Sensirion Holding AG

SIX:SENS

Earnings Call Transcript 2022-Q2

[Heiko Komaromi, executive]

Okay. Okay. Welcome. Good morning, everybody. It's 10:00 a.m., and I'm delighted to welcome everybody to the half year results webinar of Sensirion. Today with me is our CEO, Marc von Waldkirch; Matthias Gantner, our CFO; and myself, I'm Heiko Komaromi, I'm the Director of Investor Relations.

I want to highlight that today's presentation will be recorded. [Operator Instructions] Without further ado, I would like to Marc and start today's presentation.

[Marc von Waldkirch, executive]

Thank you, Heiko, and also a warm welcome from my side. Thank you for your interest and also for virtual attendance today.

And as usual, I'd like actually to start with a short business review of the last half year, and also to focus shortly on the strategic progress in the last couple of months. And afterwards, I will hand over to our CFO for the details in financial aspects.

First of all, about and -- next slide, please. Well, okay. So here it is, the first half of the year was again characterized by a lot of geopolitical macroeconomic challenges, so probably the most important one is definitely the tragic war in Ukraine, but also the inflationary situation in most of our countries, we are selling our products. And the COVID situation in China is also one of the challenges and last but not least, also the supply chain remained pretty critical. Despite of all these challenges, we can actually look back to a pretty successful half year in Sensirion's world.

In terms of operating results, definitely, but also in terms of our progress and the execution to our strategy.

On the operating side, we could achieve a solid growth of 14%. Again, CHF 264.48 million. The now normalized extra business in the medical ventilator was more or less fully compensated by number, medical extra business which comes from the sleep at home care devices, I will come back to this point later on in more details.

On the other hand, especially our new environmental centers contributed heavily to the topline growth. In terms of profitability, we could record again an above average figures. Again, it was this profitability benefited from the fact that the utilization rate of our operation were sites in Asia, but also in Switzerland, are extremely high, extraordinary high. As a result, we are currently investing heavily into additional CapEx in order to come back to a sustainable level of utilization in our operations. This also reflects the low cash flow situation in the first half of the year.

At the same time, we are continuing to expand our R&D and sales staff in order to addressing many new opportunities. They are catchable down the road, either in short but also long-term oriented. However, these additional costs and sales and R&D are not fully reflected in the P&L today because there is some latency in hiring the respective additional people.

In the meantime, that means in the last couple of weeks, we have seen a moderate slowdown in all the markets in the Western world, more triggered by the inflation situation and the depressed optimism of consumers. And in China, it's mainly driven by the unclear COVID situation and in the domestic markets. In addition, we see some risks that some customers might postpone some of the call ops in the next couple of months due to the fact that they are, of course, to reduce their output due to a lack of other electronic and -- or other raw materials due to the supply changes.

As a result, we are slightly more cautious in our outlook for 2022 in terms of topline. Therefore, we have adjusted the topline and guidance slightly downwards to CHF 310 million up to CHF 340 million. However, the profitability guidance in terms on the level of gross margin, but also on the level of EBITDA remain unchanged.

This brings me off of the short summary that brings me to the short review of all the markets. Let's start with the one which was about automotive. In automotive, as you see here on the slide, we record decline of our topline by 8%, definitely compared to a pretty strong 2021. This was mainly due to the fact that a lot of car manufacturers were forced to reduce the output of their production due to the fact that there are still a huge challenge in the supply chain for automotive manufacturing.

On the other hand, we had -- on the OEM direct business, we had additional new projects. They ramped up in the last couple of months. They could also compensate some of declines in sales from legacy products in the Korean or Asian markets.

Coming to the medical market. Here, again, the medical market was highly influenced by all these extra businesses. Last year, it was mainly driven by the medical ventilators or at least the remaining volumes of the medical pandemic-driven ventilator business. Today, it was mainly influenced by the extra business the sleep apnea device. The reason for this extra business was actually the fact that one of the major manufacturer of so-called CPAP devices was forced to start a larger exchange campaign due to some quality issues. I think it's important also to note here again that this quality issues they are facing has nothing to do with our sensor. The good story is actually due to this exchange campaign, there was an additional demand for that respective sensor solutions for -- to drive this exchange in the last months.

