.
  • The company's focus on innovation and localization, particularly in the Chinese market, is aimed at driving growth.
  • Melexis's product portfolio is well-positioned to benefit from both EV and ICE powertrains built on modern platforms.

Misses

  • Specific guidance on revenue growth or acceleration has not been provided.
  • Inventory write-downs occur annually, but the impact is stable and negligible.

Q&A Highlights

  • The company has increased its inventory to be prepared for short-term orders and to serve customers more effectively.
  • Melexis is focused on keeping costs in line with revenue and maintaining an above 25% operating margin guidance.
  • The expansion of China's chip production is met with Melexis's strategy of innovation and localization to meet customer needs.
  • The swing back to plug-in hybrids could present a positive opportunity for Melexis.

In the face of a dynamic automotive market, Melexis is strategically positioning itself with a diversified product portfolio and a focus on cost-effective solutions. The company's commitment to innovation, particularly in the EV sector, is underscored by the development of technologies like the Triphibian and Induxis. Melexis's approach to supply chain diversification and localization, especially in key markets like China, demonstrates its adaptability to customer demands and market trends. As Melexis prepares for a significant dividend payout and the associated temporary increase in debt, the company's financial outlook remains robust, with a clear strategy to manage costs and leverage its innovative product lineup for sustained profitability. The next earnings call in August is highly anticipated for further insights into the company's performance and strategic direction.

Full transcript - None (MLXSF) Q1 2024:

Operator: Good day and welcome to today's Melexis First Quarter 2024 Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And at this time, I'd like to hand the call over to Mr. Marc Biron, CEO. Please go ahead, sir.

Marc Biron: Thank you. Dear audience, thank you for joining the Melexis first quarter 2024 earnings call. I will share with you the highlight of the past quarter, after which our CFO, Karen van Griensven will talk you through the financials. In the first quarter of '24, sales came out at €242 million. Despite the inventory correction that we observed in some product line in the past few quarters, sales were up 6% compared to the first quarter of '23. Those results confirm that our product portfolio give us a very good immunity against any type of car that are preferred by the end customer. We are successful in comfort and safety application, as well as for the different type of powertrain. Through our world-premier innovations, we have a leadership position in our core market, automotive, but we are also investing in emerging markets beyond automotive like robotic, alternative mobility and health. As an example, in Q1, we have kicked off development of two products for robotic applications. In the first quarter, we have launched our game-changing Triphibian technology, which revolutionize thermal management in electric vehicles. It's an innovative high-pressure sensor which is compatible with the harsh environment. In Q1 we have also revealed Induxis, an inductive switch to be used in safety applications, can be used for example in seat belt buckle or door latch. Our design win in Q1 confirmed the success of our product strategy. Out of the top five design wins, two are related to thermal management, one is related to inverter application for EV, one for lighting, and one for e-steering applications. Note that two of the top five design wins are for Chinese market. Still, in Q1, we have been working on the diversification and localization of our supply chain to meet the future market expectation and to stay relevant independently of the geopolitical constraint. We have also set up a plan to optimize the cost of our product through different initiative. I now give the floor to our CFO, Karen van Griensven who will share some financial insights.

Karen van Griensven: Thank you, Marc. So hello, everybody. A bit of color on the financials. So, Marc already mentioned we had nearly €242 million sales in the first quarter, an increase of 6% compared to the same quarter a year ago. And the gross result was €106.1 million or 44.2% of sales, an increase of 4% compared to the same quarter of last year and a decrease of 4% compared to the previous quarter. R&D expenses were 11.1% of sales, G&A was at 4.8% of sales, and selling was at 1.9% of sales. The operating result was €63.7 million or 26.4% of sales, an increase of 4% compared to the same quarter of last year and an increase of 4% compared to the previous quarter. The net result was €52.9 million, or €1.31 per share, an increase of 4% compared to €50.9 million, or €1.26 per share in the first quarter of '23, and an increase of 6% compared to the previous quarter. If we look forward, so the outlook, Melexis expects sales in the second quarter of 2024 to be in the range of €242 million to €247 million. For the full year '24, we expect sales to be around €1 billion, with a gross profit margin above 44%, and an operating margin above 25%, all taking into account a euro-US dollar exchange rate of 1.08. For the full year 2024, Melexis expects CapEx to be around €70 million. So, I would like to now open the Q&A session. So, operator, please go ahead.

