Earnings Call: Q3 2020

Nov 6, 2020

Good morning, ladies and gentlemen. This is Moritz Gmeiner. I'm very happy to welcome you to this morning's conference call on the AMS Q3 2020 results. As usual, Alex will lead you through key developments in our business, while Ingo will take a closer look at the financial performance. Alex? Thank you, Moritz. Good morning, ladies and gentlemen. I'm very happy to welcome you to our Q3 2020 conference call this morning. This is the first time we are reporting consolidated group financial information, including Osram, on the base of our majority shareholding. Please note, however, that my following remarks will relate to our AMS business only. Therefore, the terms we and our business, Immerich Marks, will solely refer to our AMS business. The term group will refer to the total group, including Ostrand. Now some key figures to start with. 3rd quarter AMS revenues came in at $564,000,000 near the top end of our guidance range for AMS. Our group 3rd quarter revenues were $1,428,000,000 Our adjusted AMS EBIT for the 3rd quarter was $128,000,000 That is an adjusted EBIT margin of 23% towards to top end of our guidance for AMS. Our group adjusted EBIT for the Q3 was $60,000,000 We were able to achieve these strong results for our AMS business against the backdrop of continuing end market and macroeconomic impacts on the global COVID-nineteen pandemic. I would therefore like to thank our employees worldwide for their flexibility and commitment in this difficult situation. Before I look at our business, I want to update you on the acquisition of Osram and latest developments. We successfully concluded the domination in profits and loss transfer agreement, or DPLTA, for Osram in September. The agreement was approved by Osram shareholders with 99.8% of the vote in an extraordinary general meeting this Tuesday. Following the widely expected shareholder approval, we see implementing the DPLDA around end of this year as a possible time line. I'm very happy that we have completed yet another important step in the acquisition of Osram because we are keen to move forward and begin the integration of Osram. Based on the DPLTA, we will be able to drive and accelerate the combination of both companies' business in the most efficient manner. We will unite the complementary strengths of AMS on Osram and plan to create a very profitable combined company within the next years. During the quarter, we have also taken 3 seats on the Osram Supervisory Board as expected and plan to eventually increase AMOS representation to 4 seats. Let me add that from a legal perspective, Osram is a majority owned independent listed subsidiary of AMS prior to implementation of the DPLTA. Now let's talk take a look at the development of our AMS business. Consumer Solutions continued to contribute the largest share to our results for the quarter. Our leading position in optical sensing is built on our broad AMS portfolio from 3 d sensing, including VCSELs, all the way to spectral sensing. Our success is based on continuous significant R and D investments, which allow us to drive innovation in optical technologies. We are a major player in 3 d sensing in our AMS business, where our leading system know how and high value IP offer an unmatched platform to serve all architectures. Structured light, time of flight in ITOF and DTOF and active stereo vision or ASV shipping 3 d sensing products to leading smartphone OEMs for front facing and world facing applications, we have built our strong position focused on 3 d illumination for structured light, ITOF and ASV. Here we continue to leverage our advanced optics expertise and leading VCSEL technology. At the same time, we are driving the expansion of our 3 d offering, including the integration of high performance near infrared image sensing. This allows us to create 3 d solutions in different technologies. We continue focused development in world facing 3 d for 3 d Detrof technology and advanced time of flight architecture that offers clear advantages for longer distance in world facing and AR oriented applications. Here we leverage our leading 3 d system capabilities, developing a full AMS Detox solution that includes VCSEL illuminations, high performance bed sensing and related software and algorithm. We see increasing market interest to explore AR related applications on the base of full three d and DTOF technology and expect these applications and DTOF to emerge as an attractive 3 d market in the next years. Consequently, 3 d systems for this application area will be an innovation focus for us going forward. In front facing 3 d, we are developing sensing technology for face autonification that is invisible behind the display and eliminates special place components from the device front. This cutting edge approach leverage our singular expertise in behind OLED or OLED flight emission and sensing together with our deep three d system know how. For the highly innovative OLED 3 d technology, we combine VCSEL illumination, 3d near infrared sensing, software and algorithm in a solution architecture. Here, we continued focus towards demonstrating Bolar 3d in ASV early in the Q1. In the following step, we plan to explore Borla 3d sensing