Inficon Holding AG

SIX:IFCN

Earnings Call Transcript 2024-Q1

[Bernhard Schweizer, executive]

My watch it's 9:30. So good morning, and welcome, everyone. My name is Bernhard Schweizer, Investor Relations contact at INFICON. I have the pleasure to host this Microsoft Teams webcast of our Q1 2024 Results Conference. With us today are Oliver Wyrsch, CEO of INFICON; and Matthias Troendle, CFO of INFICON.The management team will first present the results and then take questions. During management's prepared remarks, please online participants are requested to turn off their microphones and cameras. During the Q&A session, then participants are invited to turn their cameras and microphones on when asking questions. Participants can add themselves to the queue of people wanting to ask questions by clicking on the Raise my Hand icon or alternatively, you can also use the chat function in MS Teams.You should have received by now a press release on the Q1 results, together with the link to accompanying visual for this web conference. All documents, of course, are available for download in the Investor section of the INFICON website. I would also like to inform you that we record this conference to archive the audio file later on the INFICON website.The oral statements made by INFICON during this MS Team session may contain forward-looking statements that do not solely relate to historical or current facts. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial conditions. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.Having said all that, I would like to hand over now to Oliver Wyrsch. Oliver, please?

[Oliver Wyrsch, executive]

Thank you very much. Bernhard. A warm welcome to everybody on the call. Thank you very much for joining today. It's my pleasure to walk you for the first part of our presentation. Let me just quickly show you the agenda. Our usual structure, I will first walk you through a couple of key points of our financials, talk through the different markets and then about the expectations for 2024. After me, Matthias Troendle, our CFO, will give you more details on the financials. And then afterwards, we'll take your questions. And with that, I'll dive in.Q1, 2024 results, we were able to improve gross margin and profitability. We had a solid start into the year, while slightly weaker as expected. We grew in all markets year-on-year, except semiconductor vacuum coating. The book-to-bill is nearly [ 1 ]. So when you look at the sales, they were minus 2.5% year-on-year, so nearly flat, 2.1% organic, the growth in Europe and Americas and again, all end markets, except semi.There is a slightly slower momentum in Q1 after a very fast growth in Q4 last year and a general growth for the full year of last year of 16%, as you remember. The order intake has started slow, but is accelerating each month. Actually, we had an increase and see this also increase further throughout the year.Regarding operating result, we worked on systematic cost management. On one hand, while preparing for the ramp in particular in semiconductor, the supply chain improved regarding availability and quality, while not fully at normal levels in all product lines. The broker costs, however, definitely are much lower and nearly disappeared. Gross margin improved by 2 percentage points.Regarding cash, good cash generation, again, with operating cash flow of USD 22.5 million. million plus USD 7 million. Continued investment into R&D as before and as we plan also for the future of 8% of sales and also production capacity with USD 12 million CapEx for this quarter. This is a little bit the timing thing, this USD 12 million, depending on the different investment projects. For the full year, we expect around USD 30 million.If I now jump into the worldwide sales, we see the different regions here. Good growth in most markets. We have, in particular, in Asia, temporarily a slowdown on a very high level of last year of minus 12%. Europe grew by 3% and North America by 9%. You see also the percentages shifted a little bit. North America now at 29%, Europe 27% and Asia at 43%.When we look now at the specific target markets, semiconductor, a solid