Melexis NV
XBRU:MELE
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
54.5
92.75
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Melexis NV
You don't have any saved screeners yet
Hello, and welcome to the Melexis NV Quarter Two 2023 Results. My name is Carolyn, and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions]
I will now hand over the call to your host, Mr. Marc Biron, the CEO, to begin today's conference. Thank you.
Hello, good morning. Thank you for joining the Melexis earnings call regarding the second quarter of 2023. As always, I will start with the business update, after which, our CFO, Karen Van Griensven, will comment on the financials. We will answer your questions afterwards. Sales in the second quarter of 2023 came out with an increase of 14% compared to the same quarter of last year. Given that we have realized a steady growth over the last quarter, we are increasing our full year of sales and profit guidance. During the second quarter, we observed stable inventory levels at our distributors as well as our direct customer.
The best-performing products were once again our current sensor, magnetic sensors, embedded motor drivers and embedded lighting product. It's a trend clearly driven by the electrification and this trend is set to continue. The common denominator of the success of this product line is electrification. The obvious beneficiary are our current sensor products. Those products are used in inverter, onboard chargers and DC/DC converter. Another beneficiary is the embedded motor drivers, which are extensively used in the thermal management application of the electric cars. All the other outperforming products are used in applications that are not related to the powertrain. We call them body, chassis and safety applications. These applications are gaining more and more traction on the design and the comfort level of the vehicle are more and more important. For example, our embedded lighting products enable interior ambient lighting. In terms of chassis and safety, our magnetic sensor can be found, for example, in e-steering or e-braking applications.
In the second quarter, we launched a new time-of-flight sensor for safety-critical application, such as dynamic airbag deployment, but also driver attention monitoring. This time of flight can also be used in adjacent applications such as industrial cameras, robot and advanced machine vision. We also launched a new embedded motor drivers, which is able to optimize the thermal and the expansion valves, which enable a longer range for electric vehicle, which is, as you know, very important for the customer. As evident from our growing design win and opportunity pipeline, electrification will continue to drive our success beyond 2023. We have the right product portfolio. Those portfolios serve the ever increasing need for electronic in vehicles, be it for powertrain, but also for comfort and safety applications.
I'll now give the floor to our CFO, Karen Van Griensven for the financials.
Thank you, Marc. Hello to everybody. So a little bit on the financials. So for the second quarter 2023, we were at €236.7 million, which already Marc mentioned, an increase of 14% compared to the same quarter of the previous year and an increase of 4% compared to the previous quarter. The gross result was €111.3 million or 47% of sales, an increase of 19% compared to the same quarter of last year and an increase of 8% compared to the previous quarter. R&D expenses were 10.9% of sales. G&A was at 5.1% of sales, and selling was at 2.4% of sales.
The operating result was €67.5 million or 28.5% of sales, an increase of 18% compared to the same quarter of last year and an increase of 11% compared to the previous quarter. The net result was €51.9 million or €1.28 per share, an increase of 9% compared to €47.6 million or €1.18 per share in the second quarter of 2022 and an increase of 2% compared to the previous quarter four. The Board also decided on an interim dividend of €1.3 gross per share. And the Melexis share will start trading ex-coupon on October 17, 2023.
The outlook for – so we expect now for 2023 for the third quarter sales in the range of €245 million to €250 million. And for the full year 2023, Melexis now expects a sales increase between 14% and 16%. Previously, it was between 11% and 16% with a gross margin of above 45% and previously, it was around 45% and an operating margin of around 27% previously around 26%. And all this at the midpoint of the sales guidance, all taking into account a euro-U.S. dollar exchange rate of 1.1 for the remainder of the year. For the full year 2023, we now expect CapEx of around €100 million, where it was previously around €70 million.
I would now like to open the Q&A session. So operator, please go ahead.
Sure, thank you. [Operator Instructions] We will take the first question from Marcel Achterberg from Degroof Petercam. Your line is open now. Please go ahead.
Yes, good morning. I have a couple of questions. The first one is on the gross margin in the second quarter of the year. In Q2, we had €8 million extra sales versus Q1 and also €8 million extra gross profit. So roughly 100% margin on the extra sales. Can you explain a bit what happened in the second quarter?