Operator: [Operator Instructions]. Our first question comes from Francois Bouvignies from UBS.

Francois Bouvignies: I have two quick ones. The first one may be Marc, on your comments. When you said that inventory correction in some product lines is now behind you, is it possible to expand a bit on this comment because it's a bit [indiscernible] to think that the inventory is kind of behind when we see the demand slowing down and inventories are still relatively high across the board? So what makes you think that inventory is behind? What do you mean by that? And also, because when I look at your guidance for the full year and forward quarter, you are still implying a low single-digit percentage growth rate, which would imply an under-shipping versus demand as such because of the content. So I'm trying to understand a bit more this comment, if you see what I mean.

Marc Biron: Yes. First of all, when we look at the inventories of our distributor, we see that they have peaked in, let's say, summer last year. Since then, it is slightly going down, but step-by-step going down since August. And clearly, the inventory situation is improving at our distributor. And from our analysis with our customers, it's the same at the customer side. If we look within Melexis, let's say, very clearly all the adjacent applications are picking up. For example, our driver for adjacent, the temperature sensor, the latch and switch for adjacent, those are really picking up, and we see also some sign in automotive that the situation is improving. It's why we believe that indeed the bottom was in Q1, and then we will grow throughout the end of the year to reach this €1 billion revenue.

Francois Bouvignies: Okay. But the automotive comment you made because, I mean adjacent and distribution channel, I think it's like a smaller portion of your revenues, I mean, correct me if I'm wrong. Automotive is a big, the most important part. What are the signs that you see bottoming out on this part? Because I guess the visibility is not as clear as the distribution channel, so just trying to understand what intelligence you have to suggest that.

Marc Biron: First, to correct your assumption on the distribution, yeah, at least at Melexis, distribution is not only for adjacent, and we have a lot of automotive business going through distribution.

Karen van Griensven: 25% to 30% of our sales. [indiscernible] Mainly a lot of Asia is going.

Marc Biron: Yeah. Distribution is a bit more than 30% of the sales and indeed, mainly in Asia, Japan, China, Korea is via distribution. And what we see on distribution is really relevant. It's not only about non-automotive business.

Francois Bouvignies: Okay, good to clarify. But then the auto piece, which is 70%, can you maybe elaborate on that part? I mean, what do you see there?

Marc Biron: I can give an example of that. When I say we see sign, it's for example, the push-out that we see or the cancellation that we see in the order. We have a much better situation on those aspects now than six months ago, I would say.

Francois Bouvignies: Thank you for clarifying. Maybe my second question would be on China. I mean, we asked you before, but it seems that China is pushing more and more towards localization.

Marc Biron: Yes.

Francois Bouvignies: And I mean, you mentioned that your thermal, for example, design wins, some are in Asia, in China. So do you see any -- I guess a little bit too early to see a meaningful change versus maybe three months ago, but what's the risk? I mean, do you see any like Chinese players entering the market more aggressively right now? It seems that you have been relatively immune from the Chinese competition so far. And honestly, I don't know many Chinese semis doing magnetic sensors, so maybe you could help on that front. And should we expect your market share in China to go down over-time because of this effect?

Marc Biron: I think, first, as you mentioned, it is not a short-term effect. As a matter of fact, our revenue in China has grew two times more than the overall corporate growth in Q1. And I think for the time being in China, as you mentioned, we don't see a threat. But also, as you mentioned, in the longer term, it can be different. That's why we are taking initiative, as I mentioned, to localize our part of the supply chain in China because it's one of the long-term requirement from our customers. The second aspect, why are we, as you mentioned, immune to this, I think it's thanks to our innovation. I mean, we have a very successful innovation machine, and I think our Chinese competitor cannot copy our innovation product. I can just take the example of the launch of this quarter, the Triphibian. It's a very complex product. It's even not only a chip, it's really a solution. And I think for the time being, it's impossible to be copied there. We can take another example, which is our TPMS, which is also a complex product that will not be copied soon. So it's three dyes in the same package and then very complex, I would say. I think the success of Melexis is and will be in the future linked to our innovation. I can take a third example because I was this week with a customer here in Belgium. We are developing an [AELD] product which is the highest level of safety for a chip. I think this is something that our competitor in China cannot copy anytime soon, I would say.