Q1, based on the market dynamics, what we see is definitely first signs of the ramp as expected, of the next up cycle of semiconductor. We have different product groups, and they go into different cycles or parts of the cycles of the ramp. So in some product group, we can see that while in other product groups, this is a little bit further away. We have decreased the sales versus Q1, 2023 by minus 15%. This is mainly in Asia, which we believe will, in this year, have a good year, good momentum we see coming, while it's a temporary slowdown.When we look at the different submarkets, memory was the slowest market in 2023 now shows already first improvement. Most submarkets have moderately optimistic outlook for 2024. It's still a mixed picture during the whole first half we would expect and then some positives in the second half. Again, we see first signs in some sections of our business. The mature edge of the chipmakers after a strong 2024, probably a little bit slower this year. So we continue with our projects, working on the next-generation products of our customers, we have a strong pipeline, and we are looking very optimistic into the future.Let me now jump into automotive, refrigeration and air conditioning, good quarter with a growth of plus 8% year-on-year, mainly from the Americas. We remain #1 position in this market. We have launched new products with good momentum. We believe that this year is a bit slower after a tremendous growth last year -- [ we've seen ] nearly 30% last year. The battery EV transition is a bit slowing the adoption. So the growth is a bit slowing this year. Generally, the market -- this is a strong market. The EV transition will further continue, and we are very well positioned in this market to grow with the markets also when I look at our R&D pipeline.Next to the solutions for battery, smart manufacturing for battery manufacturing, also air condition and refrigeration has good momentum. You saw that last year as well in this market. This is through new regulations coming in for climate protection and new refrigerants.Jumping into the next market, general vacuum. This is a very broad market for us with a number of submarkets that we work with channel partners together also to address. We generally expect this year to be flat after a tremendous growth last year also nearly 30%. This is largely driven by the general market dynamic macro. We see a bit of a mixed picture here as well. But overall, we saw a growth of 4% year-on-year growth mainly in Europe and a bit slower growth also in Asia. We remain the most competitive full liner in vacuum instrumentation in this segment, and we also believe we can further expand our business here. Also, during this year, we look optimistic throughout the year.If you then jump into the last segment, security and energy, a very strong Q1 with a new quarterly sales record. They -- both of these parts of the segment have its own dynamics, which are different than the other markets of government-sponsored programs. We -- after the launch of new products, have seen a continuous increase of this momentum. We also see for this year positive growth and have started with a very nice first quarter of 49% growth.With this, I jump to the expectations for 2024. Again, we expect a soft first half with growth in the second half, mainly through the semi up cycle that will come in bits and pieces depending on different key players and the submarkets. But we also see a momentum, in particular in Asia that should accelerate again for the second half. So we leave our guidance unchanged with sales of USD 650 million to USD 700 million and operating income of approximately 20%.Now let me jump to just a quick overview of what's happened recently. If you want to know what's going on at INFICON, please follow us on these different channels. Many different things happened recently like the opening of the Guangzhou Applications Center, renewed battery momentum with our new strategies in that area and the numerous other things. And with that, I conclude my part of the presentation.I would like to hand over to our CFO, Matthias Troendle, for more details on the financials.