All in all, these extra business was on the level of more or less CHF 15 million compared to CHF 17 million in the medical ventilator business last year. So that means at the end of the day, more or less, it was fully compensated one extra business by the other one. If we calculate all that out and we are fully focusing on the core business, we end up with moderate growth in the medical market by 13%. All in all, that means including these one-offs in 2021, but also in 2022, we are stagnating in -- on the topline level.

Going forward to the industrial market. Industrial is a market in our company, which is highly diversified. So we are including their submarkets like appliances, heating, ventilation, air conditioning, but also gas metering and last but not least, the core of industrial applications like semiconductor applications like semiconductor applications. This market is of high dynamics at the moment. So again, we could actually record a significant growth of more than 30% in the industrial markets up to 800 -- not 800, that's too much, CHF 81 million in the first half of the year.

The reason for that was mainly driven by the additional demand for CO2, PM2.5, but also formaldehyde sensor. So all new solutions for environmental monitoring in order to support air purifiers, in order to support air conditioner applications. This was also driven by the pandemic again due to the fact that the sensitivity for air indoor monitoring is still pretty high.

On the other hand, we had also additional demand in semicon applications in order to address the lack or the -- at least the tense situation in the semiconductor market in terms of capacity.

Last but not least, some words about the consumer markets. Consumer market is a highly fragmented market. There are a lot of players inside. There are no large players. And there, we have seen again the very same picture as we have already reported in March 2022 for last year's results. That means that there are a lot of smaller companies that are starting or launching small gadgets in order to address this higher sensitivity of indoor air quality interest in the market. So there are a lot of new gadgets, and we are very lucky to be able to report that a lot of the sketches are actually based on our environmental central solutions, either humidity only, but more and more also CO2, PM2.5 is actually part of these respective gadgets.

Before handing over to the CFO, I like actually -- you can actually show all the slides. Thank you. That's too much. I'd like to loose some words about the strategic progress in the last couple of months.

Our strategy -- our growth strategy is actually based on 3 main fulcrums. In addition to the fundamentals of the company, which is extremely of high value that means the people and the culture. The focus one is about our core business, our traditional historical core business of Humidity business and Flow business. There, we are already extremely strong in terms of market presence and market shares. But our goals for the next couple of years is nevertheless, to increase our market share to be even more dominant in the markets of humidity and flow.

In the last couple of months, we could expand our fourth generation of humidity sensors portfolio to an automotive person. We have launched an automotive person, but also a high precision version in order to address special -- especially demanding applications in humidity.

On the other hand, we have presented at the beginning of 2022, we have presented a cash flow center module, which is capable to measure not only one specific mixture gases, but all kinds of metrics, including pure hydrogen and including any mixture between hydrogen, biomethane and natural gas. And this is an extremely important technologic milestones in light of the challenges we are all facing in transforming our life to more sustainable energy sources. That's about the focus 1.

Focus 2 is about becoming market leader not only for humidity, but for the whole environmental and center markets. There, I'd like to remind you again that a substantial -- a significant part of the growth we can actually report today over the last couple of months was actually based or contributed by these new solutions in CO2, PM2.5 formaldehyde. So we are fully on track in that terms. We see also there is a lot of interest for our solutions not only for one or 2 of these parameters, but we see more and more that the people -- customers are extremely interested in also getting a module, which is consisting of different parameters, either PM2.5 together with all the organic compounds and humidity or even together with CO2.

And this all is definitely also supported by the higher awareness of the importance of good indoor air quality and in all the markets, not just in industrial markets. I can also remind you about the indoor air quality initiatives of the U.S. government with that is also supporting this trend.

Last one, at least some words about Focus 3. There, we have reported last year in September that we have acquired a company in Berlin, a start-up, a small startup in Berlin in order to enter another business model in addition to the traditional OEM business. And this business is about selling data rather than hardware only. Or in other words, Sensirion is not as a hardware component only, but Sensirion as a service, where you are all serving the customers with sophisticated data based on our sensor solutions.