Yes. Well, in the first place, the favorable pricing is now in full – it's now fully impacting the quarter where in the first quarter. It was only impacting for a few months. And so we now have the full impact. We are also still benefiting from cheap wafers. So the price increase is not fully yet felt. And that will gradually be felt up to the end of the year. Product mix is also helping a bit. So we had a lot of parameters that were positive in this quarter. It's also clear that this gross margin is not sustainable. So as the more expensive re-sell prices will be felt, we will also see the gross margin adapting to that.
Okay. That's clear. Then Also, Karen, for you. In the balance sheet, there were 2 new items, the huge prepayments to X-FAB and also the debt of €135 million. Can you tell us the conditions of the loan with respect to the coupon, the maturity? Is it a bullet? Or can you redeem it whenever you want?
We can redeem it use it as Swedish. So it's flexible.
Okay. And will the net impact of the interest costs and the compensation from X-FAB, will that be net neutral in your net financial results?
No. We don't get compensation. It's an operational prepayment. So it is not bearing interest from X-FAB. So in that sense, we will not have compensation. You need to look at the whole package, it is an operational advance where the benefit for Melexis is agreed on volumes in the years to come. That is – that was the package negotiated with X-FAB? So money…
So now you're paying – what kind of interest rates are you paying nowadays on that?
Around 5%.
5%, clear. And then now a question for Marc, please. My last one, and then I'll leave the floor to others. Can you explain a bit your ideas and planning for X-FAB 110 nanometer process technology? How much of your sales do you see going to that technology in, say, five years from now?
Yes, indeed, X-FAB developed the XT011 technology in Corbel. We hope that we plan that it's not a whole a plan. But in 2024, we will start to make sales out of product using this technology from X-FAB. It will GROW – the capacity of X-FAB will grow year-after-year, and we plan to use this capacity. In five years, I think in terms of volume, we should be able to use – how do I say it. The capacity in XT011 will be similar than the capacity in XT018.
Okay. Interesting. Maybe concept-wise on that. The chips you design generally do not need to double the transistor count over time. So going to a smaller node, means your chips can be smaller and more energy efficient, but also much cheaper because twice the number of chips fit on the wafer and the wafer price doesn't double. Is this something that could trigger price deflation for chip?
Yes, there is – I would like to – it's correct what you have mentioned, but I would like to add to flavor of it. Yes. First of all, the technology in XT011 is more expensive than in XT018. And in fact, usually what we see is when we go to lower technology, we also add the feature and we add value in the chip. I mean it's – usually, we don't copy a chip in XT011– in XT018 into XT011 with exactly the same feature. And then indeed, the cost is lower because, in fact, we use this opportunity to create more value in the chip then usually, it does not work like that. Let's say it does not work that XT011 is always cheaper than XT018 because we don't compare upper and upper. It's clearly what is important for us is the value that we bring to the customer.
Okay, that's clear. That's it. Thank you.
Thank you. We will take the next question from Ruben Devos from KBC Securities. Your line is open now. Please go ahead.
Yes, good morning. I have two questions, please. Just considering the accelerated investments you're making in, for instance, Malaysia, but also the advanced payments to X-FAB. That suggests you have a good degree of confidence for future demand. So how far long are you in sort of securing long-standing agreements with the Tier 1 suppliers? And what is generally sort of driving the growing need for secured supply for the longer term from your side? That's my first question.
I would say for the time being, we have LTA with X-FAB till the end of '25. And we have LTA with our customers till the end of '25. And we will, let's say, start discussion to extend those, but the discussion have not been started.
Okay.
Any general business inflow, design wins pipe is growing steadily. So we see long-term, the growth drivers out there.
Yes. We mentioned in the press release that indeed, the design wins are progressing I would say, double pipe is also progressing then we can forecast growth, let's say, for the future based on those parameters.
Okay. So with a relatively high degree of confidence, is there any comments you could make already on 2024?
Well, we don't give guidance already now for the next year. So that will have to wait.
All right. Fair enough. And then maybe more specific on the embedded lighting products. These have been performing well for some time now. And I think an estimate that you've shared in the past, it was shown that Lighting Solutions were one of the most promising activities within the CPS market. Could you talk a bit more about this type of product? What is the sort of road map at which growth may further accelerate or that you expect to reach a larger penetration, let's say, among your clients? And how does this compare from a margin perspective to, for instance, magnetic or current sensors? Thank you.
