Earnings Call: Q3 2018

Oct 30, 2018

Ladies and gentlemen, welcome to Xtron's Q3 2018 Results Conference Call. Please note that today's call is being recorded. Let me now hand you over to Mr. Guido Pickett, VP of IR and Corporate Communications at Extron for opening remarks and introductions. Thank you, operator. Let me start by welcoming you also Extron Q3 2018 results conference call. Like to welcome our Executive Board represented by Doctor. Felix Graal and Doctor. Dan Schulte as well as our VP of Finance and Administration, Charles Russell. As the operator indicated, this call is being recorded by strong and considered copyright material. As such, it cannot be recorded or rebroadcast without expressed permission. Your participation in this call implies the content to the recording. As with previous results, Compass calls a trust that all participants in our results presentation slide, Page 2 of which contains the usual Safe Harbor statement. I will therefore not read aloud, but would like to point out that it applies to our conference call. You may also wish to have a look at our latest IR master presentation, which includes additional information on Exxon's market and its technologies and is also available on our website. This call is not being immediately presented via webcast or any other medium. However, we will place an audio file of the recording or transcript on our website at some point after the call. I would now like to hand you over to Doctor. Bernd Schulte for opening remarks. Dan? Many thanks, Guido, and a warm welcome from my side as well. As usual, I will start giving you some insight into our core markets as well as an overview of the key developments in Q3 before handing over to Charles Russell, who will guide you through the financials. This will then be followed by Felix Roberts, who will give you more insights about Oil Power John's venture with IRUJA and updates to the power electronics market. I will then come back to wrap up. We had a solid Q3 with continued strong order intake. And as a result, we can again upgrade our 2018 full year guidance. Last quarter, we increased our original order guidance range from between €230,000,000 260,000,000 to between €260,000,000 €290,000,000 We now see orders to be at the upper end of that guidance at around €290,000,000 The revenue guidance remains unchanged at around €260,000,000 Last call, we gave you a guidance for EBIT margin of around 10% of revenues, which compares to approximately €26,000,000 We also expected to achieve a positive operating cash flow. This call, will see EBIT higher in the range of €35,000,000 to €40,000,000 and consequently now with a positive total cash flow. With the signing of the joint venture agreement between Energia and Exelon, which Felix will explain in more detail, we have now completed the adoption of our group structure, which we have initiated in 2017. We have focused our core business into attractive and future oriented growth markets and with that reduced our R and D spending. Now we have shown that we were able to return to sustainable profitability. Before I make more specific comments on our Q3 numbers, let me first talk about what is going on in our core optoelectronics markets and Felix will make a comment on power electronics. Our strongest market this year is for optoelectronic solutions business and in particular for production equipment for the manufacture of so called surface emitting or edge emitting lasers. These are key components of 3 d sensor systems or data common telecom. We see this as a multiyear growth trend with multiple fast growing end markets from smartphones to robotics or to automobiles. However, 3 d sensors are in the early stage of adoption, and it's not clear which sensing concept we have not share. That said, in the majority of the currently discussed technical concepts, the key components need to be manufactured with deposition equipment. And we are very well positioned with our best in class solutions. Our next biggest market this year are specialty LEDs such as red on yellow or ROI LEDs for use in displays. We have seen strong interest from our customers for these solutions, but orders are rather lumpy with the Chinese LED manufacturers usually order in larger quantity at once. Let's now return to Q3. The good news is that we are seeing strong interest for our full range of products, in particular solutions for the production of ROI LEDs, power electronics and lasers. This is reflected in a solid order intake in Q3 at €76,000,000 which leaves us with an order backlog of €152,000,000 which is 50 3% higher than the same period last year and gives us good visibility going forward. Q3 revenues were also solid at €63,000,000 up 2% on the same quarter last year and 15% up on the previous quarter. We also had a very strong quarter in terms of profitability, driven by a high gross margin of 44% and good control of operating expenses, which resulted in an EBIT of nearly €9,000,000 and a net income of €12,000,000 This is a good point to hand you now over to Charles for more detailed overview for the Q3 2018 financials. Charles? Thanks, Blanche, and hello to everyone. Starting on Slide 5, we had a good Q3 with an order intake of €76,000,000 which was similar to the previous