Earnings Call: Q2 2020

May 7, 2020

Ladies and gentlemen, thank you for standing by. I'm Hayley, your Chorus Call operator. Welcome, and thank you for joining the Ozramlich AG Analyst and Investor Call. Throughout today's call, all participants will be in a listen only mode. The presentation will be followed by a question and answer session. I would now like to turn the conference over to Julianne Barrons. Please go ahead. Thank you, Haley. Good morning and good afternoon, ladies and gentlemen. A very warm welcome to the Ostrom conference call on our Q2 2020 results. With me on the call are Olaf Bolin, our CEO and I'm happy to welcome for the first time in our earnings release call Kapsyndanker, our new CFO as well as Doctor. Stephan Kampmann, our CTO and also the first time in the call, but not new, our Head of Corporate Controlling, Francois Gerard. Gerard. Olaf and Katrin will comment on the market development and our financial performance. Afterwards, we will be happy to answer your questions. As a reminder, today's call is being recorded. You can follow the webcast on our website atosrun.com/ir, where you will also find the slides available for download. As with previous results conference calls, I would like to draw your attention to the Safe Harbor statement on Page 2 of the results presentation. As usual, it applies throughout this call. It is now my pleasure to turn over the call to Olaf. Yes. Thank you, Johanna. Ladies and gentlemen, a warm welcome to our conference call today. Before I come to the Q2 results, I would like to introduce my new colleague on the board. I'm very delighted that we have gained a widely respected financial expert in Catlett. She has great experience in transforming companies, both medium sized and publicly listed ones. This will be of great benefit to us, especially in the current situation, but it is the best if she introduce herself. Kathe? Thank you, Olof. Good afternoon to you, ladies and gentlemen. And regarding me personally, I worked in various companies, listed ones and private family owned companies and in various areas such as the finance, controlling and the M and A, where I worked for a German bank. Which may be interesting to you is appointment to as a CFO to the Board of Gildemeister AG, which is a company that is today called DMG Mori AG. At that time, it was listed in the MDACs. And I went as responsible for finance with that company through the financial crisis in 2,008 2009. And I had the pleasure to go through the corporation and the business combination with the Japanese Moriseki company. And I think these two aspects were are interesting for my current position at Osram today. My last position was with the family owned group of company, Verhan, where I was not only a CFO, but also responsible for business unit, which was the Building Materials Unit. I'm also a member of several supervisory boards, and I'm looking forward to the challenge of working for this exciting company. Yes. Thank you, Katri. I will now comment on the current state of our business. Following, Katri will present you the detailed Q2 figures. As always, we will then be happy to answer your questions. Moving to Slide number 3. Ladies and gentlemen, despite the coronavirus situation, we achieved a good second quarter in line with the market expectations. We succeeded in keeping the impact on our business moderate. We took countermeasures at an early stage. And due to our performance programs, we were able to even increase our profitability and cash flow. Effective crisis management allowed us to maintain large parts of our supply chain and production. This will be important for the time after corona when business picks up again. I will go now more in detail on the corona measures later. Up till now, Ostrom has come through the crisis relatively well. However, the effects of the COVID-nineteen will hit us fully in the current Q3. This relates to production stoppages at customers, closure of cinemas worldwide or also the cancellation of shows and concerts. As announced in mid March, we therefore do not expect to meet our original targets for fiscal year 2020. At this point, the general market situation does not provide more clarity. And this brings me to the 2nd quarter figures. Slide number 4 showed on a comparable basis, revenue in the 1st 3 calendar months fell by almost 8% to €821,000,000 The main reason was the restriction on our business in China caused by COVID-nineteen. At €96,000,000 adjusted EBITDA was a good onethree higher than in the previous year. The adjusted EBITDA margin improved by almost 4 percentage points compared to last year's quarter. It was at 11.7%. Our ongoing efficiency programs had a positive impact here. Through targeted cash management, we also achieved a positive free cash flow of €64,000,000 This is all the more important in view of the current economic conditions. And that brings me to Page number 5. Here, we can see the impact on the COVID pandemic on the global economy. For example, the OECD's composite leading indicator, which tracks changes in economic activity, has shown a rapid decline in recent weeks. This is illustrated even