Yes, I would say from a growth perspective, yes, we don't see plateau in the growth. We are still – it's one of the product family that are still very much constrained by the capacity. And then we still have much more demand than supply for this kind of product. And yes, the capacity that we have searching with X-FAB is indeed to a large extent to fill in this demand because this product line is using the XT018 process, but also the XT011 that we discussed just before. And the move to XT011 is a big part to be able to supply more than the net line product. And I would say it's also a clear product line where Melexis bring added value, holding drink USP, then we have plenty of demand. And you – we see also in the new modern cars that all those new modern cars have plenty of ambient lighting.
And we see that some years ago, it was – it started for the high-end car this ambient lighting, but now we see that, yes, more and more medium class car use these features. For the time being, this feature is mainly what we call the comfort. It's to create, let's say, a cool atmosphere in the car with the light. But we see that this ambient lighting will be used in the future more for safety application, for example, to inform the driver about the danger or later on to inform the driver that you need to take back the steering wheel. And we are moving step by step from a pure comfort to a more safety application. And as I mentioned, yes, there is huge demand, and we don't see the plateau. The plateau is created by the lack of supply, I would say.
Okay. All right. Okay, that's helpful. So thinking about your gross margin again of 47%, and you mentioned that it's partly by product mix. Is it therefore also a fair assumption to say that, well, apart from maybe magnetic sensors is also embedded lighting is contributing to that positive product mix? Or is that taking it too far?
Drivers are still rather below the average and above the average. But there has been – I mean, with the favorable pricing mechanisms, the difference is now narrowing in difference in gross margins between different products.
Yes. And I confirm that we have planned and ideas in terms of product, but in terms of process to close the gap. And I think to come back on the initial question, XT011 is part of the plan to close this gap.
All right. Thank you very much.
Thank you. We will take the next question from the line of Marc Hesselink from ING. Your line is open now. Please go ahead.
Yes, thank you. First question is on the guidance for the third quarter. A bit of a bigger step up versus previous quarters. And earlier course you shared that you grow with your supplier when they increase the capacity. Is that simply because this quarter, they also have that increased capacity? Or can you also maybe take some capacity from other clients that scaled down a bit?
Yes. I think it's not really linked to other clients. I think the order book is as that indeed, we believe we can reach the guidance that we have mentioned. It's correct that the capacity of the wafer capacity is increasing quarter after quarter, month after month. And we – yes, we take benefit from this capacity increase.
Okay, great. Then the second question on – so you increased the CapEx because the earlier – the good progress on the probability in Malaysia. Is this going to have a benefit for you in 2024 if you're at it completed earlier?
Well, we need to – there is indeed pressure in time because right now, we are with our probing in – with our suppliers. And as soon as we can move out, they can use the capacity that we feel up to fill with their equipment. So it helps in building up faster additional capacity wafer capacity.
And but the fact would be visible in 2024 then?
That will help in 2024. Yes.
Okay. And then the final question that I have is, like you especially mentioned that the design wins. And I think in the earlier call, you also said that especially 2022 was exceptionally strong, normally it takes two to three years before you really start to see that into the revenues. If you sort of map that design wins pattern that you've seen over the years, is that – are the impact on the revenues? Are those going to increase in 2024 and 2025 versus what you've seen in 2021 and 2022 and 2023? Or is that fair to say?
Well, I think, it's fair to say that indeed the design win of 2022 will have influence for the 2024 revenue. But you say you know in automotive, let's say, the ramp-up is quite slow, but it's – it's a steady ramp up. Then I would say we could say that in 2024, we start to see the result of the design win of 2022, yes, this is correct.
And is that a fair conclusion to say that everything else equal, have volumes pricing, that kind of stuff that normally your growth would accelerate a bit because of the design wins into the next years?
I think we need to take also into account the supply situation. As we mentioned in the previous call, we still have some product family that are heavily constrained by the supply. I mentioned ambient lighting in the past question, but so is the case for embedded drivers and also for some of the magnetic sensors. And for those product lines, the supply is still the constraint. For other products, we have a better balance between the supply and the demand. It means that the revenue of 2024 will not be only depending on the demand and on the design win of 2022, but also by the supply situation.
Okay, thank you.
