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Melexis NV
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Hello, and welcome to Melexis Quarter 1 2022 Results. My name is Ryan, and I'll be your coordinator for today's event. [Operator Instructions]
For now, I'll hand you over to your host, Marc Biron, to begin today's conference. Thank you.
Thank you. Hello, everyone. It's a pleasure to welcome you again to our earnings call related to the Q1 results. Today, we are, as usual, 2 speakers: Karen Van Griensven, our CFO; and myself. Let's cover first on top line and financial background, after which Karen and myself will be available to answer any questions you may have.
Q1 comes with a sales level of EUR184 million in the first quarter. It's a positive change of 11% in comparison to the previous quarter and a change of 18% in comparison to the same quarter of last year. As a matter of fact, the market is still largely driven by the demand side. Even if we have increased our guidance, thanks to the higher capacity in Q2, we remain very cautious given the uncertainties related to the impact of the geopolitical situation, the impact of the inflation as well as the impact of the COVID in China. And obviously, those uncertainties could influence either the demand or the supply.
In the context of continuous mismatch between the supply and the demand, the situation remains difficult to serve all the customers, and we are working diligently with our customers and with our suppliers to keep the situation under control. We are also focused on the fair allocation for our product in 2023, while in parallel we continue to work on our capacity improvement with our suppliers.
Before handing this comment, I would like to highlight some products that contribute positively to the outlook in the future. First, the current sensor shows the highest growth in percentage, thanks to the inverter application of the electric car. For the current sensor, we also see a very positive trend for this current sensor family in new applications such as the onboard charger and the DCDC application. The temperature product and the driver ICs secure also a very good growth. The temperature products are used either in automotive, but also in non-automotive applications, while the driver IC have a lot of traction in all the thermal management application of the electric car.
I would like also to highlight the tire pressure monitoring sensors and the time of light that will contribute positively in the midterm trend.
I'm now giving the hand to Karen for more financial results.
Thank you, Marc, and good morning to everybody. So, EUR184 million sales in the first quarter, as Marc already mentioned. And this came with gross results of EUR83.1 million, or 45.2% of sales. So, 27% more compared to the same quarter of last year and 18% more compared to the previous quarter. R&D expenses were 11.1% of sales. G&A was at 5% of sales and selling was at 2% of sales.
The operating results was EUR49.9 million or 27.1% of sales, plus 44% compared to the same quarter of last year and plus 32% compared to the previous quarter. The net result was EUR48.6 million or EUR1.20 per share, plus 75% compared to EUR27.8 million or EUR0.69 per share in the first quarter of 2021 -- sorry, EUR0.69 per share, and 48% more compared to the previous quarter.
If we go for the outlook, so Melexis expects sales in the second quarter of 2022 to be around EUR200 million. And for the full year 2022, Melexis expects a sales growth between 18% and 23%, with a gross profit margin of around 45% and an operating margin of around 25% at the midpoint of the sales guidance. All taking into account, a euro-U.S. dollar exchange rate of 1.09. So this was high level a bit more color on the financials.
We would like now to open the Q&A session. So, operator, please go ahead.
So our first question comes from the line of Ruben Devos. [Operator Instructions] Ruben Devos from KBC Securities.
I've got a question related to the higher anticipated capacity, which you talked about in the press release, I was curious whether you could talk a bit your present situation, how that has improved compared to a few weeks or months ago. I remember early last year, you mentioned that assembly and packaging was somewhat of a bottleneck than early this year, it was rather supply of wafers. So just if you could take us through what has been happening in the last few months from an operational standpoint that will lead you to get more products out there. That's very helpful.
Yes. Marc will answer.
Indeed, as you mentioned, at the beginning of this shortage, the assembly and the test were the bottleneck. Then later on, it was more the wafer fab. And indeed, the goal, let's say, is to increase all the capacity at the same time to avoid bottleneck. Then we have been able to have more wafers for mix-up. It means that indeed the supply chain was more in equilibrium in terms of capacity. And this is the main reason why for Q2 we are able to increase the capacity.
Okay. I believe you said before that there was somewhat of a mismatch between supply and demand about 20% to 30%. I think that was a figure you said. Is that -- has that changed much in the meantime?
No, it did not change much. I think it's still this kind of value. I mean, we are still a lot of more demand than supply.
Okay. Okay. And then, just thinking about the overall inventory levels and the supply chain issues, let's say, the change from sort of just-in-time inventory management to just in case, is there like an increasing willingness from your customers to have higher level of inventory as they used to have, what's your take on this when you talk with customers?
