ams OSRAM AG

SIX:AMS

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. I am Haley, your Chorus Call operator. Welcome, and thank you for joining the ams Full Year 2020 Results Conference Call. [Operator Instructions]I would now like to turn the conference over to Alexander Everke, CEO; Mr. Ingo Bank, CFO; and Mr. Moritz Gmeiner, Head of Investor Relations. Please go ahead.

[Moritz M. Gmeiner, Head of Investor Relations]

Good morning, everybody. This is Moritz Gmeiner. I'm very happy to welcome you to this morning's conference call on our full year 2020 and fourth quarter results. As usual, Alex will give you an overview of the developments of our business, and Ingo will lead you through the financials in more detail. Alex?

[Alexander Everke, CEO & Member of Management Board]

Thank you, Moritz. Good morning, ladies and gentlemen. I'm very happy to welcome you to our fourth quarter and full year 2020 conference call this morning. Please note that we are reporting consolidated group financial results, including OSRAM, on the basis of our majority shareholding and that some of my remarks will relate to our ams business only. Therefore, the term group will refer to the total group, including OSRAM, while the terms we and our business will refer to our ams business. Now some key figures to start with. Full year 2020 group revenues were $4.2 billion, up 86%, including consolidation, while fourth quarter group revenues were $1.68 billion, up 17% sequentially from the third quarter. Our ams business saw full year 2020 revenues of $2.29 billion and a full year EBIT of $519 million, which was 23% of revenues. Fourth quarter revenues for the ams business were $681 million, and the adjusted EBIT margin for the ams business was 27% of revenues.ams recorded robust overall group results in 2020 despite the impact of COVID-19, and we concluded the year with a very positive fourth quarter for the group. I'm proud to add that the year 2020, the year of COVID-19, turned out to be the best year in the history of the ams business. With revenues of $2.29 billion, the ams business showed growth in this very challenging environment, together with an increase in full year adjusted EBIT.In the fourth quarter, the ams business saw the expected very good sequential growth. It achieved revenues that were strongly towards the top end of the guidance range, clearly driven by the very firm consumer demand, while the ams medical business ended up slightly weaker than expected. The adjusted operating margin for the ams business was strong in the fourth quarter, at the top end of the guidance range, despite a currency headwind. We welcome the OSRAM fourth quarter 2020 results that came out this morning. I'm happy to see the improved performance of the OSRAM business in the revenues and EBITDA profitability and its contribution to group results. Beyond that, I'm not able to comment on details of the OSRAM business at this time.We're also pleased to see the OSRAM business improved financial outlook for its full fiscal year. We expect a positive demand development in the OSRAM business, that is underlying this outlook confirms OSRAM's leadership in the global light emitter market and the strength of its technology. We look forward to harnessing these advantages in the coming years through our planned full integration of ams and OSRAM. I also appreciate that the expected balanced revenue profile for the group is already evident, particularly in light of very good consumer demand. In the second half of 2020, nonconsumer markets accounted for 63% and the consumer market for 37% of group revenues. This is less than half of what the split was in the year before when the consumer market was made up 87% of revenues. Even in the full year group results, which exclude the OSRAM business for the first half of 2020, nonconsumer was 52% and consumer 48% of group revenues. This compares to 82% of consumer business in 2019. We continue to progress towards the business integration of ams and OSRAM. We are preparing to implement the domination and profit and loss transfer agreement, or DPLTA, which OSRAM shareholders approved in the fourth quarter. In December, an action was brought against OSRAM shareholders' resolution approving the DPLTA upholding its registration. This is not entirely unprecedented in Germany. OSRAM has, in the meantime, filed a court motion to remove the blocking as part of a specific legal procedure. We, therefore, expect to be able to implement the DPLTA in the foreseeable future. This will enable us to drive the integration of both companies in the most efficient way and realize the planned synergies of EUR 300 million, which we are happy to confirm. We have comprehensive long-term funding in place to implement the DPLTA and subsequent steps to realize the full integration of OSRAM. Our financial flexibility going forward is further supported by the expected ongoing cash flow generation for the group.A majority-owned independent listed subsidiary of ams, OSRAM has announced the intention to appoint