Comet Holding AG

SIX:COTN

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and gentlemen,

welcome

to

the

Comet's

Full

Year

2021

Results

Conference

Call

and

Live

Webcast.

I

am

Arianna

the

Chorus

Call

operator.

I

would

like

to

remind

you

that

all

participants

will

be

in

listen-only

mode

and

the

conference

is

being

recorded.

The

presentation

will

be

followed

by

a

Q&A

session.

[Operator Instructions]



The

conference

must

not

be

recorded

for

publication

or

broadcast.

At

this

time,

it's

my

pleasure

to

hand

over

to

Ulrich

Steiner,

VP

Investor

Relations,

Comet

Group.

You

will

now

be

joined

into

the

conference

room.

[audio gap]

[Ulrich Bernhard Steiner]

(00:00:50-00:00:55) on

the

phone.

Thank

you

very

much

for

joining

Comet's

full

year

presentation

for

the

year

2021.

In

the

following

minutes,

Our

CEO,

Kevin

Crofton;

and

our

CFO,

Lisa

Pataki

will

present

you

the

results

of

the

last

year.

After

the

presentation,

you

will

have

ample

time

to

ask

questions

either

here

in

the

room,

but

also

over

the

phone,

so

we'll

open

the

line

after

that.

The

documents

we

published

today

are

available

on

our

website

since

this

morning.

You

can

also

find

the

annual

report

with

much

more

information

on

our

figures

on

the

website.

Before

we

start

the

presentation,

I

would

again

like

to

remind

you

of

our

disclaimer.

We

will

make

forward

looking

statements

today,

and

as

you

know,

there

are

always

uncertainties

linked

to

those

forecasts.

With

that,

I

would

like

to

hand

over

to

our

CEO,

Kevin,

please.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Thank

you,

Uli.

Very

much

appreciated.

Great.

Good

morning,

everybody.

It's

super

to

see

some

folks

live,

all

in

3D,

which

is

awesome.

I

think

it's

the

first

one

that

I've

been

able

to

have

as

CEO

of

Comet.

So,

that's

fantastic.

And

also,

of

course,

as

Ulrich

just

said,

welcome

to

all

of

you.

Thanks

for

being

intrepid

in

making

the

trip.

And

for

those

of

you

on

the

phone,

thanks

for

joining. I

understand

there are

a

few

people

that

actually

were

supposed

to

be

here

live

that

couldn't

be

here

because,

okay,

they've

got

COVID.

So,

thanks

for

not

coming.

And

I

hope

that

you

all

get

a

good

recovery.

So,

this

is

going

to

be

hopefully

an

animated

and

a

rich

discussion.

Hopefully,

you

all

enjoy

it.

And

as

Uli

mentioned,

we

will

take

a

break

at

the

end

for

a

Q&A.

So,

I'll

be

glad

to

answer

any

questions

you

might

have.

So,

I'm

going to

talk about

what's

happened

sort

of

at

a

high

level

for

2021.

I'll

talk

about what's

happened

in

the

industry

in

2021,

and

then

I'll

talk later

on

when

we

get

to

the

outlook

session

about

what

we

see

for

2022

and

a

bit

beyond

that

as

well.

So,

with

that,

I'm

just

going

to

march

right

into

it.

First of

all,

before

you've

seen

the

results

already.

They

are,

in

my

view,

they're

excellent.

And

this

is

a

result

of

really

hard

work

from

our

employees.

We

owe

them

a

gratitude

of

thanks,

but

also

the

trust

that

our

customers

have

given

us.

They

are

absolutely

embedded

with

us,

and

it's

a

privilege

to

have

them

as

our

customers.

And,

of

course,

you

all

that

follow

us,

we

appreciate

your

support

as

well.

So,

thank

you

to

you

from

the

Comet

team

for

the

results.

You've

helped

us

get

there

and

we

greatly

appreciate

that.

Now,

relative

to

the

results,

we've

already

said

it

out

loud

in a

couple of

different

ways.

It

is

a

record

year

for

the

company.

Lisa

is

going

to

go

through

the

actual

results

in

detail,

I'm

not, but

what

I

do

want to

stress

is

that

we've

had

really

very

nice

revenue

growth

nearly

30%

year-over-year

revenue

growth.

It's

[ph]



hashy

(00:04:15), depending

upon

the

division

we're

talking

about,

and

I'll

talk

about

that

in

a

few

minutes.

And

of

course,

our

EBITDA

margin

has

actually

reached

a

threshold

point.

It's

a

hurdle

point

for

the

company

to

be

at

20%

EBITDA.

And

when

you

run

the

numbers,

you

can

do

the

math

yourself.

It

shows

you

that

we

did

a

very,

very

nice

job

in

the

second

half

of

2021

to

get

to

this

level

of

performance.

So

I'm

quite

pleased

with

the

results

as

a

company

and

as

an

organization.

So

record

results

for

the

company

really,

really

positive

for

us.

And

I

would

have

to

say

that

most

of

that

comes

from

staying

absolutely

relentlessly

focus

on

our

strategy,

and

I'll

use

that

term

relentless.

We

are

making

sure

that

we

stay

true

to

the

core

of

the

company,

stay

focus

on

our

sort

of

markets,

particularly

in the

semi

and

electronics

space,

but

also

make

sure

that

we

serve

the

aerospace,

the

automotive

and

the

security

space

as

well,

and

I'll

talk

to

that.

In

the

middle of

this

page,

we

talk

about

the

continued

progress

towards

our

midterm

targets.

To

remind

you

our

midterm

targets

2025,

we

said

that

we

would

have demonstrated

at

least

15%

CAGR

year-over-year

through

the

period.

We

said

that

we

have

reached

25%

EBITDA.

And

we've

said

that

we

would

reach

at

least

30%

ROCE. That's

what

we

said

we're

going

to

do.

And

I

can

say,

we're

quite

strongly

focused

on

that

and

we're

well

on

the

way

to

that

path.

We

announced

that

in

2019,

we're

two

years

into

that,

in

that

six-year

horizon,

and

quite

comfortable

with

where

we

sit.

So

in

the

middle

of that

page, and

quite comfortable

with where

we sit.

So, in

the middle

of

that

page, progress

towards

our

midterm

targets,

we're

absolutely

focused

on

getting

our

new

products

out.

We

launched

new

products

in

2020

that

are

bearing

fruit

in

2001,

and

as

a

result,

we

know,

without

exception,

we've

taken

market

share

in

2021.

And

so,

I'm

quite

pleased

that

what

we've

done

at

PCT,

what

we've

done

in

the

X-ray

systems

division

as

well

as

in

the

X-ray

modules

division

that

we've

taken

share

primarily

because

of

new

products

that

we've

launched

into

this

space.

And

I'll

talk

about

that

in

a

few

minutes

as

well.

We

also –

overall,

I

would

say

that

we've

really

focused

on

how

we

are

positioned

in

Asia.

And

as

you

know,

most

of

you

know,

we

started

our

mass

production

facility

dedicated

to

high volume

manufacturing

in

Penang

nearly

two

years

ago.

We

said

we

would

fill

that

factory

to

20%

by

the

end

of

2021,

and,

in

fact,

that

actually

happened.

So,

we're

on

track

to

delivering

what

we

said

we

would

do

from

the

Penang

facility,

and

then also,

for

those

of you

all

that

stuck

with

us,

we

also

announced

that

we

had

established

a,

I

would

say,

boots

on

the

ground

in

Taiwan,

direct

sale,

direct

service

in

Taiwan,

which

is

the

most

important

region

in

the

semiconductor

industry.

And

so,

we

have

boots

on

the

ground,

direct

sales,

direct

service,

and

it's

focused

on

really

the

top

foundries

as

well

as

the

top

OSATs,

O-S-A-Ts.

Those

are

the

outsource

assembly

and

test

companies

like

ASC

and

EMCOR

and

PTI.

We've

improved

our

overall

production

and

our

overall

efficiency.

We've

nearly

doubled –

sorry –

we've

grown

our

efficiency

on

employee

basis

by

nearly

50%

year-over-year.

That's

going

to

continue.

We're

not

world

class,

that's

quite

clear,

but

we

are

going

to

get

reasonably

good

performance

there.

And

if

I

look

at

the

challenges

aspect

of

this,

we're

all

kind

of

tired

of

the

pandemic,

but

it

was

absolutely

imperative

that

we

focus

on

what's

happening

with

our

team,

making

sure

that

our

workplaces

are

helpful

workplace,

but

also

that

we're

protecting

our

customers

as

well.

And

I

can

say,

we've

managed

the

COVID

pandemic

environment

that

still

exist

in

a

reasonably

good

way.

And

then

as

everybody

knows,

supply

chain,

supply

chain,

supply

chain,

that's

the

theme

of

everything

we

talk

about

today.

It

starts

off

as

chips,

but

it's

something

now

that

affects

the

entire

industry

whether

it's

electronics,

PCB

boards,

but

also

cables,

wood

for

crates.

I

mean

things

that

we

as

a

society

we

would

think,

that

must

not

be

that

bigger

deal

maybe,

but it

is

a

challenge.

And

as

I've

said

in

many

different

forums,

we've

managed

this

challenge

really,

really

day-to-day.

And

the

supply

chain

team

has done

an

incredibly

good

job

getting

there.

And

as

a

result,

we've

been

able

to

support

our

customers

and

meet

the demands

that

they

have.

So,

I'm

quite

pleased

with

the

overall

performance

there.

Now,

I

have

to

do

say,

yes,

our

results –

our

result

of

improving

end

market

conditions

in

every

market

we

serve,

different

flavors

of

how

would

that

improvement

looks

like.

Of

course,

the

semi

industry

is

in

a

boom

cycle

still,

and

I

remember

people

challenged

me

on

the

use

of

the

term

super

cycle

a

couple

of

years

ago,

and

I

hope

that

I've

convinced

everybody

to be

super

believers

at

this

point.

The

industry

grew

somewhere

around

34%.

I've

seen

some

folks

say

it

might

be

as

high

as

4-0,

40%

year-over-year,

2020

to

2021.

But

I

can

say

for

sure

that

that's

going

to

continue.

So

that

gives

you

a

taste

of

what

our

outlook

looks

like

as

well.

So

that

cycle

is

fully

in

play.

I

would also

say

that

in

the

automotive

space,

production

is

definitely

improving.

It's

lumpy.

It's

really,

really

a

shallow

recovery,

but

we

foretold

that

going

into

the

year.

It's

single-digit

growth

at

the

moment.

It's

going

to

be

high

single-digit

growth

quite

soon.

But

on

the

other

hand,

what

we

do

see

is

this

whole

uptick

of

the

EV,

electric

vehicle

programs.

And

so

by

2025,

we're

going to

see

that

EV is

going

to be

more

than

50%

of

all

cars,

light

vehicles,

et

cetera,

that are going to

be

produced.

And

why

that's

important

is

that

drives,

in

particular,

our

X-ray

businesses.

Of

course,

the

PCT

business

will

benefit

from

that

growth

as

well,

but

it

really

is

a

key

factor

in

the

IXM

and

IXS

businesses.

Maybe

third

to

– third

over

on

this

slide,

it

shows

a

cooled

jet

engine.

Remember,

I'm

an

aerospace

engineer,

so

I

really

like

this.

But,

the

global

passenger

air

travel

is

increasing,

particularly

in

North

America.

It

continues

to

recover,

we

can

see

the

industry

is

shrugging

off

the

pandemic.

It's

a

little

bit

lumpier

in

China,

but

the

rest

of

Asia

looks

to

be

quite

strong.

And

as

a

result,

again,

the

IXS

and

IXM

businesses

will

be

able

to take

advantage

of

that

growth

as

well.

And

on

the security

side,

that

goes

hand-in-hand

with

the

growth

in

passenger

air

miles,

but

also,

of

course,

in

the

defense

sectors

as

well.

So

the

four primary

markets

really,

really strong

growth

in 2021

for

the

semiconductor

space,

single-digit

to

high-single-digit

growth

for

the

remaining

three

industries

that

you

see

there.

So

maybe

some

comments

about

what

we're

trying

to

do

from

the

fabric

of

a

company

perspective.