In that terms, I can report today that we are fully on track in integration. So the integration runs pretty smooth and also the joint market activities, the joint development activities or portfolio on track. Again, I'd like also to remind you that significant contribution to the topline are not expected for the next 1 to 2 years. So it will take some time. That's always the outcome of the fact that the M&A we are running is typically focused on startup on small ones where we are developing these candidates, these acquisition targets after the acquisition, and we are not focused on companies that are already established on the market. That's the reason why we need the time afterwards to transform the start-up company to a company which is also generating significant profits.

And last but not least, I'd like to loose some words about the most valuable aspect of the company. It's about the culture and the people. I'm really happy today to report these good results in -- on the back of this challenging world today. But I think it's important also to note here that this is not possible -- it would not be possible without that all the people they are supporting heavily in all the countries we are serving.

I think the culture, again, what we have seen, the culture of Sensirion spirit, especially also in China, where we had lockdowns of our site, factory site, but culture, the spirit of never give up and tried the best out of almost impossible situation actually helped tremendously in order to achieve all these goals I can report today. So a big thanks to all the people that are working for Sensirion also on this webinar today.

That brings me to the end of my session. I'd like now to hand over to Matthias for all the financial details.

[Matthias Gantner, executive]

Yes. Thank you, Marc. Also warm welcome from my side, dear, ladies and gentlemen. Thank you for joining this session this morning. It's a pleasure for me to comment on the set of figures first half year 2022. I just invite you to have this retrospective look now after Mark's comments on strategic.

So first of all, Marc already commented on these key financials, really a strong performance in first 6 months of 2022 with a given circumstances in terms of macroeconomic and geopolitical problems, particularly the ongoing COVID-19 situation that we experienced in China with the organization there, keeping the production there up and running and so contribute to the market performance there. That was definitely a big effort and great performance still.

On the profitability side, of course, we are on an ongoing phase benefit from this economy of scales with the high volumes -- on the other hand, as Marc already mentioned, now we have to invest in production facilities. This is charging the cash flow -- the free cash flow at the bottom line. We have increased CapEx realized that is partly also coming with the delayed supply chain investments brought forward postponed from '21 to '22, but also overall, the increased CapEx volumes that we realized in 2022 overall.

Let's have a look on the revenue development compared half year '21 to half year '22 with this yellow blocks, you see for both periods, this onetime business that we want to carve out from our continuous business for '21. This is the contribution from the ventilator business out of the COVID-19 situation we had at that time. For '22, you see close to CHF 15 million onetime contributions on the topline from this quality problems one of our customers had with this final device so that we could get some additional supply volumes to that project, and this is close to CHF 15 million for the first 6 months.

So looking at the organic growth, we see a strong organic growth of CHF 22 million, close to 14% year-over-year. What we also see is only a very limited inorganic contribution on the topline from our acquired companies, the Dutch company and the German company. This is completely on track with our expectations. It is always our approach not to buy additional revenue on topline due to the fact given that these companies are definitely start-ups in an early stage that we want to develop to revenue contributors and to growth contributors in the future.

On the FX side, we can register that we could benefit strongly from the U.S. dollar, and this was set out with losses unrealized -- realized out of the exchange rate, Swiss franc Euro but also from Korean won, which was such weaker versus Swiss franc. And so overall, it ends up with a 0 FX effect for the first 6 months of the reporting period.

On the profitability side, we still could benefit definitely from this high capacity utilization also for -- from January to June in '22. We are definitely on the way to adjust these capacities there to get to this normalized level back in terms of additional labor force, in terms of additional production equipment and widening up also the production equipment also geographically to Hungary. This is on the way, but it is not reflected in the numbers here in terms of costs. So there is still this extraordinary close to 60% gross margin to be reported as per end of June.

On the overhead cost block side, the chart on the lower part of this page, you see R&D and SG&A expenses. For the cost block R&D, yes, we are very intensively active in finding talent. We have this ongoing war for talents as you all know what the status of the actual labor market is, how dry the landscape looks there. It is very difficult. We can engage people, we can recruit people. We have opened up our toolbox here with all the means and instruments that are available on the market. I think we can state that we show a lot of flexibility. But yes, we are not that fast as we would like to be.

So here, the increase driven from personnel cost is not so big. On the other hand, we have reduced costs in the periodical comparison since we have lower external services boarding in this 6 months being reported, and we had less material consumption for several R&D projects also. So all in all, there is only a limited increase in our R&D cost.