Ingo as CEO of OSRAM in the current quarter. Also, Thomas Stockmeier has recently been appointed as Chairman of the Supervisory Board of OSRAM. Four seats of the OSRAM Supervisory Board have changed since the closing, and we expect a fifth seat to change in the current quarter. Now let's take a look at our ams business in 2020 and the fourth quarter. The ams consumer business performed strongly in 2020 and was an important driver for the group despite the negative impact of COVID-19. This positive development was due to ongoing robust demand for consumer devices, which continued in the fourth quarter. Our ams business is a worldwide leader in optical sensing, focused on innovation. And our ams consumer business is a major supplier of sensor solutions to consumer OEMs.The consumer business is a major player in 3D sensing and combines extensive IP and know-how for all architectures: structured light, indirect and direct time-of-flight and active stereo vision. In 2020, our ams business shipped substantial volumes in 3D sensing products to leading consumer OEMs and continue to build its position in the Android market.We are successful in illumination for different 3D architecture based on our optics and VCSEL technologies, and we are driving the evolution of 3D technology for more differentiated usage. To this end, we have been expanding our 3D portfolio to include near-infrared image sensing, SPAD sensing, algorithm, and system and application software. On this basis, our ams consumer business implements a strategic focus to create system-level 3D solutions.In world-facing 3D, we ran high volume of VCSEL iToF illumination for camera enhancements last year. Taking 3D sensing forward for complex applications, we are focused on the development of 3D direct time-of-flight technology. This is an advanced time-of-flight architecture targeting augmented reality and other world-facing users. 3D direct time-of-flight and AR scanning functions will create an attractive new 3D market in the next years based on customer feedback.Our broad 3D portfolio and industry-leading system capabilities offer an unmatched platform to drive innovation in 3D dToF systems and address attractive opportunities in this market. We are seeing good progress in developing our complete 3D dToF solution for high performance. As a result, we have recently started to engage with customers on first evaluation. The solution integrates VCSEL illumination, optics, high-resolution SPAD sensing, software and algorithm, and we see ourselves as the only vendor having this capability. We are also engaging with a major ecosystem software player for 3D direct time-of-flight. We want to combine both parties' know-how to accelerate integrated 3D dToF solutions. We are keen to drive innovation in 3D dToF systems, and the feedback we receive validates the strength of our 3D dToF technology. In other direct time-of-flight, our ams business is successful with the 1D dToF solutions. They already power LDAF auto-focus in smartphone platforms at different OEMs, and we are seeing further market success and penetration for our 1D dToF technology.We are also focused on behind-OLED 3D technology for face authentication as a major innovation in front-facing 3D. This will allow to take -- to make 3D sensing invisible behind a display and eliminate front [ replace ] components. Our strong capabilities in BOLED light emission and sensing and our deep 3D system expertise drive our leading position in this emerging area. We are progressing in our development of BOLED 3D active stereo vision along a technical path to realize a system solution for this highly challenging technology. The full system comprises VCSEL illumination, near-infrared image sensing, algorithm and related software, and we are able to demonstrate the technical concept. Additionally, we are starting to engage with leading OLED vendors to address key technology aspects in order to commercialize the technology for the next years. As a following step, we plan to explore BOLED 3D architectures that support structured light. Our ams business has a leading position in display management for consumer devices, shipping significant volumes last year. With our innovative light and proximity sensing behind the OLED display, we enable full-screen designs. Our BOLED portfolio continued its success last year with growing adoption of leading Android OEMs.Our ams business is also a leader in ultra-small-scale proximity sensors and successful in the wireless earbud market. Camera-enhancing features are attractive value propositions for smartphone users. Our innovation for automatic white balancing creates higher picture quality and compelling natural colors using spectral sensing. Wider-range flicker detection, on the other hand, allow us to eliminate picture artifacts and from artificial light. Both solution are having nice market traction, and we see increasing adoption at smartphone OEMs. As a leading supplier of active noise cancellation in the growing earbuds and headphone market, we added a