Good morning, ladies and gentlemen. This is Moritz Gmeiner. I am very happy to welcome you to this morning's conference call on the ams third quarter 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 am very happy to welcome you to our third quarter 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 in my remarks will solely refer to our ams business. The term group will refer to the total group, including Osram. Now some key figures to start with. Third quarter ams revenues came in at $564 million, near the top end of our guidance range for ams. Our group third quarter revenues were $1.428 billion. Our adjusted ams EBIT for the third quarter was $128 million. That is an adjusted EBIT margin of 23% towards the top end of our guidance for ams.
Our group-adjusted EBIT for the third quarter was $60 million. We were able to achieve these strong results for our AMS business against the backdrop of continuing end market and macroeconomic impact from the global COVID-19 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 and Profit 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 DPLTA around end of this year as a possible timeline.
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 and Osram and plan to create a very profitable combined company within the next years. During the quarter, we have also taken three seats on the Osram Supervisory Board as expected and plan to eventually increase ams representation to four 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. Let's take a look at the development of our ams business. Consumer solutions continue 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 3D sensing, including VCSELs, all the way to spectral sensing. Our success is based on continuous significant R&D investments, which allow us to drive innovation in optical technologies. We are a major player in 3D 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, active stereo vision or ASV. Shipping 3D sensing products to leading smartphone OEMs for front-facing and world-facing applications, we have built our strong position focused on 3D 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 3D offering, including the integration of high-performance near-infrared image sensing.
This allows us to create 3D solutions in different technologies. We continue to focus development in world-facing 3D for 3D dToF 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 3D system capabilities, developing a full ams dToF solution that includes VCSEL illuminations, high-performance SPAD sensing, and related software and algorithm. We see increasing market interest to explore AR-related applications on the base of full 3D and dToF technology and expect these applications and dToF to emerge as an attractive 3D market in the next years. Consequently, 3D systems for this application area will be in an innovation focus for us going forward. In front-facing 3D, we are developing sensing technology for face authentication that is invisible behind the display and eliminates bezel-based components from the device front.
This cutting-edge approach leverages our singular expertise in behind OLED or BoLED light emission and sensing together with our deep 3D system know-how. For the highly innovative OLED 3D technology, we combine VCSEL illumination, 3D near-infrared sensing, software, and algorithm in a solution architecture. Here we continue to progress towards demonstrating OLED 3D in ASV early in the first quarter. In the following step, we plan to explore OLED 3D sensing architectures that support structured light. Overall, we are receiving market feedback on both dToF and OLED 3D, 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 3D OLED development, we realized ambient and proximity sensing behind the OLED display to remove related components from the device face. Supporting major Android OEMs, we advance 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 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, 1D dToF, 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 third quarter. Compared to the first half, this development reflects a decreasing total impact from the COVID-19 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 third quarter as automotive production volumes are improving. We continue to invest in automotive R&D and focus on differentiated applications in safety, driver assistance, autonomous driving, position sensing, and chassis control.