quarter and 10% ahead of the €69,000,000 we had in the same quarter last year. On a 9 month basis, order intake was €230,000,000 which was 16% ahead of the same period last year. We ended the Q3 of 2018 with an equipment backlog of €152,000,000 10% ahead of Q2 and the highest backlog in 7 years. This gives us a good visibility for the remainder of the year and into 2019. On a like for like basis, excluding the SOL activities, revenues in the 1st 9 months of the were 30% ahead of the same period in 2017. The improved product and regional mix produced a gross margin of 43%, which was well ahead of last year's 30%. EBIT was €21,000,000 and net income €28,000,000 in the 1st 9 months. Net income was higher than EBIT because of deferred tax assets, which we have recognized in 2018. Moving on to the next slide, let me go into more depth on the income statement. Total revenues recorded during the 1st 9 months of 2018 were €181,000,000 up from €176,000,000 in the previous year. On a quarterly basis, Q3 revenues were €63,000,000 compared with €62,000,000 in Q3 last year and €55,000,000 in Q2. Gross margin was 44% in the quarter, 43% in the 9 month period. A favorable product and regional mix, together with strengthening dollar, helped sustain this high level of profitability. Gross margins in the same period last year when inventories were being cleared and the product mix was not so good at 30%. Operating expenses of €58,000,000 in the 1st 9 months of 2018 were 21% lower than the same period last year. The comparison with last year's OpEx is not on a like for like basis as 2017 includes write downs and the expenses of the activities we sold last November. On a quarterly comparison, operating costs were stable at €19,000,000 compared with €20,000,000 in Q2, €19,000,000 in Q1. Selling expenses of €2,000,000 and G and A A expenses of €5,000,000 in Q3 and in line with the previous two quarters. R and D costs in Q3 of €13,000,000 was similar to the previous two quarters as well. Overall, EBIT for the 1st 9 months was €21,000,000 and net income €28,000,000 both substantial improvements over the same period in 2017. Net income in Q3 was €12,000,000 after recognizing a further €4,000,000 of deferred tax assets. Moving to Slide 7, which shows our cash flow statement. Operating cash flow was €5,000,000 for the 1st 9 months and €14,000,000 in Q3. The operating cash inflow in the quarter by and large reflected the profitability. Net changes in working capital was funded largely by increased customer deposits. Cash at the end of September was €245,000,000 compared with €246,000,000 at the end of 2017. Turning to the balance sheet on the next slide. The main changes are an increase in inventories and the associated customer deposits, reflecting the strong order backlog for delivery over the next months and a reduction in receivables to 45 days sales outstanding. With that, let me hand you over to Felix. Thank you, Charles. Let me briefly discuss the current prospects of the market for power electronics and give you some of flavor on the Ola joint venture announced last week. We are currently seeing growing interest to our NOCD equipment for power electronics. And this quarter, we received a noticeable amount of orders for this application. For the particular, for radio frequency, R and D, rather than just for development and for product qualification. In particular, for radio frequency, RF data transmission, we see the market in the face of production expansion with more room for growth driven by the bandwidth needs of next generation mobile networks, which is 4.5 gs or 5 gs networks, which is addressed by either gallium nitride on silicon carbide or gallium nitride on silicon solution. Also, in the market for GaN on silicon power switches, we see several customers moving from qualification to production phase. In both these markets, our equipment serves the customer need for high productivity in combination with high uniformity. In the market for silicon carbide epi wafer production, we have observed major capacity expansion in 2018 and orders reaching well into 2019, the majority of which currently still be placed at our competitor. However, our project for a fully automated planetary reactor for silicon carbide is moving ahead on schedule and as planned, and we receive very positive customer feedback on the target specification. This gives us good confidence that we will be able to gain market share as soon as this tool is qualified at customer. Last week, we announced the joint venture agreement with the South Korean boiler display supplier, ERUJA Coelietes. Under the agreement, erucia will contribute automation and handling technology as well as some cash to our OLED business, Akigas, with the goal of obtaining up to 20% of that business over the next few years. A large part of the automation and handling team of Eruja as well as their current CTO is transitioning to Ateevacolia, along by bringing the router's well proven automation and handling technology in form of software, COV volume and most valuable experience. Handling of glass substrate with highest reliability, minimum downtime and minimum glass breakage is a critical task in the display industry. Imagine in a Gen 8 system, a sheet of glass for display is more