It looks quite different in the section for SG&A costs. Here, we empowered our sales force in -- for Sensirion companies, especially in U.S. and Asia to push the penetration with our new products more strongly. And of course, it is also the buildup phase of the new acquired company in Berlin. And when it comes to sales force, here, we recruited quite a strong team in the meantime. So this drives marketing and sales cost also from the personnel cost side.

And with new foundation of the company is opening up the companies in Hungary, in Berlin also, we had to adjust here the basement of supporting services, which generates costs in administration to cover the needs we have there, to help them integrated in the group and to help them also a stand-alone company up and running, especially when we think about Hungary, there it needs a certain basis for bringing the company up and running in terms of HR, IT, finance, functionalities.

Given those cost blocks, COGS and overhead then it calculates down to the EBITDA still with this strong EBITDA margin close to 30%. On the chart, on the lower chart here, you see this development increase in gross profit by volume. On the other hand, this is huge start for this increase in SG&A. So the period-over-period comparison is quite easily to be interpreted.

I look at the income statement top down. We see the cost blocks addressed just now. In addition to that, we see a small financial result of minus CHF 0.6 million. This is a partial loss of equity invested company, and then we end up with a profit after tax of CHF 35 million, representing 21% of revenue.

Look at the net working capital because here, we see some major change compared to previous reporting periods. We proactively increased here our inventory for all segments, meaning raw materials, but also we pushed the production volumes. We have safety stocks for finished products. In order to prevent additional or to avoid additional risk that could come with lockdowns in China with the production there, but also with a worsening of the situation in the supply chain in the months to come. So now we made a step further away from optimizing our inventory here and really proactive in building up safety stocks and buffer stocks.

On the other hand, we have a reporting days situation with our receivables. They are higher given this with the reason of growth. We see -- if you look at the DSO, it is absolutely uncritical because having in the mid-CHF 40 million receivables outstanding as per end of June, this represents for around 45 days DSO. So no additional risk there. But in the end, it drives the net working capital. And of course, also, what we will see in the impact on the operating cash flow, of course, there is given 1:1.

Already addressed, we have a catch-up in CapEx spend. So this happened in the first half year of '22. You see the blue column there with close to CHF 16 million spent for CapEx for PPE. This is for the normalization of the utilization of our facilities. Geographically, this is split -- the main portion is in Staefa here, we have to refurbish our production area to have the platform ready for a new clean room, but there is also a lot of CapEx still ongoing in Hungary, where the transition of production equipment has started in June this year. So we are on the way to start up with the production in fall this year.

So the ratio is about capitalized R&D, where we are very conservative, that is still on the same levels as we have seen that in the previous periods.

So this brings me to cash flow table here. You see this operating cash flow, of course, in this comparison period-over-period, strongly impact from this buildup of net working capital and with only CHF 22 million. Then we see this cash flow from investing activities of the close to CHF 90 million, whereof only CHF 3 million in '22 was for M&A. This was a capital increase for our investment in Lumiphase, in the company Lumiphase equity accounted investee. So if you see this comparison between '22, '21, it's just skips from portion what is CapEx for M&A to report what is CapEx for PPE. This is just shifted.

So in the end, of course, this results in a very limited growth on the cash position. And I think with that, we can already move to the balance sheet.

Here is a pitfall of the development of cash flow, yes. I think this is already explained. So we can further have a final view on the balance sheet. Here, we see current assets on the right side in the balance as per end of June '22, increasing with trade receivables inventories as mentioned, we still see a very solid balance. Overall, we see this increased equity ratio with 81%. So absolutely no problems here, quite a comfortable situation even with this more bound capital in current assets.

With that, I conclude this retrospective view, and hand over to Marc for the more prospective comment on...

[Marc von Waldkirch, executive]

Thank you, Matthias.

I have already outlined shortly in my summary at the very beginning. So the geopolitical aspects but also the macroeconomic challenges are pretty high. The visibility to give you a good guidance, a reliable guidance is honestly spoken pretty parched and low. So the visibility remains low, and we try our best to give you a good guidance.