architectures that supports structured life. Overall, we are receiving market feedback on both DTOF and OLED 3 d, which supports our view that these technologies will offer volume opportunities for the coming years. Our OLED light and proximity sensing solutions continue their success in the Android market, which has already shown strong adoption of this innovation. Forming the basis for our 3 d OLED development, we realized end and proximity sensing behind the OLED display to remove related components from the device phase. Supporting major Android OEMs, we advanced our OLED light sensing roadmap as part of our display management portfolio. Ultra small scale integrated light and proximity sensing solutions are also receiving increasing market attention. In combination, we serve leading consumer OEMs with a large with a range of display management solution in high volume. Going forward, we expect sophisticated camera enhancing technologies to offer attractive adoption opportunities because camera related feature will drive key value proposition for smartphone users. This includes areas such as automatic white balancing or AWB, laser detect autofocus, 1 d T TOF, wide range flicker detection and AR oriented camera support functions. As an example, our innovative AWB solution uses accurate spectral sensing for a new way of boosting picture quality and natural color expression, and we see additional market traction in this area. Let me now switch to our AMS non consumer business. The AMS automotive, industrial and medical business recorded a more positive overall performance in the 3rd quarter. Compared to the first half, this development reflects a decreasing total impact from the COVID-nineteen pandemic, with signs of improving demand in non consumer markets. Our AMS Automotive business performed in line with expectations. We saw more signs of recovering demand and better order trends in the Q3 as automotive production volumes are improving. We continue to invest in automotive R and D and focus on differentiated applications in safety, driver assistance, autonomous driving, position sensing and chassis control. For 3 d LiDAR, a core automotive sensing technology going forward, we support illumination in multiple programs for Tier 1 system suppliers. Based on our high power VCSEL technology, we offer high count automotive qualified VCSEL arrays that enable advanced scan and non scan LiDAR architectures. We work in close partnership with lidar technology leader, Ebeo, as a key supplier for advanced true solid state lidar. During the quarter, Ebero announced a further program win for their LIDAR system at Chinese volume OEM Great Wall Motors, which is based on high power AMS vehicle arrays. Market traction for the technology remains positive, underlying the strength of AMS IPO offering. Besides this partnership, we see increasing supplier interest in VCSEL based solid state LIDAR versus other architectures driven by design and performance advantages of the technology. Optical in cabin sensing or ICS is an expanding emerging area in automotive sensing. New interior comfort and safety functions such as monitoring are receiving growing attention from OEMs and Tier 1 suppliers. We continue the development of first secure ICS projects, including illumination and see increased interest to assess 3 d technology and our 3 d solution capabilities for upcoming applications. Our AMS Industrial business performed well in line with expectations in the Q3. This reflects a still muted but less visibly impacted demand environment as we see that previously reduced industrial investments seems to improve. We continue to benefit from our broad portfolio and customer base in industrial automation and sensing, including global shutter imaging for automation and machine vision. Our AMS Medical business showed a positive performance in the 3rd quarter. Our medical portfolio is built around medical imaging for CT, digital x-ray, mammography and miniature endoscopy. We are expanding this portfolio with our highly innovative use of spectral sensing in medical lateral flow tests or LFT. Our unmatched solution optically analyzes LFT results with very high accuracy at the point of care. Without the need of high cost dedicated lab equipment, the solution is able to support fast, robust diagnostics at attractive cost, creating a new growth opportunity for the coming years. I'm happy to confirm that in our partnership with European test supplier, Cinnova, production and first volume shipments of an integrated LFT kit for COVID-nineteen antibody testing will start in the current quarter. As a result, we currently expect revenues up to a mid single digit million range still this year. I'm excited about this highly innovative technology, especially as early data shows an excellent performance of our solutions in this application. And I'm equally excited that this turns out to be a very early example of integrating an Osram product into an AMS optical solution. Visibo traction continued to build for the technology given its advantage as we target large scale testing markets for different in vitro diagnostics. For COVID-nineteen related testing, we are in advanced discussions with 1 North American partner and expanding