more clearly by the JPMorgan's purchasing managers on the right side. It has fallen dramatically since January. The key will be how the global economy recovers from this blow. Restarting the economy will not be a smooth process everywhere, but the impact depend largely on the recovery process. The effects on the COVID-nineteen on us are also evident in the global car production forecast. Slide 6 shows the global production figures as predicted by IHS. According to the latest estimate, production on our current fiscal year will drop to 71,000,000 vehicles. This represents a decrease of more than 20% compared to the previous year. With many car manufacturers shutting down production in recent weeks, the consequences are now being felt. All regions are affected with declines of up to 25%. The situation is similar for car purchases. Sales figures in March are half their usual level in some cases. The egg production has started up again in China, and IHS predicts a recovery in absolute numbers in the Q4 of the fiscal year 2020. However, given the mentioned uncertainties in starting up production, we must wait and see. One thing is certain, the current situation will have an impact on us in short term. The more important become the measures we took early against COVID-nineteen. I move to Slide number 7. All measures follow 3 guiding principles: 1st, protecting employees 2nd, keeping operations running and third, minimizing the financial impact. So far, we have managed all 3 very well. At the very beginning of the crisis in China, we set up a global task force with professional war room and under my direct leadership. We also quickly put specific hygiene measures in place, and we introduced home working to protect employees. With this strict management, we have only 8, 8 confirmed corona cases worldwide at this point. And where these cases occurred, we responded immediately to ensure operations could continue. And thanks to our existing emergency plans and the professional work of our teams, we were able to maintain a large part of our operations. We have also managed to keep the financial impact in Q2 moderate through global cost and cash initiatives. We have combined these specific corona initiatives under the so called shield programs. On Page 8, you can see the results of these efforts. Within just few weeks, we identified an additional liquidity volume of more than EUR 200,000,000 for this fiscal year. The EBITDA effect is in the range of €40,000,000 to €50,000,000 This relates to HR measures, such as short time working and also to hundreds of saving initiatives across all plants and legal entities. But of course, we are also driving forward the ongoing transformation of the company, and which brings me to Page number 9 and the structural performance measures. In Q2, we have continued to implement our existing performing programs. This applies especially to measures at Opto and in the Central Administration. They enabled us to save €26,000,000 in the last quarter. Additional structural measures have recently been announced for the German plants and central innovation. Over the entire year, we now expect cost savings of around €90,000,000 and for the midterm target until fiscal year 2022 has been raised to €300,000,000 At this point, a brief comment on the planned takeover of AMS. Antitrust approvals are still pending, and preparations for the integration process continue to be made in the background. And in the meantime, however, we are focusing on our own performance. Ladies and gentlemen, to summarize, thanks to the consistent crisis management and our transformation programs, we have kept the impact of the coronavirus in Q2 within a reasonable limit. However, for the Q3, we expect a significant impact on our business. Cost discipline and cash management, therefore, remain the top priority. And with this, I would like now to hand over to Katri. Thank you, Olaf. Now let's have a more detailed look into the Q2 figures, and I'm starting to look at the revenue, which is on Page 10. We had favorable exchange rate developments as well as portfolio additions. And both with a positive impact on nominal revenue growth. The comparable growth amounted to almost 8%, precisely 7 point amounted to a decline of 8% precisely 7.9%. The revenue decline compared to prior year Q2 is mainly due to the corona impact as discussed, which sums up to roughly €60,000,000 for the 4th quarter 2 of the fiscal year. When looking at our regions, APAC declined by minus 9 point 5 percent comparable. Therein, not surprising, China declined by minus 15.3% year on year. The biggest hit in APAC region came in for DI sales with an early corona impact on entertainment along with challenges in the city beautification business after new regulations in China and confronted with lockdowns in the region. Also, AM showed revenue decline in APAC, mainly burdened by drop in China demand and a strong decline in traditional light source OEM business. On a low comparative basis, Okta was able to grow sales in APAC by high single digit percentage compared to prior year, strongly supported by business for sensing applications. Americas and EMEA