Hello, and welcome to the Alexis Q2 2020 results call. My name is Rinkle, and I will be your coordinator for today's event. Please note this conference 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 and you will be connected to an operator.
I will now hand you over to your host for an authorization to begin today's conference. Thank you.
Thank you. And welcome to your audience. It's a pleasure for Karen Van Grinssen, our CFO and myself, from Sebastian Bass to welcome you again today to our, quarter 2 earnings conference. Let's run you through some top line and financial background first, after which we will be happy to answer any questions you may have. So we exited the 2nd quarter with a touch more than 1,000,000 sales a decrease of 16 This being said, Melexis was able to post a half year 1-twenty 20 sales growth of 1% versus half year, year 1, 2019, on the back of a severe COVID 19 disruption to the demand and supply lines.
There are 2 remarkable elements to highlight in this context. The first one relates to automotive, the second to adjacent. As far as automotive is concerned, we estimate that global car sales shrunk by about 24% in the first half year. Worldwide car production has most likely fallen about 30%. That leads to the conclusion that Melexis was able to post significant content growth.
It is also proof that the long term secular, automotive, semiconductor content growth trends remain intact. The short term industry slowdown does not change our view on the market and its growth potential. The second topic I'd like to focus on in this call is the outperformance of our adjacent product. Amidst all the economic uncertainty in the 2nd quarter, sequentially and 71% year on year in non automotive markets. If you look at half year 1, that was up 70% year on year with several smart drivers, pressure and magnetic sensors for motorcycles, scooters, 3 wheelers.
Next to that, our 1 coil fan drivers experienced increased traction in gaming applications. This boost was driven by a globally And it was also spurred by Thirdly, stronger needs of the solar industry raised our current sensor sales And last but not least, our temperature sensors has critical components too much of the equipment to overcome COVID-nineteen, continue to be in high demand. The applications range from diagnostics, patient monitoring systems, and respiratory devices to a variety of bodied thermometers. The latter can take the form of classical body ear or forehead thermometers, wearables or fever screening access control systems. The geographical spread follows the pandemic waves.
Asia Pacific continued to rebound strongly over the second quarter, whereas some of our EMEA and American customers grinded to a halt in April and started to recover slowly but surely over May June. Today, we confirm the 2nd quarter will have marked the bottom, and we again dare to give a guidance for the current quarter Customer sentiments and order behavior remain fragile and visibility remains poor. On the back of uncertainties around how the second wave of the pandemic could impact our economy. The silver lining here is that K. Going forward, the Mellexis values are our best vaccine.
We care. Our priority is in the first place with the health and safety of our people. Most of our people worldwide have adopted remote working as the new normal. Our test sites are up and running safely at Our goal is to deliver on our commitments as best we can within the boundaries of what is or will be feasible. The supply chain upstream is on the verge of normalizing, set aside some hiccups here and there.
And we always have a plan. Bringing solutions through product innovation, making our business thrive despite Corona is sure part of that plan. I now hand the stage to Karen so she can tell you more about our financials.
So good morning, everybody or good. Yes. I will start with financial results. Starting with the sales for the 1st, or the second quarter, 2020. Where we had 1,000,000, a decrease of 16% compared to the same quarter of the previous year and a decrease of 27% compared to the previous quarters.
The euroU. S. Dollar exchange rate, evolution had a positive impact on sales of 1% compared to the same quarter of last impact compared to the previous quarter. The growth results was 1,000,000 or 38.7 percent sales, a decrease of 22% compared to the same quarter of last year and a decrease of 31 end compared to the previous sources. R and D expenses were 18.1% of sales, G and A was at 7.1% of sales and selling was at 3.3% of sales.
The operating results was 10 1000000 or 10.1% of sales, a decrease of 45% compared to the same quarter of last year, and a decrease of per share, a decrease of 38% compared to 1000000 or per share in the second quarter of 2019 63% compared to the previous quarter. Looking at the first half year twenty twenty, we came out at 1000000, an increase of 1% compared to the first half year of twenty nineteen. The euro us dollar exchange rate evolution had a positive impact sales of 1% compared Center sales, a decrease of 2% compared to the same period last year. R and D expenses were at 16.2% of sales, G and A at 6.3% and selling was at 3% of sales. The operating result was 1,000,000 or 14.3 percent of sales, almost flat compared to 1,000,000 in the same half year share, an increase of 3% compared to 19.
