SÜSS MicroTec SE (SMHN.DE) Q4 2024 Earnings Call Transcript

Good day, ladies and gentlemen and warm welcome to today's Earnings Call of the SÜSS MicroTec SE on the occasion of the publication of the figures for the financial year 2024. I'm delighted to welcome the CEO, Burkhardt Frick; CFO, Dr. Cornelia Ballwießer; the COO, Dr. Thomas Rohe; as well as Vice President Investor Relations, Sven Kopsel. The management board will speak in a moment and guide us through the numbers. After the presentation, we will move on to a Q&A session in which you will be allowed to place your question directly to the management. We are looking forward to the results. And having said this, I hand over to Mr. Kopsel.

Hello and thanks. Welcome everybody. We would like to welcome you to our conference call after publishing our annual report today in the morning. And as you probably know from earlier calls, this call is 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 in this slide deck. It applies throughout the conference call. And now, I hand over to our CEO. Burkhardt, please.

Thank you, Sven, also warm welcome from my end. So here's, what we are going to cover today. First, we touch the key achievements of the past year. Then Cornelia Ballwießer provides more details on the financials and finally, I will give an outlook for 2025. After that, we will be happy to answer your questions, as usual. Let's go through the highlights. First, we managed to execute our high order book, resulting in record sales of €446 million, an increase of 46.6% compared to 2023. Second important message, we have significantly grown profitability and with that, reached a completely new level of earnings for SÜSS. We already exceeded our previous planned targets for 2025 which were sales of €400 million and EBIT margin of 15%. Changes compared to the full year 2023 in detail, gross profit margin increased by 5.9 percentage points, EBIT margin up by 7.7 percentage points and order intake slightly increased by 0.8%. I will go into this in more detail in the following pages. As already outlined in our conference call in mid-January, we achieved a record order intake of €147.5 million in last year's Q4. This development was driven by our strategic global customers in both divisions, particularly in our Photomask and Bonding business and for our UV projection scanners. Demand for our coaters continued to improve after a strong Q3. Book-to-bill ratio finally came in at 0.95%. Our operations team continued to push forward in the fourth quarter and enabled quarterly sales of over €150 million for the first time in the history of SÜSS. It was a major accomplishment and resulted in building far more tools than ever before. I've already mentioned the significant improvement in profitability. We achieved a higher gross profit and EBIT margins, mainly due to favorable product and customer mix and overall business volume. Let's now move on with our 2 segments, starting with advanced backend solutions. As we were able to execute many orders for the initial AI-related capacity ramp-up, our Bonding business and especially our temporarily bonders, debonders and cleaners were the main growth drivers. Bonding sales more than tripled compared to the previous year. In contrast, sales in our coating and imaging business were below the 2023 figures as demand was quite weak in the first quarters. In both cases, however, demand improved notably in the second half of the year which help us in this year in 2025. The higher sales volume and related economies of scale, as well as favorable product mix supported us improving our gross profit margin by 6 percentage points to 42.2% and our EBIT margin even by 9.8 percentage points to 19.2%. Let's continue with our Photomask business segment. As often mentioned and expected, orders from Chinese customers normalized in 2024. In our Photomask business, orders from China decreased by €15.8 million. The good news is that all other regions almost compensated for this development. The order book remains well filled at around €157 million. This ensures a very high capacity utilization in 2025 and is the basis for continuing our growth path in this segment. Sales went up by 46.5% year-on-year to €131 million. Two years ago, in 2022, sales were still at €49 million. This is an amazing development, in my view. And also, we are growing profitability here, as the increase in gross profit margin to 36.1% and the EBIT margin to 20.7% demonstrates. Now an update for our new production site in Taiwan. I'm doing this today on behalf of our Board colleague, Thomas Rohe, who is currently on-site in Taiwan, monitoring the progress of the project. He has nevertheless dialed into this call and he will be available for questions later in the Q&A session. In November last year, we announced that we had signed a long-term lease for this new building. In the meantime, progress is being made. Our team is already on-site to streamline all task. As you can see from the real pictures on the left and the rendering on the right, the building will combine state-of-the-art clean room manufacturing facilities with modern office and meeting spaces. I think this will be a great place to work. The official opening of the new Zhubei plant is scheduled for the end of October 2025. So far, we are on track to meet this ambitious schedule. And now I'd like to hand over to Cornelia for more information on our financial results. Cornelia Ballwießer: Thank you, Burkhardt and I welcome all of you also from my side. On this chart, there are some key messages and I -- as Burkhardt already presented some of these financials, I try to focus on relevant additional information. There has been much discussion about whether we can compensate for the normalized demand from China. Overall, orders from China fell by €41.4 million compared to the previous year. And yes, we are able to compensate for this. At year-end, there was even a slight increase versus 2023. Gross profit margin and EBIT margin benefited from a favorable product and customer mix and was volume-driven as already said. EBIT also benefit from a decline in our OpEx ratio to 22.8% of sales, a decrease of 2.5 percentage points. Net profit amounted to €110.3 million and included earnings after taxes from continued operations of €52.1 million, as well as the result from discontinued operations of €58.3 million which is the sale of our MicroOptic business. Net cash position with €122 million is strong. Free cash flow in total was €96.1 million, thereof €25.3 million from continuing operations. Investments increased by €3 million to €7.6 million which is still quite low. This number is expected to increase in 2025, as we plan to invest approximately €20 million in our new fab in Taiwan and in total, CapEx volume is expected to be roughly €30 million. Based on the strong business performance, SÜSS proposes to increase the dividend by 50% to 30% -- €0.30 per share. This would represent approximately 23% of free cash flow from continuing operations. On this page, I would like to show order intake sales, gross profit margin and EBIT margin after have developed over the four quarters. Two things I'd like to highlight. Even though there should be no reason for seasonality in our business, the fourth quarter really was particularly strong in all key figures. We managed to complete many tools and our customers were happy to receive these in December. EBIT benefited from the very high business volume. Many customers also placed additional orders to