both showed negative comparable growth of minus 7.2% in Q2, driven by all the business units. Let me now drill deeper into the revenue development in the 3 business units. Let's start with Opto. BOS revenue in the Q2 saw a modest decline of minus 1.8% compared to the previous year. Within Opto, automotive revenue had the biggest hit by corona in absolute terms, partly driven by the temporary shut down of our Wuxi back end facility beginning of February and partly demand driven. While Illumination related revenue came in rather flat on a comparable basis, Visualization faced continuing soft demand for industrial laser applications. Sensing, however, showed strong performance with double digit percentage positive year on year growth. Let me now move on to the revenues in automotive, our AM unit. With both automotive LED component and Aftermarket seeing modest comparable revenue decline in Q2 of this fiscal year, there was no compensation for the ongoing strong decline in traditional light source business. Further, end of the quarter, we started to see a significant drop in demand due to the worldwide shutdowns at the OEMs and the Tier 1 customers. This affected all of our segments and channels. Overall, the AM comparable revenue growth came in at minus 8.7% for the quarter. Without the corona impact, the decline would have been rather modest at a level of approximately minus 2%. The revenue development of the Othram Continental subsidiary, which is part of the AM reporting segment, was in line with the overall development in AM on a global base. Last but not least, the development of digital. DI sales were hit hardest by supply chain disruptions in China and the exposure to entertainment and city beautification, which experienced an early impact of the corona pandemic. Overall, the comparable revenue decline was at minus 12.3% for the quarter, driven by all segments and all regions, though with APAC seeing the strongest decline in comparable revenue. Let's move on to the profitability slide on Page 11. The adjusted EBITDA in Q2 came in at €96,000,000 in absolute terms, translating into an improved margin of 11.7%, as mentioned before. This margin in comparison to prior year is mainly driven by and our performance programs, which are successfully taking effect. Pricing and inflation impacts could be overcompensated by these productivity measures by a total of €7,000,000 In the second quarter, we had an increase of EBITDA by initially applying IFRS 16 of about €13,000,000 In the Opto business unit, the adjusted EBITDA improved compared to prior year to 21%, mainly driven by higher gross margin, especially productivity savings and lower functional costs. The adjusted EBITDA margin in the AEM dropped below prior level to 6.9% in Q2, driven by the impact of lower volume and increased functional costs compared to Q2 of the previous year. Productivity savings in Q2 of the current year overcompensated the negative price and inflation effects. Our Osram Continental subsidiary continued to be dilutive in the quarter, and the adjusted EBITDA stayed negative. Coming to the profitability of DI. Despite lower volume and corona impact, the adjusted EBITDA margin improved compared to previous year quarter and sequentially and came positive with plus almost 1% or 0.8%. The improvement of profitability was mainly driven by productivity measures, thus higher gross margin and reduced functional costs. Adjusted EBITDA in corporate items for Osram was negative with minus €12,000,000 positively impacted by rigorous cost management as well as a one off effect. Please note that as anticipated, we reached in March an agreement for additional redundancy programs in German, in the resten auskleich and Soncialplan with the German labor representatives of the company. Accordingly, the personnel restructuring cost in the result amounted to EUR 45,000,000 in Q2. Let's have a look at Slide 12. Free cash flow was positive, as mentioned before, with $64,000,000 in Q2 of our fiscal year, driven by fixed CapEx and net working capital management as well as the extension of our factoring programs. With $22,000,000 CapEx, this number stayed at a very low level in this quarter. The corona pandemic causes, as discussed, general economic slowdown, geopolitical uncertainties and limited visibility ongoing. Therefore, in this time, it is crucial for us to focus on cash and liquidity. And as you can see in the bar chart on the lower right, our available liquidity in terms of cash and undrawn credit line amounts to $783,000,000 to $383,000,000 as of March 31 this year. Cash of $583,000,000 was significantly increased as a precautionary measure in these uncertain times through early drawing of our syndicated credit facility. The remaining undrawn and committed credit line amounts to €200,000,000 under this facility. And we don't have any major ordinary repayments in the future. So what is ahead? Given the unprecedented operational and financial challenges resulting from the corona pandemic. The further development is uncertain. Therefore, we cannot quantify as at this point in time the economic impact of the pandemic on Osram. However, we