I

guess

the

first

thing

I

would

say

and

I've

kind

of

covered

it

a

little

bit

ago

is

our

productivity.

It's

raised.

It's

increased

by

almost

50%

year-over-year.

We

are

running

around

CHF 67,000

EBITDA

per

employee.

We

expect

that

to

grow

obviously

by

2022

and

that's

up

50%

from

the

previous

year.

We

also

can

say

that

our

gross

margins

have

improved

significantly.

You've

seen

that

from

our

financial

results.

It's

greater

than

300 basis

points,

and

I

think Lisa

is

going

to –

I

know

Lisa

will

talk

to

those

details

because

we've

just

given

big

numbers

here.

So

as

a

result

of

that,

that's

from

high –

of

course,

high

volume,

but

also

our

product

mix

is

also

improving

in

all

sectors

of

the

business.

And

it's

a

varying

degrees

of

how

fast

we

can

make

that

change,

for

example,

IXS.

Those

products

are

ordered

a

year

to

a

year

and a

half

in

advance.

So

we're

still

flushing

those

previous

orders

through

our

system.

But

I'll

talk

about

the

transformation

of

that

business

further

in

just

a

few

minutes.

In

the

center

there,

where

we

say

we

strengthened

our

proximity

to

our

customers,

I

mentioned

that

already,

but

maybe

to give

you

the

flavor

for

that.

Currently,

now

our

penetration

into

the

Asian

market

stands

at

about

40%

of

our

total

revenue,

and

that's

up

from

about

30%

a

year

prior.

So

that's

roughly

a

60%

growth

year-over-year.

We've

also

improved

our

footprint.

It

says

here

rapid

growth

in

Taiwan

and

China.

I

already

mentioned

the

boots

on

the

ground

in

Taiwan,

direct

sales

and

service

in

the

Taiwanese

market.

Of

course,

we're

booming

in

China,

that's

a

significant

growth

year-over-year.

But

also

we

do

have

our

Korean

R&D

center

which

concentrates

on

matchbox

assemblies

for

everybody

else

but

the

Tier

1s,

and

we

can

explore

that

later

on

as

well.

Now,

in

the

product

and

services,

I'll

get

to

some

specifics

when I

talk

about

the

actual

divisions,

but

maybe

the

most

important

is

that

we

are

well

on

the

path

to

changing

the

focus

of

IXS

and

IXM

to

be

focused

on

the

semi

space,

the

electronic

space,

and

even

the

battery

space.

And

the

reason

for

that

is

because

these

tend

to

be

higher

margin,

higher

volume

business

sectors

than

the

traditional

aerospace,

automotive,

and

security

sectors.

So,

that

student

body

shift

is

occurring

and

we're

on

that

path,

and

I'll

talk

about

some

of

the

products

that

we

launched

there

in

just

a

few

minutes.

And

then, on

the

far

right

of

this

page

is

really

our

investment

in

our

company,

and

we're

keenly

focused

on

investing

in

our

team.

We

kicked

off

a

comprehensive

talent

identification

and

management

program

during

the

year,

really

to

understand

our

high

potential

talents

and

also,

who

we

can

grow

with

within

the

company.

We've

sharpened

our

values.

And

if

I'll

remind

you,

our

values

really

are

to

be

absolutely dead nuts

focus

on

our

customers,

so

customer-centricity

is

number

one.

Number

two,

we

want

to

challenge

and

empower

our

team

members.

We

want

them

to

make

decisions

at

risk.

And

do

that

with

an

open

mind

and

a

willingness.

And

then

also

to

have

this

whole

trustful

collaboration,

[ph]



this

idea (00:15:51)

that

we

trust

each

other,

that

we

are

making

good

decisions,

we

will

work

together.

And

it's

a

way

for

us

to

make

sure

that

it's

a

team

effort

of

making

things

happen.

And

we

did

publish

our

first

full

compliant

GRI

report

for

ESG

purposes.

You'll

see

that

in

the

annual

report,

if

you

haven't

seen

it

already,

it's

a

comprehensive

report.

Remember,

we

were

sort

of

ad

hoc

on

this

in

previous

years.

Now,

we've

got

a

well-documented

situation

report,

and

it's

something

for

us

now

to

build

upon.

And

we'll

announce

what

those

metrics

and

goals

are

for

the

company

in

about

middle

of

the

year

or

slightly

thereafter.

Now,

a

few

comments

about

our

divisional

performance,

and

again,

I'd

say

it's

quite

good.

Each

one

of

these

divisions

have

grown

to

the

point

where

our

company

has

grown

on

the

order

of

30%

as

a

group,

but

each

one

of

these

divisions

were

at

the

30 percentile

or

higher

in

and

of

themselves.

PCT,

of

course,

was

higher,

it

grew

at

about

36%

year-over-year,

which

is

outpacing

the

market

conditions

and

outpacing

our

peer

competitors.

Now

IXS

and

IXM

both

grew

at

almost

exactly

30%.

And

I

would

draw

your

attention

to

the

first

bullet –

sub-bullet

on

the

left

here.

For

those

of

that

have

been

waiting

with

bated

breath

about

when

are

we

going

to announce

that

we

finally

got

a

generator

in

the

marketplace,

we

have

sold

our

first

Synertia

product,

we

used

to

call

that

[ph]



DaVinci (00:17:33),

so

this

is

the

first

RF

generator

in

our

new

generator

family.

We

have

launched

that.

We

have

received

our

first

purchase

order.

Now,

I

have

to

admit

that

I'm

shading

it

a

little

bit.

And

the

reason

why

I say

that

is

because

actual

PO

occurred

in

the

second

week

of

January.

So,

just

to

be

clear,

it

happened

in

January

not

in

December.

So,

I

should

be

fully

transparent

on

that.

But

I

think

it's

important

that

everybody

understand

that

yes

we're

in

the

marketplace.

Yes,

the

generator

has

been

sold.

And

I'm

sure

you're

going to

ask

me

questions

about

that

later.

So,

I'll

just

leave

it

at

that.

We

did

expand

our

market

share

in –

particularly

in

the

RF

matchbox

sector.

We

took

16

new

design

wins

during

the

course

of

the

year.

The

bulk

of

those

design

wins

more

than

half

were

Tier

1

level

customers.

And

also

I

would

say

that

nearly

20%

of

those

also

occurred

with

customers

in

China.

So,

good

regional

distribution,

good

Tier

1

and

Tier

2

distribution.

And

the

reason

why

this

is

most

important

is

because

that

then

bears

fruit

about

a

year

from

now.

And

I'll

remind

you,

last

year

we

took

23

design

wins.

And

as

a

result,

we

do

expect

because

of

PCT's

performance

and

because

of

those

design

wins

that

we

are

comfortable

that

we

will

be

able

to

say

in

April

that

we

have

taken

market

share

in

the

RF

match

space

again

this

year.

Last

year,

we

were

at

36%

market

share

at

number

one.

We

should

have

advanced

that

as

well.

And

I

already

mentioned

the

product

transfer.

On

IXS, we

use

that

terminology

realignment.

It's

a

euphemism

for

saying

that

we

have

really

redesigned

that

business.

This

is

a

work

in

progress.

I'll

remind

you,

I

said

that

we

were

starting

this

whole

activity

about

a

year

and

a

half

ago.

That

realignment

gained

momentum.

We

reduced

the

number

of products

that

we

sell

out

of

that

organization.

We

start

doing

custom

business.

Remember

we

are

doing

a

lot

of

one-offs,

single-off

business

items

which

you

would

sell

one-off,

maybe

two

or

three

years

later,

you'd

sell

another

one,

and

that's

a

very

difficult

set

of

business

circumstances

to

be

profitable.

So,

we've

really

moved

away

from

that

type

of

business

line,

and

we

have

been

extremely

focused

on

high

quality,

high

revenue,

high

margin

business

in

that

organization.

And

I

would

draw

your

attention

to

the

second

bullet

there

in

a

minute.

We

have

received

our

first

hard

copy

purchase

order

for

a

system

that

is

being

used

for

inspecting

advanced

package

devices. This

is

with

the

world's

largest

foundry.

That's

a

major

win

for

us,

and

it

shows

that

we

can

be

in

that

space

successfully,

and

that

we

can

probably

generate

some

delight

with

our

customers.

And

then

on

the

far

right

here,

you

see

IXM,

the

module –

the

industrial

X-ray

module

business.

That

team

has

done

a

really,

really

good

job

in

introducing

new

products

alongside

a

recovery

in

their

traditional

served

markets.

So,

we've

released

the

MesoFocus focused

product

lines

into

the

electric

vehicle

space,

batteries,

electronics,

but

also

in

the

semi

space.

In

addition,

though,

we've

been

able

to

take

more

share

with

the

Ion

product

as

well

particularly

in

the

security

space.

So,

this

whole

inroad

is

happening,

and

I

can

say

that

the

team

is

definitely

taking

market

share.

Okay.

This

is

my

last

slide

before

I

hand it

over

to

Lisa

and

I

would

just

hope

you'll

agree

with

me

as

well.

I

think

it's

been

a

very

good

year.

We're

two

years

into

this

six

year

program.

Our

strategy

is

definitely

bearing

fruit.

We're

staying

focused

on

it.

We

are

and

have

been

demonstrating

at

least

a

15%

growth

year-over-year.

We're

well

on

track

to

be

at

about CHF

830

million

or

more

by

2025,

we've

demonstrated

really

good

progress

on

the

EBITDA

performance.

We

should

be

comfortably

at

that

25%

EBITDA

range.

And

we've

done

– we're

very

close

to

the

30%

ROCE.

And

really,

the

themes

are

basically

this,

PCT,

the

process

control

technology

group,

the

RF

business,

just

needs

to

keep

doing

what

they're

doing,

they

need

to

keep

getting

the

design

wins.

We

need

to

expand

capacity

continuously

through

this

period,

so

that

we

can

stay

ahead

of

the

curve

in

semi.

The

X-ray

businesses

will

continue

the

redesign

and

the

transformation

of

IXS,

but

also

start

to

capitalize

more and

more

on

the

trend

in

IXM.

And

for

sure,

we

want

to

make

sure

that

we

have a

really

nice

and

successful

collaboration

with

all

of

our

partners,

our

customers,

first

and

foremost,

our

supply

chain,

which

probably

are

getting

tired

of

hearing

from

all

of

us

at

times,

but

I

think

if we

work

together,

we'll

definitely

overcome

challenges.

And

for

sure,

I

have

to

say

again,

thanks

to

our

employees,

because

they've

been

incredibly

dedicated

to

our

success.

And

with

that,

I'm

going

to hand

it

over

to Lisa

and

see

if

you

can

make

your

way

over.

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

Thank you.

Okay.

Perfect.

All

right.

Thank

you,

Kevin,

and

good

morning

to

everybody,

it's

really

nice

to

see

you

all

here

in-person.

And

for

those

of

you

on

the webcast,

a

very

warm

welcome

to

you

as

well.

I

will

go

through

the

prepared

remarks

here

a

little

bit

more

formally

and

then

looking

forward

to your

questions

afterwards.

In

2021,

Comet

achieved

outstanding

record

high

financial

results

in

top

line

growth,

profitability,

returns,

and

generation

of

free

cash

flow.

As

Kevin

mentioned,

these

achievements

resulted

from

our

commitment

to

maintain

our

focus,

gain

market

share,

produce

efficiently,

and

by

proactively

managing

supply

chain

and

COVID-related

challenges.

Our

strong

performance

has

enabled

us

to

return

more

to

shareholders

to

an

annual

dividend

and

to

fund

the

investments

fueling

our

growth

strategy.

Now,

turning

to

the

actual

results

of

2021,

the

company

achieved

sales

of

CHF 513.7

million,

an

increase

of

29.8%

compared

to

2020

which

was

also

a

historic

year

for

Comet.

Sales

volumes

increased

in

each

of

our

end

markets

and

divisions.

Our

core

markets

in

North

America

rose

17%

compared

to

the

same

period

last

year

and

account

for

42%

of

the

group's

total

sales.

