Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the OSRAM Licht AG conference call on the third quarter of 2019. Throughout today's call, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Juliana Baron. Please go ahead. The speaker line is currently open. Please go ahead.
Okay. Thank you, Emma. We didn't hear the beginning, so sorry about that. Good afternoon and good morning, ladies and gentlemen. A very warm welcome to the OSRAM conference call on our third quarter 2019 results. With me are Dr. Olaf Berlien, our CEO, and Ingo Bank, our CFO, as well as Dr. Stefan Kampmann, our CTO. Olaf and Ingo will comment on the market development and our financial performance and will be available for Q&A afterwards. As a reminder, today's call is being recorded. You can follow the webcast on our website at osram.com/ir, where you will also find the slides available for download. Regarding forward-looking statements, I would like to draw your attention to the safe harbor statement on page two of the management presentation. With that, I'm pleased to hand over to Olaf now.
Thank you, Juliana. First of all, a warm welcome from my side as well. Let me start with an overview of our third quarter, and Ingo will then run through the financial results, followed of course by the Q&A session. I move to slide number three. Overall, the third quarter developed in line with our expectations. We saw no significant business recovery. As you know, the automotive market, in particular, continued to decline sharply. We took countermeasures already in the beginning of the year 2019, and the first effects can now be seen in our numbers. Especially in the Opto segment, our performance programs have taken effect. This gives us some confidence for the rest of the year and despite the fact that we are not seeing only short-term recovery of the markets. We, therefore, confirm our full-year targets adjusted in March.
Our medium to long-term visibility, however, remains limited. This is due to the turbulences and the accelerated transformation in the lighting industry. In this situation, economic developments for our markets beyond the current year cannot be predicted, and as I said, visibility remains limited. Let's have a look at the third quarter results on slide number four. In line with the weak market environment, revenue fell to EUR 850 million, a decline of 14.9% year-on-year. From a quarter-to-quarter perspective, we managed to stabilize our top-line performance, especially in OS and DI. Adjusted EBITDA before special items reached EUR 58 million, resulting in a margin of 6.8%. At EUR 91 million, our free cash flow was positive. This is mainly due to a reduced CapEx and improved working capital. From a market perspective, we continue to face political and economic headwinds.
This can be seen from the indicators as we move on slide number five. While the current environment continues to slow down, the industrial climate shows cautious signs of relief. The ifo World Climate Index improved in the last quarter while still being negative. In contrast, the global manufacturing expectations further slowed down, and as you can see on the right from the global PMI index provided by JP Morgan. We clearly noticed the negative trend in our revenue development, as have many of our customers, especially in the automotive industry. A look at slide number six shows that car production continued to decline across all regions. The biggest impact was once again in China, where car production fell dramatically to around 10% year-on-year in the last three months. Also Europe continued to decrease while NAFTA remained more or less on the same level.
Accordingly, IHS has once more reduced its forecast for global car production. Yearly production is now expected to reach only 91 million cars in 2019 compared to the 99 million expected one year ago. This situation continues to affect our automotive business. We see no signals for a fundamental trend so far. Move to page number seven. This assumption is backed by the actual order volumes from our customers. Our automotive tier one key customers continue to fall short of their agreed purchasing volumes. As a reminder, on the left, you can see the order volume agreements for calendar year 2019. On the right, you can see the deviations from those agreements on a year-to-date basis. It shows that the big majority of our customers are falling behind their expected order volumes. In this situation, we are focusing on doing our own homework, which takes me to slide number eight.
Here can you see an overview of our strategic execution program. I reported their status to you in the previous quarters as well, and we continue to make good progress with these programs. Today, I want to highlight the sale of our Luminus business. In Stern Stewart Capital, we found a new owner for SITECO in June. This is sharpening our photonic profile, while it gives SITECO more entrepreneurial freedom. The other highlight, which I mentioned before, is operational improvements at OS. Our Fit for the Future initiative is taking effect. We have achieved significant cost savings. This relates to headcount reductions and to performance improvements in R&D and the sales initiative. Year to date, we have reduced almost 1,500 employees worldwide at OS. Together with other measures, we have reduced the number of employees on a group level by almost 2,400 worldwide.