are well prepared with a very tight and strict crisis management in place. Our liquidity management includes a broad range of measures, and we have further instruments at hand. We closely monitor the economic development, perform scenario analysis and continuously evaluate and execute all possible cost reducing measures. We are also looking into additional financing sources worldwide. We have a well proven liquidity forecast process in place and can rely on a strong relation to our high quality banking consortium. Therefore, our priority focus in this time is on cash management on one hand and on further cost cutting measures on the other side. Juliana? Thank you, Kathleen. We are now looking forward to your questions. Haley, please go ahead. And the first question comes from the line of Sven Beyer of UBS. Please go ahead. Yes. Good afternoon, and thanks for taking my questions. The first one is for Olaf because you mentioned at the press meeting this morning, quite thankfully, a number what you see for April in terms of your revenue development. I think you said between minus 30% 45%. I was just wondering, is that the range that you see differing between the divisions? Or is that minus 30, minus 45 a ballpark for all three divisions that you see? That was your first question. Hi, Sven. Yes. And obviously, you know us analysts, right, if you give a number for 1 month, I was just wondering, I know you don't give a guidance obviously for the year, but I think you also said on the press call, obviously, that April is going to be the weakest month. And I was just wondering if you're ready to prepare to give a range also for Q3 as a whole. Yes. Thanks, Christian. Let me try to explain a little bit a little bit what I mean with the range of 30% to 45%. The visibility is really, really low. Of course, I have the 0 visibility for June. And for this reason, we cannot give really a fair proposal for the quarter. That's the reason. I think most of our colleagues have the same issue. So what I mean is with the average is for all the 3 business units. So the numbers what you question is for all the 3 business units, average through the company because we are in all 3 take a look, as I said in my speech, the DI one part of DI is in the cinema business. We are a world market leader. There is no single cinema in the world, which is open, maybe a drive through cinema, but the rest worldwide is closed. There is no single outside show, which one is running this month, next month and definitely not in June. So the impact was heavily and will be heavily. And with that kind of rate of decline in April on the one hand, but on the other hand, you've done obviously a really good job on the cost side. I mean, do we still have to assume that with such rates of decline, it's really tough to be breakeven on an EBITDA level? Yes. That's on a monthly basis, yes. On a monthly basis, yes. I would say, if you have a decline by 30% to 45%, it's impossible to have a breakeven. So I think there's no single company, maybe Amazon or maybe Apple. But usually, your breakeven is definitely and you know it from our past, you see it from the profitability. If you have a decline by 30%, it's impossible to have breakeven. Yes, that makes sense. And the second question, if I may, is one for Stefan actually, because I mean now leaving the short term challenges aside, I was just wondering if you could also give us an update on the technology side, maybe the latest development that you see on sensing on Wickfield, how you're progressing there, maybe also on the LiDAR side? I guess, obviously, that was a bit in the background, maybe in the latest couple of months. But yes, I was really curious if you have an update on that answer. Yes. Thanks. I think when we look at the sensing division and the sensing business, I would say the LiDAR is still strong activity in the automotive. However, we see that now a more realistic phase looking forward. In the consumer electronics, we see a strong demand for new solutions. You see the world side and the face side. On the world side, we see more and more 3 d sensing systems, which are announced by our customers for tablet application, but also phone application. And we are very positive in the future demand. When we look at the LED, currently, we see huge interest in UV LEDs, as you can imagine, because the disinfection applications currently are very interesting for our customers. We are currently supporting this business still with our traditional UV lamps, and we are currently trying to increase the volume, the manufacturing development of UV LEDs. It's a kind of transformation of the development of UV LEDs. It's a kind of transformation of this industry from traditional UV lamps to UV LEDs. And for instance, if you think about the disinfection of surfaces in the interior of a car, rental cars, shared cars. There's a huge interest of the market to have its disinfection solutions based on photonics, and that's something where we are putting a lot of focus and a lot of R and D activities currently in OS. And we are very positive that we will see very soon the first solutions which we can offer our customers