number of new audio OEMs last year. Let me now look at the ams nonconsumer side. The full year segment results of the ams nonconsumer business were significantly impacted by the pandemic. Over the course of the second half, however, this challenging situation began to improve. Our ams automotive business showed an overall subdued performance in 2020, reflecting the strong impact of COVID-19 on global demand. Following a weak -- a very weak first half, our ams automotive business showed more attractive result in the third and fourth quarter as order trends and production volumes developed positively.The ams business has built a strong position in 3D LIDAR, a core automotive and 3D sensing technology that enables the evolution to automated and autonomous driving. Our ams business has VCSEL LIDAR engagements at the range of system suppliers, including LIDAR vendors in North America. Our partnership with successful LIDAR integrator, IBEO, add to this program win for Great Wall Motors, where our high-power automotive-qualified VCSEL array drives long-range illumination. Optical in-cabin sensing, or ICS, has emerged as a meaningful new market in automotive, where interior comfort and safety functions such as driver and seat monitoring are gaining real traction. Our ams business is nearly -- is early leader here with project wins in different technologies, including 3D. In the innovative micro-lense projector systems for exterior lighting that create light [ carbons ] on the ground, we are seeing increasing adoption that offers opportunities for optical and VCSEL solutions. The ams industrial business, which serves industrial automation and HABA markets, performed in line with muted expectations for 2020. Industrial demand was strongly impacted by the effects of pandemic, which reduced industrial investment globally. Following a weak first half, our ams industrial business improved in the third and fourth quarter, and we see more positive demand trends, indicating a regional recovery. We have a leading position in high-performance global shutter imaging, and our imaging expertise drives our 3D system capability in consumer, in industrial, including 3D active stereo vision. At the recent CES, a facial recognition door lock, which is powered by an ams 3D system, was announced for the U.S. market. The ams medical business recorded an overall positive performance in 2020 against the backdrop of COVID-19. ams confirmed its leading position in medical imaging for CT, digital X-ray, mammography and micro endoscopy. Our ams business continues to be successful in the growing Asian CT market and benefited from COVID-19-related demand for CT scanners. It is also the leader in later CT sensing technology that creates outstanding diagnostic resolution at low radiation doses.The ams medical business expanded into medical lateral flow test, or LFT, last year, an established in vitro diagnostics method for viruses, bacteria and other biomarkers. Driven by COVID-19 and as a real innovation, we brought a highly accurate LFT readout solution to the market at record speed. Powered by our unmatched VCSEL sensing, the integrated test kit optically analyzes LFTs at the point of care and offers fast, robust diagnostics without high-cost lab equipment.In the quarter, early production of the COVID-19 antibody test kits started at our partner, Senova, and created first small-scale revenues. Our North American partner, Precision Bio, is in late-stage development and the approval process for a highly sensitive COVID-19 antigen test kit to identify current infections. In addition, we pursue opportunities with additional partners in North America and Europe. We expect digital LFT solutions for a large in vitro testing market to offer a real growth opportunity for the coming years. In operations for the ams business, we were able to safeguard production and fulfill customer demand through the year despite COVID-19. In spite of the pandemic, our ams business achieved high production efficiency and yield across locations. Let me now turn to the outlook for our ams business. Please note that our financial outlook for the first quarter only includes the ams business given the financial guidance horizon of OSRAM. We expect the ams business to grow year-on-year in the first quarter at the midpoint of expectations despite typical seasonality effects. Based on available information and the definition above, we expect first quarter ams revenues of USD 500 million to USD 540 million, up 4% year-on-year, at the midpoint of the range. We expect an adjusted operating margin for the first quarter of 20% to 22% for the ams business, also improving year-on-year at the midpoint. The ams consumer business is expected to reflect seasonal volume effects, while the nonconsumer business is expected to align with respective end market dynamics. Please note that these expectations assume no foreseen negative effects from the pandemic that would have a meaningful negative impact on our business. With this, I would now like to hand over to Ingo.