Let's come to slide number nine, Bain and Carlyle. At this point, I would like to comment on the takeover from Bain and Carlyle. We publish today our joint reasoned response today. The supervisory board and the managing board consider the offer to be attractive for the company, for its employees, and of course, for the shareholders. We are convinced that with their financial power, Bain and Carlyle will support our ongoing transformation. Also, we judge the offer price of EUR 35 per share and cash to be a fair valuation of the company, and an attractive premium for our shareholders. We therefore recommend that our shareholders tender their shares. We're coming to an end. Ladies and gentlemen, let me summarize briefly. The market environment remains challenging in 2019. We are not expecting any short-term market recovery to help us in this situation.
We have actively taken countermeasures to address our own performance. These measures are taking effect and are therefore, we confirm our full year targets as adjusted in March. So far, thank you very much and I would like to hand over to Ingo.
Thank you. A warm welcome from my side. Thank you for joining the earnings call today. Let me start with the key financials for OSRAM continued operations summarized on page 10. Our revenue development in Q3 fiscal 2019 still reflects a challenging environment as markets for automotive and general lighting continue to be weak. As a result, comparable growth for the quarter was a - 14.9% for the company. Sequentially, revenue declined by 2.6%. Given the significantly lower volumes, adjusted EBITDA came in at EUR 58 million or 6.8% of revenue. The higher operating leverages in Opto, but also in traditional automotive, in combination with lower utilization of production capacities, were the main drivers for the year-over-year margin contraction. Our performance programs delivered EUR 32 million in gross savings, gaining further traction. Net income from continuing operations was negative with EUR 35 million in the quarter, and special items amounted to EUR 16 million.
Free cash flow was positive with EUR 91 million as we further reduced working capital in our CapEx spending. Taking now a more detailed look regarding our revenue development in Q3 fiscal year 2019 on slide 11. The impact of foreign exchange as well as the additions to the business portfolio of OSRAM had a positive impact on revenue growth. Particularly the acquisition of Fluence, which is part of our DI segment, continued to benefit well from strong market demand. The impact of IFRS 15 in the quarter was approximately negative with 0.4%. When looking at our regions, EMEA further declined on the back of an ongoing weakness in customer demand for our automotive business, both for traditional as well as LED light sources. In NAFTA, our traditional and automotive LED OEM business declined when compared to prior year, but improved sequentially.
Our Digital Systems business as part of DI, saw a strong revenue decline as the general lighting market in the U.S. continues to be challenging, also echoed by public statements of large new U.S. lighting companies. In APAC, business in China was lower when comparing to the same quarter a year ago, as declines in the double-digit range continued. At the same time, we saw sequential growth when compared to the second quarter of fiscal 2019 as end-to-end industrial supply chain adjustments in the first nine months of our fiscal year seem to have largely been effected. In the distribution market for multi-market applications, inventories came down, but are still above normal levels. Against this overall backdrop, we believe it is still too early to tell whether from this point forward, some form of recovery will occur or not.
Let me now make some comments regarding the revenue development in the three reporting segments. Opto's revenue in the third quarter stayed flat sequentially when compared to Q2 2019. Relative to the third quarter of 2018, this still translated into a significant decline. Lower volumes than pricing drove a year-over-year reduction of 21%, with volume carrying a higher share than pricing. Opto's automotive revenue declined by double-digit range when compared to prior year across all regions. Pricing dynamics were stable and in the high single-digit range. Sequentially, automotive revenue was stable, driven by higher demand from China, offset by a sequential decline in EMEA, with NAFTA being flat quarter-over-quarter. In the industry mobile segment, comparable growth declined in double-digit territory, especially driven by lower volumes as distributors covering a rather broad and diverse LED portfolio continued to destock in the quarter.
Inventory levels in the chain now seem to be getting closer to healthier levels. In our emitter sensor and laser portfolio, we continue to see the shift in our product portfolio ongoing from 2D to 3D solutions and healthy business in biometric sensors. In Opto's general lighting business, we continued on the path of quarter-over-quarter sequential revenue improvements, driven particularly by horticulture demand. We also started to ship first, albeit smaller volumes, into the U.S. market, being one key market we had targeted as part of the overall GL commercial strategy for this fiscal year. Moving now to our segment Automotive. Revenue declined at a clip of 12.5% when compared to the same period in prior year. Volume continued to decline, particularly in China and Europe, both for the traditional as well as the LED business.