than 5 square meters in size, but less than 1 millimeter thick and is moving to the older production line 100 of meters in length. Our partner, Elugen, is a market leader in sputtering technology for OLED and well known for its highest reliability solution, has improved the capability to handle such requirements. By closing the joint venture, Apeza will become a complete deposition system provider for the organic material layers within the OLED stack. Its product offering will expand a complete set of key modules from innovative organic evaporation forces, deposition process technology as well as substrate handling system and the required vacuum technology. With part of the retail automation handling team moving to Arpiva, we start building our convenient organization, which is essential for localizing production and sourcing in Korea and also for getting an in-depth understanding of customer requirements going forward. Furthermore, Erudia will be the manufacturing partner for a significant portion of Absinta's OLED Deposition System. We are very glad to have found a real partner for manufacturing who will be much more eager to meet deadlines and quality targets than just a local contract manufacturer that we wouldn't have had to work with otherwise. Our partner, Eruja, is well connected in the Corning display value chain. We see the signing of the JV also as a proof of trust by Eruja that they also see the high potential of Arpiza's OLED technology. Overall, we are very excited about this joint venture as we believe it will make Ateza a complete deposition solution provider for organic material data. Currently, we are installing our Gen2 OLED production solution for testing as a major engine display manufacturer. We are very hopeful to find a production order next year for a prototype type system scaled up to full production size as a next step in our journey towards mass production. With this, let me hand back to Bernd for a summary and closing remarks. Thank you, Felix. Let me summarize the major points discussed today before we move to your questions. Firstly, we are seeing strong interest in our diversified range of products from a growing set of customers, which gives us confidence in the quarters and years ahead. Secondly, we are firmly focused on best in market solutions to produce compound semiconductors for which we see a multi year growth trends. And thirdly, we are in a strong financial position with our strongest order backlog since 2011 with healthy margins being generated. We see orders at around €290,000,000 and revenues at around €260,000,000 which both are at the upper end of the guided ranges. We also expect gross margins to be around 40% with EBIT between €35,000,000 €40,000,000 Furthermore, we now expect to generate positive total cash flow. With that, I thank you for your attention, and I'll pass it back to Guido before we take your questions. Thank you, Bernd, Felix and Charles. Operator, we'll now take the questions, please. Yes. Thank you. And the first questioner is Uwe Schopf from Deutsche Bank. Over to you. Yeah, Good afternoon, gentlemen. Thanks for taking my questions. Two questions, please, actually. First, Felix, on OLED. And just a few more maybe clarification details rather. First of all, can you give us an indication about the absolute amount of the cash contribution, just indication wise? Secondly, how do you account for the cash at Apeva or Extron? So if it's dedicated in the Apeba subsidiary or basically where will you show it? And then really, how confident are you for 1st production system or preproduction system next year? And then maybe lastly, on OLED, do you expect this pull more on the smartphone side or on the TV side? Because historically, my understanding is the Asian display customer has been shifting a bit back and forth between the two applications. Then secondly, Bernd, at Q2, you highlighted that we should be prepared for weaker gross margins in the second half. You blamed product mix back then. Given higher LED share, I guess that was probably what you meant. Today, you reported obviously very strong gross margin after 9 months. I think you stay at you are at 43%. So I guess the simple question would be if we should model a substantially weaker Q4 gross margin based on product mix? Or are you simply very cautious here again? Thank you. So thank you very much, Ernest. So let's take the questions on the OLED first. So we've decided not to review the exact amount invested. However, the investment is expected to cover the cash yield of Akiba until the waiting point according to the current business plan. So the amount is getting invested directly into Akiba, together with a smaller investment side from the Exstrum side. And together, this is planned to bring this to the breaking point. Another step to make Apeva now fully independent also to say to give Apeva once the cash injection that is needed until the business comes floating. And of course, that is subject to the orders from the customers coming as desired, yes? But let me to your third question, how confident we are that we will get an order in 20 19 for the next larger scale that system. So once again, as we mentioned, we are executing our development program, which comes in multiple