Yes, I would say, for the time being, we don't even discuss inventory with our customers. We discuss really about supplying the minimum that what they need to keep the line running. And we are still not in discussion about inventory with the customer. In Melexis, the WIP is increasing, and the Melexis' WIP, which is also inventory, is increasing because we want to be ready to deliver more in the next months. But at the customers, the discussion is still please supply the minimum in order to keep the line running.
So our next question comes from the line of Janardan Menon from Jefferies.
Congratulations on a strong set of results. I just wanted to understand the gross margin strength that you're seeing right now. Can you give us a split on how much is coming from price increases, how much from product mix and how much from currency roughly? And in terms of the sustainability of this kind of gross margin, how do you see that? Would you expect the pricing trends that you're seeing currently in the market to continue into the second half and, more importantly, on a longer-term basis? Because previously you've always sort of said that you will have to wait for quite a long time before you get back to the 45% gross margin, 25% EBIT margin range, but you've achieved it quite soon. So how do we sort of expect -- how should we model this on a longer-term basis into 2023 and beyond? Is this a new level for Melexis because of changes in your mix and pricing levels? I've got a follow-up as well after that.
Yes. In general, in the current environment, it's extremely difficult to guide as much for sales for the margin because the context has completely changed. In Q1, we had all elements in favor of us as much -- yes, typically the new prices start usually at the beginning of the year. So that is today positively impacting in the past, it was negatively impacting. The product mix is also helping the [ dollar ] had also quite an important impact because on our inventory that is temporary. There is also operating leverage. So all these elements account for a better gross margin. Yes, they are all more or less equally important.
Moving ahead, of course, it's not guaranteed that we will keep all these elements in the same direction. And so, the [ dollar ] also in Q2 is expected to have a positive impact. The product mix, yes, we also believe that for the coming quarters, it's rather going to be in favor of us. But the price increase, that is typically happening in the beginning of the year with not much change for the rest of the year, while we still can expect price increases on the supplier side throughout the year. That's why we need to look at this with caution. And that's also what we mentioned in the press release.
So moving forward, yes, for the year, we guided around 45% at the midpoint of our guidance. Moving ahead, it's extremely difficult how also moving beyond 2022, there will -- I mean, we live in an inflationary environment, how we will be able to pass add-on to customers moving beyond '22 is extremely difficult to guide on today.
Understood. And just a quick follow-up on the TPMS product. I mean, you've had this product now for quite a few years, and you have not really talked about it as a big driver of volume until this quarter. So, I was just wondering, given some of the regulation that happened on TPMS happened a few years ago, including in China, what is it that is driving the sales of this product so strongly at this point in time?
Yes, we have indeed 2 big new business opportunity that are in ramp up. They are in ramp-up since, let's say, late last year, and now we really see the effect of the volume. But you are right, it's between, "It's an old product, let's say, but we have been able to build 2 new naive business with the TPMS".
So you're effectively taking market share on this product. Would that be a fair assumption?
You mentioned it, there is also a change of regulation in U.S. and in China where now the TPMS is more mandatory, let's say, than there is, I think, and more higher market and some market share effect, yes.
Our next question comes from the line of Matthias Maenhaut from Kepler Cheuvreux.
So, 2 questions from my end or maybe 3. You clearly mentioned capacity upgrades, allowing you to post significant quarter-over-quarter sales growth in Q2. Could you maybe give us somewhat of an idea on how further capacity lifts are scheduled throughout 2022 and 2023? And if you have demand that is substantially high enough to even grow above EUR 200 million of quarterly sales. And that will be my first question.
Second question would be on the guidance and the implied guidance on R&D because it seems that the guidance seems to imply R&D at 13% of sales, while in Q1, you were pointing to 11% of sales. So I just was wondering, could you elaborate a little bit on which kind of costs are going to trigger such a substantial increase in R&D? Is that inflation on employee benefits? Is that hiring? Is that other kind of costs?
And then, maybe a third question is on the order book. Could you maybe give us a feeling of how far your order book reaches out? So what's the visibility you now have in 2023?
Yes, I can start, and then, Karen, you complement. If we start with the last question with the order book, yes, I would say the order book is today as strong as 1 quarter ago. There is no real change in the order book. With the comment that we made already last time that there is a long-term order. I mean, in the order book, we don't have order only for '22, but also for '23, also because we have pushed out some order from '22 to '23 because of the supply limitation.