[Matthias Tröndle, executive]

Thank you, Oliver. Good morning, everyone, to our first quarter call. I will cover as usual the Q1 financials and also briefly comment our guidance for 2024.So let me first start with Slide 12, which is our highlights for Q1. Orders have been slower with a book-to-bill close to [ 1 ]. Sales had a slight decrease of 2.5%. Our gross margin improved by 2 percentage points, and our operating income reached with $31.3 million, a level of 20.3% of sales. Equity ratio increased to close to 70%. Cash flow and net cash showed a positive trend, and our CapEx have been started really high with nearly $12 million.Now let me go a little bit more into the details. As you have seen in our press release, we achieved revenue of $154.2 million in Q1. This compares to $158.2 million in Q1 last year, a decrease of 2.5%. If you take into account the negative foreign currency impact, the organic decrease was 2.1%.Oliver did already [ commented ] the development of the different markets, I think we can report that sales have increased in all markets with the exception of the market for semi and vacuum coating. We had a strong sales increase and a new quarterly record in the security and energy market with a plus of 49%. Refrigeration, air conditioning, automotive sales did grow by 8% and general vacuum did expand by 4%. Compared to previous quarter, Q4, which was our record quarter so far, sales decreased by 11.6%, mainly coming from semi and general vacuum.The visual distribution of sales, which you can see here on the right side shows growth in North America and Europe, while Asia showed some decrease of 12%.Let's talk about operational costs. First, both R&D and SG&A costs did more or less developed stable. We spent $12.2 million on R&D in Q1, as a percent of sales, R&D increased from 7.7% to 7.9% in the first quarter. In SG&A, the cost level did slightly decrease to $30.2 million. Costs for additional headcount and initiatives have been compensated by some savings and lower performance-related expense.The gross profit margin increased by 12% in absolute numbers and reached 47.8%, up by 196 basis points compared to last year Q1. This is the best level since Q2, 2021 and the third improvement in a row. Lower broker costs and improved supply chain with lower freight costs and a more favorable mix have been the main drivers for that improvement.The operating profit for the first quarter reached a level of $31.2 million -- $31.3 million or 20.3% of sales, up to $30 million and 19% of sales last year. This corresponds to an increase of 4.3%.The tax expense for the first quarter was at [ $7.2 ] million, which represents a tax rate of 21.9%, which is slightly lower than in Q1 last year. The net profit -- from net profit point of view, [Technical Difficulty] and a better currency related -- currency related financial result, raised the net profit to $25.6 million or 16.6% in Q1. This compares to $22.1 million or 14% in the prior year, a 15.8% increase.Now let's move to the balance sheet highlights. Our net cash reached $54 million, which is nearly $10 million higher than in Q4 last year. The inventory turn rate remained stable at [ 2.4 ]. And the DSO, day sales outstanding improved to 50.7 days -- to 50.7 days in Q1. Our working capital, which consists of accounts receivables, inventory and accounts payables, closed at $215.6 million or 35% of sales and with that ended [ about ] $10 million lower than end of last year. The decline is mainly due to good collections and a decrease in accounts receivables of $10 million.Our operating cash flow improved and reached a level of $22.5 million after $15.3 million in Q1 last year. The balance sheet shows a solid structure. We had an equity ratio of 70%, which improved compared to last year. So those were my comments on the balance sheet and Q1.Finally, I come to the outlook. Oliver has already commented the expectation for the end markets. Based on the order pattern, the improved supply chain situation and the expected semi upturn in the second half of the year, we maintain our guidance and expect sales between $650 million and $700 million with an operating income margin of around 20% for fiscal year 2024.With that, I would like to close the presentation. Here we see our next [ page ]. And our Q2 conference call will happen end of July as a next event. And yes, now, we are ready to take your questions.

[Bernhard Schweizer, executive]

Thank you, Matthias. We have first questions from Joern Iffert. Joern, please.

[Joern Iffert, analyst]

Hi, Oliver. H, Matthias. Three questions, please, and I will take them one by one, if it's okay. The first one would be China. China seems softer, and this is in contrast to all your peers reporting, where China is pretty strong these days. Isn't there the risk that you export to China is more linked maybe to the higher end nodes, still some [ last ] logic and foundry investments and not so much to memory, that this is a structural concern for you now going forward? Or how should we think about the end market mix in China for you in semi?

[Oliver Wyrsch, executive]

Yes. Certainly, something we're monitoring closely. First of all, we should break it down into the different end markets for us. What you currently see is that the general vacuum market is continuous on the high level. The RAC auto market as well. While, of course, it's a bit of a slowdown because of the battery, the EV transition that is a bit slower this year in terms of growth. And then, you see solar that was really fast last year that has a slower year this year. There's a bit of a consolidation year and we see that.When you look at semi, it's quite a mixed picture, I should say. So we, as you know, supply leading edge logic and also second tier chipmakers as well as OEMs. Almost each player is a bit different. I think what we agree with our peers is that in the OEM space, there's already a lot of momentum, maybe a bit of a slow start, but really a lot of momentum, but we also have some inventory still. You need to know, we come from a very high-level last year. We obviously had a semiconductor market grew 2%, while many reduced dramatically last year. Overall, we grew 16%. So we only see that this is on a high level with very high Q4, a bit of a slower start into the year, but we do not see that our trends will be different than the one from peers or the general industry.So we see these first signs on this momentum. We see the orders coming in. We see the discussions of projects. [ Well ], of course, there's a lot of uncertainty in China still. I think our customers, and so we are very closely monitoring the regulations. It's an election year in the U.S. Things developing sometimes more rapid in these years. So we're looking closer at this. The most recent update in terms of trade regulations did not affect us, but it's also possible that a few more changes will be coming there. I hope this helps, Joern [indiscernible].