secure production and delivery slots in 2025. Profitability throughout the four quarters was at a high level. The gross profit margin was always at least 39% and the EBIT margin at least 15%. This shows that given a certain volume of business and focusing on larger customers, we are able to deliver very stable results. On this chart, you can see this development a little bit deeper in terms of our 2 segments. Our segment Advanced Backend Solutions achieved gross profit margins of at least 40% in all 4 quarters. In the fourth quarter, EBIT margin was able to mark a high at 25.7% driven by the very high business volume. Photomask Solution had a soft first quarter in terms of gross profit margin with only 32.9%, followed by 3 quarters in a row with at least 37%. EBIT margin in total was better than in Advanced Backend Solutions as in 3 out of 4 quarters and we were able to pass the 20% margin mark. This page provides some additional background on the segment's performance for the full fiscal year 2024. Advanced Backend Solutions, we were able to exceed the very high order intake of 2023. AI-related orders for our temporary bonding solutions and our UV protection scanner in 2024 were more or less of a level off the previous year. Orders for our coating systems improved in the second half of the year. Growth in this segment amounted to €100 million which is an increase of 46.6% year-on-year, mainly driven by executing the high amount of AI-related bonding orders. Gross profit margin improved by 6.0 or 6 percentage points and EBIT margin by 9.8 percentage points. In the Photomask Solution segment, order intake, as Burkhardt said, was almost at the 2023 level even with the reduction in order intake from Chinese customers. The order book is still well filled and provides high visibility and capacity utilization in 2025. We succeeded in realizing the sales growth of 46.5% by increasing the number of slots for Photomask tools, additional staff and shortening lead times. Gross profit margin and EBIT margin both benefited from strong product and customer mix and the very high business volume as well. So let us now take a closer look on order intake. Please note all this, all the 3 years are adjusted for the MicroOptics order intake, meaning they include only the continuing operations. Order intake amounted to €423.7 million in 2024, an increase of 0.8% compared to the strong previous year. Book-to-bill ratio was 0.95%. At the right side, you can see a breakdown of our order intake by region. Asia-Pacific continues to be the strongest driver of our business with 78% share of global order intake and Taiwan is our most important market here. And here, let's move on to the balance sheet development. Here total assets increased by €131.2 million. Main driver for this increase were the current assets which went up by €128.9 million compared to year end 2023. On the one hand, inventories grew by roughly €47 million. In general, the rise in our business volume has led to an increase in inventories. In addition, contract assets rose by €24 million. On the other hand, current assets were reduced by the derecognition of assets held for sales in the amount of roughly €34 million as a result of the MicroOptics sale. Cash and cash equivalents increased by €98 million, in particular driven by the divestment of our MicroOptics business, with an extraordinary cash inflow of €75 million in the first quarter. But also it's supported by a strong free cash flow from continuing operations. On the next slide here, you can see, due to the high net income in the amount of €101 million, our equity position has been strengthened. The retained earnings increased by €105 million equity amounts to around €280 million [ph]. Our equity ratio is now at 55.9% which is a very solid number for a growing technology company. Non-current liabilities increased by around €12 million, mainly due to higher deferred tax liabilities and provisions. The current liabilities increased by €16 million compared to year-end 2023. Contractual liabilities went up €10.7 million, tax liabilities by €8.8 million, other financial liabilities also by €8.7 million and trade payables by €4.4 million. This increase was partly offset by the derecognition of liabilities associated with assets held for sale in the amount of €13 million. Our -- just to add this here, you cannot see it in the balance sheet right now, our new production site in Taiwan will cause an increase in total assets by roughly €40 million, because of the new site and our leasing contract with this new site. And yes, that's it on the balance sheet. Now let us talk a little bit about our ESG efforts and the ESG report. I would like to inform you about our progress and our ESG activities. ESG, as you know, stands for Environmental, Social and Governance. In 2024, we worked hard on the new ESG report based on the European Sustainability Reporting Standard, shortly ESRS. We have invested a lot of time and effort in this project. The application of the ESRS was supposed to become a legal requirement for Germany in 2024 but the law was not passed due to the dissolution of the coalition. However, our report already complies with the ESRS even though its application in Germany for 2024 is voluntary. The report offers a lot more information and is now roughly 150 pages long. And to be honest, the fact that non-financial reporting exceeds financial reporting is certainly something that needs to be reviewed. Just to mention, in Denmark, the CSRD reports were already mandatory for 2024. The reports are much shorter than in Germany. This tells a lot about German thoroughness. Currently, the EU Commission is working on some simplifications and reducing the requirements. But I would like to emphasize that the efforts we have put into this project was helping to push the ESG topics. But the reporting is, in my opinion, overdone. This brings me to 3 topics we really focus on. In 2024, we have defined 3 non-financial KPIs we are looking at on a regular basis over the year. These KPIs are part of our group-wide control system. It is CO2 emissions of Scope 1 and 2, employee engagement score and the compliance trainings, the participation rate in the compliance trainings. All of these KPIs developed positively in 2024. Compared to 2023, the CO2 emissions in Scope 1 and 2 were down significantly in absolute terms. In 2023, it was 4,144 tons. So you can see there is really, a big success here on this point. Especially, the switch to renewable helped our Scope 2 emissions. Overall, energy consumption on Scope 1 was also lower. However, we did not fully meet our target in 2024. We were with 74 tons, that's 5.2%, slightly above the target value as we could not completely source renewable energy in Taiwan. For 2025, we expect emissions to increase. The main driver will be the increase in business volume and the fact that we cannot switch to 100% Green Energy in Taiwan. We also rolled out our quarterly employee engagement score. It tracks the likelihood of employees' recommendation of SÜSS as an employer. In 2024, the score was 38%. For 2025, we want to bring the score to 50%. Lastly, our trainings and compliance. Here we achieved 98% in 2024. Of course, our target is at 100%. The deviation of 2 percentage points results mainly from onboarding new employees in the last weeks of the fiscal year. They will attend or already did attend the trainings in early '25. We aim to cover 100% of employees in 2025 again. And with that, I hand back to you, Burkhardt.