The aftermarket business posted a mid-single digit growth compared to Q3 2018, but declined sequentially in absolute volumes in line with typical summer seasonality. Our JV generated revenue in line with expectations. Administrative steps at Continental are expected to be completed in the fourth quarter to facilitate the finalization of the transfer of customer contracts. Looking into our third reporting segment now, DI. DI's comparable revenue decline of 12.5% was largely driven by a weak general lighting market environment in the U.S. for digital systems and tough comps for our traction business. Our entertainment business generated strong comparable growth. Also Fluence continued to benefit well from strong market demand in the Americas. Sequentially, DI grew its top line with 1.7%, stabilizing its absolute revenue base. Moving now on to profitability on slide 12. In Q3 of 2019, absolute adjusted EBITDA was EUR 58 million, translating into 6.8% in margin terms.
The operating leverage effect of significantly lower volumes, particularly in Opto, Automotive, but also DS, which is part of DI, were the main drivers of the absolute decline in adjusted EBITDA at OSRAM level as well as segment level. Negative price mix and inflation impact were successfully offset by our operational and performance savings programs. In addition, in the quarter, the company had to absorb charges, amongst others, pertaining to expected litigation expenses, representing a significant share of what is shown here under others. Savings from our performance programs amounted to EUR 32 million in the quarter, up 30% sequentially from the run rate we had in Q2 fiscal 2019.
Compared to the second quarter of 2019, Opto's profitability improved to 16.8% of adjusted EBITDA in the third quarter as the overall performance programs were delivering structural cost savings, helping to offset some of the volume declines and the related low factory utilization. The year-over-year decline in the Automotive adjusted EBITDA profitability reflected lower volumes and factory utilizations in its traditional light source portfolio. Price erosion and inflation were compensated by productivity measures. The inclusion of the OSRAM Continental financials in Automotive had a dilutive effect of approximately 300 basis points. DI's adjusted EBITDA was negative at EUR 7 million, main drivers being lower volumes, including the impact of lower plant utilization rates, unfavorable product mix, as well as import duties resulting from the trade conflict between the United States and China. Pricing and inflation were successfully offset by productivity measures in DI.
Adjusted EBITDA in corporate items for OSRAM was negative with EUR 18 million, in line with expectations. Moving now to slide 13. Our performance programs are very well on track, and gross savings generation gained further momentum in the quarter. We delivered in total EUR 32 million of gross savings from our overhead and plant transformation projects in the quarter. Fiscal year 2019 to date, we have generated EUR 36 million of gross savings in overheads and EUR 32 million in our programs for plants. In total, EUR 68 million year to date fiscal 2019. For the full year, we expect to exceed our original savings targets, moving closer to a triple-digit million euro amount of gross savings generated. Moving now to cash flow on slide 14. Free cash flow was positive with EUR 91 million in the quarter.
Low CapEx spend in combination with improved working capital were the main drivers behind the positive free cash flow generation in the quarter. Net debt was at EUR 424 million, reflecting the cash outflow from the completion of our share buyback program and the closing of the Ring acquisition for our Automotive aftermarket business. Finally on slide 15, our outlook for fiscal 2019 has not changed from prior guidance, and we expect to continue to operate in a business environment with very limited visibility. Now, Juliana, back to you.
Thank you, Ingo. We are now looking forward to your questions. Emma, please go ahead.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. To withdraw from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from the line of Sven Weier with UBS. Please go ahead.
Yeah, good afternoon. Thanks for taking my questions. Those would be two then, both relating to the takeover. The first question is regarding the regulatory approvals. Obviously, you've also mentioned your statement today that the bidder doesn't foresee any in-depth issues in China, which I do maybe understand from a competitive point of view, but how relaxed are you really about things like national security concerns? Obviously, the U.S. has been blocking the Lumileds takeover, and Sanan couldn't buy you. How easy should we really assume that hurdle to be achieved, especially in an environment where we still have the trade war going on? That would be the first question.