[Ingo Bank, CFO & Member of the Managing Board]

Yes. Thank you, Alex, and a very good morning to all of you as well from my side. Before I start reviewing the financials of the fourth quarter and the full fiscal year 2020, let me start maybe with a few general remarks. We will refer to the ams business and the OSRAM business when discussing the financial performance of these 2 business areas. I will refer to the ams group when discussing the fully consolidated financials of the company. The OSRAM financials are consolidated as of July 2020. In other words, the ams group financials for 2020 include 6 months of the OSRAM's financial performance in 2020. When we refer to adjusted financial metrics for the ams business, we refer to adjustments from the as-reported IFRS basis pertaining to acquisition-related, share-based compensation, restructuring costs and results from investments in associates. A reconciliation to the IFRS basis of presentation is included in the financial information of Q4 and the full year 2020, which we have posted this morning on our website where you can find the details. When we refer to forward-looking information, this is related to the ams business only, given the current OSRAM financial guidance horizon. First, maybe some of the highlights. I'm now on Page 24 of our Q4 2020 earnings release presentation. Q4 2020 for our ams business came in towards the high end of the guidance range we provided, driven by robust demand in the ams consumer business. The OSRAM business also showed improved performance in this December quarter when compared with the same period about a year ago.For the full fiscal year 2020, revenues and adjusted EBIT for the ams business were at historical record levels. Continuing revenue growth was accompanied by an improved adjusted EBIT margin, and that's all despite the backdrop of the COVID-19 pandemic. And as Alex pointed out for Q1 2021 already, we expect to show year-over-year growth in our ams business when you take the midpoint of the guided revenue range, even when we take typical seasonality into consideration. Adjusted operating profitability is expected to be very solid in the range of between 20% to 22% of revenues. Let's take a closer look at some of the key financials of the ams group summarized on Page 25 of the presentation. In the fourth quarter of 2020, group revenues were USD 1.68 billion, up with 138% year-over-year, reflecting the consolidation effects of OSRAM into the ams group. OSRAM contributed approximately USD 1 billion of revenue in the quarter. For the full year, group revenues were at USD 4.16 billion, up 86%, again, up largely due to the same consolidation effects. OSRAM revenue constitutes approximately 45% of the full year group revenues in 2020. Adjusted EBIT in Q4 '20 for the group came in at a solid 17% compared to 28% for the same period a year ago. The year-over-year change is reflecting of the -- reflective of the OSRAM consolidation effects into the total group. The ams group net result for 2020 was, on an adjusted basis, was $282 million. On a reported IFRS basis, the group's net result was negative with USD 104 million in the year 2020. The decline to 2019 is reflecting the OSRAM consolidation impact since July of 2020 as well as operational and financial expenses related to the acquisition process in the course of 2020. Year-over-year changes in earnings per share for the ams group were driven by the impacts on net results that I just outlined as well as a higher share count compared to a year ago, given the rights issue executed earlier in 2020.With the acquisition of OSRAM, the ams group revenue distribution has markedly changed, when you look at the comparison on Page 27 of the presentation. For the full year of 2020, revenue from our consumer business was almost evenly split with our revenue base in automotive, industrial and medical. However, when looking at the second half of 2020, which more importantly represents the period in which we have been consolidating OSRAM, we noticed a more diversified revenue picture for the group, substantially reducing the historically more concentrated exposure of the ams group to the consumer part of its business. Regionally, the ams group had a higher share in EMEA and the Americas on balance for the year 2020. Turning now to Page 28, looking at gross profit and profitability on an adjusted basis. Fourth quarter 2020 adjusted gross margin came in at 35%, lower compared to Q4 2019. For the full fiscal year 2020, the ams business was able to increase its absolute gross profit in U.S. dollar terms, also on the back of the underlying revenue growth. Still, the adjusted gross margin for the ams group was at 33% lower than fiscal year 2019, given the OSRAM consolidation effect. Adjusted EBIT for the group was 17% for Q4 '20. For the full year 2020, the group's adjusted EBIT stood at 13%, lower when compared with 2019. Underlying that was, on the one hand, a successful expansion in adjusted EBIT margin in our ams business from 21% in 2019 to approximately 23% in 2020. On the other hand, we saw the consolidation effects of OSRAM into the 2020 group financials, markedly affecting the overall year-over-year comparison to 2019. Foreign exchange movements, especially the weakening of the U.S. dollar against the euro, provided some headwinds for the ams business in the fourth quarter of 2020. Moving now to the OpEx development of the group for page -- on Page 29. SG&A expenses for the group in quarter 4 of 2020 were USD 230 million, USD 168 million of which related to the OSRAM business or approximately 73% of the total spend in the quarter. For 2020, SG&A expenses were USD 627 million, including 6 months of OSRAM SG&A spend amounting to USD 336 million or approximately 54% of total SG&A for 2020 for the ams group. Close to USD 64 million of the group's SG&A spend were one-off expenses related to the OSRAM acquisition recorded in the ams business financials. R&D spend in the fourth quarter was USD 179 million, USD 103 million of which related to the OSRAM business, close to 58% of the total quarterly group innovation spend. Overall, this spend for the group translated into 11% of group revenues. Efficient spending on overheads continues to be a key financial objective also in the combination with OSRAM once the domination agreement has been cleared and registered. Turning now to the net result and earnings per share information on Page 30. The adjusted net result for the ams group in 2020 was USD 282 million, by and large, contributed by the ams business with USD 274 million. The overall decline when compared to 2019 was driven by the expenses related to the acquisition, both on the operational expense side as well as on the financial expense side, taking transaction-related fees and higher interest expenses into account. Adjusted basic and diluted earnings per share for the group in 2020 were CHF 1.13 and CHF 0.98 or USD 1.26 and USD 1.09 on the dollar front. When we compare our EPS performance to 2019, we need not only to take into consideration the changes in net results outlined above, but also the substantial increase in number of shares outstanding resulting from the rights issue in spring of 2020. Let me now complete the picture on the financials with a look into cash flow and the debt position of the ams group on Pages 31 and 32, respectively. The group operating cash flow was very strong in the last quarter in 2020 with USD 384 million, with the ams business contributing USD 292 million and the OSRAM business USD 92 million. For the full year 2020, the group's operating cash flow increased by USD 67 million to USD 835 million, very strong. 2020 CapEx spend in the group was nearly unchanged year-over-year at USD 211 million. With 5% of group revenue, this spending reflected a cautious investment approach given the uncertainties presented to the group by the COVID-19 pandemic. The group's cash and cash equivalents stood at USD 1.9 billion at the end of the year compared to USD 1.46 billion at the end of the third quarter. The increase results from a combination of the net proceeds related to the placement of the EUR 760 million convertible bonds during Q4 '20, on the one hand, and the strong free cash flow generation of the group in the quarter, on the other hand. At the same time, we did also retire some outstanding short debt -- short-term debt during the quarter, notably the EUR 450 million outstanding balance of the previous acquisition-related bank bridge. As a result of all of the above, the group net debt came down meaningfully and stood at roughly USD 2 billion as per the end of 2020 compared to approximately USD 2.5 billion as per the end of September 2020. Overall, this translated into a financial leverage for the group of approximately 1.7x at year-end, positively ahead of our expectation. We believe that we now have a well-balanced funding structure in place with a mix of funding instruments and different maturities. It will allow us to support operational cash flow needs of the group, whilst at the same time also working towards the full integration of OSRAM. With that, I would like to thank you for your attention and open up the floor for questions.