Thanks, Cornelia. A lot of numbers but very good numbers and I hope you also enjoy the new form and shape, how we present this with great transparency in our new corporate templates. Now let's, move on and with the outlook 2025 which I guess is the most important news in our annual report today. But first of all, how did we come to our sales expectation? Starting point and the base is our order book as of December, 31 which amounted to roughly €428 million. The vast majority of this number, let's assume around €410 million, is expected to be executed in 2025. In addition, thanks to shorter lead times and our increased flexibility in our operations set-up, we will have open manufacturing slots in the second half of 2025, especially for our Advanced Backend Solutions. This means that we can still fill our production plan in H2 with additional orders which we are collecting as we speak until the end of the first half of 2025. In our budget, we have included a revenue contribution of €60 million to €100 million from this. If we combine both elements, we get to a sales guidance of €470 million to €510 million as a range. This means, we clearly plan to continue our growth trajectory in 2025. The midpoint of the sales range, €490 million, will represent growth of 10% compared to 2024. We expect the gross profit margin to stabilize in the 2025 financial year. The product and customer mix that led to the significant increase in the margin in 2024 is likely to be of a similar quality in the 2025 financial year. Meanwhile, a positive volume effect will be offset by one-off expenses for setting up the new production site in Zhuhai, Taiwan. Taking all factors into account, we expect the gross profit margin to be in the range of 39% to 41% in the financial year 2025, after 40% in 2024. In terms of EBIT, we expect positive momentum from higher sales volume and the associated economies of scale. At the same time, our growth transformation will have a greater impact in 2025. While we anticipate an increase in R&D and selling expenses that will be roughly proportional to sales growth, we expect administrative expensive to increase further. The main drivers here are IT projects such as the preparations for the migration of our ERP system to S/4HANA and the implementation of a new consolidation and reporting solution, ESG projects and the rising expenses for recruiting and personnel. Overall, we expect an EBIT margin in the range of 15% to 17%. I can assure you that we remain ambitious and are fully focused on implementing our strategy 2020 -- 2030 to achieve further substantial improvements. In essence, we are focusing on innovative solutions for leading customers in the semiconductor industry which we will manufacture in small series. We expect this focus to improve the scalability of our business model with further growth and higher profitability. We will provide more information on our mid and long-term ambitions at a Capital Markets Day which we are planning on November 17, 2025. Please make a note of this date in your calendar already today. Those interested can also combine the CMD with a visit to SEMICON Europe in Munich which starts 1 day later, on November 18. Finally, a few insights into how we expect our 2 segments to develop. Let's start again with Advanced Backend Solutions. Here, we expect to grow at a mid-single-digit rate year-on-year based on the order book and the current market demand. As we anticipate a minor change in our product and customer mix and higher R&D expenses, the gross profit margin and EBIT margin are expected to decline slightly. Regarding the current market demand, we expect a higher demand for our imaging systems, especially for our UV projection scanners which is qualified for the CoWoS process, as you know. The improved situation in Coating Business is expected to continue, for example, driven by OSAT and foundry customers. In Bonding Systems, a slight decline in order intake is realistic, as follow-up orders cannot keep the pace with the initial order volumes of the past 2 years due to large capacity ramp-ups, especially at the HBM players. Let's move on to Photomask Solutions. Based on the strong order book of €157 million at year-end 2024, we expect sales growth in the range of 10% to 20%. Higher sales volume and a better product and customer mix is expected to positively impact gross profit and EBIT margins. Order intake in 2025 can be slightly below 2024 level due to the ongoing normalized demand from China. Additional momentum from the launch of our new high-end and mid-end cleaner line which are both planned for 2026, is anticipated towards the end of 2025, at the earliest, if we receive early orders and further orders for those systems. And with that, we are now happy to answer your questions.