Furthermore, the Board of Directors also decided to pay out an interim of 1.3 crores per share. The Manexas shares will start trading ex coupon on October 22 2020. And the record date is at October 21, 2020. The outlook So Melexis expect sales in the third quarter of 2020 to be around 10% above the level of the second So I would like to open now the question and answer session. So please go ahead, please.
You. Our first question comes from the line of Frances from UBS. Please go ahead.
Hi, thank you very much for taking the questions. My first question was on your Q3 guide of sales, 10% versus Q2. Could you give us a bit more color on the meat that you see for Q3. When we look at Q2, nonautomotive had a a very strong growth So I was wondering if it was still the case for Q3 in your in your order bookings and, within automotive, you know, what kind of trend should we also look at Q3 and, the mix per geography? I mean, do you see APAC coming down and maybe the rest going up?
Just a bit of clarity on the mix to what Q3 would be great.
Okay. Thank you, Francois. I will answer that one. So the the to begin with the adjacent markets. As I said many times in the past, adjacent markets are much more fluid, then, and they can change a lot from quarter to quarter.
But if you look at the absolute number that we've posted in Q2. We believe that, that number can be sustained, though there will be some fluctuations going forward. But all the fundamentals behind that number are sustainable, over time. So we believe that Q3 might be more or less the same as in absolute numbers versus Q2. The non auto also, has a higher contribution from our distributors.
That needs to be said as well. As far as the automotive is concerned, we see a bit of mobilization as our Q2 marked really the bottom there, because as, as I mentioned in the introduction, some of our customers just simply stopped in April, and slowly got back into business in May, June. We see a kind of normalization whereby, China remains or let's say Asia Pacific in general, it's not only China. It's in general, Asia Pacific is continuing well. We see little disruption there right now.
And from a European and U. S. Point of view, we also see normalization. So that's it's a combination of both the sustainability of the adjacent markets on the one hand, and the normalization in automotive that is taking place that combined give a guidance of 10%. And for automotive, in fact, our direct customers, also suffered, quite a bit in, in q2, and they normalize again a bit more in, in the third quarter.
Next for geography, yeah, in fact, I've said it. And so Asia Pacific continues, Europe, U. S. Starting to get back to normal. And the question is, of course, we have a second wave, a bit everywhere.
The U. S. Never got out of the first wave in, yet. So how that will affect it the economy is still a question, but of course, we'd already almost at the end of July, our lead times are such that we at least see some, or we have a better feel for what is happening than we had, like, 3 months ago where we could not give a guidance But of course, if there is a massive, lockdown again, yeah, and customers start pushing out, yeah, that we cannot know to day. But today, we don't have an indication.
So I hope that answers all of your questions, Francois?
That's very clear for us. I have another one, if I may, on the on your gross margin and maybe more for Karen, your gross margin seems to end up, quite strongly. So I was wondering, did you have any under acquisition charges quarter, Ian, if yes, by how much?
Actually, the positive effect is 2 fold. On the one hand, we have a better product mix, from Flaz already explained, we have stronger sales in Asia stronger sales. It's to some extent, stronger sales in a distribution there as well with higher margins. And a smaller share of, our big automotive customers all over. How that will evolve is difficult to predict.
It will, yeah, Francoise already gave a little bit of a hint of how we think it will evolve, but we don't know exactly what to expect there for the next quarter. Next to that, we also have, a reduction in the, in our fixed costs in the second quarter of, in the range of a 1,000,000, to some extent, and it's linked to, unemployment. Technical unemployment that is covered by the government, particularly in Belgium. But this will be much reduced in the third quarter. So that is not fully sustainable.
Yes, and the 2 combined make it that our gross margin was a relative high level in the second quarter. But both will probably as much the product mix as the fixed cost basis will be rather negatively impact moving forward throughout the year.
But did you have any interest on charges because you mentioned last quarter, it was 300 basis points impact negative. What about this quarter?
It will be in the same. It it's a little bit higher than last, it's higher than last quarter, but not so much. Thanks to the the reduction in costs that we had. So it's slightly higher but not much higher.
Okay. And one thing I wanted to follow-up, and it will be, like, my last question on your inventory because when we look at your own inventory, it increased again significantly. I mean, it's a all time high. It's not a small number. It's you increased by 14% quarter on quarter your inventory, which was already high.
You are now an all time high inventories, no, I totally understand, you know, that your point of having high inventories, you know, in this market to capture if there is any recovery But I'm just, you know, questioning why you increased further when it was already high. Just trying to understand, you know, this, aspect, especially if we go in the second wave, like you mentioned, that could be possible or even in inventory correction within the supply chain, which is also possible. I just wanted to understand why decided to increase further?
