Earnings Call: Q3 2019

Oct 22, 2019

Ladies and gentlemen, welcome to the AMS Q3 2019 Results Conference Call. I am Sandra, the Chorus Call operator. I would like to remind you that all participants are being listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. This conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over Alexander Evertje, CEO Mr. Mike Wexler Markovich, CFO and Mr. Morris Kleiner, Head of Investor Relations. Please go ahead. Good morning, ladies and gentlemen. This is Moritz Schmeiner. I'm very happy to welcome you to this morning's conference call on our Q3 results 2019. As usual, Alex will lead you through our business, while later on Michael will talk about our financials in more detail. Max, please? Thank you, Moritz. Good morning, ladies and gentlemen. I'm very happy to welcome you to our Q3 2019 conference call this morning. I will first discuss our business starting with some key financial figures and then comment on the announced takeover of our firm for Asana. Following that, Mike will take you through the financials in detail. Our 3rd quarter revenues came in at $645,000,000 above our guidance range and showing a strong increase of 57% quarter on quarter. Our adjusted EBIT for the Q3 was $178,000,000 or 28 percent of revenues, which is very well above our expectation and means EBIT more than tripled compared to last year's Q3. As you can see, our business showed a very strong performance in the Q3 of 2019. We saw strong demand for our consumer solutions, which allowed us to achieve these positive results in light of a more subdued market situation in our non consumer end markets. Consequently, our consumer business again provided the largest contribution to our results in the quarter. We are the leading supplier of optical sensing and 3 d sensing where our extensive 3 d sensing portfolio and know how serves all three approaches structured light, time of flight and active stereo vision. Our advanced high world facing applications with the main focus on illumination and are able to serve different customer needs across all three technologies. Shipping very substantial three d sensing volumes to the leading smartphone OEMs globally, we continue to expand our position in the Android market. This includes strongly increasing volumes for world facing ITOL three d sensing illumination solutions because the camera enhancement features, which these systems support, are highly successful in the market. We therefore expect customer adoption of these features to continue to broaden going forward. The first smartphone implementation of active stereo vision is coming to the market as expected, while our partnership with Qualcomm on ASV is seeing very good progress. We are receiving very positive market feedback for our combined solution and can confirm major OEM interest to introduce ActiveCare Vision in mobile computing. We also see increasing OEM interest to explore BTOF technology for 3 d sensing applications. We already have active product developments in this promising area covering the complex technical aspects. Our 3 d illumination solution use our broad portfolio of pixels, drivers, optics, design and manufacturing, which allows us to adapt to customer requirements and application needs. Based on our extensive capabilities in structured light, ITOF, DTOF and ActiveStereo Vision, we continue to build our leading position in 3 d sensing and illumination. Our long distance 1D T DOF solution for accurate distance capture is getting further positive market feedback, extending on the 1st design win for smartphone laser detect autofocus. We recently announced partnership with image sensor specialist SmartSense for high quantum efficiency in near infrared image sensing has good traction and we are progressing with our active stereo vision reference design for consumer 3 d applications. We also continue our early industrial activities with the global OEM for an active television application in a household device while industrial OEM engagement continued to increase. In digital management, the market success of our innovative high performing behind OLED proximity and light sensors is rapidly growing. This unmatched technology allows OEMs to move light and proximity sensing invisibly behind the OLED display as they pursue maximized screen to body ratio and best of less phone designs. We are supplying an increasing number of high volume Android smartphones and mobile device platforms with these products including a share of recently launched models. Removing vesselless, vessel placed elements from the front of the device is highly effective and therefore driving continued adoption across the full spectrum of leading Android OEMs. Overall, we shipped significant volume of our broad range of advanced display management solutions in the quarter. This also includes increasing adoption of flicker detection sensors at Android OEMs, which improve picture quality by detecting flicker from artificial light. New optical sensing technologies and applications remain a focus of continued R and D investment. Building on our excellence behind OLED capabilities, we have started development activities for 3 d sensing behind the display. As this approach is fully aligned with the market trends to reduce visible components on the front of the device, we expect the technology to create very attractive penetration opportunities in smartphones and mobile devices. While too early to provide the timeline for commercial deployment, we expect to solve the related technical challenges within the next 18 months. OEM engagement of our high quality measurement solution for blood pressure and additional health parameters are ongoing while we continue to pursue medical grade certification for blood pressure in the United States. In a different application area, we see potential for lower resolution spectral sensing used in smartphones and mobile devices, which can enable high performance functions to enhance photopolitic. Our audio sensing business recorded a positive quarter with other consumer products lines shipping in solid volumes. We are a leader in noise cancellation and consumer OEMs' interest in our innovative digital noise cancellation solution for loose fitting wireless earbuds continues to be strong with several designs activities underway. Let me now look at the automotive industrial metal business of our consumer business or non consumer business. Our automotive and industrial metric business performed in line with expectation in the Q3. Our automotive business is experiencing a more subdued market environment as demand trends have turned increasingly muted across world regions. With our focus on safety, driver systems, autonomous driving, position sensing and chassis control, we offer a broad spectrum of sensing solutions for a large of Tier 1 suppliers, OEMs and market segments. We continue strong R and D investment for advanced lidar architectures where our VCSEL illumination technology is seeing substantial interest from major automotive players. Besides the large true solid 3 d LIDAR illumination program for a leading Tier 1 system supplier ZF in conjunction with Ibero, we are pursuing active LiDAR engagements in different geographies. Our capabilities in addressable high power visual arrays offer significant