Francois Bouvignies: If I may squeeze a quick one, do you see any pricing difference by regions? I mean like China pricing trend and Europe-US trend, do you see any difference?

Marc Biron: I think, in general, we are in a growing market. I mean, 15 years ago, it was a niche market. Today it is indeed a very big market. Again, we for sure enjoy the benefit of this growing market. But there is also competition and for sure there is also a price discussion. Now, to answer your question, do we see a difference in between the market, I think it really depends on the type of product and it depends also, yeah, when we can bring unique feature, when we can bring innovation, there is no limited price discussion. Of course, for the more mature product, yeah, the price is part of the discussion. But I would say it's more depend on the type of product than on the region.

Operator: We will now move to our next question from Janardan Menon from Jefferies.

Janardan Menon: I just want to dive a little bit more into the two new products you've announced, the Triphibian and the Induxis. Is the Triphibian sort of competitive with -- is it competing with a normal? Is it a temperature sensor or what is it? Will it replace temperature sensors or what is the additional value you get there? And have you already got some design wins for it? And how does the ASP of that compare with whatever the equivalent product you've been selling so far?

Marc Biron: Yeah. The Triphibian is a pressure sensor. It's not a temperature sensor, as you mentioned. It's a pressure sensor. And yeah, in terms of ASP, I will not give an accurate answer, but this is more than a chip. It's really -- we call it a solution, meaning that it's -- yeah, in terms of ASP, it's more expensive than a single or simple dye because we really provide a chip in a complex package. What does it bring versus the other product? I think it brings cost advantage for the customer. I mean, if the customer is using this Triphibian, he will be able to reduce the cost of the overall module because we integrate a lot of function in the product. And it has been designed specifically for the thermal management of the car, yeah, mainly the EV car, and it's used in this product. And to the last question, what about the design win? Well, we have a lead customer, a lead Tier 1, which is a big Tier 1, which is using this product or will use this product in the application, but we don't have yet the design, but we have a very active lead customer.

Janardan Menon: So when you say pressure sensor, how do you do thermal management with a pressure sensor? I mean, just can you explain that technology?

Marc Biron: Yeah. When we say thermal management, it means that we need, there is a fluid, let's say, moving around in order to transfer the heat or to transfer the temperature. And this fluid is moving through valve meaning that in the thermal management, you need -- in the thermal management system, you need a position sensor, you need driver to open and close the valve. As you mentioned, we need temperature sensor to measure the temperature, but also the pressure of the fluid moving around is an important indicator. It's why there is also a pressure sensor in the thermal management system. And those are harsh environment because the fluid, I mean, it's not simple water, let's say, and the chip must be robust against in this harsh environment.

Janardan Menon: Is this for the battery mainly?

Marc Biron: Then you have I would say three type of thermal management. You have indeed the thermal management of the battery because you need to keep the battery as much as possible close to 25 degrees because if it's too hot or if it's too cold, the battery is not efficient. And there is indeed thermal management to keep the battery in the correct operating zone. But there is also thermal management for the cockpit of the car because in the ICE the heat is for free, meaning that you can heat the cockpit of the car for free because the heat is generated by the engine. In the case of the ICE, the heat is for sure not for free because it's coming out of the battery. I mean, the energy is coming out of the battery. And then in this case, the OEM have a complex thermal management system to minimize as much as possible the energy coming from the battery and to keep the cockpit at the correct temperature.

Janardan Menon: Understood. And on the Induxis, you had at your Capital Markets Day, et cetera, talked about inductive position sensor as an alternative to a magnetic sensor. Is this that product or is this sort of a replacement for a latch and switch kind of product?