discussions with additional North American partners. We are also in contact with government authorities in Europe. Let me add that we continue to move ahead following release of COVID-nineteen test kits for antibody testing. Building on the solution, we expect to offer a COVID-nineteen LFT kit for antigen testing, which is targeted to identifying current infections in the foreseeable future. In AMS manufacturing operations, we are safeguarding volume production across our locations despite COVID-nineteen related challenges and restrictions and focus on being fully aligned with customer demand. Our Singapore manufacturing continues its strong operational performance in line with higher capacity utilization as we support large scale AMS product ramps in the second half. Before I come to the outlook for our business, we have taken note of the Osram full fiscal year and fiscal 4th quarter results that came out this morning. We are, however, not in a position to discuss details of the Osram business development at this time. We are encouraged by the Osram results showing a clear sequential improvement in revenues and EBITDA profitability. This appears to confirm positive demand trends in the Osram Automotive business. We are also glad to see Osram's ongoing focus on effective cash management for its business, which is starting to show first results. Let me now turn to the outlook for the AMS business. Please note that our financial outlook for the Q4 only comprises the MS business given the financial guidance structure provided by Austria. For the Q4 2020, we confirm our previously announced expectations of further robust sequential growth for the AMS business. This is despite continuing effects from the COVID-nineteen pandemic, impacting economies and our market globally. Based on currently available information and the definition above, we expect strong 4th quarter revenues for our AMS business of $650,000,000 to $690,000,000 up 19% sequentially and are driving the expected growth in our AMS business. At the same time, our AMS non consumer business sees positive demand trends taking hold and pointing towards recovering volumes in several end markets. We also expect profitability in the Q4 to increase meaningfully quarter on quarter for our AMS business. This is expected to result in an adjusted EBIT margin of 24% to 27% for AMS. In closing, let me emphasize that the positive AMS business outlook in spite of the COVID-nineteen pandemic and related impacts demonstrates the strength of the AIMS portfolio and our operational management. Please note that the mentioned expectations assume no further unforeseen negative impact effects from the COVID-nineteen pandemic that could result in a meaningful negative impact on our business. This concludes my remarks, and I would like to hand over to Ingrid. Thank you, Alex, and good morning to you on the call. As Alex pointed out, as of and including the Q3, we are now fully consolidating the financials of Osram Richterge into the AMS Group Financials. We have included OSRAM as a separate reporting segment. I will refer to the AMS business and the OSRAM business when discussing the financial performance of these two business areas. I will refer to the AMS Group when discussing the fully consolidated financials of the group. When we refer to adjusted financial metrics for the AMS business, we refer to adjustments from the as reported IFRS basis pertaining to acquisition related restructuring and share based compensation costs. A reconciliation to the IFRS base of presentation is included on Page 10 of our Q3 2020 report available on our website in the Investors section. Let me now start with the highlights, and I'm on Page 25 of our Q3 earnings release presentation. For the 1st 9 months, the AMS business showed year over year growth of close to 5%. The AMS business saw an adjusted EBIT of US331 million dollars or 20.9 percent. Year over year, that is an improvement in profitability of 3.50 basis points for the 9 month period. With the approval of the DPLTA by Alseram shareholders in an extraordinary shareholders meeting earlier this week, we have moved yet again closer towards getting factual control of OSRAM. Current momentum in the AMS business, mostly on the consumer side, remains strong, being also reflected in the AMS business guidance for the Q4 of 2020. Let's take a closer look at the Q3 financials of the AMS business on Page 27 of the presentation. In the Q3 2020, revenues came in at USD 564,000,000 up sequentially with 15% driven by the ongoing strength in our consumer business. Year over year revenue declined with 17%, largely related to different product launch patterns in our consumer business when compared to the prior year. As a result, we are expecting a somewhat different revenue distribution in the second half of our year. Please also bear in mind that through the portfolio divestitures of our former MEMS microphone IC business and the environmental sensor business, we have a lower quarterly revenue run rate of about US20 $1,000,000 in our financials, unlike 2019. Revenues in the AMS business for the 1st 9 months of 2020 were US1.585 million dollars a year over year growth of around 5% as mentioned. Moving to gross profit and profitability for the AMS business on Page 28. 