[Operator Instructions] So we received some raised hands and Mr. Kuhn, you should be able to speak now.

Fantastic. So, starting with the order intake Q1 is almost done, 2, 3 working days remaining. Is it realistic to assume that, let's say, the lower end of your sales guidance is almost achieved with the order momentum or maybe a little broader? What recent order trends have you seen over the first 3 months of the year?

Yes. Well, please forgive us that we don't comment on Q1 developments. But so much to that, it's -- it would be unrealistic to expect order entry levels we experienced in the fourth quarter of the year. We are more kind of operating closer to the range of the third quarter. That's kind of what we could indicate.

Okay. That's a solid indication already. And maybe on, let's say, profitability, you mentioned the growth and the transformation investments that you plan this year. Looking at the implied OpEx, is there cost components, for example, for IT projects, that you would define as non-recurring, i.e., could we expect some, some moderation then in 2026? Or is that all costs that will, let's say, sustainably come on top? Cornelia Ballwießer: No. These costs are more or less, non-recurring items. But of course, in the long run, our cost level will increase a little bit. But for '25, they are really, one-time effects in it for different reasons, especially for IT and digitalization projects.

Could you roughly quantify those effects? Cornelia Ballwießer: Roughly, I would say, regarding IT, no, regarding IT, €3 million or €4 million [ph] and there are some other projects. I would say, in total, we will have extra costs in next year, €4 million to €7 million for transformation.

Perfect. And then, one more question on, let's say, current capacities and plant capacities with the new fab in Taiwan. I guess in Photomask, you're now with -- with the sales guidance for this operating relatively close to capacity. What about the other 2 categories? So where do you plan or let's say, how flexible can you build up capacity and shift between the different categories and what would you expect in terms of, growth, by category, let's say, over the next 2 to 3 years?