Since

2020,

we

expanded

our

geographic

footprint

with

a

new

production

facility

in

Penang,

Malaysia;

new

subsidiary

in

Taiwan;

expansion

of

our

sales

and

customer

services

in

Japan;

and

in

our

R&D

and

demo

center

in

Korea.

Our

ability

to

be

closer

to

our

customers

resulted

in

60%

sales

growth

in

Asia.

Asia

now

represents

about

41%

of

group

sales,

compared

to

33%

in

2020.

Gross

margins improved by 360 basis

points compared to 2020. Each division

achieved

double-digit

growth in

volumes with a favorable

product

mix.

This

was really

our

primary

lever

in

driving

gross

margins

for

the

year

2021.

Additionally,

faster

and

optimized

production

processes

led

to

improved

operational

leverage

that

helped

offset

higher

input

costs

coming

from

labor,

raw

materials,

components

and

logistics.

Going

into

2022,

production

efficiencies

and

product

mix

will

further

compensate

for

rising

costs.

Operating

expenses

in

2021

were

higher

than

in

the

same

period

last

year

due

to

investments

in

growing

the

company.

We

invested

in

people

to

manage

growth

in

all

areas,

including

operational

excellence,

supply

chain,

sales

and

marketing,

and,

of

course,

in

research

and

development.

Our

R&D

represents

roughly

11%

of

sales

and

remains

the

foundational

focus

for

the

group

with

investments

focused

on

medium

and

long-term

strategic

projects,

mainly

targeting

the

semi

and

electronics

markets.

It

should

be

noted

that

net

operating

expenses,

excluding

the

2020

gain

from

the

sale

of

the

ebeam

business,

as

a

percentage

of

revenue,

decreased

from

30.9%

in

2020

to

27%

in

2021.

We

achieved profitability

at

the

upper

end

of

our

guided

range

as

a

result

of

higher

sales

volumes,

product

mix,

and

operational

efficiencies.

We

improved

EBITDA

from

CHF 58.6

million

in

2020

to

CHF 102.7

million

in

2021.

This

represents

520

basis

points

improvement

to

20%

EBITDA

margin

compared

to

14.8%

at

the

same

time

last

year.

Our

performance

grew

margins

by

590

basis

points,

more

than

compensating

for

70

basis

points

of

margin

erosion

due

to weaker

foreign

exchange

conversions

and

the

elimination

of

the

2020

one-time

gain

from

the

sale

of ebeam.

The

effective

tax

rate

for

2021

was

18%,

driven

by

the

taxable

profit

mix

generated

from

our

international

subsidiaries. We

will

continue

to

monitor

the

potential

local

tax

changes

of

our

subsidiaries,

especially

as

it

relates

to

corporate

income

tax

in

the United

States

and

with

new

changes

in

the

OECD.

As

a

result

of

our

solid

operating

results,

Comet

achieved

a

net

income

of

CHF

67.4

million,

representing

a

net

income

margin

of

13.1%

and

a

return

on

capital

employed

of

26.8%.

Now,

let's

turn to

the

division

results

for

2021.

Our

focus

on

delivering

to

our

customers

operational

efficiencies

and

culture

paid

off.

Each

of

our

divisions

achieved

double-digit

sales

growth

while

expanding

profitability.

The

Plasma

Control

Technologies

division,

PCT

achieved

record

performance

in

sales

and

profitability,

executing

remarkably

against

the

backdrop

of

a

booming

semiconductor

industry.

Sales

increased

36.2%

from

CHF 224.7

million

in

2020

to CHF

306.1

million

in

2021.

PCT

achieved

sales

growth

across

key

geographic

markets

and

with

all

major

customers.

In

2021,

PCT

benefited

from

the

start

of

its

production

in

Penang,

Malaysia,

was

reached

20%

capacity

by

year-end

2021

and

further

cost

discipline

in

operations.

These

factors,

in

addition

to

the

strong

volume,

expanded

EBITDA

margin

by

430

basis

points

versus

2020

to

achieve

high

26.3%

margins.

Division

results

for

the

two

X-ray

divisions

reflect

the

focused

strategy

and

the

improving

market

conditions.

Let's

start

with

X-Ray

Systems

business,

IXS.

IXS

achieved

important

milestones

in

its

focused

realignment

strategy.

IXS

sales

growth

was

complemented

by

competitive

wins,

with

newly

introduced

X-ray

systems

pointed

towards

the

higher

growth,

higher

margin

semiconductor

and

electronics

industry.

The

division

contributed

CHF 138.9

million

in

sales,

an

improvement

of

30.1%

versus

the

prior

year.

In 2021,

IXS

returned

to

profitability,

successfully

generating

CHF

8.9

million

in

EBITDA

and

6.4%

EBITDA

margin.

The

division

managed

its

cost

base

while

meeting

demand

and

ensuring

customer

satisfaction.

The

IXS

business

continues

to

focus

on

its

realignment

strategy

including

cost

reductions,

virtual

installations,

discontinuing

of

low

margin

custom

work,

and

investments

focused

on

the

semiconductor

and

electronics

device

arena.

Results

from

these

efforts

will

continue

to

materialize

and

add

to

future

profitability

of

the

division.

The

X-Ray

Modules

division,

IXM,

achieved

sales

of

CHF

78.9

million,

a

28.4%

increase

compared

to

2020.

EBITDA

margins

improved

by

470

basis

points

to

19.4%

in

2021.

IXM's

core

markets

showed

gradual

recovery.

In

particular,

demand

increased

in

the

second

half

of

2021

in

non-destructive

inspection

and

security.

The

division

also

benefited

from

commercial

success

of

its

new

products,

Ion

modules

for

security

applications,

and

the

MesoFocus

product

line

targeting

the

semiconductor,

electronics,

and

battery

markets.

In

summary,

a

booming

semiconductor

market,

improved

X-ray

market

conditions,

focus

on

strategic

objectives,

targeted

product

development,

and

improved

productivity

measures

produced

historically

high

and

excellent

results

for

the

group.

Next,

I'd

like

to

provide

a

few

comments

on

the

balance

sheet

and

cash

flow

metrics.

The

solid

performance

of

the

group

has

continued

to

allow

for

healthy

balance

sheet

position

at

December

end

2021

with

a

cash

position

of

$115.5

million.

Comet

generated

CHF

57.8

million

in

free

cash

flow.

As

I

previously

mentioned,

this

free

cash

flow

result

is

a

record

for

Comet

and

was achieved

through

strong

operating

cash

flow

performance.

Operating

activities

generated

CHF 70.5

million

in

net

cash, an

improvement

of

CHF

13.4

million

compared

to

2020.

Capital

expenditures

totaled

CHF 11.5

million

and

represented

2.2%

of

sales

in

2021,

reflecting

timing

shifts

in

the

Q1 2022

of

capacity

expansion

projects

in

our

Flamatt,

Switzerland

facility.

As

a

result,

we

expect

that

our

CapEx

expenditure

in

2022

will

be

at

the

upper

end

of

our

targeted

range

of

3%

to

5%

of

sales.

Our

CapEx

investment

profile

reflects

our

strategic

priorities.

We

will

continue

to

target

investments

in

production

and

R&D

capacity

in

several

locations

globally.

We

will

also

invest

in

digitalization

and

cybersecurity

efforts.

Net

working

capital

management

continues

to

be

a

focus.

Performance

is

in

line

with

our

target

of

20%

net

working

capital

as

a

percent

of

sales.

Networking

capital

was

CHF

30.1

million

higher

than

at

the

same

time

last

year,

reflecting

our

growth

expectations

and

our

supply

chain

mitigation

actions

taken

to

predict

the

company's

ability

to

meet

customer

demand.

Our

favorable

cash

flow

generation

has

resulted

in

a

negative

net

debt

position

for

the

company.

We

will

continue

to

allocate

capital

to

strategic

projects

focused

on

business

growth.

We

also

want

to

– we

want

our

shareholders

to

participate

in

the

group's

success

through

an

attractive

annual

dividend.

Our

goal

is

to

maintain

healthy

and

flexible

balance

sheet, and

our

performance

in

2021 reflects

the

same.

And

finally,

with

respect

to

our

capital

return

to

investors.

Earnings

per

share

has

more

than

doubled

to

CHF

8.68

per

share

compared

to

CHF

3.56

per

share

in

2020.

Our

outstanding

operational

performance

enabled

us

to

return

a

dividend

to

our

shareholders

at

the

upper

end

of

our

guided

payout

range.

Consequently,

the

board

of directors

will

recommend

at

the

next

annual

general

meeting

a

dividend

of

CHF

3.50

per

share,

representing

a

40%

payout

ratio.

In

summary,

the

company

executed

exceptionally

well

in

a

challenging

environment

and

is

well-positioned

to

deliver

on

our opportunities

going

into

2022.

From

my

side,

I'd

also

like

to

take

a

moment

to

thank

our

employees,

our

customers,

our

suppliers,

and,

of

course,

our

shareholders

for

their

substantial

contribution

to

our

success

in

2021.

As

Uli

mentioned,

additional

details

on

our

Annual

Report

and

2021

Performance

can

be

found

on

our

website

published

on

our

website

this

morning.

So,

this

concludes

my

prepared

remarks.

And

I'll

now

hand

it

over

to

Kevin

to

provide

a

little

bit

more

color

on

our

outlook

going

into

2022.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Great.

Thank

you,

Lisa.

Much

appreciated.

All

right.

So,

I'm

going to

talk

a

bit

about

what

we

think

is

going to

happen

in

2022

and

I'll probably

take

some really other

comments

on

the

future

beyond

that

as

well,

I'm

sure.

So,

let

me just

talk

what's

going

to

happen

really

in

2022. And

I'll

go

from

left

to

right

as

always.

In

the

semiconductor

space,

it's

definitely going

to

be

a

strong

year

throughout

2022

depending

up on

who

you

talk

to

and

who

you

listen

to.

You're

going to

get

a

forecast

of

anywhere

between

up

15%

to

up

20%.

And

I

would

tell

you

if

you

were

only

one

month

earlier,

you

would

have

had

people

telling

you

it's

going

to

be

maybe

8%

or

9%

or

10%

growth.

So,

right

now,

I

would

say

barring

any

other

factors,

the

trend

is

more

up

into

the

right.

So,

15%

to

20%

wafer

fab

equipment

growth

seems

to

be

quite

probable.

And

so

we've

gone

from CHF

63

billion

last

year

in

wafer

fab

equipment

spend

last

year

being

2020

to

2021

of

about

CHF 85

billion.

And

it

looks

like

it

will

be

about CHF

100

billion

in

wafer

fab

equipment

spend

in

2022.

And

these

numbers

are

going to

be

bouncing

around

for

a

little

bit.

They

won't

be

consolidated

by

the

industry

probably

for

another

month.

But

that

can

give

you

a

very

good

feeling

for

where

things

stand

at

the

moment.

So,

we're

going to

ride

that

semi

wave.

I

already

see

people

that

are

looking

and

forecasting

2023. 2023

right

now,

generally

speaking,

as

being

high-single

digit

forecasted

growth.

At

this

point,

more

than

one

year

away.

In

the

middle

there

with

the

automotive

sector,

we

do

expect

that

we

will

see

continued

recovery

in

the

automotive

sector.

You

can

see

the

number

here.

It's

going

to

be

about

a 9%

growth

in

production

year-over-year.

This

is

an

estimate

that

was

done

by

IHS

just

this

month. So,

it

will

be,

I

don't

know,

3

to

4

times

higher

rate

of

growth

than

what

we

saw

in

2021.

And

that

would

[indiscernible]



(00:39:11)

very,

very

good

items

for

the

team

in

the

IXM

and

IXS

businesses.

I

would

also

say

and

remind

you

that

the

content

in

vehicles,

whether

it

– sorry –

the

electronics

content

in

vehicles,

irrespective

of whether

it's

an

EV

or

a

non-EV

vehicle,

it's

really

coming

on

quite

strong,

it's

going

to

be

about

$1,000

per

vehicle,

that's

almost

2x

what

we

were

saying

would

be

in

this

timeframe.

Most

pundits

were

saying

it

would be

about

$500

at

this

time

this

year,

and

it's

actually going

to

be

about

$1,000.