Yes, Sven, thank you for your question. We have definitely no indications, either from CFIUS or from China, that the approval is under risk. If you compare some years ago the sale of the Philips part, the lighting part, there was no issue in China for these Lumileds parts as well. We have no indications in that direction.
Okay. The second question is just pertaining to the 70% threshold. Obviously, I think you have a relatively high share of retail ownership. If we combine that with the usual index fund situation and the relatively high short interest still in stock, I was just wondering to what extent if the bidder, can they improve the acceptance rate on the retail side? Because I guess that might be quite a big stumbling block, at least it was in other German takeovers. What measures are going to be taken to really reach those people?
It's a fair question, Sven. I think if you compare to former deals like in STADA or the Scout24, the threshold was much lower and it failed. The level is not an indication that you are positive or negative. It is a question to the bidder because it is from one new shareholder to the current shareholder. It is in their field to do the best and to motivate the shareholders to tender for EUR 35. As you know, usually they are mailing, and what I learned is today the first banks sending the mails to the shareholders. I think it's on a way. It's a usual measure to be expected on a daily basis.
Okay. Thank you. I have another one, but I go back in line then. Yep.
Okay. Thank you. Thanks, Sven.
Thanks.
The next question is from the line of Sebastian Growe with Commerzbank. Please go ahead.
Yeah, good afternoon, gentlemen. Thanks for taking my questions. The first set is also to ams. I'm a bit puzzled really when looking at your release from 15th of July, you stated that you will enable ams to perform due diligence. ams just recently said a week ago that they engaged in discussions with OSRAM, and earlier today you said that you haven't been in talks with ams since. Can you just shed some more light on what the status quo is here? If I may also ask, related to it, why did the earlier talks with ams fail? I think you might have been in early discussions at the beginning of the year. Eventually, can you just give us some more color on really what led to the breakup there?
Okay. Yeah. Thanks, Sebastian, for your question. After they drew back their interest, we did not receive any further notification from them. We don't speculate on any potential new offer. Please understand that we cannot comment on this any further. That means, coming to your second question, we got a possible offer, and we immediately moved in contact and said, "Yes, let's start with the due diligence." As you know, some hours later they drew back their interest. You have to ask the question to ams.
You can confirm there is no due diligence at this point in time?
That's correct.
Okay. That is helpful. On the other question, why I think in the earlier part of the year, those early discussions failed eventually. Can you just give us some more ideas around that one?
I think, Sebastian, the fact that they drew back an offer then rescinded the offer within sort of, I don't know, 24 hours, is a decision they took, not a question to us. As Olaf said, on the basis of the offer they gave us, we offered them due diligence and yet to understand 12 hours later that they were no longer interested in rescinding the offer. I understand that you guys want to understand this better, but these are questions that I think only ams can answer, not us.
That point on the most recent developments and coming up with these non-binding expression of interest and then withdrawing it, I can perfectly understand your point on this one. My other question was related to, I think you had some very early-stage talks, when also the discussions with Bain and Carlyle were rather early days, and I was just interested in what eventually did not fit or whatever the right expression for that might be, why these earlier talks beginning of the year so failed with ams.
Again, Sebastian, they drew back their interest, and they made it an ad hoc. Whatever was before, they drew back their interest. That's a fact. We do not have a new one.
Okay. The other, if I may, just very quickly on the Automotive segment, on the Conti JV. Obviously, the consolidation was very low still in the quarter three, and EBITDA was under pressure. You referred to 300 basis points headwind on the margin side, so more than EUR 10 million. My question is, because you indicated on the last call that you get some reimbursement from Conti, what's the status quo on this one?
Well, the reimbursement is still there, and the dilution effect is including the reimbursement for the revenue or the customer revenue transfer that has not yet taken place.
Okay. That will be one go and then really big volume like, I don't know, [51 million] in the quarter four? What would be a realistic assumption, if I may ask that?
Well, again, obviously customer contracts will be transferred one by one. Depending on the timing, it depends on how much revenue will come. I don't want to speculate simply because this is not really in our control. This is now with Conti and Conti management in Hannover. We're very hopeful that they will accelerate this development. When exactly they will do the necessary steps is unfortunately out of our hands.