On the second question about, let's say, the cost increase in development, I think you mentioned at least 2 of the 3 elements, the wage inflation of the people will continue to take on.
In Belgium, that will be 8%...
Yes, something like that indeed.
In the third quarter.
We have also a hiring plan or hiring budget in order to increase, let's say, the development bandwidth that we develop this hiring plan, and we execute this income in '22 and probably also in '23.
And the third element that you did not mention, but there is also, let's say, the effect of the problem in Ukraine because we have, let's say, 10% of our development bandwidth is based in Ukraine. And in order to mitigate the effect, we have also -- we are also to increase the cost in other countries in order to compensate with some hiring as an example.
Well, we keep paying our people in Ukraine.
Yes, we keep paying the people in Ukraine. They are still contributing. I mean, they are working from home or we have helped them to delocate outside Kyiv, and now they are located, let's say, mainly in the west part of the country. And they are still working from home, but you can imagine that the delivery, let's say, or deliverable is not the same in those circumstances and in normal circumstances, meaning that we compensate, let's say, the output with some additional cost in other countries.
And also, we expect the supplier investments in R&D that will also step up over the next quarters. So there are several elements here that contribute to the speed at which it will all happen is still difficult to guide on, but we are ramping up R&D. Yes.
Yes. And then, the first question was about the outlook of the capacity in the supply chain.
It's a difficult answer because as we mentioned, there are a lot of uncertainties. Our suppliers have difficulties to increase their own capacity because they miss some equipment and the lead time of the equipment for our supplier is sometimes 2 years. And when they receive the equipment, sometimes the equipment is not complete, then they cannot use it. It's why it's quite difficult to guide on how the capacity will increase, mainly because of a timing perspective. I mean, the timing is unclear. The target of capacity increase is clear, but how it will be executed in the time is difficult because of all this uncertainty on the equipment delivery.
Yes. Shorter-term, we have been able to increase our inventories. Our guidance for Q2 is also quite up because indeed that is quite secure. But longer-term, the effects of the Ukrainian war and also the major lockdowns in China, there is probably going to be impacts on supply side, but we don't know yet today how much that will be. But it is a risk in the longer-term, more in the second half of the year.
And that's the main reason why you actually guide for sequential weakening of sales in H2, if I understood correctly?
Yes, the lower end indeed could mean depending on supply, mainly the supply risks are indeed the dominant reason to do that.
Okay. And then, maybe I have just 1 follow-up on the inflation and wage inflation. I noticed you had quite an important financial income, which seems to be an inflation hedge. Could you maybe elaborate a little bit on how we should model this going forward because the EUR 9 million of financial income seems quite substantial.
Yes, it's ad hoc. So, it's indeed hedging contracts. Normally, it's 0, and the guidance should be 0. But yes, ad hoc there can be extreme differences, but it's impossible to guide on this. So, in principle, financial results should be around 0 going forward.
Our next question comes from the line of Marc Hesselink from ING.
Yes. First question on the growth guidance. Can you split it up maybe between [ what you're ] there and expecting in automotive and adjacencies? And also asking in automotive, clearly very strong in the month, but you also see that the prediction plans of the OEMs are expected to be lower than at the start of the year. So, can you maybe talk about all the moving parts of the volumes, the content increases that you see at the automotive and the split between automotive and adjacencies?
Yes, for the split between adjacent and automotive, indeed you realize that in percentage, the adjacent stay constant at around 10%, and the automotive is increasing quicker, let's say, than the adjacent. I think, given, let's say, the automotive situation for the next month, it will remain the same. I think we will continue to grow quicker the automotive than the adjacent at least in short-term because we need to allocate the majority of the capacity for our automotive customer.
In terms of, let's say, volume from the OEM, I confirm that indeed, looking at the IHS figures, let's say, every month, the prediction is going a bit down. I think now we are close to 80 million or 81 million cars for 2022, which is indeed lower than at the beginning of the year. But for Melexis, what drive, let's say, the revenue is more the content. We move from 13 -- in average 13 Melexis IC per car in 2010 to 18 in 2000 -- sorry, 13 in 2020, moving to 18 in 2021. And the content keeps increasing for the chip content. And coming back on the IHS, they believe EUR 80 million or EUR 81 million for '22, but they are still convinced of '23, we will see a significant increase.