[Joern Iffert, analyst]

If I may have a follow-up on this, to be pretty clear that I understand it correctly. So in China, you do not have the concern that you're over-indexed to logic, which could start to weak quite significantly over the next few years in China, given that they are not access the tools they want to have in logic?

[Oliver Wyrsch, executive]

No. And I'll be honest with you in parts, it's also surprising to us how resilient it is, and how much interest there is for leading edge sensors for leading edge technology, Leading edge in China being not a little bit removed, of course, from the absolute leading edge that we see in other regions. So that [Technical Difficulty] shows relatively good momentum also already in Q1. But it's mixed, right? So we see some players a little bit different than others.

[Joern Iffert, analyst]

Okay. And the second question, a quick one on the order trends. You mentioned it was improving during Q1. So I mean, if book-to-bill in March above [ 1 ] and should we expect that Q2 already is quite materially better than Q1? Or how should we think about it? I mean, Q1 [ very ] close to the previous year levels? Should we also expect Q2 to be close to the previous year's levels?

[Oliver Wyrsch, executive]

Yes. We're not giving guidance, obviously, for the next quarter specifically. What we -- what I can say is that we see a month-on-month increase steadily now. And that, we believe, will continue. We'll have to monitor it closely, right. The big question this year is a bit, which submarket of semi will really see a proper ramp this year and when. And some will be earlier, and we see first indications there and some you don't see anything yet, and they might be late in this year, right? So this is a bit still a question mark that is a bit hard to answer. But yes, we see the positive momentum. And we would also think that in Q2, this will continue.

[Joern Iffert, analyst]

And the last question on the gross profit margin. Finally, the broker fees are more or less disappearing. So I mean, the 48%, I think, was all supported by lower revenues in China. So how should we think about the full year? Is this 48% now the run rate when China is coming back, which is valid? Or should we expect that operating leverage given higher volumes supporting the gross profit margin also going forward that we see ongoing improvements sequentially?

[Oliver Wyrsch, executive]

Yes. So I think the details definitely Matthias should talk some more about. But in general, just a disclaimer. I know you know that Joern, specifically, but maybe for the benefit of some that haven't heard this yet, INFICON gross margin has to be taken with a grain of salt Why? Because the product mix is very diverse when it comes to gross margin. It goes from the [ 70s, 80s ] down to the [ 40s ] depends on what channel and what product line is in the mix to what degree, right? All of these products, we aspire the same operating income. That's what we truly measure our businesses on. And I believe we've shown progress there.It comes from 3 places. It comes from, obviously, these broker fees disappearing. The inflation, we digested the dynamic, how we can ship when the supply chain eased up and also the cost, the systematic cost management that we work on continuously. So I hope that this will continue to improve. We have been surprised a little bit in the last couple of years of what happens macroeconomically. So if it's only for INFICON itself, we will continue just to work on this, and I think we see an optimistic future. I hope this helps as a general statement.I believe the guidance for the full year we gave, right, we would give this on operating income level with the approximate 20%. I think in that regard, we have made a good start into the year. We will, as you know, also continue to invest. We will also continue to invest in capacity and R&D, while, of course, we also work on these cost levels, as I just mentioned earlier. So both will go in tandem throughout the year. We want to catch the ramp-up, obviously. Certainly.

[Bernhard Schweizer, executive]

Thank you, Joern, for your questions. Just a minute ago, I had seen questions from Michael Foeth, [indiscernible]. I don't see their hands up right now. Are you ready, for instance, Michael to ask your questions. Apparently, he's not with us. Patrick -- Patrick [indiscernible]. Anyone else, any questions, please. Joern, again, yes.

[Joern Iffert, analyst]

Sorry, yes, and I'm back just in case nobody else is asking question [indiscernible]. I will just ask one question and then going back in the queue. On general vacuum, I mean, general vacuum was again pretty robust, while [ this year ] many other industrial companies having significantly weakness in Q1. So yes, I would call it a mild positive surprise. Did you get some more color now what was helping in Q1, which end markets in particular, after you maybe talk to some of your distributors or so?