in this regard. So overall, I think even the crisis is demanding new solutions of our photonic business. Thank you for that. That's very helpful. Thank you, Sven. The next question is from Sandeep Deshpande of JPMorgan. Please go ahead. Yes. Hi. If I may ask the question back again on in terms of what you're seeing in the June quarter, I mean, if you're talking about the kind of decline that you mentioned this morning on in April, I mean, some of your semiconductor peers have 25% or so revenue decline. On a 25% revenue decline, can Osram move around cash or through your working capital management, etcetera, be cash breakeven in the quarter? I understand that, other point I would make a question I have is in terms of the overall business in the automotive space. Even despite you seeing so much decline, I mean, IHS is indicating auto units decline of almost 50%. So do you think that this weakness continues into the second half of the year? Thank you, Sandy. Yes, as I tried to explain, and I think you will hear it, and I'm quite sure you hear it from other colleagues in the worldwide industry as well, especially automotive. So I think the COVID-nineteen lockdown is in Europe, especially in Germany, we are coming back. We opened it. I think U. K. Is still locked and U. S. Is locked. But nevertheless, so my issue, Sandeep, is not the lockdown. My issue is the missing demand. So I'm a little bit afraid that if we everything is fine again and we are able to walk around and are going shopping that people are not buying anything. So my worry is the missing demand. And for this reason, I would say, in the month of April, May June, we have to manage the lockdown and the lockdown impacts. And in the rest, and that was your question in the second half of the year, we have to fight for demand. So the we are buying parts and then that my customer, the automotive industry, can produce cars and then I can deliver parts to the OEMs. So I would say it will be a question it will be really a question how quick people are coming back in the for shopping. If I see it in China, it's quite good. So in China, and I tried to say it in this morning, in China, we have a typical V curve. That means we had the lockdown in January February. But beginning in March, China came back. And in April, our factory is fully loaded, and it seems to be that demand is in the Chinese market good. And the question is and that's really a question and nobody can give me an answer, maybe you can, how quick people are going back for shopping? I mean On the cash part, maybe Yes. On the cash part, maybe the best one is I give it to Catherine or to Gerard. Well, on the cash side, as I outlined, we have so many initiatives in place, especially working capital initiatives, plus the reduction of CapEx. So that the cash impact is sort of softer than the business small but limited since we don't have a crystal ball for the months to come. However, we think that the cash impact at the end of the day will not be as strong as possibly the revenue. Okay. Sandeep? Just one follow-up. I mean, I believe there was a meeting in Germany this week between the auto vendors and Chancellor Merkel. I mean, have you heard anything from your customers on what happened and whether there is going to be any scrappage programs or any help for the industry, which will cause that second half not to be so bad and demand to return. Yes. And it's true, Sandeep, yes, they had a meeting on Tuesday. It was called car the car Gippel, car summit on Tuesday. I think maybe the car industry really started quite early with the question, do we get money? I think I'm quite sure something will come. I'm quite sure something will come. But I think now from the governance point of view, it is in the main direction really that the people are coming back and have more flexibility. As you know, we stopped the lockdown, and we reopened now all the shops in Germany. We will reopen the restaurants next Monday, and we reopen step by step more and more shops and malls. So again, I would say but it's a guessing. On Tuesday, there was an open discussion without any decision, and I'm quite sure they will come up with some good ideas. Thank you. Next question is from Sebastian Growe of Commerzbank. Please go ahead. Yes, good afternoon. Sebastian here. Hi, and thanks for taking my question. The first one is around Opto. Earlier this day, you said that in the Malaysian plant, you were temporarily down to only 1,000 full time employees there, and now you're back to 6.4%, I. E. Fully utilized. Can you just give me a sense what that meant in terms of cost headwind when you're really running down the plan for that period of time? And then can you also give us a sense of how long you have been running at only this 1,000 stuff level? And would it be fair to say that based on your earlier demand comments that you might be prepared to once again shut down or at least reduce the load at the Malaysian plants? Or as long as China is pretty vibrant in demand, then you will be running at a 100%. That is it for Opto. And the other question I would have is around cost savings and the upgraded target here to the €300,000,000 I think since the early 2018, you have in total booked almost €300,000,000 in special items. The question that I have is how many or how much of special items is needed to get to this $300,000,000 gross savings target? And could you also remind us of what is really P and L charges and expenses compared to what is like the cash cost to that program? Thank you. Yes. Thanks, Sebastian. Coming to your first question, OS, yes, it's absolutely right. We started with 1,000, then we had the middle step with 3,200, and now the factory is open and everybody can come back. To be honest, maybe Mr. Gerard can help me, I do not know what was really the EBIT impact for the cost down. I have to say, I do not know it, Simba. I do not know it. I would say it's a single million part, but it's a guessing. It's really a guessing. So I do not know it. But I think what we can do is that we give you a call and let Juliana give you this information because I do not know it. What I can say, Sebastian, is that Malaysia plays a really important role for China, for China Automotive. And we have a huge we have a good demand from China. And it was very important for Osram to reopen or to get the full capacity because we try to utilize more Regensburg. This was one of the reasons that the Regensburg plant was in February March full running because they tried to compensate the missing capacity in Malaysia. So we are quite happy now to be back and can deliver to our customer. And again, the number is coming from Juliana. And maybe, Francois, can maybe Kathleen, can you answer the question with the second question? Yes, cost saving. The cost saving program, which you mentioned, totals to €300,000,000 It was started in 2018 and is expected to run until 2022. We're sort of like in the middle of it, and it is all about earnings improvement. There's no liquidity as we have under the €180,000,000 under this program as per quarter 2. And then the quarter to your question And in the quarter, 20 In the quarter was 26,000,000, but cumulated is 180, and we are quite confident that we achieved the 300, maybe a little bit earlier than 2022. Yes. And Sebastian, maybe to add on that regarding your question on special items. So we booked the majority of our special items in the year 2020 in the first half of the year, but we still have a few programs outside of Germany, which we're going also to account. So the original guidance we gave in terms of special items roughly at the same level of last year is still rolling. Yes. I was just wondering, when one looks at the €180,000,000 that you saved so far, as you said, at the same time, you have booked almost €300,000,000 So the ratio is obviously almost €2 that you spend for €1 of savings. And that is the nucleus of the question. So what does it really need to get to €300,000,000 or is really like the majority is done and now it's really smaller bits and pieces that are still coming. That is basically what I was interested in. And then on the cash part, I was not so much asking for any liquidity leeway. I was more asking how much of these special items is ultimately really a cash charge, I. E, that you need to make redundancy payments, whatever comes to mind? And that is my question. Yes. So on the first one, as mentioned, we still have in the second half of the year, we will have some charges. And we have a usual run rate as well when we go into 2022, but it's not factored in. So we will be down mostly by the end of this year with this program. Regarding the cash, there is not a lot of difference between the accrual and the provision we book and the cash out. So we have certain assumption, obviously, depending on the voluntary program and when we will have this executed so that it will reach in the second half and probably more in next year our cash. And we booked it if you announce the program, you have to book it. Yes, it's now okay. And the earnings and the savings are coming later. So I would say the $300,000,000 what we booked already, if you get then the savings over the years, you have a good return. So in this case, I would say it is it was the right decision to lean the organization and to streamline and to increase the performance. And maybe I don't know if you And you see it in the results, Sebastian. You know, you look on Yes, I agree. You see in this corona crisis, we increased profitability to 12%. And in OS, you see that we increased from 14% to 21%. So I think it's a good return. So I'm happy about that. Yes. No doubt at all about that, Catherine. It wasn't meant to be any criticism. Also from my end, the contrary is the case. I think you had a straight beat in the quarter much better than everybody would have expected. Was that really to get a proper sense? Because usually, you never have a 1 to 1 ratio, €1,000,000 expense and then €1,000,000,000 saving. That, in reality, very rarely works, at least based my experience and that was basically the background of the question. I think there was one other comment you wanted to make and I have one very quick follow-up just on the CapEx budget after €50,000,000 in the first half of the year, what should be the run rate? Is