3rd quarter 2020 adjusted gross margin came in at 41%, lower by 320 basis points compared to Q3 2019, reflecting scale effects from lower volumes. For the 1st 9 months, the adjusted gross margin for the AAM business was 40%, improved by 100 basis points compared to the same period in 2019. The adjusted EBIT of the AMS business for the 3rd quarter was USD 128,000,000 or 22.7 percent of revenues towards the high end of our guidance for the quarter. For the 1st 9 months of 2020, the adjusted EBIT margin improved meaningfully by 3 50 basis points versus the prior year to 20.9%. Foreign exchange movements, especially the weakening of the U. S. Dollar against the euro, provided some headwinds for the AMS business in the Q3 with a meaningful negative impact on EBIT profitability. Moving now to the OpEx development of the AMS business on Page 29. R and D expenses for the Q3 were USD 70,000,000 or 12% of revenues, in line with our expectations. SG and A expenses were US87 $1,000,000 an increase of US32 $1,000,000 compared to Q3 'nineteen largely related to transaction related costs incurred within the context of the Osram acquisition. On an adjusted like for like absolute U. S. Dollar basis, AMS SG and A expenses were slightly below the same period last year. Efficient spending on overheads continues to be a key financial objective for us, also in the combination with Osram and once the transaction related costs have cleared out. Let me now add only a few comments on the Ostrom financials, given that the results are now part of the AMOS Group Q3 2020 consolidated financials. For more information on the stand alone financials of Osram Niichdaghe, I would like to refer you to the Osram website at www.osram.com. I'm now on Slide 32 of the presentation. Ostrand's overall revenues in the quarter were USD 865,000,000 representing a comparable decline of minus 17.7 percent relative to a year ago. On a sequential quarter on quarter basis, revenues increased by close to 22% on a nominal basis with all reporting segments of OSRAM contributing to this meaningful sequential uptick. Adjusted EBIT was negative with minus US68 $1,000,000 or minus 7.9 percent of revenues. Compared to the same period a year ago, the Alstom quarterly and year to date financials are clearly impacted by the COVID-nineteen pandemic. Sequentially, over the last quarters, however, that is comparing the September 22, 2020 to the June 2020 quarter, the financial results have improved markedly, which we would see as pointing to a recovery trajectory in the most important markets Osram is currently operating in. Let me now turn to the AMS Group Financials on Page 35 of the presentation. In the group quarter, group revenues were at US1428 billion dollars with the AMES business contributing US5.6 US564 $1,000,000 Let me also briefly comment on backlog here. Given the absence of comparable backlog data for the Alstrom business importance of intra quarter business, we have not included it here anymore. Adjusted EBIT for the group in Q3 was 4.2%, with AMS at 22.7% and Alstrom negative at minus 7.9%. For the 1st 9 months, group revenues were at US2.450 billion dollars with the AMS business contributing US1585 billion dollars Adjusted EBIT for the 1st 9 months was at 10.7 percent or USD 263,000,000 Turning to the net result and earnings per share now on Page 39 of the presentation. The adjusted net result for the Q3 for the AMES Group was positive with USD 11,000,000 with the AMS business recording an adjusted net result of US67 $1,000,000 The IFRS net result, as reported for the Amos Group, was negative with USD143 1,000,000, USD101 1,000,000 of which were attributable to AMS shareholders. The company's net financing result in the quarter reflected fees related to the Alstrom transaction and higher interest expenses when compared to the same period in 2019, overall net financing expenses were US77 $1,000,000 into the quarter. Adjusted basic and diluted earnings per share were CHF0.09 and CHF0.06 or CHF0.10 or dollars The comparison to prior year is, of course, quite distorted given the first time consolidation of Osram into the group financials this quarter. Let's now take a look at the cash flow and balance sheet items related to liquidity and net debt of the AMS Group to complete the picture on the financials. I'm on Page 40 now. The group operating cash flow was 80 $4,000,000 in the quarter, fully absorbed by CapEx spend in the group, resulting in a free cash flow just above breakeven for the Q3 of 2020. Looking at Page 41, Cash and cash equivalents stood at US1.4 billion dollars at the end of the quarter compared to US2.5 billion dollars at the end of the Q2. This change mainly resulted from the closing of the Alstram transaction and settlement of the tender offer as well as market purchases of Osram shares. As of today, we hold approximately 71% of OSRAM shares. The group net debt stood at 2.4 $1,000,000,000 at the end of the quarter. As a result, total leverage for the group was at a level of approximately 2.2 times as per the end of the Q3 2020. The Q3 of 2020 and the month of October were a fairly active period for AMS on the financing front with a number of transactions being