That's

really

great

for

PCT,

it's

great

for

IXS

and

it's

great

for

IXM.

And

I

would

say

that

because

of

this

transition

to

the

EV

as

well

that

I

mentioned

earlier,

that's

going

to be

a

big,

strong

pull

for

the

businesses.

So,

I'd

say

it's

going

to

be

in

that

9%

or

slightly

higher

growth

in

our

served

sectors.

In

the

aerospace

sector,

we

think

that's

going to

continue

to

recover.

It's

not

going

to

be

a

rapid

climb

out,

but

it's

still

going

to

continue

to

improve,

and

it'll

be

in

the

high-single-digit

area

of

growth.

Asia

will

continue

to

lag

probably

for

the

first

half

of

this

year,

but

from

a

long-term

perspective,

Asian

travel

in

particular

is

going

to

be

a

driver

overall

in

the

aerospace

sector.

Private

aviation,

defense,

they're

still

very

strong

and

will

continue

to

be

very

strong,

although

it's

a

relatively

small

niche

in

the

aerospace

sector

overall.

In

the

security

arena,

we

will

see

growth

in

the

security

sector

that

will

primarily

drive

IXM.

We

will

continue

to

see

that,

and

I

think

it's

going to

be

in

the

high-single-digit

range, and

we'll

see

that

structural

travel

growth

in

Asia,

also

will

pull

the

businesses

along.

So,

in

the

aggregate,

we're

going to

see

very,

very

strong

pull,

we

think,

through

2022.

So,

if

you

take

that

backdrop

and

then

look

at

what

we

have

to

do

and

what

our

opportunities

are,

it's

really

again

the

matter

of

seizing

our

opportunities

that

are

put

in

front

of

us,

stay

focused

on

what

we're

trying

to

accomplish,

stay

focused

on

our

strategy,

stay

focused

on

our

served

markets,

and

take

the

opportunities

that

are

put

in

place

in

front

of

us.

And

as

long

as

we

execute

to

that,

you'll

see

that

if

you

look

at

these

bullets

on

the

right-hand

side

of

this

slide,

it's

basically

showing

that

our

TAM,

our

total

available

market

is

growing

by

something

like

1.5

times

between

2020

and

2025.

But

our

served

available

market

is

growing

by

more

than

2.5

times

in

the

same

period.

So,

our

SAM

is

growing

faster

than

the

TAM

that

we're

in,

and

you

can

see

the

bulk

of

that

is

coming

from

the

electronics

and

the

semi

space.

And

that's

really

coming

on

the

backs

of

us

opening

up

this RF

generator

space

that

we

just

– remember,

we

got

our

first

purchase

order

in

for

the

[ph]



DaVinci (00:42:39)

product

and

it's

also

because

of

our

penetration

with,

quite

frankly,

the

IXS

businesses

in

the

3D

architected

space,

advanced

packaging.

So,

to

keep

pace

with

that,

what

we

need

to

do

is

focus

on

all

of

these

major

bullets

that

you

see

on

the

left-hand

side

of

this

slide.

PCT,

they're

going

to

be

like

durables

in

a

cage,

they

just

got

to stay

in

front

of

the

growth

that's

being

pulled

by

the

semi

space.

And

that

means

that

we've

got to

take

along

capacity;

we

got

to stay

ahead

of

what

our

customers

demand

forecast

looks

like,

we

have

to

get

more

generator

variants

into

the

market.

Remember,

this

generator

is

a

platform,

it's

not

a

singularity.

And

when

I

say

platform,

in

the

industry,

we

have

power

and

we

have

frequency

domains

that

we

must

be

able

to

operate

in.

There

is

no

one

size

fits

all,

and

so,

there

will

be

multiple

variants

that

we'll

be

launching

during

the

course

of

this

year

and

next

year. So,

it's

going

to

be

a

continuous

wave

of

products

in

this

RF

generator

category.

So,

our

next

variants

will

also

go

into

beta

testing

in

2022.

I

already

mentioned

we're

going to

expand

our

market

share

in

the

RF

matchbox

space,

that's

an

opportunity

for

us,

and

we

think

that

we

can

do

that

quite

successfully.

And

we

want

to

maintain

our

vacuum

capacitor

share.

We're

sitting

at

in

that

70%

to

80%

market

share

range.

So,

this

is

a

protect

that

domain

in

the

future.

And

as

Lisa

just

mentioned,

and

as

I've

mentioned

as

well,

we

have

to

make

sure

that

we

ramp

this

Penang

factory.

So,

we

expect

that

the

factory

will

be

filled

by

to

nearly

60%

by

the

end

of

2022.

Again,

it

was

filled

at

about

20%

in

2021,

so

60%

in

2022,

we'll

start

to

see

the

benefits

in

a

real

meaningful

way

in

the

cost

of

goods

sold

side

of

the

equation.

In

IXS,

we've

got to

continue

that

transformation.

I've

mentioned

it,

Lisa

has

mentioned

it.

You

know,

look,

the

performance

of

that

division

improved

quite

significantly,

but

it's

not

there

yet.

So,

we

still

got

another

year

or

two

of

progress

that

we

need

to

make.

And

that

means

we

need

to

be

dead

nuts

focused

on

the

semi

space.

We

need

to

move

the

product

lines

in

that

direction.

We

still

need

to

take

a

few

more

products

out

of

our

portfolio.

We

need

to

get

on

one

software

platform.

We

need

to

reduce

our

cost

structure,

not

in

any

sort

of

lay

off

situation.

That's

not

what

I

mean. But

we

need

to

reduce

our

overall

cost

structure.

For

example,

we

still

use

an

inordinate

amount

of

representatives

and

agents

in

the

industry

to

go

to market.

Well, that

comes

at

a

very

high

cost.

Hence,

while

we're

trying

to

get

more

direct

boots

on

the

ground

in

our

served

available

markets

[indiscernible]

(00:45:48).

And

so

we're

going to

invest

in

that

semi

space

and

we're going

to invest

in

new

products

in

that

semi

space.

And

we

are

going

to

reap

what

we

can

as

a

cash

cow of

the

automotive

and

the

aerospace

sector.

And

then

in

IXM,

just

grow share in

our

markets

with

the

new

products

we

mentioned.

We've

already

mentioned

a

massive

focus

in

the

Ion

products.

We

need

to

continue

that

ramp.

We're

going to

invest

in

further

products

for

the

semi

space,

particularly

from

that

items

that

are

used

at

the

sub-10

nanometer

design

node.

That's

going to

be

important

for

the

IXM

business.

And

IXM

is

also

going

to

start

investing

further

into

our

presence

in

Asia.

Which

kind

of

gives you

the

idea

of

my

previous

two

slides.

Of

course,

I'm

very

bullish

about

what's

going

to happen

in 2022

with

one

dot,

dot,

dot

point

that

I

need

to

make

sure

that

I

acknowledge.

And

that

dot,

dot,

dot

is

a

geopolitical

situation,

do

drive

uncertainties.

And

the

Ukraine

situation,

in

particular,

is

clearly

disturbing.

Right

now,

today,

the

impact

on

our

business

is

very

negligible.

At

this

point,

we

have

very

little

revenue

risk

and

when

I

say

very

little,

it's,

I

mean,

really

little.

And

at

the

same

time,

our

supply

chain,

so

far,

we

have

not

seen

anything

in

our

supply

chain

to

give

us

concern.

Of

course,

that

could

change

tomorrow

or

the

day

after.

We've

taken

these

accounts

into

our

guidance.

We've

taken

our

supply

chain

challenges

that

were

already

pre-existing

to

come

up

with

the

guidance

you

see

here

of

CHF 570

million

to

CHF

610

million

in

2022.

And

I

would

say

that

that

is

well

on

line

with

what

our

overall

strategy

would

indicate

that

we

were

trying

to

accomplish.

I

think

Serge

is

going to

ultimately

ask

me

a

question, well,

what's

the

upside

to

that?

And

there

is

upside.

Of

course,

I'll

admit

that.

But

there's

also

downside

to

this

as

well.

And

we've

tried

to

be

right

through

the

middle

and

tell

you

what

we

feel

at

the

moment

in

this

time.

And

our

EBITDA

margin

21%

to

23%.

We're going

to

continue

to

invest,

as

Lisa

mentioned,

in

the

business.

Infrastructure

is

going to

be

important

to

us,

new

products

is

important,

capacity

is

important. We're

going

to take

on

inventory

to

make

sure

that

we

can

manage

the

demand

side

from

our

customers.

So,

that

kind

of

gives

you

a

flavor

for

how

our

EBITDA,

we've

tried

to be

quite

careful

about

what

we

project

our

EBITDA

performance

to

be.

So,

I

think

our

focus

really

is

on

growth.

We

have

to,

yes,

of

course,

improve

our

efficiencies

overall

and

we

will

continue

to

do

so.

And

of

course,

we

want

to continue

to invest

in

our

people,

in

our

culture.

So,

I

would

say

we've

got

to be

steady

as

she

goes.

And

I

think

the

last bullet on to

that

growth

and

efficiency

and

culture,

we

have

to,

as

a

company,

continue

on

a

path

to

become

an

employer

that's

attractive

to

new

employees

coming.

This

is

going

to

be

a

problem

for

the

entire

industry,

it's

a

problem

for

Comet

as

well.

We

need

to

be

able

to attract

talent

to

our

company

disproportionately,

to

the

guys

that

are

up

the

road

from

here,

like

[ph]



VAT

or

the

Infracon

or

the

Fibers

(00:49:30) or

whoever it

is

that

are

out

there.

We

need to

get

more

talent

than

they

do.

And

so,

we

need

to

be

focused

on

gathering

that

in

the

industry.

So,

we're

going

to be

really

focusing

on

attracting

and

recruiting

skilled

workforce.

We

are

going

to

be

really

clear

about

university,

for

example,

university

relationships,

etcetera,

we

have

to

go

and

farm

that

for

ourselves.

It's

not

going to

come

to

us.

We

are

going to

have

to

manage

the

supply

chain

irrespective

of

the

conflict

that's

going

on

right

now,

we

will

be

facing

a

situation

very

similar

to

2021 that

we're

going

to

have

to

manage

our

supply

chain

prudently

through

the

entire

2022.

And

in

some

cases,

I

think,

maybe

even

into

2023.

Now

I

know

people

were

already talking

about

a

second

half

recovery

in

the

supply

chain,

again

disregarding

Ukraine.

People

are

saying

maybe

second

half

of

2022,

there's

a

recovery.

Well,

I

hope

with

some,

their

mouth

to

the

lord

above,

because

I

personally

believe

that

it's

probably going

to

be

a

whole

2022

period

where

we

have

to

manage

our

supply

chain

and

manage

them

very,

very

closely.

And

then

we

are going

to

have

to

mitigate

energy

costs,

rising

costs

in

our

supply

chain

as

well,

logistics

costs,

so

far,

we've

been

able

to

prudently

and

fairly

pass

those

costs

on

to

our

customers.

And

they've

been

able

to pass

those

costs

on

to

their

customers

as

well.

It's

a

well-known

phenomenon,

but

at

the

same

time,

I

will

say

we

are

not

trying

to

raise

our

prices

in

an

extortionate

way at

all. So,

we're trying

to

be

quite careful

about

how

we

thread

that

needle.

All

right?

So,

that

gives

you

an

idea

what our

guidance

looks

like

at

the

moment.

Again,

I

want

to say

thanks

to

you

all

for

your

interest

in

the

company

and

the

interest

as

shareholders,

thank

you

for

supporting

us

and

thanks

to

our

customers

and

our

employees

as

well.

And

with

that,

I'm going

to

go

ahead

and

open

it

up

for

questions.

I

know

we've

gone

a

little

bit

long,

but

happy

to take

as

many

questions

as

anybody

would

like

to

ask.

Okay.

I'll

go

sit.

I'll

try

to

sit

down.

[Ulrich Bernhard Steiner]

Thanks a

lot,

Kevin,

Lisa,

for

all

your

explanation.

And

I'm

sure

that

you

have

a

lot

of

questions

now.

As

we

have

somebody –

a

few

colleagues

on

the

phone, so

please

wait

with

your

questions

until you

got

the

microphone

from

[ph]



Ines

or

Cornelia (00:52:11),

my

two

colleagues,

so

that

everybody

can

hear

it

on

the

phone.