Okay. Understood. Thank you.
The next question is from the line of Charlotte Friedrichs with Berenberg. Please go ahead.
Thank you. My first question would be on the current trading. In your prepared remarks, you mentioned that you'd seen a sequential improvement in China in your most recent quarter. Is that something that you see continuing, or has over the past weeks the environment changed either in China or in one of the other areas that you're active in?
Yeah. Hi, Charlotte. Good question. To be really honest, it's a little bit too early to say this is a trend. We have positive signals, as I said, quarter-to-quarter and month-to-month. On the other hand, we have so many negative signals. If you listen to our customer, to the automotive industry, how they see the next quarter and the second half of the year. For China, as I said, it looks like that we left the bottom line, and then it's going up. For the rest of the world, we are still not optimistic. We are cautious.
Okay. My second question would be around ams, and perhaps you've looked at them in the past as well. Do you have any kind of feel in terms of where the synergies could be in a combined entity theoretically for us to understand a little bit, what ams is thinking here is?
I understand your interest, Charlotte, but to be honest, you have to make a call to ams, so I cannot tell you about the strategy of a potential bidder. ams is a good company. In some areas, we are competitor, and we know them quite well, but what are the strategy and the synergies? You have to make a call to ams.
Okay. Thank you.
The next question is from the line of James Moore with Redburn. Please go ahead.
Yes. Good afternoon, everyone, Olaf, Ingo. I wonder if I could start with the bid. I'm not an expert, but I'm told under German M&A rules, any company can elect to ignore a second bid within a 12-month period. I wonder whether you can say whether the previous ams indication of interest, followed by walking away, could constitute a first bid in such an instance that they come back with a second bid. Secondly, are you able at all to talk about the shape of management compensation in the proposed private equity bid from Bain and Carlyle, and how it compares and contrasts to the existing arrangements?
Thanks, James. Coming to your first question, as ams or maybe a bidder made an indication of interest, a non-binding offer and not a binding offer. This legal procedure, what we are talking about, depends to a binding one and not an unbinding one. What we got from ams was a letter, and as we explained some hours later, they draw back their interest. In this case, this legal restriction is not there. The second one, and I wrote it clearly in the internet as well. There is no discussion about any compensation package for the whole management team, so we didn't have that in the past. It would be in this point of time, we are independent and we would like to be independent.
In this case, we do not have had and have any discussions for the whole management team, first level, second level, or top management level about any compensation package.
Very helpful. Thank you.
The next question is from the line of Lucie Carrier with Morgan Stanley. Please go ahead.
Oh, hi. Good afternoon, gentlemen, and good afternoon, Juliana. My first question, so none of it's going to be on the bid, but the first one is actually, I was curious to hear about your progress in VCSEL technology and whether Vixar has seen first commercial solution being implemented. In light of that, as we are heading towards 5G deployment in China, how do you see potentially the smartphone cycle in this area and potentially the benefit for you and through Vixar? That's my first question.
Okay. Thank you, Lucie. I think that's a great question for my colleague, Stefan. Stefan.
Thank you, Lucie, to putting a question in my direction. With Vixar, we are basically following up on the plans and the roadmaps which we have started when we acquired Vixar. We have now the first design ins, and Vixar with the Vixar solution is basically fulfilling our expectation in regards of future volumes.
Just on that, have you started to really kind of sell into devices or other commercial solution, or it's still big?
We are in volume production with the Vixar design, and we are generating sales volume.
Just my question about 5G deployment and the smartphone cycle in Asia?
I think what you mean with smartphone cycle, that's a cycle. If you listen what Huawei and Apple said, that they see an increase in demand in Asia as well. I think just recently Apple announced they have an improvement in Greater China. In this case, I think it is running quite good.
Lucie, if you listen to my prepared remarks, I mentioned we clearly see a move from 2D to 3D, which is VCSEL. Obviously we do have from past projects, the relationships with also large Asian players in that area. We have a number of design wins where we're in with a significant share, and that's what Stefan mentioned when you talk about commercial production. We are, let's say, in the next cycle that comes with in terms of window introduction of a large Asian player, and then the volume obviously depends very much on how well that phone sells. According to our plans, we're making that progress that we had in mind.