For 3D 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, Ibeo, as a key supplier for an advanced true solid-state LiDAR. During the quarter, Ibeo announced a further program win for their LiDAR system at Chinese volume OEM, Great Wall Motors, which is based on high-power ams VCSEL arrays. Market traction for the technology remains positive, underlining the strengths of ams' Ibeo 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 3D technology and our 3D solution capabilities for upcoming applications. Our ams industrial business performed well in line with expectations in the third quarter. This reflects a still muted but less visibly impacted demand environment as we see that previously reduced industrial investment 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 third 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 unmet 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, Senova, production and first volume shipments of an integrated LFT kit for COVID-19 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 solution in this application. I'm equally excited that this turns out to be a very early example of integrating an Osram product into an ams optical solution. We see good traction continue to build for the technology, given its advantage as we target large-scale testing markets for different in vitro diagnostics. For COVID-19 related testing, we are in advanced discussions with one 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-19 test kits for antibody testing. Building on the solution, we expect to offer a COVID-19 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-19 related challenges and restrictions, and focused 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 fourth 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 fourth quarter only comprises the ams business, given the financial guidance structure provided by Osram. For the fourth quarter 2020, we confirm our previously announced expectations of further robust sequential growth for the ams business. This is despite continuing effects from the COVID-19 pandemic impacting economies and our market globally. Based on currently available information and the definition above, we expect strong fourth quarter revenues for our ams business of $650 -690 million, 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 fourth quarter to increase meaningfully quarter-on-quarter for our ams business. This is expected to result in an adjusted EBIT margin of 24%-27% for ams. In closing, let me emphasize that the positive ams business outlook, in spite of the COVID-19 pandemic and related impacts, demonstrates the strengths of the ams portfolio and our operational management. Please note that the mentioned expectations assume no further unforeseen negative effects from the COVID-19 pandemic that could result in a meaningful negative impact on our business. This concludes my remarks, and I would like to hand over to Ingo.
Thank you, Alex. Good morning to you on the call. As Alex pointed out, as of and including the third quarter, we're now fully consolidating the financials of OSRAM Licht AG 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 investor section.
Let me now start with the highlights. I'm on page 25 of our Q3 earnings release presentation. For the first nine months, the ams business showed year-over-year growth of close to 5%. The ams business saw an adjusted EBIT of $331 million, or 20.9% year-over-year. That is an improvement in profitability of 350 basis points for the nine-month period. With the approval of the DPLTA by Osram 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 fourth quarter of 2020.
Let's take a closer look at the Q3 financials of the ams business on page 27 of the presentation. In the third quarter 2020, revenues came in at $564 million, 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 $20 million in our financials, unlike 2019. Revenues in the ams business for the first nine months of 2020 were $1.585 billion, a year-over-year growth of around 5%, as mentioned.
Moving to gross profit and profitability for the ams business on page 28. Third 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 first nine months, the adjusted gross margin for the ams business was 40%, improved by 100 basis points compared to the same period in 2019. The adjusted EBIT of the ams business for the third quarter was $128 million, or 22.7% of revenues towards the high end of our guidance for the quarter. For the first nine months of 2020, the adjusted EBIT margin improved meaningfully by 350 basis points versus the prior year to 20.9%. Foreign exchange movements, especially the weakening of the US dollar against the euro, provided some headwinds for the ams business in the third quarter with a meaningful negative impact on EBIT profitability.
Moving now to the OpEx development of the ams business on page 29. R&D expenses for the third quarter were $70 million, or 12% of revenues, in line with our expectations. SG&A expenses were $87 million, an increase of $32 million compared to Q3 2019, 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&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 Osram financials, given that the results are now part of the ams Group third quarter 2020 consolidated financials.
For more information on the standalone financials of OSRAM Licht AG, I would like to refer you to the Osram website at www.osram.com. I'm now on slide 32 of the presentation. Osram's overall revenues in the quarter were $865 million, representing a comparable decline of -17.7% 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 -$68 million or -7.9% of revenues. Compared to the same period a year ago, the Osram quarterly and year-to-date financials are clearly impacted by the COVID-19 pandemic.
Sequentially over the last quarters, however, that is comparing the September 2020 to the June 2020 quarter, the financials 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 quarter group revenues were at $1.428 billion with the ams business contributing $564 million. Let me also briefly comment on backlog here. Given the absence of comparable backlog data for the Osram business and the increasingly very limited relevance of backlog information for the ams business due to the growing 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 Osram negative at -7.9%.
For the first nine months, group revenues were at $2.450 billion with the ams business contributing $1.585 billion. Adjusted EBIT for the first nine months was at 10.7% or $263 million. Turning to the net result and earnings per share now on page 39 of the presentation. The adjusted net result for the third quarter for the ams group was positive with $11 million, with the ams business recording an adjusted net result of $67 million. The IFRS net result as reported for the ams group was negative with $143 million, $101 million of which were attributable to ams shareholders. The company's net financing result in the quarter reflected fees related to the Osram transaction and higher interest expenses when compared to the same period in 2019. Overall net financing expenses were $77 million into the quarter.