Are

we

ready

on

the

phone?

Okay.

So,

the

first

question

is

from

[ph]



Michael. Michael

(00:52:24), please.

Thank you. Is this

working?

Yes.

Thank

you.

Two

questions,

actually.

You

mentioned

the

importance

of

direct

sales

and

service

in

Taiwan

in

the

semi

industry.

And

I

was

wondering

if

semiconductor

production

gets

more

geographically

diversified

around

the

world,

more

regionalized, nationalized.

How

will

you

service

your

customer?

How

are

you

preparing

to

get

that

direct

service

in

sort

of

the

changing

environment in

semi? And

I'll

ask

the

second

one.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Okay.

Thank

you,

[ph]



Michael (00:53:07).

First of

all,

it's

absolutely

clear

that

nationalization

is

going

to

occur

in

the

semiconductor

space.

There's

no

doubt

about

that.

Our

situation

as

Comet

is

that

regionally

we're

very,

very

well-positioned

direct

in

Europe,

quite

well-positioned.

So,

I

don't

see

that

as

an

issue.

And,

of

course,

our

biggest

development

area

for

PCT

is

in

the

West

Coast of

the

United

States.

So,

quite

well-positioned

for

the

new

fabs

that

were

just

recently

announced

going

into

play

in

North

America.

We're

going to

have

to

continue

to

expand

our

footprint

in

Asia.

And

what

I

mean

by

that

is

we're

going to

have

to

continue

to

put

more

people,

sales

and

service

on

the

ground

in

Taiwan.

We're going

to

have

to

do

the

same

thing

in

Korea.

We

do

have

a

development

center

and

an

applications

development

center

in

Korea

already. But

we

actually

don't

have

the

sales

and

service

team

in

place

in

Korea

as

well.

So,

we're

going to

need

to

do

that.

In

China,

we

are

kind

of

a

mixed.

We're

a

mixed

business

model

there.

We

do

use

quite

a

few

reps

and

agents

with

a

core

of

our

own

employees

with

boots

on

the

ground.

We're

going to

expand.

We're going

to

invest

in

that

so

that

we

become

less

reliant

on

the

agents

that

we

have

there.

And

that

intimacy

is

extremely

important.

Our

customers

need

to

have

a

direct

interchange

with

somebody

that

carries

a

Comet

business

card.

It

gives

them

a

degree

of

comfort.

It

gives

them

a

great

degree

of

satisfaction.

And

it lets

them

know

they're

dealing

with

the

entity

and

not

with

a

third

party

to

get

to

us.

So,

I

think

it's

quite

crucial.

It

will

require

more

than

maybe

the

business

model

of

Comet

has

been

in

the

past

because

we

will

have

to

become

more

geographically

diverse.

But

we're going

to

go

do

that,

and

it's

the

right

thing

to

do

anyway

as

a

company

that's

growing

in

the

way

we

are.

Thank

you.

And

the

second

question

is

on

IXS,

the

order

you

got

from

TSMC

for the

advanced

packaging.

Is

it

an

in

line

or

at

line

application

and

is

it

a

systematic

testing

of

every

product

or

– and what's

the

pipeline

looking

like

for

that

kind

of

business?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yeah.

Great.

Thank

you

for that

question

as

well.

So

just

to

be

clear,

I

said

the

world's

largest

foundry.

I

don't

think

I

said

the

[ph]



T (00:55:48)

company,

but

you're

probably

right.

No,

you're

right.

The

situation

there

is

that

it's

offline

–

it's

being

used

for

offline

testing,

so

it's

mostly

used

for

failure

analysis

and

for

quality

assurance

purposes.

And

what

that

means

is

this

is

for

this

particular

customer

to

prove

out

their

process

flows.

I've

sort

of

said

this

a

bit

repeatedly,

and

I'll bore

you

guys

with

this,

but

I

think

in

the

future,

it

will

evolve

into

an

at

line

test

protocol

that

the

industry

follows.

But

in

in

line

test,

meaning,

every

single

wafer

or

every

set

of

package

devices

being

inspected

using

X-ray,

every

wafer

day

in,

day

out,

24

hours

a

day, 40

wafers

an

hour.

I

struggle

to

see

the

ability

to

actually

solve

that

physics

problem

at

that

rate.

I

mean, you're

talking

about

being

able

to

put

a

test

article

into

a

product,

whether

it's from

Comet

or

from

somebody

else,

put

it

into

that

X-ray

platform

and

have

it

settle

because

[ph]



we're

moving (00:57:10)

granite,

thousands

of

pounds

of

granite

that

has

to

step

and

settle,

and

then

actually

do

an

X-ray.

And

to

do

that

in

6

seconds,

that's

what

you

would

have

to

be

able

to

do.

And

right

now

the

industry

would

struggle

with

being

able

to solve

that

that

physics

problem.

But

doing

it

in

an

at-line

mode,

meaning

an

AQL

level,

an

acceptance

quality

level

of

testing

where

you're

testing

x

number

of

articles

every

20

minutes,

maybe

6

minutes

in

that

range.

That

probably

becomes

quite

interesting.

Our

view

right

now

in

our

business

plan,

in

our

model,

we've

only

said, our

model

online. So,

that can

kind

of

give

you

the

idea

that

we're

being

conservative

because

there

is

a

challenge

that

we

need

to

go

and

address.

And

the

way

we

may

be

able

to

address

that

6

minute

or

6

to

20

minute

inspection

challenge

is

with

our

acquisition

of

ORS,

optical

research

systems.

And

for

those

of

you that

aren't

familiar

with

that,

this

is

a

part

of

our

company

now

that

specializes

in

artificial

intelligence

and

machine

learning,

where

you

can

imagine

taking

a

blurry

image

via

X-ray,

and

because

of

the

learning

that's

occurred,

you

can

actually

make

a

reasoned

decision

that

that's

a

known

good

device

or

a

known

bad

device

without

having

a

perfect

picture.

That's

exactly

what

happens

in

the

CT

space

in

the

medical

sector,

for

example.

That's

exactly

what

happened

in

some

of

the

automotive

inspection

arena

as

well.

So,

the

proof

points

of

that

are

there.

It's

what

happens

in

optical

inspection

in

the

semi

space

already.

So,

it's

not

a

leap

of

faith

to

get

to

that

point.

But

we're

probably

a

couple

of years

away

from

that,

[ph]



Michael (00:59:25).

Right. So,

the

sales

pipeline?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

So,

the

sales

pipeline,

again,

remember,

this

is

a

failure

analysis

and

quality

assurance

adaptation

right

now.

The

overall

served

available

market

for

this

by

2025

is

somewhere

in

that

100,

plus

or

minus

150

systems

in

that

range.

So,

it's

double

handfuls

of

tools

that

are

being

sold

for

this

application

today

in

our

pipeline.

In

our

pipeline,

we

have

quoted

to

some

seven

or

eight

different

customers

with

multiple

systems.

So,

we

think

we're

right

in

the

mix

of

it

and

in

very

good

shape.

Okay?

[Ulrich Bernhard Steiner]

Thank

you,

[ph]



Michael (01:00:20).

May

I

also

ask

you

to

state

your

name

and

company

so

that

the

audience

on

the

phone

knows

who's

talking.

Serge

next,

please.

[Serge Rotzer]

Yes.

Good

morning.

Congrats on

result.

Yes,

my

name

is

Serge.

Serge

Rotzer

from

Credit

Suisse.

I

have

many

questions,

but

I

will

try

to

focus

on

a

few

ones.

The

first

is

you

mentioned

the

order

book,

that

your

order

book

is

full

with

orders

you

got

almost

two

years

ago.

So,

can

you

share

with

us

how

much

of

the

order

book

is

covering

your

sales

guidance

already

to

get

a

little

bit

of

the

visibility you

have?

That

would

be

question

one.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Great.

Thank

you,

Serge.

Let

me

clarify

because

I

probably

didn't –

either

I

said

it

too

fast

or I

didn't

say

it

clearly

enough.

The

order

book

that

I

was

referring

to

specifically

was

related

to

the

Industrial

X-Ray

Systems

business

IXS.

And

in

terms

of

what

percentage

of

our

order

book

for

2022

does

that

cover,

I

would

tell

you

that

it's

substantially

more

than

half,

without

giving

you the

specificity,

if

you don't

mind,

because

that

– it

becomes

a

bit

competitive

when

we

talk

about

it.

So,

for

IXS,

it's

quite

a

long

range

view

of

what's

happening

in

the

business.

Overall,

our

book-to-bill

for

2021

was

in

excess

of

1,

which

gives

you

a

good

idea

that

all

of

the

businesses

are

in

good

shape

and

are

scheduled

to

grow.

[Serge Rotzer]

Okay.

This

is

very

helpful.

Thank

you

so

much.

Then

I

will

move

to

the

sales

guidance.

This

implies

growth

will

be

in

11%

to

19%

if

I'm

not

wrong,

I

think

this

is

a

fair

guidance at

the

point

of

time.

But

it's

a

wide

range

as

well,

like

others

do –

other

companies

do

the

same

currently.

But

can

you

share

your

thoughts

with

us?

What

is

the

11%

growth

and

what

is

the

19%

growth?

What are

the

triggers

or

what

are

the

downsides

when

we

talk

about

11%

and

19%?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yeah.

Maybe

I'll

say

a

few

points

on

that,

and

then

I'll

ask

Lisa

if

I've

missed

anything

and,

because

I

probably

will.

On

the

downside,

first

of

all,

the

downside

situation,

we

think

that

we've

bottomed

that

to

at

least

from

what

we

can

see

right

now,

it's

really

what

we

see

as

our

low

probability.

We've

taken

into

consideration

a

probability

that

this

supply

chain

challenge

is

going

to

continue

irrespective

of

the

Ukraine

situation.

So,

the

down

side

would

mean

it

could

get

worse.

But

nobody

can

forecast

that

right

now.

And

as

I

mentioned

earlier,

we

don't

see

a

sales

problem

at

this

point.

We

have

very

little

exposure.

And

to

give

you

a color

on

that,

it's CHF

1

million to CHF

1.5

million.

It's

very

minimal

from

a

company

perspective.

And

our

supply

chain

situation

seems

to

be

okay

relative

to

the

Ukraine

situation

right

now.

But

it

could

worsen.

So,

we've

tried

to

take

into

account

what

could

be

the

worst

case

scenario

as

we

understand

it

that

we

experienced

during

2021

for

the

recovery

of

everything

else

that

was

happening

in

the

supply

chain.

A

further

downside

on

that

would

be,

can

our

major

customers

in

the

semi

space

continue

to

deliver

because

of

their

supply

chain

risks?

And

that's

a

hard

one

for

us

to

really

predict

at

the

moment

because

the

mantra

in

the

industry

has

always

been

copy

exact,

no

changes.

And

as

a

result,

you

become

monolithic

in

your

view.

And

you

have

some

companies

like

my

former

employer

that

they've

got

a

perfectly

optimized

operations,

perfectly

optimized.

Any

bumps,

they

can't

react

to

it

and

the

supply

chain

challenges

or

bumps.

So,

then

they

have

to

go

through

looking

at

alternative

components

and

alternative

suppliers

even.

But

that

violates

their

copy

exact

protocol.

So,

in

our

case,

we

have

been

really

way

ahead

of

the

game

looking

at

new

components,

alternate

components

from

different

suppliers

or

new

designs

to

go

into

a

product,

even

to

the

point

where

we're

looking

at

also

different

geographical

regions

and

we're

buying

a

bunch

parts

to

protect

the

supply

chain.

And

we've

been

a

little

bit

faster

than

some

of

our

bigger

customers.

They're

getting

there.

So

there

could

be

a

lead

lag

situation,

and

what

I

mean

by

that

is

you

could

see

us

a

little

bit more

back

ended

loaded

than

front

end

loaded

first

half

to

second

half.

But

we

have

to

go

manage

that.

So,

I

hope

that

gives

you

the

flavor

on

the downside.

I

think

that

we've

been

prudently

cautious

to

talk

about

where

we

think

the

downside

is.