Okay. Yes, Thomas Rohe speaking and answering. Thank you for the question. Well, capacity, I would say, concerning Photomask, we are really, I think, well, well, yes, not -- not at the limit of the capacity but the capacity is really in line with the order intake right now. Concerning all other business units and product lines we have the capacity to even grow further. We have also a capacity to handle orders which are coming in right now, even this year. And, we also have the capacity to even grow further. With the new fab in Taiwan, we have also spare area which we can even increase for the next year. So this is really giving us a, a very good position to, yes, support our growth ambitions for the next years. And the shift between the sites is also something which we are already doing, so this is nothing new. We did it in the last year where we -- or the year before already in November 2023, when we shifted the border line, the bonder system from Germany to Taiwan and then vice versa. But this is also something which we can do and which we are doing, so to level out the capacity and the utilization.

Perfect. Okay. And then very last question, on the 2, let's say, future growth projects, or 2 of them, wafer cleaning and hybrid bonding. Could you provide us an update on those 2, please?

Yes. Wafer cleaning is, of course, a new product segment, we are entering. There we are in a phase that we -- we are kind of in a closure of the development and starting to -- to have, a better tool available towards the end of the year. So which then also can -- can be tested by customers. That, still is a -- is a lower volume tool but, high volume production tool is in close pursuit. So that is -- is well on track, to be evaluated towards the end of the year. The hybrid bonding, as you know, we are rolling out products as we speak. We have a die-to-wafer hybrid bonder, to be launched in the next quarter. So this is just a couple of weeks from now which is the first one which can positioned in a production environment. So we are on track with the execution there. It's more the question of are customers ready to deploy hybrid bonding, especially in the memory space and that is still, out for debate when this is actually happening. So we are still targeting volume sales, in the timeframe of 2027. So in that sense our timeline hasn't changed.

And we now move on to Ms. Jenkins.

Yes. My first is just kind of -- we've seen recent news around a potential moderation of CoWoS capacity additions at TSMC and also potentially a mix shift to their SoIC technology kind of in line with potentially NVIDIA's Rubin GPU moving to hybrid bonding. I was just kind of wondering if what kind of you thought of this and also kind of what you expected in terms of CoWoS demand in the next few years?

Yes. Madeleine, of course, we are working very close with the leading company engaged in CoWoS versions and variants. And in the last few months, demand, at least, for the tools we supply into this process went up quite significantly. We started this effect, already, seeing this effect in the fourth quarter last year, where we started getting larger orders and this continues also throughout this quarter. So, in contrast to what's sometimes seen in the press, at least, demand for our solutions and we are only providing a few machines in this very complex process, look pretty good. As a matter of fact, we are, as we speak, scaling up our, especially the UV Projection Scanner production in Taiwan with a multiple of the capacity we had before.

Okay, that's very helpful. And then just a quick follow-up. I saw in your annual report, you're saying demand for China in Advanced Backend Solutions is down quite a lot. I think it's like 30%. What's driving that reduction in orders last year? Just if you could give me some color, that would be very helpful.

Well, I think, China is and this is also covered of course, I know, by other companies is normalizing across a broader base. And that affects us equally in Photomask but also in backend business. But also larger companies reported on that, that they see a normalization towards a 20% level of their share. While I think this is a bit conservative, we still see slightly higher levels but we agree to this trend that it's reducing. The effects have multiple reasons. There's also a saturation effect going on after a few years of heavy spending, you could even say hoarding of semiconductor fab-related equipment but also, of course, saturation of installing those capacities. So I think it's wise and not to go in with similar China share levels as companies that did before. And we already saw this coming more than a year ago. And we start it to materialize as of the second half of last year. So this is no surprise to us. It was anticipated but we still have very strong business links in China and we want to maintain it.

And we move on to Wiesel Teys [ph]. Well then, we move on to our next participant. This is someone from Apus Capital.

First congratulation to the great presentation, the charts are much, much better than in its history, much more information. First question regarding the actual maybe discussion yesterday heating up against with statements about Microsoft and Baidu. Any comments from your customers how they see the development of the AI market and also the development of the HBM market? Coming back to a further earlier question, it looks even that the demand for HBMs is increasing with the next generations of NVIDIA's chips. The Rubin needs more in my eyes. But any -- any maybe direction, any maybe you can say from your view about the actual further maybe concerns that there could over investments and that the market could slow down? Any comments from your customers would be helpful.