steps. Currently, we are now installing our Genpooz system inside of the customer. The customer will then test the system, and it has to live up to the value proposition that we are expecting. And if this value proposition is verified, then of course, we can expect to get an order. If it fails to fly, then we will not get the order. So that is the risk, which is still there in this space as we had always mentioned, yes? To your question about the target market, smartphone or television, Once again, this depends largely on the decision of our customer. Along with that, it's going to be likely different sizes. A television system would be a larger size than a smartphone system. And once again, I would not want to anticipate here the decision of the customer before it is being made because we understand that at our customers, a number of things really depend on the very situation of the technology and on their internal roadmap discussion, yes? We will tell our customers this year. And with this, I will hand over to Bernd. Yes, Nishu, thank you for your questions. Certainly, I mean, you remember well that we announced that the product mix in the second half in terms of cost margin will be less than the first half. And in detail, you see it's not exactly the case. That has to do in Q3, in particular, with significantly stronger dollar. But also, we see here certain cost reduction measures in terms of design to cost activities taking some benefits, which were difficult to anticipate. Then secondly, we will get them into execution. And regarding Q4, certainly Q4 will be at a lower gross margin than in Q3. This is quite logical going forward. But we are when you look in our EBIT guidance and the range we have given, we also anticipate in certainly a continued stronger dollar than $1.20 which is our usual anticipation for the year. So this range basically is covering the potential difference in bonus. But we will see definitely some reduction in gross margin in Q4 compared to the other quarters, but not dramatically. Yes. I was going to say that the dollar continues to be a tailwind, presumably, given the asset $1.20 budget rate, and it's we have spotted that 114, 115,000,000 plus I guess the design to cost measures are probably also here to stay, right? Or is there any reason to assume why they should be evaporating rather sooner than later? You can certainly stay. Thank you. Very clear. Next up is Charlotte Friedrichs from Berenberg. Hello. Thank you. And I have a few questions. First one is on order intake. Can you give us a bit of an idea of what the split was in 9 months or Q3? And looking at your guidance for the full year, that implies a slowdown in Q4. Is there a particular reason or a driver for this? Then second question would be around Opto and if you've seen any news here on your clients' ramp up plans, if there's a new announcement, any postponements, etcetera? And then finally, the third question is around the cost structure. If you are now round about at what you would call a run rate And if you can maybe give us a bit of color on your R and D spending going forward, especially also now that you have made progress with the JV? Thank you. Okay. Coming to the order intake in Q3, I think we mentioned it during our speech, we had a pretty easy split between our main applications, which are systems for lasers, systems for LED and there, the majority is for light orange yellow LEDs and power electronics. And this is noticeable because it definitely shows an increase in orders for the power electronics side. For your questions regarding optoelectronics, whether we see a significant change in the market in the sense that customers trying to postpone shipments, The answer is, no, we do not see that. And about new customers, and I think I mentioned already, I think in the last call, I believe, that we're seeing new entries of customers, in particular, coming from Asia and there, in particular, from China. And Charles, you mentioned about Yes. Okay. On the question about the run rate of the expenses, I think we are at a more or less stable level for run rate alone. I would expect that the R and D spend in Q4 will be slightly less because some of the expenses associated with some of the lumpy projects will be less in Q4. And going forward into 2019, as Felix said, we will be building up the organization of Apevo in Korea a little bit. So what is the effect if we get an order for a larger system in Korea in 2019, the overall effect on the results will be less from APEVA. I don't see a huge reduction in the expenses. Okay. Thank you. The next questioner is Jonathan Menon from Liberum. Hi, good afternoon. I'm just wondering about your outlook. I know you're not going to comment on 2019, but your sales are spiking quite a bit into Q4. You're going from around $65,000,000 to about $80,000,000 of sales from Q3 to Q4. Based on your backlog, which gives you quite a bit of visibility into the early part of next year, Would you expect that run rate to sort of drop back in Q1 to the 65 ish kind of level? Or can you do you think it will continue at a slightly higher level, closer to Q4 level based on your current visibility? And I have a couple of follow ups. Yes. Thank you, Sernad. I mean, you're quite right. The sales will