Thank you. We will take the next question from the line of Robert Sanders from Deutsche Bank. Your line is open now. Please go ahead.
Yes, hi. Good morning. I just wanted to check for the products you have on allocation, what percentage of your revenue is actually on allocation right now? And for those products, what is the level of demand that you're seeing above your ability to supply? And I have a follow-up. Thanks.
Yes, for those products, the gap is, I would say, 20% between demand and supply. And it's a serious gap. It creates serious sales gap, yes.
And that's mainly ambient lighting and current sensors? Or is there other categories?
In fact, technically, it's mainly the 0.18 technology, the XT018 and the XH018 technology and the product line using those technology ambient lighting, embedded drivers and part of the position sensor, magnetic positions and so.
Got it. And then on the EV business you have, it seems like you've had a lot of success in China and the big U.S. player. It does seem like there's an incremental cost downs that those companies are facing because they're trying to cut prices and they seem to be pushing prices down in the supply chain. So how have you seen that pressure so far? And when will we see that in the financials?
Yes. I think we need to – you need to extinguish a different case, let's say, yes, first of all, we have LTA with some of the customers where the volume and the price has been fixed. Another aspect is what we just mentioned, the constraint of the supply and for some of the products in China, but also not in China, we still discuss much more about volume supply than about price. Yes, for the products that are more in balance between supply and demand, I would say we are more back to normal business. Yes, for those products, we will have discussion about price after summer. But I mean, it's more as usual in the normal business. And I repeat, this is for a small portion of the overall portfolio because we have LTA because we are still a constraint of supply. I don't know if you want to add something, Karen?
No, I think that's indeed all, nothing to add.
But you have seen – you have seen already those companies in the EV supply chain trying to squeeze you when they're not on LTA or you haven't yet seen it?
No. No, no. I think the price of 2023 are fixed, and we don't discuss about the 2023 price.
Okay. Set more for the years after. Okay, thank you.
Thank you. We will take the next question from Nikos Kolokotronis from Van Lanschot Kempen. The line is open now. Please go ahead.
Hi, good morning and thanks for taking the question. My first one is related to the lead times. I mean, a loser of yours. So yesterday spoke about almost normal levels of fleet times after a decline of around 30% in the previous quarter. So I was wondering if you can provide a bit more color on what you are seeing at your end and how it has been – how it has evolved actually in the previous quarter.
Yes. You mean the lead time of the process? The…
Yes, yes, exactly.
I think it's a bit linked to previous discussion for the process where we have supply constraints, the lead time did not change and is still big along for the process technology process where we have less constraint, the lead time has reduced a bit. And yes, we have updated our sales catalog beginning of July and for those products, we have reduced the lead time. But in general, it has improved, but it's still longer, I would say.
Okay. Thanks. And what are the dynamics that you are seeing at your orders intake actually at this stage? I mean, in the previous quarter in fact?
Order intake is still very regular for the moment. On the one hand, we have a huge backlog for the products that are still in supply constraints. And on the other hand, we see normalized order behavior in the rest of the business.
Okay, thank you.
So it's difficult to make a general statement here.
Yes, yes, I see, okay. Thanks a lot.
Thank you. We will take the next question from the line Olivia Honychurch from Jefferies. The line is open now. Please go ahead.
Hi, good morning. This is actually Janardan on Olivia's line. A couple of questions. One is I joined the call a bit late, so I might have answered this earlier, but the gross margin of 47% that you got, what actually drove that? Was there any pricing increase? Or was that because of capacity utilization? Or was it product mix? Can you give a bit of color on what is driving the higher gross margin?
Yes. So the biggest reason is indeed favorable pricing that was now effective for the full quarter. But in Q1, there was – it was only started somewhere in the quarter. And now we had the full effect of that in Q2. So that's the most important combined with still buying the wafers that – I mean, there is a delayed effect in seeing also the cost increase, mainly on the wafers because of inventory effects. So that is still very much visible in Q2. Also a little bit product mix probably and leverage operational leverage. But in the first place, the price increase with – in full effect, which still delayed timing of the wafers increased pricing. Yes. I hope that answers your question.
Sure. So looking out, the price increase will hold up. I mean, are we looking at more at the 47-ish kind of margin range into the second half? Or is there any other effect that will play on then?