Marc Biron: Yeah. This one, the one that we discussed now is indeed the replacement of a latch and switch. But you are right, we have also positioned sensor Induxis. But the one that we discuss now is to replace latch and switch, which is why I gave the example. It can be used for the seat belt buckle because it was an on/off chip that will detect if the seat belt is in the buckle and the same for the door handle. This is indeed for switch. But the fact that we have a huge portfolio of magnetic sensor, very successful. But indeed we want also to put in our portfolio to propose our customer some inductive option because in case of electrification, let's say the inductive version is more robust against the magnetic disturbance.

Janardan Menon: But that product has already been commercially launched, the position sensor.

Marc Biron: Yes. We have a two-position sensor, one high speed to detect the position of the motor. This one has been launched. The number is 90510, I think. And we have also a low-speed position sensor to detect, for example, the position of the pedal, I mean, 90513. This product is used by a customer to detect the position of the pedal with an inductive solution.

Janardan Menon: Yeah. And just moving on to the inventory, as Francois was discussing before. So can we assume, as you said, we are growing at less than what we would assume is the growth, including content growth and car growth in your revenues right now? So can we assume that as we go to the latter part of the year and into 2025, your growth rates will keep accelerating from this point onwards given that you are saying that the inventory correction is over or is there any uncertainty on the Tier 1 actual level of inventory, et cetera, which still reduces your visibility on how that trend will come through in coming quarters?

Marc Biron: Yeah. I would say for the time being, we stick to the guidance of '24, and we believe that the grow will increase to reach €1 billion at the end of the year. There is no sign to give a contrary view, let's say.

Janardan Menon: Okay. And is the inventory situation that you described more applicable to, say, your Asian customer base or is it a sort of global phenomenon that you're seeing in terms of the inventory levels?

Marc Biron: On the local aspect, I don't have a view. I think it's indeed more a global view. Yes.

Karen van Griensven: Long term, we can reiterate our statement of 10% CAGR -- over 10% CAGR, which we also mentioned on the Capital Markets Day. So outperforming the markets is still our plan.

Janardan Menon: And so if the inventory is truly over, then by 2025 you should be achieving those kind of growth rates, right, I mean, logically?

Karen van Griensven: I don't want to look for the short term. For the long term, we reconfirm.

Janardan Menon: But given that you have more confidence of the inventory position in the adjacent markets, would it be fair to say that you will see an acceleration of growth there in coming quarters? Would that be a fair assumption?

Karen van Griensven: It's too early to make a statement in this. We never give guidance beyond one year, so we also don't want to do short-term.

Janardan Menon: No. I'm sort of more looking into the second half just on the adjacencies. Is there --

Karen van Griensven: Yeah. The second half, yeah, there will be, yeah. We guide for €1 billion meaning that the second half will be stronger than the first half year.

Janardan Menon: And would that be more true on the adjacencies? And would that be the bigger driver or will it be growing faster than your automotive business, let's put it that way, in the second half?

Marc Biron: Yeah. I would say the adjacent will go strong in the second half. Yes.

Operator: We will now move to our next question from Sandeep Deshpande from JPMorgan.

Sandeep Deshpande: My question is on one hand you're saying that the inventories at your customers are reducing, but when you look at your own inventory on your balance sheet, it has increased very dramatically from last year as well as increased from the fourth quarter. Can we understand the dynamics of your own inventories increasing when inventories are decreasing at your customers? I mean, I would have thought that if your customers are seeing and distributors are seeing lower inventory, your own inventories would decline on the back of that. And then I have a follow-up.

Marc Biron: Yeah. I think in Q1, in absolute value, the inventory stays very much stable. But yeah, indeed, if you look more in the past, it has increased. I think our goal is always to level out the production and to use the capacity at best. It's why we have selected some products without risk of obsolescence and we create some inventory also because it's clear that, let's say the behavior from the past of the customer is back. They are much more short-term oriented and it's why we want to be agile and we want to be able to serve the customer when they came with short-term order. The inventory has increased, but I think first it's a healthy inventory because we pay attention that there is no risk of obsolescence and yeah, we want to be ready for the next wave of the dynamic.