Lucie, put in your mind, it's not only mobile, it's the watches as well. There are a lot of applications where you need VCSEL technology. It's not only in the mobile.
No, of course, I appreciate that. I was just curious because, of course, we are hearing about the deployment of 5G in China coming in the second half of 2020. I was just curious if you were seeing already momentum in preparation of that, because a lot of the devices, of course, will have to change or be replaced if people want to be using 5G. I was curious to see if you were already seeing indication of that quite imminently or not.
Yeah. We see an indication because we are in a lot of design-ins and not design wins. It seems to be a lot of new mobile applications were coming up, as you said, for 5G. This will happen definitely in 2020. All the mobile companies have design-ins, and in this case, we are all in discussions with all the Asian parties.
Thank you. My second question was related to the auto division and specifically the conventional lighting. Can you maybe give us some indication if we normalize a little bit for seasonality that you have in the business, which type of decline are we seeing on the conventional OE for automotive, and then where are we in terms of the growth or maybe flattening in aftermarket? Is there a risk that we start seeing erosion in the profitability of this business as this is being to some extent replaced by LED?
Okay. I will answer that together with Ingo. As you know, I think from the past, the third quarter is always the weakest quarter for OSRAM. We have, especially in the third quarter, traditional decline in comparison to the other quarters. For that reason, we commit our guidance for 2019 because we expect a much better quarter for the quarter four. Ingo, maybe you can talk about price decline in, I think you are asking for DI or DS part, right?
For automotive, I think on the traditional side for auto, Lucie, of course, all of the year-over-year comparisons look terrible. They were talking double-digit territory for traditional OEM, but also that is the same, similar to what we see with LED. I think what's more telling is maybe the sequential picture, and there where we've seen into sort of absolute amounts, we've seen some stabilization now. Olaf mentioned the seasonality in Q3, which is what we typically have also in the aftermarket. Y ou see always a stronger fourth quarter when we come out of the summer holiday period, the furloughs in the factories with our OEM customers, new models being introduced, and also the aftermarket picking up. That's a seasonality effect we also expect for now the running the fourth quarter.
Sequentially, it seems to be stabilizing, but yeah, year-over-year, it's still in the double digit territory.
Sorry if I was not clear with my question. I was asking more, I understand the seasonality point, but just if you normalize for seasonality, how do you see what I would call the structural decline in the auto conventional lighting? Is the aftermarket continuing to grow or is it flattening in terms of growth if we look at it on a normalized basis excluding the normal seasonality?
Yeah.
How is the margin reacting to these structural changes?
Yes. I understood. I believe I said in my prepared remarks that the aftermarket business grew in the quarter relative to a year ago in mid-single digits. That's, if you like, given that seasonality is always the same, for us, that's a good sign that the aftermarket is still growing. We're doing the right things in the aftermarket. Structurally speaking, nothing has changed to what we always said that, of course, the LED penetration goes on, and we've said the decline in traditional light sources in automotive will continue. From a pricing perspective, so because you asked about margins, from a pricing perspective, we've not seen any significant differences to prior quarters, and the price pressure on the traditional side is much less than on the LED side.
Because of the LED side, of course, you have compensation typically through higher volumes, with the exception of this year maybe. Structurally, therefore, nothing has changed. What will determine very much in the future the profitability in our traditional business is our ability, which we've shown so far to, let's say, compensate for lower volumes and inflation with operational and performance savings, and that's the plan we always had, and we will continue to set also going forward. We have a very strong cost awareness culture in that part of our business, similar to the lamps business we used to have. I'm quite confident that we are able to continue to work on that also going forward.
Thank you very much.
The next question is from the line of Philip Saliba with HSBC. Please go ahead.
Yes. Hi, thank you very much. Just to understand the Conti JV issue in more detail. There's also these technical topics and it takes a bit longer to transfer some customers. Maybe asked differently, under the assumption that the technical process was going smoothly, what would be the full year contribution overall?
Okay. Thanks for your question, Philip. I think, Stefan, would you like to give an answer from the JV?