[Oliver Wyrsch, executive]

Yes. I mean, last year, what I think it concerns for us, at least so far, that we can see this year is the growth last year was true growth that we made. There is a few subsegments there that continue to grow or, let's say, improve last year. It's a pretty wide area of industrials. There's pharma in there to big science and many things in between. The big slowdown is probably solar in this space that is slower this year. We don't know exactly how slow it will be. It's not only negative signs that we hear, but of course, we all know there is a consolidation going on in there.Maybe if you look at the regional distribution, Matthias or other colors that you see.

[Matthias Tröndle, executive]

Joern, yes, maybe yes, actually, which [ he was ] maybe [ this coming first ] [indiscernible] did increase versus Q1 last year, but we also had this decrease versus Q4, right? Q4 was very high. I think it was even a record quarter, and we dropped by roughly 14% in there. So there were -- as Oliver said, there are many -- really many different industrial customers in there and the regional development is also sometimes a little bit splitted and different driving this, right. But overall, I think Q1, most probably last year was a little bit impacted by us not being able to deliver as much as we can, so capacity and material issues, which now helps in that comparison. Nevertheless, it's a decrease against Q4 levels.

[Bernhard Schweizer, executive]

Thanks again, Joern. We now have next questions from Nejc Lavric. Are you ready to ask your questions, please?

[Nejc Lavric, analyst]

Yes. Maybe also as a follow-up on the general vacuum. You did have quite some backlog there. So to what extent were the sales coming from backlog and to what extent from the orders? Maybe that's the first question.

[Oliver Wyrsch, executive]

Yes. So obviously, if you do the year-on-year comparison, we had tremendous backlog last year. Last year, the situation in gen vac was that the supply chain couldn't deliver yet to the degree that we needed it. And we had quite some backlog that you then reduce throughout the year. Now the level is much lower. I would say it's nearly normal. So this is actual orders on this level. But of course, you know that China is one of the key markets in there as well, originally, has performed good on a good level. Nonetheless, we are actually with no large macroeconomic shifts happen or trade war impacts also optimistic for the year. Generally, the outlook remains flat, right, plus/minus.

[Matthias Tröndle, executive]

Maybe to add. I think in the Q1 numbers, there's not a lot of backlog reduction impact in [ that ], right? So most is normal business. There's not -- there are not many old orders, which have been shipped in Q1, so it's more current. And although, the situation more normalized in that market.

[Nejc Lavric, analyst]

Perfect. And maybe as -- sorry.

[Oliver Wyrsch, executive]

Yes. I was just saying that you need to see that Q4 was really a tremendous shipment quarter. And this also you see how it compares sequentially that we really shipped out how we could in Q4 still and then have this slower start into the year overall.

[Nejc Lavric, analyst]

Okay. Perfect. And maybe as a second question on sanctions and maybe also the sentiment from your customers. Is there still advantage that you are a Swiss supplier compared to MKS is your big competitor? Or has that advantage basically faded away?

[Oliver Wyrsch, executive]

No, I think this specific [ constellation ] remains the same. I believe being a European company has certain advantages. But of course, it's become a complicated picture right now also when you see the dynamics in Europe and in U.S., I mentioned already election year. So we have to stay really close what now the different bits and pieces are that go in this or the other direction, right? There's also Chinese counterreaction. But you also see collaboration in many areas on trade or could be on security topics. The part of it is when it comes to some drug or pharma topics, more collaboration on the other side and [ it's entirely ] the opposite. So it became a bit more complicated. At this moment, though, our position remains maybe better than some of our peers.And yes, I would like to refer to the general setup in China. We're there for 3 decades. We have a lot of very strong business relationships. And in the end, these companies, they focus on doing business like we do, and we try to find ways of working together and develop the business together, and that has stayed the same, right? Well, of course, there's concerns and a lot of discussions to understand these regulations ongoing at the same time.

[Bernhard Schweizer, executive]

The next question come from [indiscernible].

[Unknown Analyst]

Oliver, I just have a small -- a short question on your supply chain situation. Are you back to normal there? And where do you see the main risk maybe in this geopolitical situation crisis situation now?