Karen van Griensven: It's strategic for us and we've done it in all the cycles and it always has helped us a lot when the market picks up.

Sandeep Deshpande: So, I mean, following on that, I mean, you're saying that the inventories that your customers have reduced or the distributors have reduced your own inventory is high, but then why are you not indicating or guiding to acceleration of your growth at this point given that normally when inventories decline in the channel, you should be seeing revenue growth associated with that as the channel restocks as such?

Karen van Griensven: Yeah. We can only restate a full-year guidance as we have done in the past and that we will see acceleration in the second half of the year, as we mentioned already earlier as well. And then long-term, the fundamentals are there so that we expect to see substantial growth in the long-term, I mean, in the future. But we don't want to say more than that.

Sandeep Deshpande: I mean, one last thing maybe I should try. I mean, when you talk about the growth in the second half that is already guided by you at the beginning of the year in terms of the year-on-year growth at €1 billion. If you're seeing a transition here or you're seeing a change here, should that not mean that the second half growth is better than what you guided at the beginning of the year?

Marc Biron: I think, yeah, we reached €242 million in Q1. We are guiding between €242 million and €247 million in Q2. It means that Q3 and Q4 will be much higher, let's say, to reach €1 billion. And I think it's what we are seeing now integrated in the full-year guidance to recover the €1 billion, the weak Q1 and the weak Q2, let's say.

Karen van Griensven: Yeah. We've always said that it would be a soft landing. It's not different today than what we said in the previous quarters, but maybe the market did not fully believe it.

Operator: We will now move to our next question from Marc Hesselink from ING.

Marc Hesselink: First question is coming back on the pricing environment, and I think we discussed it also in the previous conference call. How do you expect the normal price deflation on average? And over the quarter, we've actually seen quite a lot of comments about OEMs wanting to push down the cost of their products and also pushing on their suppliers. How do you square that with just limited price deflation on your end and more aggressive price pusher from the OEMs?

Marc Biron: Yeah. Indeed, we are reading the same press. I confirm this. Yeah. First of all, for '24, there is no discussion about the price, but indeed we anticipate some price discussion. Yeah, usually, it's after summer for '25. As we said last time, I think it's nothing new. I mean, it did not happen during the last two years because of the chip shortage, but it was a bit the normal way of business in the previous year. And yeah, I would say we are preparing ourselves for those discussions. First, we have our innovative product, and as I mentioned at the beginning, the innovative product creates some immunity versus the difficult price discussion. It also ensures some higher margin. And for the more mature product, indeed, we need to prepare ourselves for those price discussion. And it's why indeed we are, let's say internally, we are working on the product cost in such a way that we can have those price discussions. And we are preparing internally in our supply chain those price discussion more for the mature product than for the innovative product, as I mentioned.

Marc Hesselink: And the second one is actually on your own cost. As we took some cost measures in the fourth quarter, quite feasible in the first quarter. How do you expect your cost to trend in the coming years? I know you kept your above 25% guidance, but it seems that you're trending a bit on a higher level. Please share if you have anything to add there.

Marc Biron: I think there is, yeah, we have indeed taken some cost measures, as you mentioned, and the goal is to keep the cost in line with our revenue in such a way that we can continue to predict 25%.

Karen van Griensven: Yeah. Operational costs are historically low for the moment, also, thanks to the cost optimizations. I do expect that we will keep investing in R&D that it will further, it might go up a bit moving up. But we will keep it under control.

Operator: We will now move to our next question from Michael Roeg from Degroof Petercam.

Michael Roeg: I have two questions. First one is on China, a follow-up question. In your presentation, there's a very interesting slide number 10, where you show all the industry first for Melexis, and that shows indeed that you are innovating which helps to keep the low end of the market far away from you. Nevertheless, we all see that Chinese customers are buying massive amounts of semiconductor manufacturing equipment, and there was also recently some news that chip production in China in Q1 grew by 40% year-on-year. So if this is not affecting you, which companies are threatened by this massive expansion in China in mature chips that are simpler than your innovations? Can you explain where that threat is? Who is suffering from that?