It's as we had mentioned in the after the Q1 and as we did expect you to still increase in inventory level, as we saw orders, customer orders really being pushed out to a very big extent. And, yeah, so it was not fully matched in, the deliveries of wafers that we still had ongoing. Moving forward though, we do expect our inventory levels as business is gradually picking up to also further reduce. So it's in line as we had expected it and we more or less had planned it as well.
Okay. And as inventory are gonna gonna reduce in the next few quarters. Sorry?
That is indeed the expectation.
Yes. Okay. And if it goes down the inventory, what kind of impact should we expect for the indirect authorization charges in the next few quarters on the back of this low inventory?
What do we need to expect for Which charges?
Under under it is on charges for gross margin. I mean, should we expect this to increase?
Yeah, that,
we the underutilization will well, it's something we managed to a big extent with, unemployment, if that were the case. So at least for the workforce, we can manage it within a technical and employment for the fixed assets. Obviously, there might be some decrease in utilization that is correct. But it depends a lot on how much sales we how much what the sales level will be the next quarter to be.
Okay. That's very clear. Thank you very much.
Thank you. We have a next question from the line of Janardan Menin from Liberum. Janardan, please go ahead.
I just wanna dig a bit deeper into the adjacent markets, and what your strategy there would be, going forward. In the in the past, you've always said that, you know, there's a lot of opportunity in the automotive market. And so you were not sort of actively pursuing the adjacent markets, to the extent of redesigning products or developing specifics, sales and distribution channels for them, etcetera. Is there any change in that you you see this as an inflection point? And if so, what steps would you take?
Would you be specifically designing products, going forward increasingly for these markets and trying to increase your market share there, as well as on the sales and distribution side. And I have a few follow ups, please.
Okay. Yes. So, well, let me first start by saying there are still a lot of opportunities in automotive. That's for sure. So we continue to see that as our prime, prime, market.
However, the adjacent strategy, I mean, it's a couple of years ago already that we changed that strategy in the sense that, after probing with the, with the products that we had on hand. We definitely changed, changed gear into making product specifically for adjacent markets because there there are different requirements. For example, the the way they talk to the application is different than in automotive. In automotive, you have, like, automotive safety requirements, the the so called ACL, automotive safety integrity levels, that take a lot of work during development and take a lot of, dye size as well, for the chip. You don't need that.
In adjacent markets. You need other things in adjacent markets, like higher ESD levels, etcetera. Now it's In fact, the strategy is for both adjacent and automotive, we are looking for disruptive world first innovations based on the technologies that we master. And as I mentioned already a couple of times in past, temperature is one of those, technologies that we master very well. And where we made a developed product specifically for adjacent market.
Like these thermometers, like the fever monitoring that I talked about. And we see now that some of the health and well-being applications, they seem to profit or benefit a lot from having a temperature sensor. This is something we discovered over time. For example, patient monitoring systems. When you look at you look at the pandemic, and the fact that, the 1st wave and hopefully not the 2nd wave, but at least we we've seen it in the first wave, the health system could get overwhelmed.
And then, this does change the mindset of some of the people in our health system saying, well, we need to monitor patients, while they're at home to avoid that they come to the hospital, too soon, but also to avoid that they come to the hospital too late. And we can use the patient monitoring system as well to let them go from hospital much sooner than we would now. Because in many cases, whether it's after an operation or after they've been thoroughly ill with, for example, COVID-nineteen. They keep patients in the hospital just for observation reasons. But in fact, that can be taken over by technology.
And it I can tell you about it because it was already in the press. And that's one that we were, we are really excited about is the cooperation with Belgium startup called biteflies, who have a sensor dot, that a patient can indeed stick on his or her breast and that measures heart rate, temperature, etcetera. And you see that This is being adopted much more willingly by the health system and certainly in the first place, by the hospitals who do not want to get overwhelmed. So the mindset has changed quite a bit. But even before the pandemic, our strategy has been indeed, to look at the technologies we master, look at the market and see where there is a match for bringing really disruptive innovation.
And, the sensor dots of biteflies could probably not have taken our previous generation, but the current generation where last year, we got even 2 innovation awards for the current innovation is small enough and have medical accuracy. So there's nothing that comes, that is as small as ours. And has as good medical accuracy patients. And we're pretty excited about that thing. But it's a it's an opportunity that we could take, but it's not something that just dropped out of the sky.