That means also that we are slightly more cautious in our topline expectations for the year. I have already explained why. On the one hand side, we see that there is a moderate slowdown in the markets in the Western world, but also in China. And secondly, we see that there are some postponements of call-offs due to the ongoing supply chain issues, mainly automotive, but there is also some other customers. They are -- they have actually to adjust their production output due to the lack of material.

The long-term market trends and i think it is also important to say that means technology, the technological road map, but also the product pipelines, they remain strong. So there is no indication of any changes in mid- or long-term perspective of the company. So we can also confirm all these perspective for short-term outlook, we are slightly more cautious.

That brings me to the official guidance. On the one hand side, we reduced the guidance of topline to CHF 310 million up to CHF 340 million. For comparison reasons, the old guidance given to you in March was CHF 325 million up to CHF 365 million. So we narrowed the range. But on the other hand, we also slightly shifted downwards the midpoint of the range.

Gross margin, EBITDA margin on the level of mid-50s to be expected on the level of mid-50s and mid-20s. They are both confirmed compared to the guidance in March 2020.

I think so we can finalize our presentation and then hand over to Heiko for hopefully a lot of questions from your side.

[Heiko Komaromi, executive]

Yes. Thank you, Marc. Thank you, Matthias. I hope you enjoyed this nice summary of our first year 2022. As announced at the beginning of this presentation we would now turn to the question-and-answer section. [Operator Instructions] So let me check.

Wonderful. Good. So let's start, first come first serve. Good. So a question from Mr. Deshpande. So the EBITDA margin in the first half was 29.7%, but guidance for full year is mid-20s. This would mean collapse in margin to 20% in the second half. Why such a significant half-on-half collapse in margin despite sales still growing? That's the first question.

[Marc von Waldkirch, executive]

Well, so I think we have to refer to the fact that the costs especially R&D and sales costs, they will go up on the back of our intense recruiting activities. So we have already hired a lot of new R&D and sales engineers, not only in Berlin, as Matthias has mentioned before. But also here, we had quarter in all our sales sites worldwide, and they will fully affect the P&L in the second half of the year. So we expect that the cost work, especially in R&D and salaries and sales sides will increase in the next couple of months.

And that's one of the reasons. Another one is also that we expect or we further expect that the economy of scales and based on the high utilization rate will come down to normal levels, thanks to all the CapEx we have actually invested in the last months and is also ongoing in the second half. So that all brings us still to the expectations that we come down in EBITDA to the mid-50s. We are now slightly below 30%, so it's not that big the changes.

In terms of revenue, I'd like also to note that we are not expecting a significant growth in the second half of the year compared to the first half. So if you take the midpoint of our guidance, you end up with more or less the same level of topline for the second half compared to the first one.

[Heiko Komaromi, executive]

Thank you, Marc. The second question builds actually on this story line. The question is there is a one-off in the first half of 2022, as announced. And thus, there is a more difficult outlook for the first half or comparison to 2023 next year. So the question is, will this coupled with slowing momentum mean lower 2023 growth than 2022 based on the initial indications?

[Marc von Waldkirch, executive]

Well, that's a hard question to say because visibility is really very low. So I've been in the business for many, many years already. And I think honestly that the visibility you have now at the moment we are facing is probably the most lowest -- the lowest one I can remember. So it's really difficult already to give you any rough guidance for 2023, especially because we have always 2 aspects to consider.

On the one hand, the existing business and how this will progress, and this is really hard to say. And on the other hand, there is an ongoing startup of new projects coming in and also there and that you have -- the question is not whether these projects will ramp up. It's more the question, are there any delays either due to development activities at our customer side or due to some lack of supply chain issues or raw materials, they are not related to our sensors.

So at the moment, it's really too early to call about any guidance for next year. So we'll definitely inform you as soon as we have first indications for 2023.

[Heiko Komaromi, executive]

Thank you, Marc. Next question is, when we guided our 2022 outlook if we have known about the medical one-off already because if not, it means some business underperformed compared to our perceived performance when we gave the guidance for the full year. So the question is which was were these businesses?