Yes. Johannes, a. A lot of work went into [indiscernible] and the reporting. So it's nice to be recognized. In the question you're asking, that's of course the billion-dollar question which is, very hard to see. I mean, you also watched, the GTC, with, Jensen Huang, for NVIDIA. There is -- the new chip generations coming out which have 100x of the processing power and demand for AI, I think will remain strong. But we have 2 effects here. One is the saturation of and then getting those lines into yield and into volume. And we installed multiple lines at those players in the past quarters and we still do so. So we -- this is not, not ending. But these lines, of course, have to produce output first and, we do see, somewhat a slowdown but I would say it's just a pause to absorb in the capacity, because as you all know, HBM was heavily underinvested in terms of capacity and this had to be compensated. We are busy with that. We see continuous orders also coming in just not at the level we experienced, the last 5 quarters before. So it keeps going. It will be always an absorption than another sprint, so I think this is by far not over yet. So we are confident that this will, continue. But, I mean, luckily we are not, solely depending on HBM. There are many other products we have, going in different applications. Often, ASUS is being reduced to an, HBM, bonder player only but of course we have much more in our portfolio.

Great. Maybe a question to the new product versions of -- mask cleaner and also the UV scanner. Maybe how much that you have even a mid-class, solution now for the -- for the mask cleaner. This could, be additional, maybe, opens you additional market opportunities. And more important, if I look especially to the gross margin of the Photomask business which has a clear maybe gap to your backend solution, how much maybe with the new versions there's a chance that you can close up a little bit this -- this gap because of the new construction, you mentioned before which is maybe, I guess, better maybe says -- says the cost of relations than you had before?

Yes, indeed, we have high expectations for the mid-end, cleaner which, is currently under development. That addresses particular, the needs of customers who are non-EUV customers but who have been buying our high-end equipment before which is kind of overkill for the application. The mid-end cleaner addresses, cleaning needs, in between, 30 nanometers and 70 nanometers, so more the mature semiconductor, processes and indeed has a much, much, a different, cost price point. And, therefore we want to really address this -- this field. We have a mid-end cleaner but this is coming to age and almost end of life, so this is a new version, a modular version which deploys many of the higher-end features but in a -- in a modular way which where we can address, yes, mid-range applications much better. We see a lot of interest already now while this, machine is still under development. There is a big replacement need also for, aging installed base, machines, not only in China but across the world. So, this will be, I think, a quite interesting, new product which will be available soon. UV scanner, that is of course to broaden, the applications. There we have a roadmap in improving the -- the overlay accuracy. But also the overall, cost structure, because also our existing UV scanner, has a very, established, bill of materials, so we do really a redesign of that one with a few more innovation steps coming in the next 1 to 3 years, to also find more customers in this product segment beyond and above CoWoS applications.

And could maybe is this a new -- so not only is it mid-range, it's also a new high range mask cleaner. Could this also be -- help maybe to bring this margin of this Photomask segment higher? Or is it from the different kind of business from the maybe less on work, more and more parts you buy from outside, given that there is a huge difference between the backend and the gross margin of the mask here, says the Photomask business?

Indeed. The new high-end version we are working on that's the MaskTrack Smart which is becoming ready in the next few quarters is exactly addressing what you said, Johannes. It will have a better margin structure, while offering additional features and having kind of a more value priced approach. So that one, I think, will contribute to further margin improvements. But if you look closely at the margin of the Photomask business, especially, last year, it had greatly improved. So, as a standalone segment, this one looks actually really, really good compared to previous years. But we don't want to stop there. We want to, of course, make sure that our high market share is also represented in a decent margin.

Maybe a question to Cornelia. We didn't maybe discuss or saw a shot about maybe working capital and working capital in relation to revenue. Are you here at your target? Or do you see ways to improve this ratio and so forth maybe increase as free cash flow further? Cornelia Ballwießer: Yes. Of course, we are our target is to improve, in terms of working capital. And as you can see in the in the figures, working capital increased in '24, especially in the fourth quarter because we had we pushed our tools and had revenue recognition but at the same time, contract assets went up. But, of course, inventories are a little bit too high and we are working on this.

And we move on to our next participant, Ms. Winkler.

Following up on the demand environment for temporary bonders, you mentioned earlier and you also mentioned during your prelim call that you see a more even distribution for bonding solutions not only related to AI. Could you elaborate for what applications and from what regions these orders coming from?