[Operator]

[Operator Instructions] And the first question is from the line of Stephane Houri of ODDO.

[Stephane Houri, Research Analyst]

Actually, I have 2 questions, sorry. The first one was about Q1. As you are guiding for normal seasonality and given the very strong context and momentum at Apple earlier, I would have expected probably a slightly better seasonality in Q1. So can you please comment a little bit what's happening there? Is there any share loss, I would say, at other manufacturers like Android? Or what -- is Huawei the problem? Or are you facing price pressure? So any information would be appreciated.And the second question is about the DPLTA delay. Can you tell us what time frame for the implementation of the DPLTA according to you? And how much does it delay the restructuring?

[Alexander Everke, CEO & Member of Management Board]

Yes. Let me -- Alex here. Let me take the first question. Ingo will the second one. For Q1, actually, we are very happy with the development of our business and expect good business momentum to continue in the first year. It's a normal seasonality as we see it from the market and from others. We expect to even grow year-on-year at the midpoint in the quarter, which reflects a typical seasonality on a scale that is very much like in previous years. Plus, we have continued effects from the pandemic. So in total, we are very happy with the fiscal Q1 guidance and don't see any additional impacts on the first quarter.

[Ingo Bank, CFO & Member of the Managing Board]

Yes. And on the DPLTA, I think it's important to note that, as Alex said in his prepared remarks, that OSRAM has already filed for the counter claims, so to say, which is on the basis of an established, in German law, if you like, accelerated procedure. And I think Alex said foreseeable future, that should be a couple of months in our expectation.

[Operator]

The next question is from Achal Sultania of Crédit Suisse.

[Achal Sultania, Director]

Can you just help us understand, there is obviously a lot of noise around design changes for, potentially, for 3D sensing at one of your large customers. Obviously, you can't comment much on what the customer may be planning or thinking. But can you just help us understand like how are you trying to position yourself from a technology standpoint to be ready for any design change, either on the 3D sensing side for front-facing or for the ambient light stroke color sensor? Just to give us some sense of where you're trying to head towards in terms of technology.