Marc Biron: I think it's not up to us to define who is suffering of what. I can just repeat that our answer is innovation, and I mean, we have also taken some organization adaptation that we discussed during the last quarter to make sure that we boost our innovation machine. The first answer is innovation, and the second answer is localization. I mean, from the mature product, we are going to localize some part of the supply chain in China for cost reason, but also because it's the expectation of our customer.

Michael Roeg: Okay. But there's nothing in particular that you hear from either your customers or other parts of the supply chain that suggests where all that equipment and capacity is going to, whether it could be a threat in the midterm for you.

Marc Biron: No. What we hear mainly from our customer is in the midterm, the need of localization in China.

Michael Roeg: Then I have sort of a technicality on inventories because you mentioned that you keep especially products with limited risk of obsolescence in the inventories.

Marc Biron: Yeah.

Michael Roeg: And although that makes sense, every year in the annual report, I see that you have write-downs of around €6 million, but you also have a reversal of write-downs from the year before of €5 million. So just the technicality, why are you writing down your inventories when you reverse that every year and the year thereafter?

Karen van Griensven: These are new -- I mean, it's a continuous change in -- I mean, this is the normal way of working. In general, it is usually around the effect. It's around half a percentage of the margin, but it's extremely stable. It's a very stable percentage.

Michael Roeg: Yeah. But the net impact is close to zero, so why write-down at all?

Karen van Griensven: No. There is each year an impact, but it's rolling forward because we keep certain rules in place. There is always a small effect on the inventory, but it's very stable and neglectable. And it's different products. It's that sometimes we resell parts, sometimes that we wrote down because it had been in stock for too long, so it changes. But the overall effect on the P&L is limited to around, yeah, maximum half a percentage.

Operator: [Operator Instructions] Now the next question comes from Robert Sanders from Deutsche Bank (ETR: DBKGn ).

Robert Sanders: And my first question is just on the capital structure. Is there any plan to do any further prepayments? And do you expect to draw-down on any kind of credit facility in the next sort of 12 months?

Karen van Griensven: Well, next quarter we have a big dividend payout, so yes, we will increase our debt position, but then to be reduced further in the year. Yeah, in Q2 its the peak always of debt or the low, yeah, and it has to do with the dividend payment.

Robert Sanders: And on the X-Fab wafers that you've signed a deal with 0.11 micron for the next three years. I mean, the prevailing market price is a lot lower than what you've agreed. Is there any opportunity to extract concessions or perhaps migrate volume away a little bit from X-Fab just in order to improve your cost structure because, I mean, some of your competitors will have lower-cost wafers?

Karen van Griensven: We in general are diversifying our supply chain across the board. This is in all areas, but the commitments to X-Fab, we will keep intact, that is clear.

Robert Sanders: Got it. And just last question, just on the pure EV situation, obviously you've seen price pressure since middle of last year. How is that playing out as we look into 2024? Is there continued price pressure because those guys don't sign LTAs or is it starting to level-out because of any particular reason, maybe because of the ramps coming next year?

Marc Biron: I would say, we don't have a price discussion for the '24 situation with our customer. And linked to the EV, I think what I mentioned in the past I think is still valid. For Melexis, if we build an EV powertrain or an ICE powertrain, it's the same. I mean, we have the same number of sockets or the same number of products or the same number of opportunity in an EV powertrain versus an ICE powertrain. What is important for Melexis is the comfort and the safety aspect. And it's important that this portraying EV or ICE come with a modern platform because on the modern platform, there are much more electronics linked to comfort and safety. And for us, we are quite immune. If at the end the car is built with ICE or with EV powertrain, as long as it's on a modern platform, I would say.

Robert Sanders: But the swing back to plug-in hybrids this year should be a big positive for you. Should it not?

Marc Biron: You could say because there is two types of engine. Yeah. For us, if we have an EV and ICE engine in the car, it is positive.

Operator: [Operator Instructions] And it appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Mr. Marc Biron, CEO, for any additional or closing remarks. Over to you, sir.

Marc Biron: Yeah. Thank you and thank you for the discussion. Thank you for the question. And we are all looking forward to discuss with you again for the half year result beginning of August. Thank you all.

Operator: Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

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