No. So the prices will remain stable throughout the year, and we see the big move somewhere in the beginning. It's the usual price changes happen at the beginning of the year, but then it remains stable on the sales side. But on the cost side, we will gradually see increased pricing. So that will put some pressure on the margin in the second half.
Understood. And is the price increase at all playing into your guidance into Q3? Or is that mainly volume driven?
That is volume driven.
Got it. And the inventory rose in the quarter, how do you see that trending into the second half of the year?
Inventory, our own inventory?
Yes, your own inventory.
Well, the biggest increase we've seen so far was – is based on the – I mean, also the inflation of the prices. There is some volume increase as well. Yes, it's – we are still in constraint. So we still favor what we can to take inventory. Here and there, there might be some finished goods, but it's still very limited. So yes, in general, we are still in a situation where we would like to see some, yes, improved inflow of material.
Understood. And my last question is…
Expect major deviations to come in that respect may.
Okay. And my last question is just on the sentence you put saying that you have a new embedded motor driver that improves thermal and expansion valves in electric vehicles, extending their range. Can you just describe that technology a little bit, how it improves, what it exactly does and how much is the range expansion that you can get using that technology?
Yes. I cannot answer how much. I don't want to state on the quantity of extended ranges. But in fact, the – in the electric car all the thermal management is full of electronics. And this thermal management is very important for two aspects. First of all, I would say, in ICE, you have the heat for free. I mean the engine generate the heat and then this heat can be used to heat up the cabin as an example. In an electric car, the heat is not for free because if you use the battery to heat, then you reduce the range. Then in electric car, all those thermal management is extremely important. It's important to heat up the cabin to keep the cabin around 20 degrees. But it's also very important because the battery is efficient, if the battery is close to 20 degrees, meaning that in winter, you need to heat up the battery and in summer, you need to cool down the battery to keep it around 20 degrees.
And there is the thermal loop for the cabin and for the battery. And this thermal loop, yes, use a lot of valves to open and close. Then we are supplying the actuator to activate the valve. We are also supplying some position sensors to define the position of the different valve. And a lot of – all the OEMs are working hard to have this thermal look as efficient as possible. Okay. And then we enable some of those applications.
Understood. Thank you very much.
But now that I'm thinking of to give an idea about the range. Okay. I cannot give the number, but if you go in the – at the OEM shop, for some car, there is an option which is called something like thermal management, and you can take or not the option. Okay, the option is some thousand euro. But if you take this option, you see that the range of the car increase.
Understood. And is your drivers more on the HVAC?
I think the name of the option is heat pump, in French pompe à chaleur and in English heat pump.
Okay. And is your drivers more on the HVAC side? Or is it more on the battery cooling, I mean temperature control side or it's equally on both? Okay.
On both. Yes, both.
Got it. Understood. Thank you so much.
Thank you. We will take the next question from the line of Robert Sanders from Deutsche Bank. The line is open now. Please go ahead.
Yes. Just a quick follow-up on the 0.11-micron SOI. So it sounds like you're transitioning from 0.18 micron to 0.11 SOI. The substantial uptick in the wafer cost, does that mean that your average selling price is going to follow suit? Or because it seems like the number of mask layers, obviously, the process technology is more expensive. So do you expect that to lead to a step-up in your ASP, perhaps because you're integrating more functionality or not? Thanks.
Yes. You say we transition to XT011. Yes, I think we are still using XT018 capacity, but – and this capacity will increase at XT018 but at the same time, they offer the opportunity to also use XT011, meaning that we will also develop specific products in XT011. We see the XT011 as an opportunity to extend the capacity, I would say. And in terms of average selling price, as I have explained in the past, Indeed, everybody expects that when we go in lower future side, you had the cost decrease and the price decrease. But there is the other effect, which is that we want to add more value to customer, meaning that we had more feature, which then creates a bigger chip. Then in total, yes, what will be the balance about those two effects, yes, I cannot say for the time being. But for sure, we want to add more value to the customer.
Got it. Thank you.
Thank you. [Operator Instructions] We have no further questions in the queue. I'll hand it back over to your host. Thank you.
Thank you for all the questions and the discussion, and we are looking to hear you at the end of the Q3 results. And since then, for the one that have not been on holiday yet, I wish you – or we wish you a good holiday.
Thank you for participating in today's call. You may now disconnect.