[Alexander Everke, CEO & Member of Management Board]

Yes. Thanks for the question. And as you know, as before, there are certain areas in our business we cannot comment on specific projects or customer engagements. But what we are doing is very clear that, as in the past, we invest significantly into our optical competencies. We are driving the road maps further in bringing light sensing behind the OLED. We do the same in the 3D area. We expand our portfolio from structured light to active stereo vision, direct time-of-flight. So you see that we have positioned ourselves as a company with a broad portfolio, leading-edge technology to be able to support our customers in the best possible way. And that's what we'll continue in the future as well.

[Achal Sultania, Director]

Alex, just maybe a quick follow-up on that, what you said. So how should we think about some of these projects ramping, not just at your major customer, but across the board with the Android camp as well? Can we expect some new projects to ramp up on the 3D side of things as we go through 2021?

[Alexander Everke, CEO & Member of Management Board]

We are in strong engagement with the broad customer base in the consumer space. As you can imagine, we have launched multiple new designs where we brought ambient light sensing, proximity sensing, behind the OLED. We mentioned this already. We see very good traction there. We're engaged in 3D technology, also in -- and world-facing 3D, direct time-of-flight. But we cannot give any timing there. When we are allowed to talk about design wins, we can do this, but we cannot give specific timing on all the areas. But we feel very well positioned with our portfolio, which is very broad and address basically the majority of our customer needs.

[Operator]

The next question is from Janardan Menon of Liberum.

[Janardan Nedyam Menon, Technology Analyst]

So my question is also a little bit along the previous lines. But normally, you -- let me try it another way. Normally, your seasonality is quite strong in the second half of the year. Is there any reason why we should expect that not to be true this year as well, that we should not see the kind of seasonality in the second half, third quarter ramp, et cetera, that we've seen in previous years? And my second question is on -- you talked about a sort of an ecosystem partnership on the direct time-of-flight. Could you just elaborate a little bit more on that? Like what kind of a partnership it is, what it brings to your solution that you don't have on your own, et cetera? That would be useful.

[Alexander Everke, CEO & Member of Management Board]

Yes. On the guidance, we give now only the guidance for the first quarter, and we don't give indication for the remaining of the year. You may have indications in the next quarter. But today, we give the -- purely the guidance on the first quarter, and we will stick to that. On the second question, the relationship with software in companies related to 3D. This is more related to the application level -- layer, not only on the firmware, what we're doing with our solutions, but in the algorithm with our solutions. This is more on the application level to utilize applications like AR for end customers and other use cases. And it shows that working with software companies very closely together, you can optimize the technical setup of the system to create better performance and also be ready for new software applications which may come present at the marketplace. So we see a very good combination there, and the way of working is very intense and very constructive. And later on, next quarter, potentially, we can give more insights. But the first step, engaging with those companies, very, very successful.

[Operator]

The next question is from the line of Sébastien Sztabowicz of Kepler Cheuvreux.

[Sébastien Sztabowicz, Head of Tech]

Could you please help us understand a little bit the kind of OpEx budget that you have for 2021 maybe on a clean basis? And separately, what do you expect in terms of PPA for 2021, basically? And on spectral sensing and medical lateral flow testing technologies, you mentioned a little bit of revenue in Q4. Can we understand a little bit what kind of revenue you had already? And how do you expect the volumes or the revenue coming from medical lateral flow testing business accelerating moving to Q1 and 2021?

[Alexander Everke, CEO & Member of Management Board]

Yes, let me take the second question first, and Ingo will talk about the OpEx. The revenue in the fourth quarter was a couple of million. So very -- so quite small number, but this is starting off the business, and we see it improving over the next 3 quarters. We're not giving a guidance on that, but what we see is a very good traction in this area and good interest, multiple -- 2 customers we announced already. And I think it's very clearly seen that the market requires such solutions. But the ramp, of course, is complex for getting all the medical approvals, which is nicely on track.But we see, besides the current COVID-19 application, also future application with other viruses and bacteria where this technology can be used. So that's why we see a meaningful growth opportunity in this area and a ramping business, but we have not given guidance quarter-by-quarter for it, but steadily improving.