Yes. Of course, the biggest application area is in the AI space, so there's no doubt about that. We have other applications. Any application where wafer thinning is required is basically a target application for our temporary bonders, because and that is happening across the industry and that's happening in silicon carbide. It's happening in various other markets. So it's not solely focused on that. However, AI was the biggest boost, we experienced last year. And of course, it's difficult to keep running on that level. So, therefore, we are very actively looking for additional application fields and are quite happy that we have a broader portfolio to compensate with other products which is quite a benefit. Does it answer your question, Nicole?

Yes. And another one on your P&L. I've noticed that the R&D expenses and percentage of sales dropped by more than 2 percentage point. Could you give us some more background to the under proportional growth, especially keeping in mind that you're still in developing of the wafer cleaner, for example and the mid-end mask cleaner. Should we expect this as a normalized run rate, or, yes, what are the reasons for that? Cornelia Ballwießer: With R&D, we have, especially in the fourth quarter, more R&D projects, than we have usually over the month end time. And that's -- our level of R&D expenses will increase a little bit over time. Yes, also in future.

And Nicole, you were asking around the R&D ratio, right?

Yes, exactly.

Yes. Okay. So one driver -- yes, Thomas, you can -- you can, you can answer.

Yes, just one comment that. So the ratio goes a little bit down, correct but the absolute number goes up. So this is simply due to the reason that we cannot speed up with the R&D, extension as we want to, mainly because we're really hiring a lot of people. So we went up with our R&D expense but not at the speed that we planned initially. So in the end, you can expect that -- that we go up with our percentage-wise in the future, depending on the rate how we find people but also how we find external companies to support us in our R&D roadmaps.

Okay. Well, understood. Yes and maybe also on the CapEx expectation, the €20 million earmarked for the -- for the Taiwan side. How much, of this is, geared towards clean room facilities and how much to office meeting spaces? Can you give us a percentage range here?

Well, on it, again, I do not have a really clear percentage-wise. It's a for sure, mainly, the most money goes into the clean room and also the infrastructure for the clean room, because this is 2 floors which we really build up as a complete, clean room there in Taiwan. But I do not have the percentage really by hand right now. Perhaps you can really, read it out later.

And we move on to our last participant with a question so far. Mr. Schaumann, you should be able to speak now.

First question is on the OpEx. Firstly, you had quite an unusually strong surge in the last quarter of the year, coming from lower 20s per quarter in Q1 throughout Q3 to more than €32 million in Q4. Maybe you can elaborate a bit more around the background? And then secondly, the indication for the one-off, increase in the OpEx this year, does that only affect '25, or will that carry over in '26 and then, phase away only later years? Or is will these projects be more or less, finished by the end of the year? Cornelia Ballwießer: Yes, OpEx in the fourth quarter are roughly, €9 million, higher than in the other quarters. And there are some non-recurring items and, or special, or extraordinary expenses for, bonus provisions and special payments, for all the SÜSS employees worldwide, because we wanted to our employees to participate in the success of this outstanding year; it's around €4 million to €4.2 million. In addition, roughly €1.5 million in higher R&D expenses in the fourth quarter and the rest spread across various topics, for example, IT or maintenance activities at our locations. And, yes, there will be some project costs, especially, IT, because we are at the start of many of our IT initiatives that will spill over into '26.

Okay. So the one-off character is -- it's not very short term one-offs, so it will potentially carry on for a while. Cornelia Ballwießer: Yes. Especially say, the big IT, projects, yes.

Yes. Okay. And then a quick one on China, Do you expect a further, headwind from further declining, demand from China? Or would you say that, as you experienced a slowdown since a year or so that the current demand should prove to be more or less stable?

Yes, it's always difficult to project the future but I think corrections, took place and of course, we need to watch the geopolitical space. But nothing hampers us to do business in China, at the current state, we're now following the new rules. So we don't see any signals of further decline, except of course, the Photomask business which already has settled in. That we try to counter also with having this mid-end cleaner available soon, because I think this will, especially in China, trigger quite some interest.

Yes. Okay. And then, again, on HBM, sorry for that. But, I mean, with the looking at the technology roadmap provided by NVIDIA, I mean, we are going to see kind of a pretty significant step up in HBM content in the Rubin Ultra which is scheduled to launch in the second half of '27. Do you think that would kind of give the temporary bonder market a new push then maybe next year? Or is that too early to tell? Or do you have no real opinion on that? So any thoughts from your side on that, would be appreciated.