Adjusted basic and diluted earnings per share were CHF 0.09 and CHF 0.06, or $0.10 or $0.06. 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 $84 million in the quarter, fully absorbed by CapEx spend in the group, resulting in a free cash flow just above break even for the third quarter of 2020. Looking at page 41, cash and cash equivalents stood at $1.4 billion at the end of the quarter, compared to $2.5 billion at the end of the second quarter.
This change mainly resulted from the closing of the Osram 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 billion at the end of the quarter. As a result, total leverage for the group was at a level of approximately 2.2 x as per the end of the third quarter 2020. The third quarter 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 EUR 1.25 billion equivalent five-year senior notes with international investors comprising EUR 850 million and $450 million notes in total.
Very recently, on October 27th, we successfully placed EUR 760 million of convertible bonds due 2027, with a coupon of 2.125% and a conversion premium of 47.5% 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 million and paid down the outstanding balance of the existing bank bridge of EUR 450 million. 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 Osram going forward. With that, I'd like to thank you for your attention and open the floor to questions.
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 touchtone telephone. If you wish to remove yourself from the queue you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. 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 to the line of S é bastien Sztabowicz 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 a 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 DPLTA, 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.
Yeah. Alex here. Let me take the first question. Ingo takes the second. Visibility for Q4, this is reflected in our guidance range. We feel comfortable with this guidance range, and that's why we reconfirm today, the guidance for the fourth quarter as we have done some days back.
The potential lockdowns by country, it's included in the guidance range, but as we mentioned in the statement before, if there would be a significant decrease of the situation, that would have an impact. 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.
On your second question on the integration, I think we progress very well with the integration planning with the teams. As you know, since fairly early on in this year, we've already started to put working groups together with colleagues from both ams and Osram 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 DPLTA commercially registered and then all the plans are in place where we can hit the button basically, somewhat early January probably to start with the work.
Thank you.
The next question comes from the line of Robert Sanders with Deutsche Bank. Please go ahead.
Yeah. 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 3D sensing rather than Behind OLED. 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 microoptics or something else. Thanks.
Yeah, Rob. Thanks for the question. As we just indicate, 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 adaption in the Android space because it makes the 3D sensing technology invisible, and addresses some topics which the current 3D technology has compared. Automotive, 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, Ibeo, is very strong, and Ibeo is building up their own pipeline with car OEMs significantly.
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. 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 OEMs driving this forward. 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. Related to ICS, we have multiple customer engagements. It's still in the beginning, but we see traction going forward utilizing the 3D technology in-cabin, and this is related not only for 3D, but also in 2D.
Thanks a lot.
The next question comes the line of Achal Sultania with Credit Suisse. Please go ahead.
Hi. Morning, Alex. Morning, Ingo. A question on the synergies again. I guess you'd already given a guidance of EUR 300 million of pre-tax synergies. Can you just help us 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. Secondly, on your 3D 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? Can you just help us understand what are the discussion points or parameters that is being taken into consideration as you plan for 2021? Thank you.
Yeah. Alex, let me take your second question first and Ingo take the first one. On 3D, related to a large customer, as you know, we can't give any statements related to one specific customers. We feel comfortable based on what we're seeing right now, but we cannot give any details on that.
Yeah, 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 EUR 300 million 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 the integration, but also realization of synergies. 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. Forgive me if I don't give you precise guidance now for the synergies for 2021. The teams are clearly also incentivized to execute with speed on realizing all the objectives of the integration, including the synergies.
Thank you, Ingo.
The next question comes from line of Janardan Menon with Liberum. Please go ahead.