completed. In July, we successfully placed a multi tranche issue of around €1,250,000,000 equivalent 5 year senior notes with international investors comprising €850,000,000 €450,000,000 notes in total. Very recently, on October 27, we successfully placed €760,000,000 of convertible bonds due 2027 with a coupon of 2.125 percent and a conversion premium of 47.5 percent by way of private placement to international investors. Also, very recently in October, we replaced our existing bridge facilities with a new bridge facility of EUR 750,000,000 and paid down the outstanding balance of the existing bank bridge of EUR 450,000,000 We believe that the new and redesigned transaction funding structure that is now in place puts us in a very solid position to work towards the full integration of Alstram going forward. And with that, I'd like to thank you for your attention and open the floor to questions. The first question comes from the line of Sebastian Stavkovitz with Kepler Cheuvreux. Please go ahead. Yeah. Hello, everyone, and thanks for taking the question. The first one is, what kind of visibility do you have for the end of this year taking into account that there are growing number of countries going back into lockdowns or partial lockdowns? That would be the first one. The second one, even if you have not already completed the DPMTA, could you please make an update on the integration process of OSRAM? What have you already done so far to prepare for the upcoming integration of OSRAM by the beginning of next year? Thank you. Yes. Alex, yes, let me take the first question. Ingo takes the second. So visibility for Q4, we this is reflected in our guidance range. We feel comfortable with this guidance range, and that's why we reconfirmed today the guidance for the Q4 as we have done some days back. The potential lockdowns by country, it's included in the guidance range. But if it's as we mentioned in the statement before, if there would be a significant decrease of the situation, that would have an impact. But from the current point of view, based on latest customer forecast and based on our production capabilities, we feel comfortable with the guidance we gave. And on your second question on the integration, I think we progressed very well with the integration planning with the teams. Since fairly on early on in this year, we've already started to put working groups together with colleagues from both AMS and Onstream to work on a number of plans. We regularly go through that together internally, but also with the Osram management, and I think we're well on track. With the approval in the EGM now of Osram this week with a high approval rating, We're now looking forward to have the DPLT commercially registered and then all the plans are in place so that we can hit the button basically somewhat early January probably to start with the work. The next question comes from the line of Robert Sanders with Deutsche Bank. Yes. Hi, good morning. If you could just talk a bit about pipeline into 2021. Maybe if you could just give us an update on your traction, the Android OEMs in 3 d sensing rather than behind OLED? And is that driven by VCSEL or full solutions? My second question would be to do with automotive. If you can just update on your pipeline in automotive, if you can quantify it somehow and whether you expect strong growth into next year and the years after, whether VCSEL or in cabin or Micro Optics or something else? Thanks. Yes, Rob. Thanks for the question. So as we just indicated, we see a very positive traction in the Android space, especially in the behind OLED proximity sensing and ambient light sensing. We are confident with bringing the first solution out in the beginning of next year to bring ASV behind OLED, and we see a good potential there for adoption in the Android space because it makes the 3 d sensing technology invisible and addresses some topics which the current 3 d technology has compared to motive. The strong business we are building up is on the LiDAR business, which will start ramping in the end of 2021, but more in 2022. The traction we have with our largest customer Abeo is very, very strong, and Abeo is building up their own pipeline with car OEMs significantly. And we are seeing also more traction from other Tier 1 companies engaging with us with our VCSEL technology and VCSEL array, including the VCSEL driver, which increases the content even further. And we see that the technology we have available for long distance is very unique, and that's why we see the traction from the car, driving this forward. And we strongly believe the technology we have and the architecture we have with the capabilities we acquired makes us a very unique partner in this area. And related to ICS, we have multiple customer engagements. It's still in the beginning, but we see traction going forward utilizing the 3 d technology in cabin. And this is related not only for 3 d but also in 2 d. The next question comes from the line of Achal Sultania with Credit Suisse. Please go ahead. Hi, good morning Alex. Good morning Ingo. Maybe a question on the synergies again. I guess you had already given a guidance of $300,000,000 of pretax synergies. Can you just help us get provide a bit