[Oliver Wyrsch, executive]

Yes. Yes. So first of all, the key thing is, [ Christophe ], is that we have a big improvement if you look year-on-year. I mentioned earlier that at the beginning of last year, we were really struggling still to ship to the degree that we wanted to, specifically in the more sophisticated product lines. So one that I could name would be the [ upside ] part of the security and energy product line. This has really dramatically improved.We worked a lot on stabilizing and improving and also future proofing our supply chain. So we believe we have a much better level in terms of our capabilities, but also in terms of our collaboration, and also then really the supply chain has improved in terms of availability and quality. There are some remaining issues that we're still working on.For the year, I believe the first part now [ before ] specifically the semi ramp, we don't see any issues. Geopolitically, we have not seen any issues also through the wars in Europe or other troubles cost in the -- through these in the Red Sea. But this is something we're continuously monitoring. Right now, it didn't affect us, and we didn't see any signs. You need to know also, we have a significant part of our precision suppliers in Europe and in U.S. So for now, this is a good stable situation.When we go into a ramp and maybe if there is macroeconomic factors or trade war implications, this could be in the second half, maybe towards the end of the year, specifically next year, this could change this picture. It doesn't have to. We wouldn't necessarily expect it because we truly improved, and there was a lot of collaboration [ with ] our suppliers and us with our customers. But we have to continuously monitoring -- monitor the situation and also continuously improve our supply chain capabilities. [Christophe ] I hope, I could answer your question.

[Bernhard Schweizer, executive]

Thank you, [ Christophe ]. Michael Inauen has next question for us.

[Michael Inauen, analyst]

Yes. Good morning, everyone. Hope you can hear me. I had dialed in by my phone. So sorry if it's not working so properly. I have a question regarding general vac, air -- sorry refrigeration and air conditioning. You mentioned in your presentation the refrigerant situation, and I think we were discussing that the presentation on your full year presentation, actually, I was just wondering if you could give a bit more detail into that. Is it the situation in the U.S. that it will change to A2L refrigerants that are a bit more flammable? Is that something that you are actually benefiting from? That would be my first question.And the second question will be on semiconductor, particularly in memory. I know and that Oliver will [ discuss once we try ] to get a bit more into the memory business as well. So I was just wondering, do you see some design wins, project wins, did you get more into the memory market, particularly now that we see also more 3D DRAM, so-called HBM stuff coming up because of AI? Is that something you're also seeing a bit more momentum for you. This would be my 2 questions, please.

[Oliver Wyrsch, executive]

Thank you, Michael. I'll take them one by one. So in terms of [indiscernible] generally, you need to know that we're working very [Technical Difficulty] on their products, right? We supply the premium component there, the sensor. And so not everything is fully transparent for us. But we have seen momentum in all regions regarding this, but a little bit for different reasons.In the West, it's certainly much more through this recent refrigerant regulations, specifically in the Americas. That is correct. We have seen a lot of momentum last year. So for this year, we'll have to see how much is there. There's a little bit of a macroeconomic impact as well. So we're kind of a little bit still try to understand the situation a bit better. Maybe Matthias is there anything that you like to add.

[Matthias Tröndle, executive]

No [indiscernible].

[Oliver Wyrsch, executive]

All right. So when we look at memory, memory started for us to become more and more interesting with sophisticated sensors, probably 5 years ago or something like that. Certainly, for a little bit lower-end sensors was always interesting, lead detection also. But now that this tech nodes of the memory industry is -- are coming more and more to a more sophisticated level, where UV is even used and so on. And now, of course, you mentioned it, the AI memory, the HBM is the next big topic. Not all of the memory makers are fully there yet, but certainly all have a strong focus on it. So there's a lot of projects going on in that area for future use of sensors.And also, in this Q1, we had positive signals already. I should just remind you that for us, it is an important market. It's a growing market. It becomes more important, but it's also one of 5 to 10 submarkets in semi. So certainly, the one I would say, has the earliest or one of the earlier signals of positive dynamic and ramp-up, but there's also a distinction between DRAM and 3D NAND there or HBM, right? So that comes a little bit in bit and pieces [Technical Difficulty].