[Ingo Bank, CFO & Member of the Managing Board]

Yes. And then maybe your question on OpEx and PPA. So please understand, we do not typically guide for selected P&L or balance sheet items. So I appreciate if you understand that. The only thing I might say that if you look at, for instance, PPA, you've now seen 2 quarters where we consolidated OSRAM, so the third quarter and the fourth quarter of 2020. And I think that should give you an indication as to what kind of run rates you would probably have to expect in the combination as well. And once the domination agreement is in place, then we will give guidance for the group. Then forward, you will also see probably a bit more language on the OpEx level going forward. But at this point in time, I'm afraid I can't give you a clear answer to this one. Thank you for understanding.

[Operator]

The next question is from Sandeep Deshpande of JPMorgan.

[Sandeep Sudhir Deshpande, Research Analyst]

Maybe I can ask 2 questions. I mean, firstly, regarding your spending plans in the ams stand-alone business through the year, I mean, based on what wins you have, do you need to ramp up or change the spending plans through the year? And do you expect to cover the overall D&A that you have like you have through last year? I mean, as you know, in the past, you've had some problems on -- because of the spending, but you had a very smooth 2019 despite the pandemic, and do you expect that same sort of trend in 2020? And my second question is regarding some of these new wins that you've talked about in direct time-of-flight on the back of the phone or whether it is a white light balancing. When -- are these going to produce significant revenues, which is going to cause a significant shift in your revenues, whether it is in 2021 or '22 or beyond that?

[Alexander Everke, CEO & Member of Management Board]

Yes. Let me start with the second question. We see, as I mentioned before, very good traction there, especially in the Android camp, where more and more customers are interested to get those features because this helps them to give better use case and experience to the end customers. Direct time-of-flight is certainly an area for the next couple of years where we see clearly use cases for world-facing, and AI is a good example. And there, we are positioning ourselves to be a full system provider, including the image sensor and software. So this is a very, very strong technology, and we will see progress through '21 in the technology offering. So that's very clear.On the spending, I think we indicated that our CapEx will be 10% or lower based on revenue for the coming year and as it was similar to 2019. So we don't see a very -- as a goal, and we don't see a major change there.

[Operator]

The next question is from Robert Sanders of Deutsche Bank.

[Robert Duncan Cobban Sanders, Director]

Alex, do you see any appetite to simplify structured light by using cheaper optical components on the transmit side, such as polymer and there's molded glass as opposed to wafer-level optics? I mean there's been a lot of debate in the market. Do you think this is actually doable in terms of supporting facial authentication given accuracy and temperature, et cetera? And I have one follow-up.

[Alexander Everke, CEO & Member of Management Board]

Well, as you can imagine, our engineers are looking at all different areas, and we are very, very strong in structured light, but I cannot reveal any technical ideas here because we want to don't distribute it in the world. But we are looking at those technical details, but we are not speculating. And there's always different ways and looking at it, but we feel comfortable with the technology we have in-house.

[Robert Duncan Cobban Sanders, Director]

And just on the behind-OLED content opportunity, do you still believe that, that is a higher content opportunity than having a notch, et cetera, when it comes to 3D sensing, particularly facial authentication? Is that still the case? Or do you think that there are ways around it by using a bezel that will actually not necessarily increase the content opportunity significantly?

[Alexander Everke, CEO & Member of Management Board]

Well, certainly, as you can imagine, this is to bring 3D or any other sensor behind the OLED screen is significantly more complex than having it visible. And for that technical competence, the value and the content is certainly higher. So we see high opportunities and content the moment those technologies goes behind OLED. And we have demonstrated this when we brought proximity and ambient light sensing behind OLED, where the ASP is significantly higher than the same functionality being visible on the screen.

[Operator]

The next question is from the line of Adithya Metuku of Bank of America.

[Adithya Satyanarayana Metuku, Associate]

So 2 questions, please. Just firstly, just a follow-up on one of the previous questions. When I look at the stand-alone 1Q guide, you're guiding for your revenue to be up 4% at the midpoint on a year-on-year basis. However, when I look at iPhone unit expectations, they're expected to be up almost 30% year-on-year. Similarly, in the December quarter, your stand-alone revenues were up around 4% year-on-year, while life and units were up 11% year-on-year.How do we -- how do I square this difference? How do I understand this underperformance? Is there something going on around pricing pressure and maybe content changes that we're not fully understanding? Any color you can provide around this would be very helpful.And secondly, just on the ramp-up of synergies. You mentioned the synergies will now come 3 years post the DPLTA. We were previously modeling these synergies to come 3 years post closure. So how should we think about the implications on restructuring expenses within our models? Should we assume -- should we delay these out as well? Any color around this would be helpful.