I think from the technical point that the project, as Ingo said, we are currently in the transfer. We are pretty positive that this transfer will be made in the next month. From the technical content and the technical rationale of the joint venture, we see that we find acceptance for our solutions in the market. As you know, basically the contribution currently from both of the models. On the one hand, there is the light module from OSRAM and the light control unit. This business is developing according our expectations for the future. The contribution for this year, I would basically hand over to Ingo.
Yeah. We will not disclose it because it's revenue that is not with us, that's with Conti. F or that, we get a reimbursement. As I said, there we're seeing revenues more or less in line, of course. That revenue is somewhat impacted by the slowdown in the automotive industry, but not to the extent impacted as we see it for our other component businesses in OSRAM. I think we have a better point in time when these customer transfers have occurred to talk more clearly about what the full revenue level would've been, but I would stay away from that, given that it's revenue that's not recorded with us, but with Conti right now.
Okay. Thank you very much. You said that the inventory levels in APAC are still high. Just to have an idea there, how high was it in Q2? By what degree has it decreased now as we moved into Q3?
It depends a bit on the type of business you're looking at. My comment was referring to the, what we call multi-market business, which is a very diverse portfolio that goes into hundreds of different applications and is done through distributors. There we are still at inventory levels of somewhere between 10 and 11 weeks. That has come down from what was much higher than that over the past month, but it's still above what we would call a normal level. A normal level typically is anywhere between, let's say, seven to eight weeks. There we would still expect in the fourth quarter some de-stocking taking place. For the rest, what we've seen in China is that automotive inventory at dealerships has come down quite significantly in the last couple of months.
We believe that there were some disturbances with the introduction of new emission standards in certain cities and dealerships were not necessarily prepared for it and had to sort of deal through inventory levels for a while and that seems to have sort of more or less cleared now. Their inventory levels seem to be normalizing in automotive and also in our sort of emitter laser and sensor business in China also there we've seen, again, normal inventory levels.
Okay. Thank you very much. One final question. You mentioned already that Q4 is seasonally strong and also there will be new models. Just to have an idea, I mean, in Q1, Q2 and Q3, you had comparable revenue decline by 15%, 13.5% and 14.9%. What are chances that we see a breach of the top-line guidance? Should we rather expect it to be somewhere around -14% then in the end, the overall organic top-line decline for the full year?
Well, we basically confirmed our full guidance for the year. Again, every year we see that the fourth quarter is stronger and that's also something we are sort of seeing at this point in time. Where we end up in the -11% to -14%, we have to see. I would not expect it to be at the -11% end of our growth, but rather sort of the midpoint maybe of that range or even at the sort of higher end of that range, if you like. We have to see because again, visibility is somewhat limited, but we see that Q4 will be better than the third quarter from a revenue perspective.
Okay. Thank you very much.
The next question is from the line of Sven Weier as a follow-up question from UBS. Please go ahead.
Yeah. Thanks for taking the follow-up questions. The first one would be a follow-up on the VCSEL question from Lucie. Basically, I think you're featuring on the 5G model of Samsung. You're making some good inroads on Samsung. I was just wondering, I mean, also with a view to the American manufacturer, are you foreseeing further market share gains and that motivating factor for ams to pursue you that they are simply losing market share? That's the first question.
Say something.
No, we didn't. No, we don't say any names. Especially with the American company you seem to be referring to, if we were in business with them, we would not be able to disclose it.
Yeah, but are you generally seeing that you are taking away market share from ams? I think that's a fair question and rather at a rapid pace ?
I don't think we should comment on market share gains or losses against competitors, specific competitors right now. I think we're doing a good job in establishing our technology, especially VCSEL, with a number of players. At this point in time, we have a large focus on Asia. I would argue maybe less on the United States.
Okay. The second follow-up question was just on the Opto margin. You had this litigation charge, so maybe first of all you could give us some more background what this litigation was about and is there potentially follow-up risk here? O bviously, if you adjust for that margin, the Opto margin would be back in the high teens, low 20s. I was just wondering, is that just based on the cost savings or was it also a mix issue in the quarter? That's the second question.