increase in Q4. That's obvious. And in terms of run rates going forward, I mean, we give you guidance for the full year order intake, which gives you certain suggestions, meaning around from $272,000,000 around $290,000,000 Honestly, for the run rate Q1, it's a little bit early in terms of order intake to speak. So please bear with us a bit and here we can speak about this. Okay. And on the silicon carbide, the new higher productive platform, I presume your current order intake does not include any order that system as yet since it's still in qualification. I was just wondering once that system gets qualified and goes and given the kind of demand profile the silicon carbide has in the market for the next many years, What kind of orders do you think is reasonable? Would you would about £10,000,000 a quarter or in that range be reasonable and which will come on top of your underlying orders for your existing businesses? Or would that be too optimistic? Well, I think that really depends on the market share. And jumping to your second question, by the way. That really depends on the market share we can gain with the system, right? So you're right, there is no orders on the system yet. It needs to be qualified first. This is for sure, yes. And then relating to the sales volume and potential, I think it can outgrow the $10,000,000 you mentioned if it's dominating a large market share very much, yes? However, that still needs to be proven. We are in an attack up position, yes? As we mentioned, the market today is with a competitor. And of course, we are here very ambitious, but that remains to be proven how much share we actually will get. And we are aggressive. Got it. And my last question is on the LED side of your business, where the revenue run rate seems to have fallen quite a bit in 2018 compared to 2017, where you were sort of averaging $15,000,000 to 20,000,000 a quarter across the 4 quarters. I was just wondering, I understand that it's lumpy and that some of it is coming from big Chinese orders, etcetera. But is there any specific reason why we will be sustainably at a lower run rate on that business? Or can we go back to the kind of run rate that we saw in 2017 on the specialty LED side? Jonathan, as I mentioned, the LED business and the order intake and then with that also the revenue has a certain scarcity. And don't forget, in 2017, we had the sell off of the fixed inventory, which were also reported under the new product segment. And with that, I mean, we received more orders in this year, which basically now getting in the second half shipped in terms of probably generating revenue in the second half of this year and will even go into the first half of next year. Okay. Well, it's 100. It's pure timing and basically the ramp cycle of customers. Got it. All right. Thank you very much. The next questioner is Andrew Gardiner from Barclays. Over to you. Good afternoon. Thanks for taking the question. I had another one on OpEx. I suppose sort of the financial guidance more broadly for the Q4 as implied by the 2018 profit guidance. I can see sort of based on what you've been describing revenue and gross margin wise, how you get to the lower end of that €35,000,000 to €40,000,000 range. But if unless gross do if gross margins even remain sort of flattish or slightly down based on what you've described and you hit the revenue guidance, To get towards the higher end of that range to the €40,000,000 for the year, it implies a more material drop in OpEx. So I suppose, Charles, to your point, just how lumpy were things in the Q3 that could lead to a bit more of a downtick in Q4? What put another way, what is it that can get you towards the high end of that €40,000,000 range? Thanks for the question. I think that the guidance is gross margin around 40%. So I would think personally somewhere between where we are now and 40%. The OpEx, I think, will be down a little bit by maybe a couple of years or so. But what will get us to the higher end of that or towards the higher end of that is what happens with the exchange rate because we typically ship quite a lot in November December, and it depends what's happening in the exchange rate towards that time. And these are the things that could get us towards the high end, but the guidance is 35 to 40, not 40. Perfect. Okay. That's understood. And then just as I think into 2019, if I recall what you said at 2Q, the P and L cost for Apevo was around €25,000,000 this year. And you thought at the time it would decline into 2019. I take it from obviously the progress you've made, the signing of the JV and what you described in infrastructure, that is no longer the case. And in actual fact, it will is it going to be sort of flattish at that €25,000,000 level? Or is there more moving parts around that? No. It's clearly planned. So the OpEx for the OLED for the Aptiva is expected to decline as previously announced. What exactly that number will be will also depend largely on the size and the timing of the customer contract or customer order, yes? So no too detailed on that debt, but there was a message that it will be reduced. Okay, understood. Thank you, Felix. And now we come to the next questioner. It is Jurgen Wagner from MainFirst Bank. Yes. Good afternoon. Thank you