[Marc von Waldkirch, executive]

Yes, this was already expected. So this was also in the statements about the outlook given in March. It was already stated, not in quantitative numbers. But at least in pointing out that we are expecting an additional one-off in the medical sector due to CPAP. So this was already part of the guidance and is also stated in the respective wording in the March guidance.

[Heiko Komaromi, executive]

Correct. The last one, what percentage of our business is now from new environmental center products?

[Marc von Waldkirch, executive]

So we are not going to disclose -- due to competitors' reasons we are not going to disclose the topline contributions product line by product line. What I can disclose to you is the figure I have disclosed last time. I think it was in March when I informed about the contribution of 25% -- slightly more than 25% of our revenues already coming from the environmental sensor and area definitely without humidity because humidity is not actually new. So CO2, PM2.5, formaldehyde and all these environmental modules sum up to 25%. These are figures of 2021.

And honestly, I don't have the exact contribution for the first half of this year. And -- but it's definitely some indication it will not roughly -- it will be roughly in the same order of magnitude as in 2021.

[Heiko Komaromi, executive]

Okay. Thank you. These were all the questions from Mr. Deshpande. So we move on to the next gentleman, Mr. Inauen? His first question is, why did other automotive-related companies increase the guidance? Do we have any idea?

[Marc von Waldkirch, executive]

So you have actually asked Devon not me. I think there are some. They were also struggling last year to strip out all the products due to raw material lags. That means they had a pretty high backlog of material. And in some areas, especially for semiconductor wafers, the supply chain is slightly better than half a year ago. That means it's easier to get wafers, slightly easier at least, and also to ship the product so I can assume that some of these companies they can now actually work on their backlog.

In our company, we had a very successful 2021. So we had -- fortunately, we had no significant issues in shipping our products to our customers. Also, our lead times were significantly lower than all our competitors' to lead times. And that resulted in the fact that we had good topline last year, but not a significant backlog, which was actually triggered by the fact that we were not able or capable to ship the product.

So I think there is also some kinds of working on backlog level. But at the end of the day, please ask my colleagues in the other automotive companies, it would be definitely interesting to know more about that.

[Heiko Komaromi, executive]

Thank you, Marc. Next question from him is, can be a little bit outlined the scenarios or scenarios, or assumptions for the low and upper end of our guidance. And tied to that question, would we expect that the amount of revenues we cut the guidance around CHF 25 million, would spill over to the next year?

[Marc von Waldkirch, executive]

I think there is not -- as always, if we are giving a guidance in terms of a range, we have not a clear scenario for the high end or the low end because there are so many factors that can actually influence the topline at the end of the day. I think there are 2 main drivers. And one is what I have mentioned, the slowdown in the market that the demand is slightly going down. And secondly -- at least short term. And secondly, the fact that there is a higher risk of spillover for the next year of customers' calls because they see that they are not able to produce all the materials because of the supply chain. Both effects are likely to happen. And both aspects are also part of the revised guidance. And therefore, the higher end indicates more that those aspects might have been but at a prelimited extent. At the lower end is probably more that this happens more than we expect.

But this is the only what I can say. There are a lot of different factors. Definitely, there were higher risk what's about the geopolitical situation but we are pretty optimistic that at the end of the day, Ukraine war, but also all the tensions in Asia, namely China, Taiwan, we remain on the more or less same level as today.

[Heiko Komaromi, executive]

Thanks, Marc. I think you addressed a similar question before. We imply a clear margin drop in second half, can we explain?

[Marc von Waldkirch, executive]

I think this was already discussed about R&D and sales. And yes, the economy of scales.

[Heiko Komaromi, executive]

I hope we addressed this question before. So the next question from next gentleman is, could we quantify the benefits of the high levels of utilization?

[Marc von Waldkirch, executive]

The benefit is more than obvious, that's our financial growth. Definitely, if you have a utilization of more than 100% of all your equipment, that's just great in terms of financial figures. It's not that funny for the people working there and also for the flexibility you definitely need from an entrepreneurial spirit or point of view in order to address also short notice changes or extra demand of your customers.

So financially, it's definitely a benefit for entrepreneurial flexibility, I'd like definitely to come down to a sustainable level in order also to have the chance to catch extra business as soon as it pops up -- pops out. And at the moment, we are not able to do so.