[Bernhard Schweizer, executive]

I think we had a few other questions for somebody else there also in the background. We'll stick to our own company and our questions.

[Unknown Executive]

Yes, we do. Questions through the audience, any further questions? I still see [ Christophe ] [indiscernible] hands up, but I believe that's just up there still, right? Any more questions from the audience, please. If not, then this is the moment for Oliver's closing remarks. Yes. Nejc Lavric comes again. You go ahead, please.

[Bernhard Schweizer, executive]

One more question.

[Nejc Lavric, analyst]

Yes. Perfect since we have some more time. Maybe on the CapEx, could you maybe give some more color on that? I mean, where are you investing -- you invested almost half of your CapEx guidance, maybe part on that? And also, maybe on R&D, you said you have some interesting products in your pipeline. Could you maybe give some examples on that?

[Oliver Wyrsch, executive]

Yes. Sure. So maybe first, on CapEx. We will continue with roughly the same level as we have in the past, right? We -- if you look back 3 years, we had a burst, where we increased capacity by [ 50% ]. There was a big expansion in nearly all locations. And we concluded that last year, but then added also some more through the growth last year and through the long-term growth that we see, that we have this [ USD 12 million ] in Q1 is only a timing topic.And you need to know, CapEx also doesn't always for us, immediately translate into production capacity. There could be long-term investments there in building a plot of land, things like that. So that's a bit of a mix for us. That's why we also want to stress that we roughly would stay at the same level for this year around USD 30 million. Maybe if you have some more color, Matthias.

[Matthias Tröndle, executive]

Yes. It's -- I think the big chunk out of this [ USD 12 million ] is really related to our long-term strategy that it's not machinery equipment, but it's important for us to be able to grow further in the next years, and that's a big jump. So it's not directly related to next quarter's output, for example, right? It's not a machine with a higher capacity of output. It's more long-term investment, which we need for our strategy and our expansion plans we have in our strategy.

[Oliver Wyrsch, executive]

And then maybe to the second part of your question, R&D. Yes. The good thing is when you had slower years, and I know I realized that I said that last year as well. And then in the end, it didn't turn out to be such a slow year, but may be slower in the semiconductor area as well. So when you have this down cycle, the collaboration on R&D increase, although there's more capacity, more tool time and we certainly have a lot of activity going on right now, exciting amount of activity in many areas.It's not that we would look at the next couple of quarters when we do these R&D projects, also not when we talk to our customers, it's really all long term. If you need -- you need to match this the way that we work on the next generation of their products, which is a couple of years out. So that could be R&D of a chipmaker, it could be R&D of a tool maker. So these projects, they run over a number of years and now really intensified. Some of it, you could even say we try to speed up since we all expect the ramp, and we want to make good progress on this.We have a really strong pipeline certainly in sensors, in semi, but also outside of semi, I think automotive, we launched a lot of products last year. We solidified our #1 position there. We work further in all areas on Smart Manufacturing Industry 4.0, data analytics, you can call it AI. We call it rather a machine learning and advanced data analytics, I think we pushed forward. So I'm extremely optimistic for what's going on. When it will materialize, of course, the next question because that is basically after the next ramp when you see this in high volume, right? So we think a little bit further ahead in this area and can be a little bit anticyclical in our -- in terms of our investment. I hope that helps a bit, Nejc giving some color.And maybe one more remark. I invite all of you, we have announced that before, we have a Tech Day in November this year, where we largely will talk about new technologies and products. And so, if you're interested in that, I would very much encourage you to participate in that event.

[Bernhard Schweizer, executive]

Thank you, Oliver. Again, question through the audience, any more questions for our management team. Yes. This does not seem to be the case, Oliver, then it's the time for your closing remarks. Thank you.

[Oliver Wyrsch, executive]

Thank you very much, Bernhard, and thanks, everybody, for joining. Thanks, everybody, for your continued interest. The interesting Q&A we always have. We look forward to meet you again for the next quarter's earnings release and further discussions in the different events you participate that you can find on our website. Thank you very much. Have a wonderful day, and talk to you soon.

[Matthias Tröndle, executive]

Thank you. Bye-bye.