for taking my question. You mentioned the silicon carbide new platform. When will you see qualification next year? And second question on your or you mentioned new customers for VCSELO, HD millimeter laser equipment out of China. How do you expect the installed base for your equipment to develop going forward, especially into 2019? Yes. So let me take the question on silicon carbide first. So the qualification is beginning very soon. The first tool is being installed at a customer within a week from now. And the qualification will run and expand throughout the first half of twenty nineteen. Given the length of how fast it is finished, be it late spring, be it late summer, you will see that. But clearly, we expect the qualification to be concluded and finished at customer at a customer premise during 2019. And maybe follow-up to this. And so that will be then early enough to generate some revenues next year for your new platform? Yes. Yes. Okay. Yes. To your question, the development of the VCSEL market, well, in general, we have seen over the last 18 months, basically the market has developed Sonae in 3 phases. 1st phase, we have the Tier 1 players, which are dominantly supplying the current end customer for cell phones. So basically, these customers have ramped their capacity about 12 to 18 months ago, given the orders. And they all have invested in significant increases of factories, which are now getting into the phase of being finished. And this is to be seen when they continue their investment into the next level. 2nd phase has been passed followers from Asia, mainly Taiwan. And what we have seen recently, so to say the first phase, these are new entries from China. And basically, companies we haven't known much before. And we are wanting to run a certain entry in this market, in particular to get a share in the local Chinese market for 3 d sensing applications. And basically, when you look in the future, I see the question is when are the Tier 1 players who have started to invest 18 months ago, when are they going into the next phase of their production then. And that is depending on many manufacturers, of course, when are what end products will get equipped with 3 d sensing solutions. I mean, for that, we also do not know more than you in terms of what telephone makers will bring up what products. But in principle, I think the it's just a matter of timing. It's not a matter of a general discussion, yes? Because all the customers, as I mentioned, they have done significant investments in new factories. Okay, understood. Thank you. The next question comes from Malte Scharman from Babcock Research. Good afternoon. One question left on the silicon carbide business. With how many customers are you in talks regarding potential qualification tool? And then secondly, is the timing, the availability then from your tool sufficient to meet the customers' demand to ramp capacity in Power Electronics? We are currently talking to all market participants relating the specification and the tool. And we received very positive feedback, as mentioned, very broad across the market, across all continents. We have multiple more than 3 customers with qualification tools. And to your question whether we will be able to meet a let me interpret your question a sudden demand spike if the interest then really comes, we would not see any reasons we can't address that demand. Okay, good. And let me add something to relate to the last question. And do you see from a timing perspective, from the market demand, customers are can wait for your tools and are not forced to make investments that might come too early for you? So we see in the market a continuing large investment rate that is ongoing. So the large investments have been made in 2018. Even larger investments are being made in 2019, but we see a continuous investment even further growing in 2020. So we see this not as a, let me call it, a one time wave with us being too late to catch the wave, yes? But rather, we do see it because it's a very broad market with market participants from Europe, from North America entering now from China, but also as you all know from Japan, big automotive industry there, a very broad market and a continued gradually growing expansion. The next questioner is Weisel Taze from ODDO BHF. Yes, Thank you for taking my questions. The first one would be basically on the VCSEL business. You mentioned the different technologies in the market and it's not clear which technology will be will become the main stream technology. Does it matter for you if it's time of flight or structural light or other solutions from an equipment supplier perspective? Yes. The thing is that, I want to try to point to make here, it really does not matter too much for us because in the end, you need a laser device as basically high source for this solution. And with that, I think in the end, you would need an almost degree tool for the deposition of these laser devices. But the quality requirements between these three technologies, what we have, is the one which favoring rather you versus your competitors? Or doesn't really matter that much? I don't think there's a big difference, Dominik. In all cases, very high performance in terms of yields and light output power. So