And

similarly,

upside,

there

is

more

there.

However,

we

have

been

–

we've

taken

into

consideration

as

well

what

our

customers

are

saying

and

what

they've

shown

us

in

their

ability

to

ramp,

and

that

sort

of gives

us

what

we

think

is

the

top-line

potential

as

it

stands

today.

If

the

supply

chain

does

improve

in

the

second

half,

the

supply

chain,

I

mean,

the

worldwide

supply

chain

for

our

customers

and

their

suppliers,

not

just

ours.

If

that

really

happens

in

the

second

half,

like

some

people

believe,

that's

upside.

That's

where

our

upside

comes

from.

[Serge Rotzer]

Okay.

Thank

you

so

much.

Probably,

a

last

one,

if

I

may.

Then

on

the

supply

chain

question

for

Lisa

probably.

When

did

you

notice

the

impact

in

accounting

from

the

supply

chain

–

inventory,

you

had

working

down

and

then

really

had

negative

impact

on

the

margin?

When

did

this

start

last

year,

what

time?

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

I

mean,

I

think

as

we've

said,

we've

been

managing

the

supply

chain

diligently

all

year

long.

So

it

was

something

that

we

noticed,

obviously,

in

the

first

half

of

last

year.

We

baked

it

in

to

the

guidance

for

the

second

half

of

the

year.

I

think

there's

a

few

factors

from

our

perspective

that

we

were

able

to

leverage

to

achieve,

honestly,

the

gross

margin

growth

that

we

did.

So,

most

of

that

gross

margin

expansion

did

come

from

increased

volumes.

But

at

the

same

time,

there

is

a

portion

of

that

that

did

come

from

operational

efficiencies.

So,

we

were

able

to

get

the

factories

operating

more

efficiently,

specifically

in

Flamatt.

We

were

able

to

ramp

Penang

up

to

20%.

So,

those

are

good

things

for

us.

But

then

obviously,

we

were

dealing

with

what

everyone

else

is

dealing

which

is

higher

labor

costs,

higher

raw

materials,

some

longer

lead

times.

Now,

on

the

flip

side of

that, we

were

able

to

also

work

with

customers

to

push

through

some

price

increases.

Majority

of

those

will

flow

through

in

2022.

We

didn't necessarily

see

them

flow

into

the

second

half

of

2021.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yeah.

One

more

point

to

that,

if

you don't

mind,

is

that

the

overall

exposure

for

us

last

year

and

going

into

this

year

with

the

cost

increase

that

our

supply

chain

has

given

us

to

this

point,

net-net-net,

it's

on

the

order

of

0.5%.

And

with

the

efficiencies

that

we're

talking

about

and

with

the

improved

mix

that

Lisa

just

mentioned,

we've

been

able

to

offset

that

with

a

very

good

degree

of

headroom.

[Serge Rotzer]

Okay.

Great.

Happy

to

hand

over

to

the

next

client.

[Ulrich Bernhard Steiner]

Well,

how

about

[ph]



Harold

(01:08:32) in the back first and

then

[indiscernible]



(01:08:33)

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yes.

Gentlemen in the back.

[ph]



Mark (01:08:41),

I

believe.

[Ulrich Bernhard Steiner]

Should

be

open.

Hello.

It's

[indiscernible]



(01:08:44).

Basically,

two,

I

would

say,

broader

topics.

First

one

is

the

IHS

forecast

on

automotive.

In

the

past,

they

were

mostly

too

upbeat,

and

I

was

just

simply

wondering

what

from

the

midpoint

of your

guidance,

if

now

automotive

production

turns

out

to

be

zero?

What

broad

impact

would

that

be?

And

the

second

one

is,

yeah,

Ukraine,

Russia.

What

is

your

gut

feeling?

What

are

your

customers

thinking?

What

could

the

magnitude

be

and

how

long

could

this

situation

last?

I

mean,

we

are

hearing

that

drivers,

truck

drivers

are

heading

to

Ukraine,

missing

on

the

market,

[ph]



not (01:09:27)

impacting

logistics

clearly,

and

then

probably

also

a

[indiscernible]



(01:09:33)

inflation,

I

mean,

the

risk

meanwhile tilted toward

–

to

the

upside.

What

is

your

broad

assumption

of

the

inflation

for

your

guidance?

Thank

you.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Thank

you.

Thanks

for

the

question.

I'll

take

the

first

two, and

I'll

ask

Lisa

to

comment

on

the

inflation

side

of

things.

First

of

all,

on

–

gosh,

I

got

to remember

the

order

of

the

questions

again.

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

Automotive

first.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

What's

that?

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

Automotive.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Automotive.

Oh.

Yeah.

The

automotive

sector.

The

impact

of

if

it's

a

0%

growth,

just

flat

relative.

And

at

9%

is

what

IHS

sits

right

now,

what's

the

impact

to

our

overall

guidance.

And

to

be

frank,

it's

quite

low,

very

low.

I

would

say

it

doesn't

impact

our

lower

end

of

our

guidance

in

any

way

whatsoever.

Second

one?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Second

was

your...

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

The conflict...

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

...gut feeling on

Russia

and

Ukraine.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

The

conflict

with –

thank

you.

The

conflict

with

Russia

and

the

Ukraine

situation.

That's

a

hard

one.

That's

a

really

a

hard

one

to

address.

And

let

me

just

– we

got

to look

at

the

mosaic

of

what,

in

particular,

the

semiconductor

industry,

how

it

sits.

Many

of

the

raw

and

rare

earth

materials

come

from

Russia.

For

example,

palladium

is

there

40%

of

the

world's

entire

supply

is

coming

from

Russia.

And

every

single

electronic

device

in

the

world

has

palladium

in

it.

So,

there

could

be

a

knock-on

effect

not

directly

to

my

customers

and

my

customers'

customers,

but

at

the

next

level

up

there

could

be

an

impact

there,

right?

So,

it

becomes

a

food

chain

phenomena.

In

the

meantime,

you

can

see

in

South

America

or

even

Latin

America

and

in

China

and

[indiscernible]



(01:11:30)

exact

material

they

are

already

starting

to

ramp

production.

So,

it

might

be

a

cost

impact

that

trickles

down

through.

But

it

looks

like

supply/demand

would

probably

be

okay.

On

the

other

hand,

there's

so

many

things

you

could

look

at.

You

can

look

at

neon.

Neon

is

a

sourced

material

heavily

from

Russia.

You

can

also

look

at

aluminum

and

stainless

steel,

particularly

316L.

All

of

those

are

heavily

turned

down

industrially

by

Russia.

So,

honestly,

it's

an

unknown. I

don't

–

how

long

will

it

last?

It

comes

down

to

where

we

have

a

treaty,

where

we're

not.

It

could

be

just

a

minor

perturbation.

We're

planning

as

if

our

plan

at

this

point

today

is

that

we

know

what

our

top

line

looks

like.

We

know

what

the

impact

currently

today

on

our

supply

chain

looks

like.

We've

looked

at

the

N

minus

2

level.

At

that

level

in our

supply

chain

also

looks

fun

today.

So,

we

think

that

we've

taken

the

prudent

view

today

about

what

the

conflict

is

going

to

orient

itself.

So,

I'm

sure

that

doesn't

really

help

to answer

your

question,

but

that's

how

I –

it's

the only

way I

can

answer at

this

point.

Yeah.

Thank

you.

I

mean,

also

a

psychological

question,

how

end

consumers

demand

now

might

[indiscernible]



(01:13:10)

due

to

the

fear

of

spreading

of

the

conflict

of

course?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yeah.

That

is

a

possibility.

I

think

that

honestly

in

some

respects,

the

semiconductor

industry

as

an

example

right

now

currently

is

kind

of

going

hum, it's

sort

of

like,

hmm, the

pandemic.

Remember,

it

was

an

incredible

growth

year

through

the

years,

through

the

pandemic,

because

societal

demands

are

insatiable

right

now.

And

so,

mostly

the

industry

right

now

is

kind

of

saying,

hmm, well,

look you

have

to

go

figure

out

how

to

deal

with

it,

okay.

My

gut

feel,

this

is

Kevin

Crofton, and

not

Kevin

Crofton,

CEO

of

Comet.

My

gut

feel

is

that

we'll

find

a

way

to

manage

through

it

and

the

businesses

will

be –

likely

to

be

okay,

unless

this

spread

into

a

worldwide

conflict.

And

then

it's

a

different

story.

Okay.

Thank

you.

[Ulrich Bernhard Steiner]

Okay,

then

we

have,

Michael.

[Michael Inauen, Analyst, Stifel Schweiz AG]

Yeah.

Thanks very

much.

It's

Michael

from

Stifel.

I

have

two

questions

for

Kevin,

and

one

for

Lisa,

if

I

may.

So,

on

the

supply

chain,

we're

always

talking

about

supply

chain

issues.

But

I

was

just

wondering,

what's

the

– which

parts

are

really

missing

at

your

end

clients

that

they

cannot

deliver

their

tools

or

their

machines?

Because

what

– if

I'm

not

completely

wrong,

VAT suggested

yesterday that

it's

actually

power

tools, there's

a

shortage

in

power

tools.

So,

assuming

some

of

your

competitors

are

not

really able to deliver, which leads me actually to the second

question

for

Kevin. Were

you

able

to sell

your

Synertia generator

because

you

were actually

able

to deliver

it

or

were

you

able

to

sell

it

because

there

is

something

that

you do

better

that

you

can

maybe

now

explain

to

us

because

before,

you

couldn't

do

that?

So,

these

are

my

two

questions

for

you.

And,

the

one

for

Lisa,

probably,

also

answer

it

right

now.

So,

I

was

trying

to

do

a

little

bit

of

maths

here

on

my

notebook

and

I'm

not

the

best

in

math,

actually,

but

when

I

just

make

a

quick

calculation,

the

lower

end

of

your

EBITDA

margin

guidance,

assuming

that

the

IXS

margin,

which

I

think

is

a

little

bit

low

actually

in

2021,

would

just

go

up,

let's

say, 200

basis

points

and

the

rest

will

stay

more

or

less

stable, not

even

taking

into

account

the

Penang

factory,

the

cost

initiatives

that

you

have,

I'm

not

getting

to

the

2021,

I'm

already

getting

more

than

2021.

So,

maybe

you

can

just

elaborate

a

little

bit...

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

I

appreciate

your

optimism.

[Michael Inauen, Analyst, Stifel Schweiz AG]

...maybe if

you could

just

elaborate

a

little bit

how

conservative

you

really

are

on

the

margin

side,

not

on

the

top

line.

But

just

on

the

margin

side,

it

doesn't really

add

up,

in

my

opinion.

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

All

right.

Why don't

I

take

the

margin

question

first and

then

we

can

go

back

to

supply

chain?

So,

I

mean,

I

think

when

we

put

out

the

guidance

for

the

year,

we

are

trying

to

give

a

12-month

outlook,

factoring

in

a

lot

of

different

things.

So,

I

mean,

I

think

to

go

back

maybe

to

the

sales

discussion

because

that's

really

a

large

focus

for

us. So

we're

seeing

the

demand

coming

from

the

customers.

Our

order

backlog

at

the

end

of the

year

was

roughly

50%

higher

than

it

was

at

the

end

of

2020.

And

so, I

think

from

that

perspective,

we

feel

good

about

the

demand that's

coming

in.

We

also

feel

good

about

where

we're

able

to

produce.

I

think

we've

done

quite

a

good

job

in

terms

of

making

sure

that

we

have

the

capacity

to

meet

the

demand

in

the short-term.

Obviously,

I

think

we

need

to

ramp-up

where

we're

spending

from

a

CapEx

side

to

make

sure

that

we're

ramping

capacity

for

where

we

need

to

go

to

2025.

But

at

the

same

time,

the

supply

chain

constraints

are

persistent.

The

other

thing

that

–

and

we

talked

about

supply

chain,

but

we

also

need

to

put

labor

into

that

as

well.

So

there

are

price

increases

on

the

cost

of

labor.

We

need

to

make

sure

that

we

are

retaining

labor

that

we

are

attracting

labor

to

meet

the

goals

that

we

have.