Okay. Well, I don't think it was a mix issue, either positive or negative on the quarter for Opto. The sequential improvement was largely driven by the performance programs that Olaf also mentioned earlier in his prepared remarks. Opto has done a very good job in adjusting its cost structure fast on the back of that program. The litigation charge, please allow me that I will not detail it further out because obviously we don't want to give too much out there because we do not know who's listening to this. If you were to eliminate for that charge, Opto would've been higher, not in the 20s, certainly not, but somewhere below that. Again, it's something where we've accounted for what we expect right now. We do not expect, at this point in time, anything beyond that.
Okay. Thank you.
The next question is from the line of James Moore as a follow-up question with Redburn. Please go ahead.
Yeah. Thanks for taking the follow-up. Ingo, thanks for your very helpful breakdown of the demand trends in Opto earlier. It makes me think of the automotive LED business within Opto, and I think you've been very open about this in recent times. There has been some market share loss on top of the difficult market cycle, with Kulim allocation, et cetera. When you look at the current design wins or tenders or orders, are you seeing signs that that share loss is continuing or stabilizing or even reversing favorably?
Thanks for your question. I think we already communicated from the beginning that we see a loss in market share by 3% - 4%. That depends, the issue what we had in end of 2017, beginning of 2018, that we are not able to deliver. This is absolutely stabilized. There is no additional indication that we lost any market share. I would say the opposite. I think we earn market share because some competitor are struggling. It looks like that we are coming back, and as I said, it takes 18 - 24 months to be on the same level as before, and I see a good trend in this.
J ust to make sure we don't get ahead of ourselves here. We're not gaining that market share back immediately that we lost. We are basically moving from customer to customer. We're still extremely competitive with our offering, and the teams are working hard, and all these discussions are taking place with the customers, only starting a little bit in a few months from now. We haven't had any concrete negotiations with them about next year or so. What we hear, what we see also in customer contacts, et cetera, of course our delivery performance has improved a lot. Our quality has always been top of the class, best in class, so no deterioration there. We're very confident to go into the next season where we negotiate with our customers.
Thanks. Could I ask about advanced LED? You've obviously seen the penetration story in standard LED. How is adoption going in the advanced categories? I know there are different types of advanced LED, from laser to mask to pixel. Can you say whether you're seeing one of those technologies being selected more, o r has there been a slowness here because of the wider challenges in automotive?
Yeah, it's a good question for Stefan, especially if we talk about laser and if we talk matrix . Stefan.
I think when we look in the certain categories, you mentioned basically multi-pixel matrix front light system, we see that the take rate is increasing. It's getting more and more also a standard in the more volume segment. We see an increase in the need for LEDs, for discrete LED, for multi-pixel front light systems. We see also a high interest currently in the next generation of our multi-pixel monolithic, the so-called EVIYOS solution, where we have more than 10,000 light points on one chip. It is currently in development together with our customers. It will be market being generated beyond 2022, 2023. There's a high interest in these multi-pixel solutions and the current demand for discrete LEDs for multi-pixel application is increasing.
Thanks. Lastly, if I can, LiDAR, clearly a long-term opportunity, but is there anything concrete happening in the last three, six months that gives you any indication of the pace or potential adoption?
I think when you look in the community and the discussions which we currently have, I think the applications are now more clear. One segment is basically a so-called people mover, where you have very high sophisticated LiDAR systems where you can basically sell all the technology because the business case is very favorable. When you think about to get rid of a driver, where you can save EUR 60,000-EUR 100,000 per year. Therefore, for these applications, you see the high specification for LiDAR systems on a high value. However, on a smaller volume, because these cars will not reach the volumes of passenger cars sold today. The other segment is basically the private-owned passenger car. Here we see the need for more cost-oriented and price-oriented solutions.
That's the reason why we also started a project together with our customers to look for solutions which can serve this high volume market. In a summary, we can say we have now the clear specification for these two categories, and we are now working together with our customers to develop the project for the future volume sales.
Thanks, everyone.
Ladies and gentlemen, there are no further questions at this time. I hand back to Juliana Baron for closing comments.
Thank you very much for 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. We hope you will enjoy the rest of the day. Thank you and goodbye.
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