it still at around €25,000,000 a quarter? Or is there at a certain point in time, a tipping point reach where you will have to increase the CapEx spend? No, we have the CapEx freezing. I will say, I think in a time where you are running a crisis like this one, it's good to stop breathing and stop spending. And that's the reason we said, look, as we have a CapEx freeze, really a CapEx freeze like a hyperhidering freeze and only spending if you need it because something is has to replace, then we do it. But Francois? Yes. Maybe I mean as mentioned by Olaf on Page 8, I mean as you see the free cash flow measures, I mean the main part of this non EBITDA is related to CapEx. So I would say it's a mid level digit number, what we're looking at. And obviously, that will reduce our CapEx in the second half of the year. And just what you said, I think $25,000,000 is a good number. Exactly. The majority is that. At the minimum what we need to keep it running. Okay. The company. Okay. That's helpful. Perfect. Thank you. Okay. The next question comes from Lucy Carrier of Morgan Stanley. Please go ahead. Good afternoon, Catherine. Good afternoon, gentlemen. Thanks for taking my question. The first one, I was hoping if you could give us some color around the strength in the sensing business you've seen in the Q2 in OS. I was just curious if you could give us some idea which type of application it was, whether there was any specific contract that was related to that? And if so, what would be the length of that contract or those contracts? They are several. Okay. Hi, Lucie. How are you? Very well. Thank you. Hope you're well and good. No, we are quite I think it's good to be in Germany and not in U. K. Sorry to say, but that. If I take a look to the numbers in U. K, I'm very afraid. But I think from French to French, Francois, that's the perfect, yes. Which language? And you can do it in French. I'm only half French, so. Okay. Do it in English then. I think regarding the sensing business, right? Yes. I mean, we had in the quarter, as mentioned, a very good evolution. I think we have the 1 or the other program ongoing. So that's definitely what helped us. And then looking forward, obviously, 2 more of that. I think the sensing is a very good market, a tough market, and now we have the one or the other program project, that one supporting us in Q2. And you have seen, this is very this is a stable business, a sensing business and a COVID crisis as well. So we are quite happy. I think it was a good progress. It helped in terms of the Sorry, just maybe I don't know if my question was clear, but I was not so much talking about the cost elements of that business. Just more to understand a little bit the top line development because you said that business was up, I think, either high single digit or double digit. And I was just keen to understand which applications have driven that and whether there was any specific contract related to this? Nobody, I think we're not disclosing on specific customers on that one. But what I mentioned in terms of program was not the cost program, but the program we have in the one or the other mobile customers what we're delivering. So I think usually we don't disclose and we will not do that on that call. Yes, absolutely. And you know, Lucie, that we are also quite balanced in the industry with smartphones, mobile devices and so on. And yes, what Francois mentioned was related to the business, not to the cost. Okay. So from that standpoint, I should understand that there was not any I'm not asking for customer name, but there was not any specific programs which had a bigger ramp up in the quarter versus what you expect for the rest of the year, for instance? Yes, there was a program if you mean your customer order, yes, there are some customer order that ramped up in this quarter. That's for sure. I think if you take a look to this market, you have seen that there are some new products that are coming up, and we are in this product. So there was a program, and we are in. Thank you. And a question related to the potential recovery in automotive. 1, on one side, I'd be keen to understand which type of conversation you're having right now with your largest customer considering the amount of pressure they are on and how they're thinking about allocation, but also pricing and also the type of product that they are going to go for? And then secondly, as well, you've mentioned that China was picking up quite nicely since March, April. I was how much visibility do you have whether the demand you are seeing, which is improving, is more related to what I would call a restocking effect versus a demand actually in the market from the final customer? I think the first one is, of course, we have a lot of discussions with our customer, and I think that's maybe the change and the learning effect from 2,008. I think one is really that you have a conversation really every week with large customer, and I'm in close contact with the BMW CEO and the Mercedes CEO and with our direct clients like Heller and so on. So they all have very limited visibility. And the visibility was, of course, in 2 steps. The