Yes. Wafer thinning needs you need for all generations of HBM. So but as I said, a large, installed base is in -- is being processed right now. And I can't tell once that peaked out in serving this extra demand. So, that's very hard to guess. But I said several times before, I do expect further waves, once the line capacity is being fully utilized. So we still see a lot of installation activities taking place and we see those lines not running at peak capacity yet. So there is still some room but once that room is exhausted, I would expect new orders also to us.

Okay. And again, we try to give Wiesel Teys [ph] the opportunity to place the question. You should be able to speak now. So we still can't hear you. So, therefore, we move on to another participant with a question, Mr. Mueller [ph], you should be able to speak now and place your question.

Yes. Just one. You alluded to Q1 order intake being in the order of Q3 last year. I think it was around €85 million. Now just as a working example, you know, let's assume you have €85 million of orders in the next following quarter, so that's around €340 million. Obviously, you -- let's say, the sales are mid-range around €490 million in 2025. It means the order backlog would come down dramatically, probably to levels then, I mean, if I do the math correctly, we will be around €280 million or so order backlog by end of 2025. Now where do I want to go with that? I mean, if you have an order backlog of €280 million by the end of 2025, you might have sales in 2026, obviously, depending on many things but maybe around €400 million. So a sharp decline from where we are now. My question is, I mean, you're ramping now. You're ramping costs, especially OpEx costs. I mean, we've seen a sharp increase in Q4. And even on this now, even including Q4 on an elevated level, we see another sharp increase of OpEx cost. I mean, what would happen in '26 if the sales were to decline to levels of around €400 million? I mean, what would you expect to be able to counterbalance on the cost side, given that you're just increasing costs to kind of stabilize the margins?

Now, well, it is, of course, many questions. And maybe I have to put in context the Q1 expectations. So I said we're closer towards Q3, so I think we still end up above that but a single quarter never makes a full year. So we will have uneven distribution over the years. You've also seen, I think, we showed the data of the last 2 years, how much variance is there in the quarterly order intake. Often orders especially for big ticket items are pushing over quarter end and then have a relatively large impact. So, this doesn't give me sleepless nights. So we think we can end the year with a higher order intake than you depicted there. The second question is about, ramping up and scaling. And there are, probably, Thomas can also, chip in but let me take a start here. We are scaling in a very flexible way, the new site we are moving into, actually will improve efficiency because we are consolidating by now, more than 8 sites we have in Taiwan into a single site. This new site, has room for more capacity but only will be built up in a phased approach. So we will only build out as much capacity as we have visibility, to not create over capacity. So this can be done in a -- in a very smart way. And thirdly, we have really, a complete new production planning and, a better system in place that, we are much, much more flexible how to plan our production. Also, in terms of, manufacturing headcount, where we can easily switch, gears there, to adjust for changes in market demand. Having said all that, so I expect greater efficiencies, that's why we are running these programs which yes costs some money but will actually save money on -- on the long run and give us much more, flexibility. And therefore, I think it's -- the risk you, you were hinting there, I think is somewhat under control. Nobody can steer the market, of course. We have to follow, what the market does. But we will maintain maximum flexibility and we do have, midterm plans to grow further. At which rate, we will tell more about, towards the end of the year. That's why we invited you all for our Capital Markets Day. But 1 quarter and I think I said exactly the same a year ago, we'll not make a year.

Perhaps, I may make a short notice also on this, Burkhardt already said a lot. But concerning the flexibility also on operations, be aware that we really did, a little bit of our homework what we said last CMD, Capital Markets Day that we have flexibility in manufacturing in terms of outsourcing, where we have flexible, capacities at supplies. And the second point is we have also really pretty high flexibility with, temporary workers right now, so that we really can react in a very flexible and very fast way on -- any, yes, downturns which could be ahead of us which we do not expect right now.

And we give Wiesel Teys [ph] a last try to place the question. You should be able to speak now and hopefully we will hear you. Well, unfortunately this is not the case. We have no more participants with any questions and so we come to the end of today's earnings call. Thank you everyone for joining, your shown interest in SÜSS MicroTec and this lively conversation. Should further questions arise at a later time, please feel free to contact investor relations. A big thank you also to you, Mr. Frick, Dr. Cornelia Ballwießer, Dr. Rohe and Mr. Kopsel, I wish you all the best and a lovely remaining day. And with this said, I hand over to Mr. Kopsel for some final remarks.

Yes, thanks. Just one remark as addressed, please get in touch if you have any more questions today, tomorrow, or next week, or whenever. And Wiesel, you can also give me a call, later this afternoon. I'm there for you. Bye.