[Alexander Everke, CEO & Member of Management Board]

Yes. Thanks for the question. Let me take the first one. As I mentioned before, we see a standard seasonality for the first quarter here. And we don't see any different structural changes if I look at the first quarter this year to previous years. So we feel happy with the guidance. We look at specific customer demands and market demand, and that derives our guidance, which was, in the past, always quite accurate. And -- but we don't see any structural changes in the first quarter guidance, not at all.

[Ingo Bank, CFO & Member of the Managing Board]

Yes. Then maybe on the synergies, I think we always said that on the synergies, we would expect that to be around sort of 2/3 in the first 3 years, which is, I think, also what we confirm today. We've not changed our view on the absolute amount of synergies that we see coming in based on what we've now seen also with OSRAM. But obviously, we can start realizing those only once we have the domination agreement in place. So that's maybe the only change in that because of legal reasons, there's nothing of own or OSRAM's making, if you want, from that perspective. As far as the expenses are concerned related to such synergies, I would expect those to be always a bit front-loaded relative to the savings, for obvious reasons, as far as those are related to personnel kind of measurements. So the front-loading of that relative to the profile of when then the synergies come in should be the same as what's indicated before. So no change there as well.

[Adithya Satyanarayana Metuku, Associate]

Understood. Maybe if I could just a quick follow-up on the year-on-year changes in Apple units versus your guide. Is there anything additional you can add?

[Alexander Everke, CEO & Member of Management Board]

Sorry. Can you repeat the question?

[Adithya Satyanarayana Metuku, Associate]

I understand your point on seasonality into 1Q. But just on -- I understand you have been accurately predicting in the past your revenues. But I just wondered if you could help us square the circle around why your performance in the fourth quarter was significantly lower on a year-on-year basis versus Apple's units on a -- and it is, again, very low in the March quarter as well per your guidance. Is there anything we need to keep in mind when we're modeling this within our estimates going forward?

[Alexander Everke, CEO & Member of Management Board]

Look, so first of all, we can't give specific information about one platform or customer. But what I can tell you is that we don't see structural changes not in the fourth quarter of last year nor in the first quarter of this year. We see it very similar to the years before, and we don't see any changes there. So I unfortunately cannot add more there. Very similar to other -- what we see in the market. I mean -- so that's why we feel quite comfortable with the guidance, and we feel happy with the 4% increase year-on-year.

[Operator]

[Operator Instructions] And the next question is from the line of David O'Connor of Exane BNP Paribas.

[David O'Connor, Analyst of IT Hardware and Semiconductors]

Maybe 2 from my side, Alex. Firstly, helping us with the growth drivers for 2021, can you please rank the product growth drivers for this year?

[Alexander Everke, CEO & Member of Management Board]

We are not giving by product category the growth drivers. But as you well know, larger areas of growth is everything related to ambient light sensing and 3D. We indicated a growth driver of -- in the medical business. We are seeing the start of -- towards the end of the year in the automotive business to move up, but we are not giving specific drivers by product category. But it's very similar to the years before, I would say.

[David O'Connor, Analyst of IT Hardware and Semiconductors]

Okay. Okay, fair enough. Understood. And for the second question, how confident are you that you can maintain your 3D sensing market share in 2021?

[Alexander Everke, CEO & Member of Management Board]

Well, we certainly have the ambition to position our portfolio, which is the broadest in this industry, as broad as possible and position ourselves for all possible customers with our portfolio. That's very clear. And we put all the efforts behind to continue to create leadership in the market in 3D, in display management and other optical components, and we see this very positively. And specifically, in the next years forward with new opportunities we get with the combination of OSRAM, we see this in a very, very strong positive way.

[Moritz M. Gmeiner, Head of Investor Relations]

Ladies and gentlemen, this concludes our question-and-answer session for this morning. We thank you very much for joining us this morning for our Q4 results conference call, and we look forward to speaking to you again with our next quarter's results. Thank you very much, and have a good day.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.