So

I

think

that

just

gives

a

little

bit

of

color

around

the

sales

guide.

And

then,

at

the

same

time,

on

the

profit

side

associated

with

all

the

factors

I

just

explained

with

the

input

costs,

and

obviously,

we're

still

continuing

to

work

with

select

customers

on

pushing

through

price

increases.

And

we've

taken

a

view

on

that

into

the

margin

numbers

as

well.

I

think

the

final

thing,

though,

to

say

on

the

margin

and

I

referenced

it

in

my

prepared

remarks,

but

we

are

investing

in

the

company

and

we

are

investing

in

digitalization

efforts

and

we're

investing

in

cybersecurity

and

some

of the

things

that

we

need

to

do

to

make

sure

that

we

are

creating

a

scalable

organization

to

meet

our

goals

going

into

2025

and

into

the

future.

So

that's

my

view

on

how

we

thought

about

margin

and

what

the

guide

looks

like

for

2022, since

the

supply

chain...

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Okay.

I'll

move

to

–

I'll

take

your

question

on

supply

chain

and

impacts.

I

think

I

held,

Michael,

some

of

his

slides

at

some

point

for

his

presentation.

Look,

the

situation,

if

you

look

at

the

major

subsystems

that

go

into

a

plasma,

a

plasma

piece

of

capital

equipment.

There's,

of

course, VATs

product

lines.

There's

typically

turbo

pumps

and

other

types

of

roughing pumps

from

Pfeiffer

and

companies

like

that.

And

then

you

have

the

RF

power

subsystem,

et

cetera,

et

cetera,

et

cetera.

The

biggest

problem

for

our

primary

customers

is

the

availability

of

RF

power

control

systems.

That's

the

issue.

And

if

you

were

to

look

at

my

–

our

biggest

competitors,

they're

quite

–

well,

of

course,

advanced

energy

and MKS.

They've

been

very

clear

in

their

results

that

they've

reported

multiple

quarters

that

they

are

having

trouble

to

produce.

Their

supply

chain

is

letting

them

down.

And

as

a

result,

there

have

been

missed

opportunities

for

revenue.

And,

of

course,

that

then

has

a

– gives

a

problem

to

the

large

Tier

1s,

okay,

for

sure.

And

so

that's

a

pacing

item.

There

are

other

pacing

subcomponents,

but

that's

the

primary

system.

In

our

case,

you

asked

specifically

were

we

able

to

capture

RF

generator

opportunities?

I

think

as

a

way

to

interpret

your

question,

Michael.

And

I

would

say

no.

But

I

would

say

on

the

RF

matchbox

perspective,

the

answer

is

yes.

And

the

reason

why

that's

the

case

is

that

we're

well-known

as

a

provider

of

RF

matchbox

assemblies.

We're

qualified

across,

most

of

the

Tier

1s

and

Tier

2s

with

RF

matchboxes.

And

so

we're

able

to

step

in

and

take

positions

that

maybe

our

competitors

couldn't

fulfill.

The

generator

is

a

different

story,

and

the

reason

why

that's

different

is,

particularly

in

the

Tier

1s,

they

have

to

go

and

qualify

a

generator,

not

just

on

their

product,

but

then

they

have

to

qualify

that

generator

as

part

of

their

overall

piece

of

capital

equipment

with

the

TSMC's and

the

Samsung's

and

the

Intel's

of

the

world.

And

that's

not

the

work

of

a

moment.

So

even

more

of my

biggest

competitors are

not

able

to

supply

a

generator

that

is

form

fit

function

that

we

can

fit,

no

chances

in

this

timeframe.

There's

no

chance

that

we

would

be

qualified

that

quickly.

We

have

had

a

situation

that

come

up

where

one of

those

very

large

Tier

1s

have

said,

we

need

to

go

qualify

your

product,

in

anger.

But

that's going

to take

time.

But

before

that, it

was

like,

oh

yeah,

we'll

get

to

you.

Sometime,

we'll

talk

to

you.

But

now

it's

become

[indiscernible]



(01:21:55)

so

that's –

but

that's going

to

take

us

time

to

be

fully

qualified

in

a

Tier

1.

Does

that

answer

your

question?

[Michael Inauen, Analyst, Stifel Schweiz AG]

Yes. Perfect. Thank you very much.

[Ulrich Bernhard Steiner]

Thank

you,

Michael.

Do

we

have

one

more

question

in

the

room?

Two

more

questions,

first.

[indiscernible]

(01:22:13).

A

couple of

questions

on

the

RF

generator

business. You

said

your

estimate

first

sales

in

2022.

So

could

you

give

us a

ballpark

figure

of what

kind

of

sales you

expect

this

year?

And

then,

you

said

addressable

market

is

CHF

1.2

billion,

do

you have

an

estimate

what

market

share

you

can

get

in

the

midterm

in

this

market

and

will

it

be

more

of

Tier

1

or

Tier

2

suppliers?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Gosh.

That's

a

big

question.

Okay.

First

of

all,

I

will

defer

about

telling

you

what

our

revenue

line

for

2022 is

going

to

be

for

this

generator,

and that's

highly

competitive

information,

first

of

all.

And

to

give

you

an

idea

of

why

we're

so

careful

about

divulging

that

at

this

point,

we'd

rather

talk

about

design

wins

and

first

customers.

And

the

reason

is

because

our

two

competitors

that

I've

already

mentioned,

they've

got

boots

on

the

ground

everywhere

in

the

world.

They

want

to find

out

where

every

single

beta

site

tests

we

have

going

on

is

occurring

and

think

about

what

their

reaction

in

the

marketplace

would

be

if

they

knew

exactly

what

product

at

which

customers

are

being

qualified

on.

They

would

go

to

that

customer

right

away

at

the

highest

level

of

management.

And

they'll

say,

why

are

you

entertaining

those

guys

from

Switzerland?

What

did

we

do

to

not

satisfy

you?

How

do

we

make

it

better?

Can

we

reduce

price?

Can

we –

maybe

we

need

to

give

you

more

people,

maybe

we

need

to

give

you

spares?

They

can

act

like

a

gorilla

in

the

marketplace,

at

least,

that's

what

I

would

do.

So,

I

would

do

everything

I

could

to

prevent

a

Comet

or

[ph]



A (01:24:05) another

to

come

into

my

customer

because

that's

my

customer.

So,

that's

highly

competitive

for

us

to

actually

divulge

that.

But

I'll

try

to

give

you

some

flavor.

We've

been

very

clear

about

saying

we'll

get

revenue

in

2022.

We'll

get

some

more

revenue

in

2023.

It'll

be

interesting

revenue

in

2023.

But

then,

you'll

start

to

see

a

significant

uptick

in

2024

and 2025.

As

long

as

the

product

does

what

we

say

it's

going

to

do,

right?

And

we're

still

in

that

phase

where

the

baby

has

no

words.

It

looks

really

good,

it's

going

to

be,

prince

charming

when

it

grows

up.

We're

still

in

that

phase

right

now.

But

looks

like

it

works,

it

looks

like

it

does

what

we

say

it's

going to

do

on

the

TAM

for

really

one

power

regime

and

one

frequency

regime,

so

far

so

good.

As

long

as

the

other

variants

do

the

same

thing,

then

our

stated

objective

as

a

company

is

that

we

will

take

10%

market

share

by

2025.

And

I've

been

quite

clear

that

I

believe

that's

a

very

humble

objective.

Because

if

the

product

does

in

every

variant,

if

it

does

what

we

say

it's

going

to

do,

by

2025,

we

should

have

a

shot

at

being

– at

least

number

three

in

this

space.

So,

again,

so

you're

talking

about

– we're

talking

about

a

$1.1

billion

to

$1.3

billion

served

available

market

in

2025.

And

we've

been

very

clear

about

stating

our

objective

is

to

be

at

10%

share

in

that

timeframe.

Okay.

It's

going

to

be

in

that

range.

And

that would

be

a

very

major

success

for

the

company.

Okay.

Thank

you.

And

then

one

question

on the

CapEx,

you

said

that

you're

expecting

CapEx

to

be

at

the

upper

end

of

the

3%

to

5%

range.

Can

you

give

us

an

indication

of

the

split

between

the

three

divisions?

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

I

can

give

you.

Yeah.

Sure.

I

can

give

you

a

kind

of an

indication

of

where

that

CapEx

will

be

directed.

So,

the

majority

of

that

CapEx

is

related

to

capacity

expansion

and

R&D

expansion.

It

will

be

in

Flamatt,

Switzerland.

Part

of

it

could

be

in

San

Jose,

California.

A

minor

part

of

it

will

be

directed

towards

Penang. And

then,

of

course,

Aachen

is

where

we

have –

Aachen,

Germany

is

where

we

had

planned

to

produce

this

inertia

RF

generator.

So

–

but

the

majority

of

the

CapEx

is

really

around

capacity

expansion,

R&D

expansion.

It

will

be

disseminated

globally.

The

majority

of

our

CapEx

is

in

the

Plasma

Control

Technologies

division.

It's

our

largest

division.

It's

where

many

of

our

strategic

aspirations

are

at

the

moment,

especially

in

the

mid

to

the

long

term.

So,

that's

how

I

put a

flavor

around

the

CapEx.

And

the

other

thing

is

really,

again,

we're

investing

in

digitalization.

And

that

includes

in

operations

and

so

part

of

the

CapEx

is

related

to

those

activities.

Very

good.

Thank

you.

[Ulrich Bernhard Steiner]

Sebastian?

[Sebastian Vogel, Analyst, UBS AG]

Okay.

Sebastian

Vogel

from

UBS.

Perfect.

Many

thanks.

I

got

three

questions.

The

first

one

would

be

on

Penang.

Can

you

sort

of

give

an

indication

or

a

rough

indication

of ballpark

figure,

how

much

of

a

margin

help

that

was

already

in

PCT

for

this

year

to

have

a

little bit

of

a

better

sense

what

is

the

potential

going

forward?

And

the

other

one

would

be

on

the

RF

generator.

Just

to

be

clear

there,

is

that

just

mean

one

single

generator

that

has

been

sold

in

these

orders

or

there is a

couple of

machines

been

included

in

there?

And

is

the

delivery

supposed

to

be

happening

next

week,

tomorrow

or

in

two,

three

months'

time

down

the

road?

Just have

a

little

bit

of

a

more

of

a

sense

how

quickly

that

will

turn

into

sales.

And

then

a

bit

of

a

housekeeping

question.

Could

you

share

with

us

the

FX

impact

on

the

sales

number

for

the

different

segments?

That

would

be

great.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Okay. So

you

handle

FX

and

– what

was

the

first

part

of your

question?

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

Can you

repeat

the

first

part of

your

margin

question?

[Sebastian Vogel, Analyst, UBS AG]

Yeah.

Sure.

I

mean,

since

you

have

said

that

you have

already mass

production

to

Penang,

so

the

question

is just

like

what

is

the

margin

support

that

you

have

seen

in

PCT

already

from

this

transfer?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

So,

if

you're

ready...

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

Yeah. I

can

start...

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

...go

ahead.

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

...I

got

to look

at

the

sales

number,

but

I

know

it's

in

the

Appendix.

So,

on

the

margin

side,

again,

just

to

kind

of

repeat

back

what

we

have

seen

happened

in

the

second

half,

so

the

major

thing

here

with

Penang

is

that

we

did

ramp

it

up

to

about

20%

this

year.

And

so,

that

was

on

schedule;

it's

on

plan

and

it

did

what

we

needed

it

to do.

Again,

remember

that

we're

transitioning

from

manufacturing

of

our

matchboxes

from

San

Jose

to

Penang.

So,

the

real

lift

from

that

is

going

to come

2022

and

then

into

the

out years.

In

the

second

half

of

2021,

we

also

needed

to

compensate

for

increases

in

labor,

raw

materials,

components,

etcetera.

So,

just

in

terms

of

where

did

our

margin

expansion

really

come

from,

in

2021,

it

was

generated

from

volume

and

a

favorable

product

mix.

And

as

I

did

say,

a

portion

of

that

gross

margin

expansion

did

come

from

operational

efficiencies.

But

the

lion's

share

of

that

was

really

coming

from

volume.