one was the lockdown and how long does it take. I think now we have better visibility. We are all back. We ramp up our factories, BMW, in Volkswagen or in Daimler. But now the next wave is the visibility, how good is the demand. That's what I was taking talking about. And the question is people are now able to go out for shopping. And but the question really is, are they willing to spend money? And that's we do not have any visibility. That's we do not know. We simply do not know. What I'm doing is that I'm looking to the 3 areas like in America, China and in Europe to the stock of the dealers. They are detailed statistics. And you can see that the dealers in U. S. Are full with cars. We can see that in China, they are selling cars from the dealers. So that's the reason that the Chinese automotive industry is producing cars. So as I said, it looks like that we have in China a combination of destocking and really demand. And there's one very simple reason that and this is maybe changed to 2019. We had a decline in 2019, you still remember. And I was talking about that people are thinking spending money more in real estate and less in an owned car because infrastructure was so good in big cities like in China. Now people are thinking about how good is it to travel with bus or sub. So they're thinking about to buy cars again. So there is a changing in mind, and that is one thing. Question is how long does it take, but it is a demand definitely in China there. And but the question is for Europe and America, we have to see. So it's answer is, it is a destocking, and it's demand definitely in China. And pricing, we do not have pricing discussions. There is no question it is in the past, in the 1st 3 months of this new year our QQ, it was really a question of the supply chain. Are we able to deliver? And in China, we really had hard times to deliver on time, especially I had the reduced capacity in Malaysia. But as I said, we managed it with Ingsbruck. So in this time, we do not have a pricing issue. What we have and what we expect, Lucy, is that we maybe have special promotion programs. So I'm quite sure that one tool for a better demand will be maybe help from the different governments, but definitely will be good prices. And I think in this case, maybe some promotions are coming up. Thank you very much. Thank you, Lucy. The next question comes from Jurgen Wagner of May 1. Please go ahead. Yes. Thank you. Good afternoon. I have a follow-up question on your cash initiatives. And you mentioned you had limited cash burn in April despite sharp volume drops. But on Page 12, you show us that you have drawn quite a bit of your credit facilities. Why have you done this? And second question would be how strategic is the Conti joint venture with negative EBITDA margin even on adjusted level? Thank you. Yes. It's a very good question, Jurgen. I give the first one to Kathleen and the second one to my colleague, Stefan. Okay. Well, the cash the drawing of the facility is very easy. That was just for caution because as an experience from the financial crisis in 2,008, you better make sure that all the committed lines really are there. And if you draw into those lines, they are just then used. That is just may not be the most efficient type of liquidity measure, but it's the most cautious approach. Okay, understood. I think it's good to have your lines. It's always good. Cash is king in these times. Cash is important, yes. What you have? You have it. Jurgen, in regards of the your question, according to the joint venture, when we currently look at the acquisition results of the joint venture, we see that the rationale to form this joint venture where we always said it's important to join basically competencies in electronics and lighting. For. We have currently awards of new businesses with new solutions like, for instance, light carboards for cars. We're looking to new light electronic solutions where we are very successful in awarding new businesses. So looking forward, also what we already disclosed, the acquisition volumes which we had last year fulfilled and over fulfilled our targets. We are currently suffering a little bit from the inherited business, which came into the joint venture that we have to work on the manufacturing costs. And this is basically the burden which we currently see. But looking forward, we are very happy with the results which the management is currently showing in regards of awarded volumes and also the new technologies where we see a high customer acceptance. The awarded volumes, can you quantify those? No, but they are supporting basically the growth which we have planned for the joint venture. Okay, good. Thank you. Thank you. I think that's it. And there are no more questions at this time. I hand back to Julianne Barren for closing comments. Yes. Thank you very much, and thank you very much for all your participation. With that, we would like to close this conference call. If you do have further questions, please get in contact with our Investor Relations team. Have a very good day. Thank you, and goodbye. Stay healthy. Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.