It's something that at least we've been busy, stimulating over the past couple of years because it's a it's it's quite a long, it has had quite a long development cycle, because it's a very difficult product to make or to develop, let's see.
Understood. And, on the automotive side, you've said order behavior, and customer sentiment is fragile. And and visibility is poor. Can you just expand a little bit on on what exactly you mean by that, how much visibility do you have right now what what are not not just what you have as firm orders, but what are automotive customer forecasts looking like, for a more extended period toward the end of the year and into the early part of next year at this point?
Yes. Well, customers are still a bit hesitant, and what we see is a bit erratic in the sense that some customers might push out heavily and 2 weeks after they pull in. So it's that that is why it's still a bit hard to understand where where that is going. When we ask for forecasts, well, some say yoga is as good as mine. But in in general, they do have to plan their production levels as well.
Therefore, we see a bit of, normalization, as I said, in the introduction. And therefore, we feel, again, a bit more, able to, forecast or at least give a guidance on the current quarter. It's hard to predict the Q4. It's even harder to predict 2021, but What we do see is that there is a recovery, ahead of us. How much that recovery will be that still remains to be seen.
Okay. And just my last question is one trend that's coming through especially in Europe, but also, to a certain extent in China, is is an improvement, actually in Europe, very strong growth in the EV side, both EV and plug and hybrids even through this crisis. I'm just wondering whether you know, how how you are seeing the benefit or the impact of that on your sales is that, you know, in the past, you've talked about how you are, you know, have have design wins and EVs on current sensors and, and some of the comfort safety, body applications, etcetera. Is there any any qualitative comment on how you see the impact of this, sort of ongoing transition in Europe towards more EVs and perhaps less on the gasoline side affecting your sales specifically?
Well, I don't think that China, had such a surge in EVs. They'd rather have the, a downward trend, because they, scrap the subsidy schemes. In Europe, we do see indeed a surge. And typically, the EVs that we have today I think that might change going forward longer term, but the EVs that we see today are rather high end vehicles. And high end vehicles tend to have quite a bit of, of semiconductor, on board as well.
So for us, that looks like a good, a good trend going forward. At the same time, it's not only EVs, it's also hybrids that do well. So in that sense, for us, the, whether it's EV or something else, somehow, and it will change the it will change the product mix some somewhat, but not enormously, I would say. In our Investor Relations presentation, which is on the website, you will find what we think will happen in the but okay. There it's our forecast is also as good as yours.
But we believe that with that, we can steer our business in the right direction. So, yeah, it's good news in general for the climate, of course. What we see is that, with air travel and public transport travel being, not so advisable, I think that might have a good, impact or a good influence, let's say, on automotive sales going forward, certainly in the midterm. In the longer term, climate concerns will definitely come back, but not in the term.
Is is
that, is is that what, is that an answer to your question, Gena, I think?
Yes. That's that's that's great. Thank you so much.
You're welcome.
Thank you, Jonathan. We currently have one question in the queue. So as a final reminder, We have our next question from the line of Jeff Osborne from Cowen and Company. Jeff, please go ahead.
Hey, good morning and nice to see the strong results. A couple of questions on my end. You mentioned Transwali increased content, additional sensors per vehicle. I think last year you averaged 11. Do you have any sense where that is as you reflect on the number of sensors and switches shipped in the quarter relative to vehicle production?
Well, we only make that calculation once a year because then we know how many chips we sold in that year and how many cars were, produced. I think we take the production. Yes. We're produced in that. Year.
So, I don't have that number for you right now. And, but I'll have that in February next
All right. Sounds like a plan. You referenced
solar
Is that in the inverter or the combiner box on the back of the panel? Where are you seeing shipments into the solar industry?
It's, indeed, in, inverters, back panels, I'm not completely sure. It's definitely in the inverter and in, motor controls. It's the bit this it's also in industrial server server, markets, but for solar I think it's mainly inverter and also some electric motor control. Back panel, I'm not sure if that's the if we mean the same thing here.
That's helpful. And the last question I've had is just on social media and Alexa seem to be, stepping up your advertising of your your 3rd generation time of flight system on LinkedIn and other mediums. I I didn't know if you're seeing any momentum in, orders or bookings for driver monitoring or other applications for that solution?
Well, what we're we're seeing in, in that area is that there is a lot of, interest customers continue to work with us on development in, in automotive, mainly in, indeed, in interior for interior awareness and for driver monitoring. What we do see is that because of, the, the, yeah, pandemic, the technical unemployment, etcetera, is that some definitely European OEMs, have delayed a bit there. Their work because, yeah, their engineers are simply not available. They they need to stay at home in many cases. But they do continue.