more color on the phasing of that synergy given that you will start in early January 2021? How much can we expect in 2021 and 2022? That's the first question. And then secondly, on the your 3 d business with your large customer, how should we think about changes or any potential changes going into next year, given that you must be already collaborating with that customer talking about designs for future iPhone models. So can you just help us understand what are the discussion points or parameters that is being taken into consideration as you plan for 2021? Yes. Alex, let me take your second question first and Ingo take the first one. On 3 d related to a large customer, as you know, we can't give any statements related to one specific customer. We feel comfortable based on what we're seeing right now, but we cannot give any details on that. Yes. And on your questions on the synergies, I think, first of all, I think it's important to note that we feel very confident about the €300,000,000 that we communicated consistently in the past. I mentioned just now also on the question of your colleague that we're quite good to see the work on the work streams to support not just integration but also the realization of synergies. So overall, we have a very good feeling about this. We've always said also that overall, we would, of course, try to implement and integrate as fast as we can possibly do that. But forgive me if I don't give you precise guidance now for the synergies for 2021, but the teams are clearly also incentivized to execute with the speed on realizing all the objectives of the integration, including the synergies. The next question comes from the line of Yanadann Menon with Liberum. Please go ahead. Hi, good morning. Thanks for taking the question. I have 2. One is, again, on the integration, but I'm looking more at what you plan to do with some of the struggling businesses within Ausram. So, for instance, things like digital where you've expressed possibility of an exit, How do you think how do you look at that in terms of timescale and what are the sort of challenges or how easy do you think that process will be? And is that something that you will be able to achieve within 2021? And similarly, there is a decision made that on the Continental JV, the 2 parties will take back their respective businesses, which I understand is loss making. So, once you take that business back, do you have any initial thoughts on how you would be able to deal with that in terms of bringing it back to profitability? And my second question is on biosensing on the LFT side, where you said that you had a you expect shipments of a mid single digit million in 2021. What roughly is the sort of pricing that we can expect on that product? And if you look further, are you seeing interest in non COVID applications as well, which could sustain that as a bigger revenue trend going into 'twenty two, '23, etcetera? Thank you very much. Yes. Thanks for the question. Let me start with the second, and then I'll come to the first one. Small correction, you mentioned Q4 2021, actually the revenue start this quarter, so Q4 2020, which is quite encouraging. There are multiple options for this solution and the largest highest content could be several dollars in one LFT kit. So it's quite significant what we can see there. And you are right, the great advantage besides measuring COVID-nineteen antibody and antigen to a later stage is that this technology can be used to identify also other kind of viruses. So everything which has an impact on an LFT stripe can be measured with our spectral sensing technology in an extremely precise way, in a very cheap way and very fast, delivers the the result of the test directly to a cloud and can be accessible whoever has access to it. So that means that there is a very strong trace and follow-up on test result. And we see more and more other opportunities utilizing this technology from based on LFT. So that's very positive. COVID-nineteen is certainly a driver, an ignition to bring this product to the market. But the moment it's there, it can be a wide application space, which makes life much easier and can identify any kind of viruses over time in a very fast manner and can avoid spreading diseases around the globe. On the Ostrom side, as we mentioned multiple times the last quarters, we clearly see that DI is not a strategic asset for us moving forward. And the intention obviously is after the domination agreement is registered that we act timely on all the matters we indicated, whether synergies and making portfolio choices. This applies for DI, that applies as well for the Conti joint venture. We are very happy to see that also made a decision to find a good way forward with Continental to disengage from it. And certainly, the part which comes back to us will be investigated based on profitability and strategic positioning. And we will make them with the assumption decisions beginning of next year. Okay. But timescale wise, would 12 months be something achievable on the DI side? Well, I think the way you know us is that we act as fast as possible and consequently bring this company, the combined company, to a more profitable situation. The next question comes from the