[Heiko Komaromi, executive]

Okay. Thank you, Marc. And the last question so far. So please, if you have more questions, please type them in soon. The question is, what are the price and volume effects in the organic revenue growth figures?

[Marc von Waldkirch, executive]

I think that's -- we might spend two hours to discuss about that because at the end of the day, the existing business is consisting of a large variety of different markets and products. So on the one hand side, we have consumer. On the other hand, we have automotive. Secondly, we have components and high volumes. We have the more specialized and modules, they are in lower volumes but comes with a significantly higher price level and price pipe. So there is all combination of them. All in all, I think at the moment, what we are used to be is to be in a market where we have more decreasing price levels because we are part of the electronic industry.

At the moment, we see that this comes to an end due to the inflation. So we had also last year and I had already reported that in March, we had also the chance to increase surprises. And on the other hand, this was also on the back of higher raw material prices in order to stabilize our gross margin, which was pretty successful in doing so.

But at the moment, we do not see significant changes in the price development. So on one hand side, we have still the increased raw materials levels. And we also -- we have also to hand over some of these raw material prices to our customers.

Longer term, I expect to come back to the rules, they are valid for electronic component market since many, many decades or years, that means there is a constantly decreasing price levels, which is also triggering higher demand in volumes, which is at the end of the day, definitely a benefit for us. But this is -- at the moment, we are in a formulary times about that.

[Heiko Komaromi, executive]

Good. Thank you, Marc, and thank you for the questions. We've just received many more. The first question for Mr. Huber is, should we have grown more without the Shanghai lockdowns?

[Marc von Waldkirch, executive]

No. Thanks to our team there. We have a lockdown of 4 weeks only, the full lockdown of 4 weeks only. Afterwards, we could actually restart our production pretty early, thanks to a so-called closed-loop approach. That means more than 60 or 70 people from our operations side there were willing to stay in the factory 7 days, 24 hours in order to restart the production. So this is this closed-loop approach, which was approved by the government, the local government in Shanghai.

Thanks to the fact that we had only a lockdown of 4 weeks, and also thanks to the fact that we had reasonable inventory levels, we could actually work on the backlog already and to catch up all the delivery delays in the meantime. So more or less, topline was not affected by this lockdown in China.

[Heiko Komaromi, executive]

Thank you, Marc. Next question is, will there be further medical one-offs in the second half?

[Marc von Waldkirch, executive]

Yes, this is our expectation that there will be another contribution from this CPAP effect in the second half of the year. Also there that -- to give you a precise guidance, it's hard to say because also the medical companies, especially the one which is affected by this exchange campaign is hardly working on raw material issues. So also for them, it's not that clear how much they can actually ship in the next couple of months. But definitely, there will be an extra one-off again in second half.

[Heiko Komaromi, executive]

Thanks, Marc, further questions. Are the 4 time equivalents in the press release, the average over the year or per end of the period?

[Matthias Gantner, executive]

This is their end of the period. So it's really this third...

[Heiko Komaromi, executive]

Yes. There, we see the next one. All right. That's the next question. Do you see current design wins changing end market exposure of the company in future?

[Marc von Waldkirch, executive]

Definitely, we had a very strategic and important design in the last months. I think it's still a disruptive change of the exposure in the market. So it's more or less what we have hoped not expected, but at least we hoped to gain the design wins. That means in the area of bringing our environmental solution to a couple of them to our customers in the area of industrial applications. Appliances at HVAC, but also automotive. But it's no disruptive change in the applications we are serving.

[Heiko Komaromi, executive]

Next question is -- what is the company's share in the temperature humidity sensors doing at this point?

[Marc von Waldkirch, executive]

Yes, we are raising -- the market share of humidity temperature was assessed to be on the level of 52%, 53% of the worldwide market during the IPO 4 years ago, by a study provided by Gartner. And in the meantime, we have seen that we could win additional business from competitors and we have not lost significant customers in this area. That means that brings me actually to the assessment that we are probably today at the level of 55, 56%. So it's a constant increase of our market share, but it's not any more disruptive that we jump up to 70%. I think that's unrealistic. But I think if I refer to the slide at the Capital Markets Day in March 2021, we assessed it to be on level of 55-plus percent of the market share.