So we have seen no, no, reduced interest rather a continued interest, but it was already pretty, pretty okay before that. So yes, we are continuing that. We do see that the time of flight, the 3rd generation that we bring on the market is really, really, satisfying customer requirements in terms of, sunlight rejection, in terms of, of accuracy of performance. And, I hope that, we will be able to bring some real design wins, fixed design wins going forward. Words.
It's great
to hear.
Thank you. If you're looking at when does it go into production, typically such complex systems, they take quite some time. So it is it will not move the needle in 2020 or in 2021. It will will see that starting maybe 22, 23. So the SOPs for such are a bit later.
Maybe to that point, some of the tier ones that have reported, have talked about, reduced, bidding activity from the OEMs themselves, but certainly seeing a recovery in the market that you referenced. Are you seeing a disconnect between new vehicle design because of COVID and qualifications in labs? Relative to just the broader recovery of the automotive market as it relates to some of these new programs, whether it's EV Zdas or in cabin gesture control or driver monitoring?
I would say from from our point of view, we do see some, projects being delayed. We've seen some projects being canceled. We didn't see a big delay or cancellation in the electrification area, a little bit more delay in, in, in, let's say, ADAS related projects.
We have a last question from the line of Mark Hessling from ING. Mark, please go ahead.
Thank you. My first question, would be on the, inventories And I've seen that some other companies that that, they also possibly benefit from the fact that clients wanted to stock up because of the uncertainties of COVID nineteen. And in the introduction, you said that you believe that the inventories are are still low. So just to be honest, I'm sure you you you didn't see that kind of behavior in your, in your sector.
Which kind of behavior could you repeat that, please, Mark?
Yeah. So people stocking up inventories, because they were afraid that because of COVID nineteen, a price change might be disrupted and and just to be have some excess.
Ah, okay. In that sense. No. We did not see that necessarily. I think that what our what our customers did is make sure that they had, they had all the components readily available before planning their production.
And when they didn't, then they tended to ask us to push out some of the some of the deliveries. That's what we've seen in Q2. Stocking up I would say not really. And that is also a bit of a concern, to us that because of the financial impact on working capital that customers tend to shift,
the stock and don't take the stock.
That they need, which might lead afterwards to, well, a bit of a run on the bank, let's say, and that's why we're cautious also, and really dig deep when customers ask us to push out, we really dig deep, not to all of them, but let's say the ones that really mattered in terms of volume. And we, we need to understand why they push out. We don't, because it is a concern that once, the economy starts moving again, that suddenly then everybody start, ordering on a very short notice. And that would be, that will be difficult to follow.
Okay. And second question is on your comment that you made that the if we push out in in in in China because of lower subsidies, what's the impact, for you, because if I'm correct, you're you're at a a bit stronger position in more traditional or the hybrid forms. So is is is that a is that a positive for you?
Well, I would not say that we have, that we don't have a strong position in, battery EVs, I think we do. It's just that the product mix is quite different between one and the other. Again, whatever type of power train, is being used I think there is melexis, inside, the everything that has to do with body, shaft the safety is the same no matter which powertrain it is. And when you look at the projections that we made in, in our, in our Powerpoint investor relations power point on the website, you will see that the potential is more in body chassis safety, and that again is independent from power train.
Okay, clear. And a final question, you talked about the impact of the technical unemployment on the gross. Can you also say something on the the the OpEx cost, going forward and and the effect of this?
In the OpEx, we have, in total, around good $3,000,000 in OpEx less than the previous quarter. This is partially, external services that were reduced, but also technical employment is impacting there. So some is sustainable. Some is not, so probably the next quarter's come, we will see a further increase, but not the levels that we had in Q1.
Thank you, Mark. We have our next question from the line of Varun Rajwani from JP Morgan. Varun, please go ahead.
Yeah. Hi. Thanks for letting me on.
I have a couple of questions And I do apologize if these questions were answered before. I missed your opening remarks. My first question is on the gross margin. You reported 38.7 percent gross margin in 2Q, which is a little higher than what I, you know, I was expecting. So can you maybe clarify if there were any one off, components within your 2Q gross margin?
And then how should we think about your gross margin evolution going into, you know, second half of this year? Clearly, there will be some operating leverage you know, driven by your sales improvement. So maybe you can, you know, help provide some color on that. And then a slightly, you know, midterm question, when can we expect Alexis to achieve, you know, this mid to high sort of on let's submit 40s percentage gross margin level, you know, going into 21 or 22 because you have your new Sofia testing capacity which will start ramping from early next year as well, which will be a headwind for your gross margin. So some color on gross margin, please.