And second question is on the extra capacity that you have in the supply chain. To understand that, how did you get that extra capacity? Was your supplier able to debottleneck some parts or was there another client that pushed out a little bit of demand, how was that possible?
Then you know that our main wafer fab supplier is X-FAB. And X-FAB is now ramping up a new site in Corbeil in the south of France. And let's say, the capacity in Corbeil is increasing step by step. And as I mentioned before, it's sometimes impacted because they cannot get the equipment that they have order or the equipment is delivered with huge delay. It's why -- from a timing perspective, it's always a bit difficult to make some plan. But for sure -- what is sure is the extra capacity is coming from the Corbeil site of X-FAB.
And are you prioritized over other clients or is everybody gets a bit extra?
Yes. This is a question that you should ask to X-FAB.
Okay, yes. Okay. Fair. And then -- and maybe then the final question, actually for your guidance, you take into account the U.S. dollar-euro of 1.09. Actually, today, it's already at 1.06, which I suppose is going to be extra beneficial than, again, if it stays where it is. So maybe, firstly, why did you take this still to 1.09?
Pardon?
So, the U.S. dollar-euro exchange rate, you take into account for the full year 1.09, today it's 1.06. And I suppose, I mean, it's going to be -- if I'm right, it's going to be the beneficial on your [ line ] and your margin.
Indeed, as much on sales as on the margin temporarily because of the inventory impact. Longer-term, the percentage will not be influenced a lot.
But is that like this extra maybe almost 2%, 3%, what would you -- how would it fall down to your revenues and your margin then?
But on the margin, the dollars longer-term has no impact, only short-term, because of inventory revaluation. And obviously, on the sales, it has an impact. But today, it is 1.0 -- I mean, it can fluctuate. We guide for 1.09. Now it is maybe a bit stronger, but yes it's fluctuated for time. And we look at -- yes, we always look back at the average of the past. So we always have a bit of a debate effect.
Our next question comes from the line of Robert Sanders from Deutsche Bank.
My first question is on your '22 revenue growth. I just want to understand, is pricing the biggest -- majority contributor to that growth? The reason I ask is that's what Elmos is saying, for example. So I just wanted to check whether pricing is the majority of that growth in '22 or if it's a minority. And then I have a couple of follow-ups.
It's an important aspect, but it's by far not the only one.
Okay. And then, on China, I just -- what we're seeing is some of the domestic suppliers are taking share in power analog and some ADAS areas. I was just wondering in magnetic sense of current sensors, these areas where you play, have you seen any domestic suppliers take any share within the Chinese market or has that not yet happened?
I would say, for automotive, we did not see yet market share taken by the Chinese supplier, but I think we really need to pay attention because they are also learning. And it's why we need to continue to innovate and to bring some additional features, some added value for the OEM because indeed we cannot neglect that there is some Chinese suppliers that are also in the place. But it's also the reason why we spend more R&D effort because it's via those R&D that we can innovate and that we can stay in front of the pack in terms of technology innovation.
Got it. My last question, you mentioned your exposure in Ukraine, that's about 100 engineers or so. Is that right? And then, related to Bulgaria, you know that Russia seems to have cut off Bulgaria for natural gas. I was just wondering if that would be a kind of minor exposure given that that's mostly people or is there a potential impact in Bulgaria as well?
This is very new, but in the past, we also had a cut. It's not the first time that Russia, I think, 2008 or '09 or so, it also happens. It didn't have an impact on the Melexis base this time. So we don't expect it to have major impact today either.
Our next question comes from the line of Francois-Xavier Bouvignies from UBS.
I have a couple of the first one, and I'm sorry, I joined a bit later, the call if you answered already. But the capacity that you see higher than you expected coming in the second quarter. Is it only from X-FAB or are you using other kind of, yes, suppliers expecting on the foundry side? That's the first clarification.
Yes, it's only coming from X-FAB.
Okay. That's perfect, clear. The second one is on the -- I mean, understand...
Hello. The sound has disappeared.
Yes. So sorry about that. No, I was saying that you talk about the content being a big driver of your performance. Nevertheless, I mean, when you look at the production of cars worldwide and the top 5 Europe countries, which is a big part of your market, I mean, it's coming down global production like double-digit percentage, and China is not looking much better in terms of production in the first quarter.