Hi. Good morning. Thanks for taking the question. I have two. One is again on the integration, I'm looking more at what you plan to do with some of the struggling businesses within Osram. For instance things like Digital Imaging, where you expressed possibility of an exit. How do you look at that in terms of timescale? What are the sort of challenges or how easy do you think that process will be? Is that something that you will be able to achieve within 2021? Similarly, there's a decision made that on the Continental JV the two parties will take back their respective businesses which I understand is loss-making. 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?
My second question is on biosensing, on the LFT side, where you said that you expect a shipment of a mid-single digit million EUR in 2021. What roughly is the sort of pricing that we can expect on that product? 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 2022, 2023, et cetera? Thank you very much.
Yeah. Thanks for the question. Let me start with the second, then I come to the first one. A small correction, you mentioned Q4 2021. Actually, the revenue starts this quarter, Q4 2020, which it's quite encouraging. There are multiple options for this solution. The largest, highest quantity could be several EUR in one LFT kit. It's quite significant what we can see there. You are right, the great advantage besides measuring COVID-19 antibody and antigen to a later stage is that this technology can be used to identify also other kind of viruses. Everything which has an impact on an LFT strip can be measured with our spectral sensing technology in an extremely precise way, in a very cheap way, and very fast. It delivers the result of the test directly to a cloud and can be accessible whoever has access to it.
That means that there's a very strong trace and follow-up on test results. We see more and more other opportunities utilizing this technology based on LFT. That's very positive. COVID-19 is certainly a driver, an ignition to bring this product to the market. 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 Osram side, as we mentioned multiple times the last quarters, we clearly see that DI is not a strategic asset for us moving forward. The intention obviously is after the domination agreement is registered, that we act timely on all the matters we indicated, whether it's synergies and making portfolio choices.
This applies for DI, that applies as well for the Continental venture. We are very happy to see that Osram made a decision to find a good way forward with Continental to disengage from it. Certainly the part which comes back to us will be investigated based on profitability and strategic positioning. We will make then with the Osram team the decisions beginning of next year.
Okay. 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. Consequently bring this company to combined company to a more profitable situation.
Understood. Thank you very much.
The next question comes from line of Jürgen Wagner with MainFirst. Please go ahead.
Yeah, good morning. Thank you. I actually have two questions. First, on your free cash flow, ams stand-alone in Q4, given the high growth you indicate quarter-over-quarter, what can we expect there? Second question on Q1 2021. 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.
Yeah, 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. To give guidance on Q1 is too early. We are confident with the Q4 guidance. If all the other companies you're talking to still see less seasonal than in a smartphone market, potentially we see the same. It's too early to give any guidance on the first quarter.
Okay.
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 not the combined company, as you can probably understand. If you look at the expectation we have from a business perspective for the fourth quarter, we also expect that that will be accompanied by also a strong free cash flow performance of the company. 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 line of Stéphane Houri with Oddo. Please go ahead.
Yes. Hello, good morning. Thank you for taking my question. You have talked about the EUR 300 million synergies. 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. Is that still what you have in mind for the combined company? If yes, what is the timeline for that? The second question is, you've been talking also in the past of a EUR 400 million one-off charge for the restructuring. Is it still the same amount? When do you think we will see it in the accounts? Thank you.
Thanks for the question, Alex here. 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 years to come. We didn't give a timeline guidance on that one. In the midterm, this is certainly a financial profile we can consider for the combined entity, moving forward. On the EUR 400 million charges, Ingo, take it.
Indeed. We always communicate indeed that we would estimate around EUR 400 million. As you can imagine, likewise with the work we're doing and the work streams, et cetera, 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 EUR 400 million was on the rather conservative side of the equation. That's all I can say for now. Again, I think it's a very conservative number that we communicated back then. We're currently looking with the rest as well. Next to the synergies, also into 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? The contrary?
Yes.
Okay. Thank you very much. Understood.
The next question is from the line of Adithya Metuku with Bank of America. Please go ahead.