line of Jurgen Wagner with MainFirst. Please go ahead. Yes, good morning. Thank you. I actually have two questions. First, on your free cash flow AMS standalone in Q4, given the high growth you indicate quarter over quarter, what can we expect there? And second question on Q1 '21. Other smartphone chip suppliers have indicated a less seasonal pattern this year, not only due to delayed iPhones, but also to Huawei? How do you see that? Thank you. Yes. Thanks for the question. Let me take the last one. I think it's a bit too early to give a statement now on Q1. We look positive into next year, but to give guidance on Q1 is too early. We are confident with the Q4 guidance. And if all the other companies you're talking to us do see less seasonal than in the smartphone market, then potentially we see the same. But it's too early to give any guidance on the Q1. And maybe then the question on the free cash flow. Obviously, at this point in time, I can only comment on our expectation for the free cash flow of AMS and the combined company as you can probably understand. So I mean, if you look at the expectation we have from a business perspective for the Q4, we also expect that, that will be accompanied by also a strong free cash flow performance of the company that so for the overall year, we will again look probably at a very strong free cash flow for the AMS business. Okay. Thank you. The next question comes from the line of Stefan Houri with ODDO. Please go ahead. Yes. Hello. Good morning. Thank you for taking my question. You have talked about the €300,000,000 synergies. But I also remember that in the past or really at the beginning of the offer in 2019, you were talking of a combined company that was able to generate double digit growth and more than 25% EBIT margin. So is that still what you have in mind for the combined company? And if yes, what is the time line for that? And the second question is, you've been talking also in the past of €400,000,000 one off charge for the restructuring. Is it still the same amount? And when do you think we will be we will see it in the account? Thank you. Yes. Thanks for the question, Alexia. Let me answer the first one first. The double digit growth and the 25% adjusted EBIT margin, this was the indication we gave we see as a potential for the combined company. This is our target model. We have the ambition to achieve this in the next few years to come. We didn't give a time line guidance on that one. But in the midterm, this is certainly a financial profile we can consider for the combined entity moving forward. On the EUR 400,000,000 charges, Ingo, take Yes. So yes, indeed. So we always communicate indeed that we would estimate around €400,000,000 as you can imagine. Likewise, with the work we're doing and the work streams, etcetera, and we're now looking into next year. At this point in time, we are already putting that together. I think it's too early to tell. I've also said in the past that I believe that the €400,000,000 was on the rather conservative side of the equation. But that's all I can say for now. So again, I think it's a very conservative number that we communicated back then, And we're currently looking with the rest as well next to the synergies also and to the implementation cost of some of the changes we're anticipating to make. Sorry, when you say conservative number, you mean that it could be less, right? Or Yes. Yes, yes. Yes. Okay. Thank you very much. The next question is from the line of Aditya Metuku with Bank of America. Please go ahead. Yes. Good morning, gents. So I had two questions. Firstly, just a clarification for Ingo. So Ingo, you said earlier that the net debt to EBITDA was at 2.2 tonnes, if I heard that correctly. And so essentially, you're implying that the pro form a EBITDA for the last 12 months is around €1,100,000,000 Am I right in my calculation? And if so, does this €1,100,000,000 include the run rate synergies? It just looks very resilient because you had $1,200,000,000 on a pro form a basis in 2019. So I just wanted to understand if I've got this correct. And secondly, again, when I look at our Fram's financial disclosures, they look in a much simpler, much nicer, much cleaner than they've been with AMS historically. So I just wondered, what are your plans as you take over the financial reporting side of OSRAM? OSRAM, AMS has had dollar reporting, euro reporting. And so this complicated reporting has been investors. Are you planning on making it simpler? And just one quick question on the consolidation. I was a bit surprised to see that you have consolidated from the beginning of 3Q when the deal ended and the deal closed in the 2nd week of July. So this is how we should expect consolidation in full year numbers as well for our modeling purposes. Thank you. So first of all, the leverage does not include synergies, obviously, because the transaction has closed, but we don't have yet started the work on the integration. We can only do that once we have control, which is after the date the DPLT has been registered in the commercial register in Germany. So it's not included in that calculation. On the reporting, I think, again, that's something for us to look into once we have, again, control. I