Nevertheless, I mean, you delivered like 18% growth year-over-year this quarter. And looking at your guidance, it's still fairly strong. My question is like, the content in your medium-term target and even if you look historically, it's rarely above 10% as such. I mean, we are looking at a very significant spread between production and what you are delivering. So, can you break down maybe the explanation of this or maybe give some color, content is one of them, but the magnitude seems quite huge, if you see what I mean. So, just want to understand such gap of numbers.
Maybe just in general, there is -- I mean, there is impact of inflation, there is impact of dollar. So, the volume growth, we are talking rather of high single-digit growth. So that is higher than production, car production, but it's also not substantially higher. And so we need to look at it in that context as well. It's more in line with growth levels that we saw in the past, volume growth levels.
So, what did you say, Karen, I didn't catch it. So you expect high single-digits for what the dollar, I didn't get you [indiscernible]
Volume growth? We are in an inflationary environment. So, part of the growth is pure inflationary. The volume growth...
You mean pricing?
Pricing in the -- to compensate supplier increases.
Okay. And can you quantify this pricing impact high single-digits, that's what you meant?
We have been open about this in the past as well. It's higher single-digits indeed.
Okay. All right. And maybe on the currency side, for the full year with 45% gross margin, how much is the currency impacting your gross margin for the full year?
It's around 4% in the guidance. It was 3% in Q1. For the full year, you need to correct with around 4% for dollar impact.
So, it would be 41% at constant currency. Is that correct?
In the sales growth guidance. In GPM, it's...
We're talking about gross margin here, yes.
Sorry. I misunderstood.
Gross margin.
No, in gross margin, it's maybe temporarily a smaller effect, but for the moment, it's not big yet. It's not big. So, the 45% is that we gave us guidance for the year does not include a lot of dollar impact.
Okay. But you said just before, I think that currency was a big impact on the gross margin strength.
In Q1, there is some impact.
I misunderstood.
But in the full year guidance, we don't expect that to be in the 45%. It's not the -- I mean, it's difficult to guide on that because we don't know yet. But like I mentioned long-term, there is zero effect. It's only a temporary effect from revaluation of the inventory, which phases out once you have a stable dollar environment again.
Okay. So what is the impact in Q1 then of the gross margins?
Maximum 1%, but it's not even 1%, I would say.
So, less than 1%.
Our next question comes from the line of Michael Roeg from Degroof Petercam.
First question I have is on X-FAB, -- how many months of visibility do you have in terms of wafer supply?
Well, we have asked this question to our different suppliers. And I don't know if you refer really to the wafer or to the gas that is used for the process. But anyway, they have enough to cover the next 10 months or something like that.
Okay. What I wanted to mean is, your supply to you is better than expected for Q2, which gives you the nice guidance of EUR 200 million. But beyond that, you expect some cautiousness because your full year guidance at the midpoint suggests that it will be slightly lower than EUR 200 million in Q3 or Q4. So, based on their production ramping up, their growth in Corbeil, I would have assumed that from the EUR 200 million in Q2, there may be a small step-up in your sales in Q3 and Q4, but you guide for a slight decrease. So that's why I ask what's your visibility on the wafers that you're getting for X-FAB, how long is that visibility?
Yes. As we mentioned, there are a lot of uncertainties on different aspects of the supply chain. Okay. X-FAB is one of the aspects. And it's why we -- perhaps we are a bit cautious, but we want to be cautious because, yes, if one bottleneck appears in the supply chain, then everything is impacted. And yes, given all the uncertainty that we mentioned in the past, I think we want to be cautious.
Okay. Understandable. Then about a potential bottleneck, China and Hong Kong combined were about 22% of your sales last year. Have you noticed anything from lockdowns, which may be causing some disruptions in your supply to those customers?
Yes. There is -- there is -- we have what is very noticeable is that indeed, we have this -- I mean, our carriers have difficulties, let's say, to bring our goods to China, and some of them to do this. Some of them accept, but they don't want to take any risk if the goods are lost. And this is a very concrete consequence, let's say, okay. We know also that, our Board in Shanghai are closed or almost closed for sure. Then, yes, for the time being, some of our materials are not shipped to China, and we keep to be able to ship them in a second step.
So this could perhaps be a reason for your cautiousness in Q3 and Q4, because if your clients accept the product today but cannot use it in their factories, then they will use it in Q3 and push out some of their normal orders for the remainder of the year, something like that?
For sure, the lockdown in China is...