So going first to Q2, so there was indeed positive impact Obviously, there is underutilization as the sales went down more than in Q1, but it was somehow limited by also reduction in costs, of which temporary unemployment is also an important one. But also some costs go down when sales go down. Next to that, we had a more favorable product mix that also helped to keep margin relatively high compared to Q1. Moving forward, that is very difficult to say. Yeah, if we would use all full full utilization will definitely increase margins, by, yes, certainly more than 3%.
But when that will happen, it's extremely difficult to say today also the product mix. Q2 is in a relative disruptive quarter, looking at, the proportion of adjacent and automotive sales, how that will further evolve, it's also very difficult to to, yeah, to no. So when sales go up, there will gradual improvement, but how fast and that will be. That is very difficult to predict.
Okay. Understood. The second question is on the sustainability of, feeling the performance seen in adjacent markets clearly, you know, great job on executing in that market. My question is, how sustainable is this demand? Because, as I understand, a a big chunk of this demand is distributed driven.
And, you know, the order lead times are typically, shorter for the adjacent markets. So I'm just trying to understand how do you see evolution in the adjacent markets going forward? I mean, it's grown, 46% year on year in 2Q. Should we expect a similar cadence for the rest of the year and into 2021? Some thoughts on that.
Okay. So adjacent indeed has grown quite a bit versus, the previous year Now when you look at the absolute figure around 14000000, 15000000, that, though though adjacent will always be much more volatile, from quarter to quarter than automotive. We do are sustainable. On the one hand, we have several product lines that are contributing, and so it's not just one, in particular. And it's also different markets that are behind it.
So we have, for example, and indeed, if you missed the introduction, yeah, partly it is already in the press release, of course, but we have, on the one hand, we see an increased, demand in general because of new applications that come onboard direct injection. For example, the Bharat 6 norm in India has driven quite a bit of more content growth for scooters and motorcycles. And that helps us in, in, delivering more smart drivers, more pressure sensors, more magnetic sensors. So that's one item. It's also in ebikes, in general, but like Q2 was mainly in the area of motorcycles.
Then we have already for quite a bit of time, we're well known in the, in the industry for fan drivers because of our high reliability, high quality, fan drivers. And what we've seen in during lockdown is that there was a lot of interest in gaming. There was also recently a release of a next generation gaming GPUs, which drove, in fact, much more, much more fan drivers. But these fan driver, I mean, these trends are also sustainable, though it might have seen a bit of a surge in Q2. We do see it continuing.
Then we also had current sensors, that where there was more traction, from the solar industry, but that solar industry is also quite sustainable. There was some ups and downs over the past year, mainly because of China, because of also subsidy schemes that, that have changed. And then, 4th is, 4th element is temperature sensing, where we see that it has changed the mindset of many in the health and well-being areas where, temperature measuring temperatures continue with or measuring temperature when you enter a building, or when you are, using the subway or whatever, That is also quite a sustainable area of business that we see. So in that sense, we do believe that it is sustainable, but at the same time, it will be more volatile from quarter to quarter. In Q3, we see it more or less at the same absolute level.
But there, you are right. The order behavior of customers is much more is shorter than in automotive. So it that's why it's also a bit more erratic. But we do see it sustainable going forward. Yes.
Thank you so much, Franco. One final question from my side. In terms of recovery profile across different geographies, I mean, if I look at your sales by different regions. APAC is still up close to 18% year on year, whereas Europe and North America are down, you know, 48 to 50%. How do you see the recovery playing out across Europe and North America, you know, based on the recent order trends that you have seen exiting June the 1st few weeks of July, do you expect, these regions, you know, to sort of be flat on a year on year basis over the next few quarters.
Just want to get a sense of, you know, how we should expect the recovery profile playing out, over the next few quarters.
Well, we we we only gave a guidance for Q3 because we we still believe that it's difficult to project, q 4. We see overall, that Asia Pacific is continuing. It's, it's recovery we don't see a a downward trend in that area. So that continues to do well. And we see a normalization after a very, very difficult Q2.
We see normalization in Europe and in, in the Americas.
Thank you, Varun. We currently have no more questions in the queue, so I will hand it back to yourself for any closing remarks Thank you.
Well, thank you all. Thank you for your attendance and until our next earning conference on October 28, please do keep safe and stay healthy out there. Thank you, and goodbye.
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