don't think it's a bit premature to talk about that now. I'll take your feedback. Thank you for that. But I think it's too early to tell. As per the consolidation, we have basically been able to integrate it, as you said, and that doesn't also change for the year. As you rightfully point out, the closing took place on July 9. We've included it for the since the 1st July, which is agreed with our auditors. So you should also assume that to be the case for the balance of the year. Understood, very clear. Just one quick clarification on that. So the pro form a EBITDA for the combined company for the last 12 months is SEK 1,100,000,000 am I right? But I think if you look at what I said about the net debt and the leverage. Yes, that's what it comes out to, yes. Okay. Because that looks pretty high and I don't think consensus is expecting that. So, thank you. The next question comes from the line of Sandeep Deshpande with JPMorgan. Please go ahead. Yes. Hi. Thanks for letting me on. I have two questions, if I may. Firstly, I would like to have your views on your VCSEL business in Singapore. I mean, where are you at this point on VCSEL manufacturing as well as on the customer side? I mean, how far have you been able to realize the promises of that business as it was when it was invested in? And then secondly, when you look at AMS stand alone growth into 2020, 2021, what are the biggest two revenue drivers that you see in terms of AMS stand alone? And thirdly, I mean, you've previously, when you announced the acquisition of Osram, given an overview of what you would like to do, but are you now allowed to give a clearer view of what you would like to do at OSRAM? Thank you. Yes. Alex, yes. So on the VCSEL, the facility in Singapore is ramping up. So far, we are according to plan. The major volume for VCSEL we see with the automotive ramp for 3 d LIDAR our VCSEL array. This step is automotive qualified and therefore the products. And as I mentioned before, end 2021, we see the 1st ramp for the automotive part and then certainly getting stronger in 2022. But so far, the VCSEL business we have started for AMS is on track. The revenue drivers, I think, was the second question for 2021, very similar to 2020. It's in the area of display management. It's in the area of 3 d. And certainly, in the more area in bringing the same technology behind the OLED, both in display management and in 3 d. And then certainly, the exciting part, what we show the last two quarters on LFT, on COVID-nineteen, but then also expanding into other application related to LFT. So these, we consider as the volume drivers for the coming year. Thank you. And the last one? Ingo, the last one. Again, please understand that at this point in time, Alseram is a majority owned subsidiary company of AMS, but it's still independent. So we cannot comment on it at this point in time. We patiently will wait for the registration after the very positive vote on the EGM this week, and then we will execute. Thank you. The next question is from the line of Andreas Bolla with Deutsche Cantonaubank. Please go ahead. Yes, good morning gentlemen. 2 or 3 questions. One is bullet 3 d with structured light. Can you give a timeline when the solution could be ready? And what's the progress there? That's the first question. 2nd question on the acquisition related costs and the restructuring costs. These are about north of SEK130 1,000,000 this quarter. What should we expect for Q4? And how much will be cash costs in Q4? Then maybe the third one on bridge financing. Can you give us an indication of the interest costs relative to the refinanced bridge Thanks for the question. Let me take the first one, Alex here. The behind OLED 3 d, as we have indicated, priority for us is active stereo vision. We see this as the optimal solution from today's perspective for 3 d functionality related to front facing. We have ideas and have plans to bring structured life behind OLED as well, but this will be a topic for next year. And first of first priority is bring active stereo vision behind OLED into the market. And then structured like we'll follow. Okay. And then your other question was around restructuring. I'm not so sure I understand your the numbers you mentioned because as a group, there were adjustments indeed, but that doesn't mean that it's all related to restructuring. As far as I can see it, it's the on a group level, the only restructuring charges in the group accounts were related to OSRAM and not to AMS. So if you have questions regarding that, I have to sort of point you towards OSRAM management for that. Please understand at this point in time. So therefore, also with respect to forward looking restructuring adjustments, that's more or less an Austrian point at this point in time. As far as interest is concerned, what I can say is that if you look at the financial results or the financial expenses of the company, AMS said this quarter, roughly half of that was related to interest. Ladies and gentlemen, this concludes our question and answer session for this morning's call. We thank you very much for joining us this morning, and we look forward to speaking to you again with our next quarter's results. Thank you very much, and have a good day.