we think that in general, the specifications in 1 or the others are quite similar. Okay. And on the Power business, I mean, David, you commented a lot about silicon carbide. But looking at the gallium nitride part of the business, it looks like you're surprised by the strong order entry in Q3 or you were not maybe anticipating that. Do you think this is with older applications picking up in communication and data and telco network equipment. Do you think this recovery or this strong momentum in Q3 to have to accelerate or to continue in 2019, particularly in first half? We interpret this now or what we believe and what we see in discussions with our customers is the market for gallium nitride being at a tipping point. We do see that the market for radio frequency, so for the data transmission, is in a continued expansion phase. And that expansion phase continues, similar what we mentioned to silicon carbide, yet at a slightly smaller base. And what is new, what I mentioned in my speech, we do see now that the market also for gallium nitride power, power supplies, Our customers have been buying systems for R and D, for qualification, a system here, a system there. But essentially, they're good there with the R and D teams and our customers. And now we see step by step orders coming really from the production team. And we know that on our tools, volume production is volume. And we expect, again, to start from a small base, but we expect that starting from the small base, continually, this will grow in a winning production volume. And we see as we interpret the current order momentum as a change of where the market stands. Okay. And then final one on your cash position. I mean, if I strip out what you need for your operating business, then spare cash is something around €180,000,000 something. Any plans with the cash position, I mean, small acquisition maybe where you think you have in your technology some black dots which you need to fill or any kind of giving some cash back to the investors as you are now turning the business around with decent profitability and free cash flow visibility? Yes. Please keep in mind, and I mentioned this also in the speech that we're basically now at the point where we have really completed the new adoption of the group structure, meaning coming out of a phase where we lost liquidity money and turned this into a profitable business. We're focusing on the different products, which are our key technology. With completing this, of course, we now have to think about how we move forward. This is a process we are now beginning. And so far, we cannot give comments and details in what we are going to do with cash. But also keep in mind that we are business as an equipment manufacturer will always have significant cash demand. And our business model is always in a situation on a complexity that we do not want to go back to the local bank to borrow money. So this is very important for us to have a solid and strong cash position. Understood. Thank you very much and congratulations to the results. And we have a follow-up question from Ubershop, Deutsche Bank. Just a second. Mr. Schupp, your line is open now, sorry. Yes, just a follow-up on the 5 gs question from Weisel just a minute ago. Have you ever tried to size the market for 5 gs? As of now, could it be will it be a VCSEL size of a market? Or will it be, for whatever reason, much smaller or much bigger? And then probably can't mention customer names, but I mean, who would be the IQE, so to speak, of that particular market? Maybe regionally, you can nail it down somewhat. That would be very helpful. Thank you. Yes. So on the 5 gs market, yes, of course, we do have the sizing of the market. The market falls essentially in 2 submarkets, the one being in the baseband equipment, let's just say, installed on the telecom tower, yes, let me put it this way. The other market would go into the higher frequencies of the 5 gs band, 20 to 60 gigahertz, which is bigger cell phones, yes, And that would double the market size. And the future will show, yes? And the decisions of the telecom operators and of the mobile phone makers and when which part of the market is coming, yes? So I would not want to give you a sizing of the market. But we clearly see that the whole discussions around Internet of Things, autonomous driving and so on. Mean those parts are clearly not a topic for 2019, but further down the road. And if these things materialize, the higher frequency band will be used. And if this frequency band is used, that market will need the gallium nitride power amplifier in the zone, yes? We see this as a long term trend. Can you indicate a few customer names or maybe you can nail it on regionally where we are seeing that demand coming from right now? As you know, we have a very high market share in the GaN Power. So I think we know who the players in the market are, taking with our customers. So thank you all. This concludes today's Q3 results conference call. Our next results will be announced on February 26, 2019. This will be the full year 2018 results. In the meantime, I hope to see one of some of you on either the upcoming investor conferences or meetings in Europe or the U. S. Until then, see you later. Have a good day. Thank you.