Okay. That's clear. Then a question for Karen on the gross margin. If I look at X-FAB, your main supplier, then every quarter, there is a strange inventory effect in the gross profit. If the company produces more than that they supply, then there will be something capitalized and that has a positive impact on the gross profit. And the other way around, it has negative and so on. Is this something that also happens at Melexis, if you have more work in progress in your testing facilities than the quarter ago, that you capitalize some inventories and that there's a positive impact of our verse profit?
We have this from the dollar movement, but I cannot get to anything else.
Okay. So it's only a currency effect at Melexis, not absolute inventory volume impact.
If we test more, then obviously this is also impacting our inventory. Yes, that's typical. Yes. Higher inventory has a positive impact on the gross margin, but it's not so substantial for Melexis.
Okay. Clear. So that's reassuring...
Yes. For Melexis, there is a big difference. We only have -- our production is only 20%, 30% of the total gross margin where in X-FAB it's almost 100% of the gross margin.
Yes, yes. That's why at X-FAB, the gross margin always goes in all directions, and it makes some sense if you have to adjust for the inventory effect, but at Melexis is much smaller. That's clear. That's reassuring. It means that 45% is actually quite a good margin.
Then again, for Karen, you elaborated quite on the step-up in R&D efforts. I looked to my model. It was about EUR 20 million a quarter for 17 quarters in a row. So now, it will become higher or this roughly there the ballpark number that we should think of on a quarterly basis, EUR 23 million or EUR 24 million.
What do you mean, EUR 23 million increase?
No, no, the absolute R&D spend per quarter. It was about EUR 20 million a quarter for a long time.
Yes.
And that's going up, inflation, extra people and the Ukraine situation. What is the ballpark number going forward, EUR 23 million or EUR 24 million?
It's very difficult to guide on that. But indeed, there will be substantial -- there can be substantial increases from quarter-to-quarter.
Okay. And then the final one, more technicality. Those strange -- well, strange, those hedging results in your net financial results, is that part of your dividend base, because if it would be 4 times EUR 10 million, if?
That's quite a big impact.
Cash flow in general is high, because investments are not much higher than depreciation today. So we are not -- yes, we're not counting on that, plus the -- I mean, our dividend policy is based on the real cash flows. The financial result is unrealized, so it can still go in all directions.
So we currently have 1 final question. [Operator Instructions] Our next question comes from the line of Varun Rajwanshi from JPMorgan.
Very short follow-up from my side. Actually a clarification on an earlier answer. So you've increased your gross margin guidance for the full year to 45% from 42%. Can you just break it down into different components? How much of this increase is driven by pricing? How much is driven by product mix? You mentioned that dollar moves -- the impact from the dollar move is not very significant. So just those 2 components, some color on that will be helpful.
And one question for you, Marc, on competitive intensity, have you seen any change in recent months? Can you comment on your share and market expenses and potential threats that you see from computing technologies such as xMR versus Hall effect?
First, on the gross margin, like we mentioned already, there are 4 elements, and they both have an important impact. So, the operating leverage, the pricing, the U.S. dollar effect, but that is temporary, and then the product mix on the other hand is also one. So, we don't want to -- I mean, they're all important in this increase.
Can you quantify this, Karen, because that...
But not one is more, there is not one that is more than 1%.
Sorry. So no factor is more than 1%?
More than 1%.
Okay.
Yes. And on the competitive aspect, yes, I must say that the current shortage, let's say, and the hungriness from 4 pieces, hide a bit the competition aspect. The competition is more on the, who can supply instead of any other component, let's say. Really, for the time being, the competition is really on who can supply.
To come back on the xMR, your xMR question, which is, I mean, the MR is indeed a way to have much more sensitivity, but it has also a disadvantage, let's say. And I really believe that the hall sensor is the best compromise between the cost and the performance. It's why -- I mean, in some specific application, you really need more sensitivity and the MR is one of the solutions. But for the vast majority of the application, I think, the compromise between cost and performance is always at the advantage of the whole technology.
That being said, coming back on the R&D investment, we are also working in the longer-term or in the midterm on solution to have more sensitivity, not with the MR because competition is using MR and we want to provide a different feature with a different performance. But we are also working for the future on the solution where we can bring more sensitivity.
Thanks for your comment, Marc.
Did I answer the question?
You did.
We currently have no final questions. So, I'll hand over to your host for any final remarks.
Okay. Thank you for the discussion. Thank you for the interesting question. I hope you have appreciated the discussion. And I think we are all looking forward to meet you again in 3 months for the earnings call after Q2. And again, thank you for the discussion.
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