Yes. Good morning, gents. I had two questions. Firstly, just a clarification for Ingo. Ingo, you said earlier that the net debt to EBITDA was at 2.2 times, if I heard that correctly. Essentially you're implying that the pro forma EBITDA for the last 12 months is around EUR 1.1 billion. Am I right in my calculation? If so, does this EUR 1.1 billion include the run- rate synergies? It just looks very resilient because you had EUR 1.2 billion on a pro forma basis in 2019. I just wanted to understand, if I've got this correct. Secondly, again, when I look at Osram's financials disclosures, they look in a much simpler, much nicer, much cleaner than they've been with ams historically. I just wondered, what are your plans as you take over the financial reporting side of Osram?
ams has had dollar reporting, euro reporting, and some of this complicated reporting has been off-putting for investors. Are you planning on making it simpler? 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 second week of July. Is this how we should expect consolidation in full-year numbers as well for our modeling purposes? Thank you.
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 DPLTA has been registered in the commercial register in Germany. 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. 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 the 9th. We've included it since the 1st of July, which is agreed with our auditors. You should also assume that to be the case for the balance of the year.
Understood very clear. Just one quick clarification on that. The pro forma EBITDA for the combined company for the last 12 months is EUR 1.1 billion. Am I right?
I think if you look at what I said about the net debt and the leverage.
Yeah, that's what it comes out to. Yes. Okay. That looks pretty high, and I don't think consensus is expecting that. Thank you.
The next question comes from the line of Sandeep Deshpande with JP Morgan. Please go ahead.
Yeah. 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. Where are you at this point on VCSEL manufacturing, as well as on the customer side? How far have you been able to realize the promises of that business as it was when it was invested in? Secondly, when you look at ams standalone growth into 2021, what are the biggest two revenue drivers that you see in terms of ams standalone? Thirdly, you've previously, when you announced the acquisition of Osram, given an overview of what you would like to do, are you now allowed to give a clearer view of what you would like to do at Osram? Thank you.
Yeah. Alex here. 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 3D LiDAR, for our VCSEL array. This fab is automotive qualified, and therefore the products, and as I mentioned before, ends 2021, we see the first ramp for the automotive part and then certainly getting stronger in 2022. 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 3D, and certainly, in the more area in bringing the same technology behind the OLED, both in display management and in 3D.
Certainly, the exciting part, which we showed the last two quarters on LFT, on COVID-19, also expanding into other applications related to LFT. These we consider as the volume drivers for the coming year.
Thank you. The last one?
Osram. I think it was the last one. Again, please understand that at this point in time, Osram is a majority-owned subsidiary company of ams, but is still independent. 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, then we will execute.
Thank you.
The next question is from the line of Andreas Müller with Zürcher Kantonalbank. Please go ahead.
Yes. Good morning, gentlemen. Two or three questions. One is OLED 3D with structured light. Can you give a timeline when the solution could be ready? What's the progress there? That's the first question. Second question on the acquisition-related costs and restructuring costs. These are about north of EUR 130 million this quarter. What should we expect for Q4? How much will be cash costs in Q4? Maybe the third one on bridge financing. Can you give an indication of the interest costs relative to the refinanced bridge loan?
Yeah. Thanks for the question. Let me take the first one, Alex here. The Behind OLED 3D, as we have indicated, priority for us is active stereo vision. We see this as the optimal solution from today's perspective for 3D functionality related to front-facing. We have ideas and have plans to bring structured light Behind OLED as well. This will be a topic for next year. First priority is to bring active stereo vision Behind OLED into the market. Structured light will follow.
Okay.
The other question was around restructuring. I'm not so sure I understand the numbers you mentioned because, as a group, there were adjustments indeed. That doesn't mean that it's all related to restructuring. As far as I can see it, on a group level, the only restructuring charges in the group accounts were related to Osram and not to ams. 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. Therefore, also with respect to forward-looking restructuring adjustments, that's more or less an Osram 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, at this quarter, roughly half of that was related to interest.
Okay. Thank you.
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.