[Heiko Komaromi, executive]

Thank you. Probably a question for you. When is the working capital expected to normalize?

[Matthias Gantner, executive]

I think normalizes here to be precise what is normal with this -- even with this growth that we have, and it definitely is only as per date. So -- and if we look back to the previous years, we always see a much lower balance of our outstanding receivables. So we can definitely not broadly right. What we do here with net working capital is really to pay a premium and not to optimize net working capital to that extent that we take more risk on the supply chain.

So we build on -- we continue to build up our safety stocks, our safety levels to mitigate the risk of having supply chain issues in our own added value chain. But trade receivables, that is more also given with the fact how our customers act on the market. And of course, we monitor the risk of outstanding receivables permanent.

[Heiko Komaromi, executive]

Thank you, Matthias. Next question is, what is the potential of the new gas sensor? I'm not sure which one exactly.

[Marc von Waldkirch, executive]

It's not clear what you mean with gas sensors. We have different ones. So CO2, formaldehyde, but also our volatile organic compound sensor, which is based on the metal oxide technology. I think all of them, they have a great potential to address additional applications in the market. In automotive, mainly in automotive, industrial and consumer markets and also the combination of them.

So just to loose some words about, I think CO2, it's is not just due to the pandemic, but also beyond the pandemic a great proxy to indicate how good is actually indoor air quality in rooms, but also more and more, there is an increasing interest also in automotive because at the end of the day, CO2 a high of CO2 and that starts already at the level of 1,000 ppm, which is extremely fast achieved in a room, which is not well ventilated.

And this level of 1,000 ppm or even higher brings already for 3 comfort to the people, that are in this respective world. So to increase the comfort of life, this is definitely one of the -- is an extremely good proxy. Secondly, we see also some drivers in energy saving. That means the ventilator companies, the air conditioner companies, they like actually to know more about the use of the air indoor in order to adjust the fresh air ratio. And because as the more -- they can actually just recirculate the existing air that can also save energy.

On the other hand, if they see that there are many people in the meeting room, for example, and the use is heavily used then they definitely have to change the air by fresh air, and this air has to be -- is polluted typically, not here in Switzerland, but in other countries, that means they have actually to clean it first, they have to cool it down and they have to humidify it, and all of them takes a lot of energy.

So at the end of the day, if you have information about CO2, about the usage of the air in indoor and then you get a better understanding of how to optimize your ventilation systems and to save energy. And this is definitely one of the big trends worldwide.

[Heiko Komaromi, executive]

Very good. Thank you, Marc. The next and so far last question, again from Mr. Inauen is we stated to aim to be the global leader for environmental sensors. So can we put that in numbers, what market share, in what market size, what would that mean?

[Marc von Waldkirch, executive]

Honestly, that's not that easy to say because there are actually 2 changes. On the one hand side, we are with all our products, even with humidity in a market which is highly fragmented. So the market share is anyway hard to assess. Secondly, this is now focus on CO2. CO2 is a very dynamic market at the moment. So it's not even fully clear for the experts how large the market is today. And then this combination brings a very unreliable factor of market share. What we see is that we are definitely one of the -- especially, for example, for CO2, we are already one of the big players there.

And then also, if we are looking forward to all what we are working with our customers, also the perspective, the growth perspective in the next years is very good. Market shares is not reliable in fees, but also not very healthy. Our intention or ambition is actually to lose -- to never lose any deals that means actually to convince our customers to design in our sensors in any applications there.

And if we -- just some words about the other markets, not the CO2, but also the volatile organic compounds, even harder there to say because volatile organic compound is a huge basket of different applications of different mixtures of gas compositions so to assess the market share there is almost impossible.

[Heiko Komaromi, executive]

Very good, Marc. We agree. So far, this was the last question. I hope we addressed your question so far in a satisfying manner. Maybe I'll give you a few more seconds. But it seems that we come to the end of this session today. I'd like to thank you and the name of everybody for your attention and your good questions and looking forward to see one or the other at the conference anytime soon. Thank you very much.

[Marc von Waldkirch, executive]

Thank you for attending. Bye-bye. Have a good day.

[Matthias Gantner, executive]

Thank you. Bye.