But

going

into

2022,

the

ramp up

for

Penang

should

be

around

to

60%

and

that

we

should

be

seeing

an

appreciable

increase

in

gross

margin

from

that.

Why

don't

you

take

the

next

one

just

because I

need

to

check

the

actual

number

on

the

FX

side?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yeah.

So,

one

last

comment

on

that.

The

summary

of

that

answer

primarily

is

that

Penang

was

a

volume

increase

situation

that

we're

trying

to

get

it

filled.

But

the

overall

impact

on

cost

of

goods

sold

is

pretty,

pretty

small

relative

to

the

opportunity,

quite

small

to

the

tune

of,

1

million,

plus

or

minus.

If

you

get

to

60%

capacity

fill,

it

would

be

substantially

more

than

that. And

that's

what

our

plan

has

always

been,

by

the

way,

Sebastian.

So

thanks

for

that

question.

The

second

part of

your

question

about

the

RF

generator,

I

hope

you

all don't

laugh

at

me,

but

remember

I

said

that

we

would

sell

one

in

2021.

We

didn't

quite

get

there.

We

sold

one

a

couple

of weeks

ago.

And

so,

so

just

to

be

dead

nuts,

straight

down

the

line

here,

there

will

be

repeat

orders

from

that

customer,

for

sure.

I

want

to

– I

don't

want

to go

into

the

specifics

of

that,

if

you

don't

mind.

We

have

five

ongoing

data

sites

already

for

that

variant

already,

as

I've

previously

announced.

We

expect

will

convert

a

significant

portion

of

that

into

revenue

and

into

extended

purchase

orders

for

the

year.

And

by

the

way,

that

first

unit,

yes,

it's

shipped.

Yes,

it's

there.

Yes,

it's

at

the

customer.

Yes,

it's

real. Sorry,

I

forgot

that

part of

your

question.

The –

and

then,

we

have

an

objective

to

have

another

handful

or

more

beta

sites

going

on

mid-year,

so

they'll

be

carrying

on

through

the

course

of

the

year.

Can

convert

some

of

those

into

revenue?

I

would

say

between

the

ongoing

beta

sites

we

have

plus

the

new

beta

sites

that

we

have

coming,

there's

probably

the

likelihood

that

we'll

convert

something

smaller

than

a

handful

of

those

into

actual

repeat

orders, it's

just

because

of

the

amount

of time

that

it

takes

to

get

qualified.

Yeah. Hopefully

that

answers

your

question.

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

And

then circling

back

on

the

foreign

exchange,

the

impact

on

sales

year-over-year

2020

to

2021

was

CHF

5

million.

[Sebastian Vogel, Analyst, UBS AG]

And

what's

the split

between

the

two

segments?

[Elisabeth Pataki, Chief Finance Officer, COMET Holding AG]

So,

I

don't

have

it by

the

split

of

segments,

but

the

way

to

think

about

it

is

that

the

majority

of

our

exposure

is

coming

from

US

dollars,

and

that

is

mostly

with

the

PCT customer.

[Sebastian Vogel, Analyst, UBS AG]

Got

it.

Many

thanks.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Thanks, Sebastian.

[Ulrich Bernhard Steiner]

Thank

you,

Sebastian.

So,

we're

already

running

a

little

bit

behind

schedule.

So,

if

there

is

no

urgent

question

in

the

room

right

now,

then

I

would

ask,

and

we'll

come

back

to

you.

After

that,

I

would

ask

if

there

is

one

or

two

question

coming

from

the

phone.

Do

we

have

something

there,

operator?

[Operator]

There

are

no

questions

registered

at

this

time.

[Ulrich Bernhard Steiner]

Okay.

Perfect.

And

we

have

another

question

in

the

room.

[indiscernible]

(01:33:45). Just

a

tiny

question

is

in

reference

to

design

wins.

If

you

win

the

design,

does

it

mean

you

get

the

order?

Or

how

does

that

work?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Okay.

So,

the

question

is,

if

I

– if

we

get

– when

we

say

we

get

a

design

win,

do

you

get

an

order

from

it

right

away?

The

answer

is

yes.

Typically,

what

that

means

is

you'll

get

a

first

set

of

orders

for

depending

on

the

product

that

it's

going

on,

right?

Our

customers

product,

it'll

be,

some

10s

of

RF

matchboxes.

It'll

very

rarely

get 100

units

because

nominally,

you're

getting

qualified

on

either

a

new

product

from

our

customers

or

a

new

variant

from

our

customers

or

you're

in

a

situation

where

you

are

replacing

an

incumbent.

So,

you're

getting

part

of

what

they

are

already

delivering,

not

all

of it.

So,

it's

typically

in

the

10s

for

the

first

orders

that

you're

going to

get.

After

that,

if

it's

on

the

right

product

at

your

customer,

the

right

end

product,

I

mean,

look,

our

biggest

customer,

in

one

of

their

product

ranges,

they're

supplying

500

modules

per

quarter.

Okay, that's at

least

500

RF

generators

per

module

going

out

the

door,

so

it

could

be

substantial

order,

or

it

could

be

with

a

little

tiny

customer

that

maybe

their

entire

production

for

the

entire

year

is

200

modules, depending

on

the

customer

mix,

customer

position.

Do

you

pay

the

design?

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Yes.

Under

normal

circumstances,

we

do

all

of

the

design

work,

we

do

all

of

the –

so,

we

do

all

the

engineering,

we

do

all

the

design

for

manufacturing

as

well

as

the

product

engineering.

And

it's

a

wholly

sold

article

from

Comet.

There

are

circumstances

where

we

do

build

to

print,

but

nominally,

what

ends

up

happening

is

it

becomes

billed

to

print

for

the

first

units.

Then

we

do

design

upgrade

on

behalf

of

the

customer

and

then,

it

becomes

a

Comet

design

to

deliver. So,

that's

a

transition

that

occurs.

Thank

you.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Thank

you

for

the

question,

[ph]



Daniel (01:36:30).

[Ulrich Bernhard Steiner]

Do

we

have

a

final

question

in

the

room?

[indiscernible]



(01:36:36).

Sorry.

If

I

may,

a

final

question

for

me.

On

IXS,

I

was

not

sure.

You

mentioned

that

you

see

some

competitive

headwinds

in

IXS.

Can

you

–

what

is

wrong

if

I

understand

this

not

correctly.

Then

on

IXS,

if

this

is

not

true,

you

showed

a

roadmap.

You

want to

achieve

2025

initiatives

or

something

like

that.

Can

you

give

us

a

feeling

how

much

you

already

have

achieved

of

this

roadmap

and

what

we

can

expect

for

this

or

then

even

later

from

that

and...

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Okay.

Yeah.

That's

it.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

All

right.

Thanks for

that

question.

If

I

said

headwinds,

I don't

remember

saying

that

to

be

honest.

You

caught

me

off

guard

on

that one.

Maybe

you

can

whisper

to me

and

tell

me

when

did

I

say

that.

On

the

–

let's

talk

about

the

IXS

transformation.

Maybe

to

try

and

put

that

into

a

broader

context

and

narrow

down

to

where

are

we

headed.

When

I

came

on

board,

we

had

26

different

products,

13

of

which

were

single

one-off

custom

designed

systems

that

were

literally

being

sold

one.

And

then

three

or

four

or

five

years

later,

you'd

sell

one.

And

then

there

were

maybe –

so

there

were

13

of

those.

And

then

there

were

another

13

or

14 that

were

standard

products

that

had

quite

low

margin.

I

want

to

tell you

the

ease

conditions.

So,

that

was

the

ease

condition.

We

also

will –

each

of

those

products,

those

26

things

that

we're

selling,

we're

on

four

different

software

platforms.

Now,

how

does

a

small

company

have

four

different

platforms,

software

platforms

and

being

able

to

support

that

as

an

entity?

That's

like

having

some

of

your

products

on

a

Dell

computer

and

some

of

them

on

a

Macintosh,

as

an

example.

They

don't

work

the

same,

right?

We

also

had

300

agents,

distributors

and

representatives.

Many

of

them

were

historical

from

the

Phillips

days.

Probably

you all

know

this

division

was

formerly

part

of

Phillips,

and

so

the

contract

had

– that

Phillips

had

put

in

place

carried

on

through

that

period.

And

you

kind

of go,

why

is

that

important?

Well,

they

were

contracts

that

were

not

to

the

benefit,

maybe

at

the

time

they

were,

but

in

today's

day

and

age,

the

commission

structure,

the

service

structure,

it

was

not

what

you

would

expect

in

a

capital

equipment

company

that

is

in

the

semiconductor

market.

Wasn't

fit

for

purpose?

So

those

are

maybe

some

three

examples

of

what

the

ease

condition

was

a

year-and-a-half

ago.

We're

down

to

–

we're

down

to

the

point

now

where

we

have

six

products

that

are

actually

standardized

and

real

and

we

can

produce

them

repeatedly.

We

still

have

two

custom

products

that

we're

still

delivering

and

still

building.

We

are

on

two

software

platforms.

And

we

have

a

little

bit

over

50

reps,

distributors

and

agents.

And

where

we're

headed

is

that

we

want

to

get

to

a

point

where

we're

probably going

to

have

seven

products.

And

we're

probably

still going

to

have

one

custom

product

that

we're

going to

deliver

for

a

period

of

time,

because

of

the

nature

of

the

customer

and

the

nature

of

the

industry

that

we're

in,

in

that

particular

case.

By

2025,

we

should

be

on

one

single

platform

from

a

software

perspective,

one.

And

we'll

have

something

less

than

50

partners

in

the

channel.

So,

we're

on

that

and

then

I

should

have

said,

remember,

I

said

we'll

go

from

six

to

seven,

we

might

go

from

six

to

eight

new

products,

because

you

can

imagine

that

we

might

have

a

semi-only

product,

and

electronics-only

product.

Currently,

today,

we

think

it

might

be

that

one

additional

product

will

cover

both

sector

demands.

But

you

can

envision

maybe

that's

not

going to

be

right, because

that

comes

back

to

Michael's

question,

is

it

going

to

be

online

at

line

or

a

one-off

sort of

test

system.

And

that

would

be

a

different

architecture.

So,

where

are

we

in

that

journey?

Okay.

We've

done

the –

we've

done

the

sort

of

easy

part,

sort

of.

And

now

we

need

to

get

through

this

design

and

industrialization

activity.

And

we

probably

have

another

year

to

year

and a

half

to

go

in

this

transformation.

So,

2022

for

IXS,

yes,

it's

is

going

to

be

better.

And

I

hope

that

all

of

you

all

are

believers.

I

remember

coming

into

these

forums

and

there

weren't that

many

believers,

but

hopefully

we've

changed

that.

But it's

going

to

be

–

we

got

work

to

do.

But

I've

lived

it

a

couple of

times

and

I'm

sure

we

can

make

that

happen.

Hopefully,

that

helps

you.

[Ulrich Bernhard Steiner]

Great,

so

thank

you.

Thank

you

very

much

for

your

lively

participation

in

the

event.

We

can

close

the

official

part

of

the

event

right

now.

Thank

you

for

showing

up

here.

Thank

you

also

to the

audience

that

joined

us

over

the

phone.

After

the

meeting

and

here

will

have

served

some

finger

food

at

the

back

of

the

room

and

management,

Kevin,

Lisa

will

also

be

available

for

you

if

you

have

one

or

more

questions.

Also,

thank

to

–

I

would

not

miss

that

to

[indiscernible]



(01:42:55),

who

organized

the

event,

including

the

food

you're

getting

after

that

and

the

drinks.

So

thanks

for

coming,

Zurich

here,

and

I

hope

you

stay

a

while

to

have

a

conversation

with

our

management

team.

Thanks

a

lot.

[Kevin Timothy Crofton, Chief Executive Officer, COMET Holding AG]

Thanks everybody.

[Ulrich Bernhard Steiner]

And see

you

soon.

[Operator]

Ladies

and

gentlemen,

the

conference

is

now

over.

Thank

you

for

choosing

Chorus

Call

and

thank

you

for

participating

in

the

conference.

You

may

now

disconnect

your

lines.

Goodbye.