system level advantages for multiple scanning architectures and can be leveraged into future applications in different markets. Link tapping monitoring is another emerging optical application in automotive, which offers attractive opportunities in the coming years. We are seeing very good traction in this new markets as Tier 1 and OEM interest continues to increase. Pursuing several development projects, we have recently gained an in cabin design win for 3 d for illumination at the global Tier 1 supplier. Positive momentum also continues in the sizable emerging protected lighting markets. Based on advanced illumination and projection, this technology enables new comfort and safety features as well as differentiated lighting applications such as light carpets. Our industrial business showed a more muted performance in the Q3, reflecting a challenging market and demand situation in industrial markets worldwide. Serving a wide range of high performance industrial applications, we are able to benefit from a broad portfolio and customer base and the current environment. Industrial Imaging, where we are leading a high performance global shutter technologies, developed in line with end market trends, while contributing positively to our overall performance. Our Medical business performed well in the 3rd quarter, benefiting from its leading market position in medical imaging and CT, digital X-ray and mammography as well as miniature camera endoscopy. Our market penetration is strong across share properties with Asian markets providing ongoing opportunities for expansion. Supporting next generation medical endoscopy, we supply 1 eye micro camera solution to several customers in volume and note ongoing market traction for new micro camera applications. Looking at operations, we are recording very positive effects from the significant cost reduction and yield improvements in our Singapore manufacturing. These ongoing benefits include lower staffing levels and material usage. And I'm happy to see that enable our strong profitability on the basis of robust capacity utilization. For VCSEL based solutions, our outsourced supply chain fully supports the attractive volumes we are recovering recording this year. At the same time, our internal VCSEL line for differentiated designs is ready for the planned front end ramp from around year end. Combining scalable outsourced and internal VCSEL capacity creates a strong position to support expected future volume needs in this growth area. Let me now comment on the takeover offer for Assam, which we announced on Friday. I will focus on some key topics here as I trust we have seen Friday's announcement describing the relevant aspects of the offer. We are pleased to be able to announce this new offer to acquire Osram delivering on our stated intention. We are confident that our offer will be successful as it is very clear in providing a highly attractive fully valued price for Osram shareholders at €41, and a straightforward acceptance threshold. As a preeminent OSHOM shareholder at 19.99%, we are also convinced that this offer is the best available option for OSHOM shareholders. Our shareholding has also resulted in another rumored interested party pulling out, which has made the offer situation very clear from our point of view. Subject to bathroom approval, we currently expect the offer period for 4 weeks to commence by the end of October. The strategic rationale of creating a global leader in sensor solutions and photonics with strong European roots is unchanged, And we clearly believe that this is a compelling opportunity for Osram, AMS and our shareholders. In this context, I'm glad to confirm that our constructive discussions with Osram to update the existing cooperation agreement are ongoing. I feel confidence to conclude these discussions successfully as before and they also underpin our commitments to employees and manufacturing locations in Germany. So given these fruitful discussions, I would like to reiterate that we are offering a winning way forward for AMS and Osram. Combining AMS and Osram will create an outstanding technology platform and a stronger combined company to benefit all stakeholders. Based on this, we look forward to working with the Osmo management team to realize our strategic vision. Let me now come to the outlook of our business. For the Q4 2019, we expect our business to show a strong performance with large scale consumer programs continue to provide very attractive contributions based on smartphone volumes. In our other end markets, however, business momentum is expected to reflect a more challenging macroeconomic environment with higher levels of cautionness. On the basis of available information, we expect 4th quarter revenues of $610,000,000 to $650,000,000 which demonstrates continued strength of a year on year increase of 28% at the midpoint. The adjusted operating margin for the 4th quarter is expected to reach at least the level of the 3rd quarter, which reflects operational performance benefits and expected sequential strength while more than doubling year on year. Based on this positive outlook, we expect leverage for our AMS on a standalone basis and excluding any effect from OXXO share purchases to decrease significantly to a net debt to EBITDA level of 1.5 or lower at year end. Let me now hand over to Maarten for a detailed look at our financial results and further comments on the offer for us now. Please, Martin. Thank you, Alex, and good morning, ladies and gentlemen. As usual, it's my pleasure to give you an overview of our IFRS and adjusted numbers for the Q3 2019. Let me start with our P and L on the top line development. As Alex already mentioned, our 3rd quarter group revenues were $645,000,000 a record level and above top end of our previous guidance. We're very happy about this strong performance, which was again mainly driven by a very strong consumer business based on several smartphone and consumer programs. We saw significant growth in the 3rd quarter as Q3 revenues increased by 57% sequentially from the Q2 and 41% compared to the Q3 last year. Our adjusted gross margin excluding acquisition related and share based compensation costs was 44% compared to 33% in Q3 last year, a significant increase of more than 10 percentage points. Adjusted gross margin also increased by 6 points quarter on quarter. These gross margin developments reflect higher capacity utilization as well as continuing positive effects from significant productivity improvements in our manufacturing processes in Singapore, which results into lowest carbon levels and material usage. Our IFRS reported gross margin was 42% compared to 31% in Q3 last year. Our R and D spending in the quarter was CAD72.5 million in line with our plans and increasing from CAD65.2 million in Q3 last year. In relative terms, we spent 11% of revenues in R and D in the quarter, which is a very attractive level. Our continued strong R and D spending supports a range of platform development and large product opportunities, including automotive lidar for ZF, EDIO and others, as well as innovation in new optical sensing technologies and applications such as behind this grid 3 d sensing. While there are always quarter to quarter movements in R and D spending, we expect similar levels of spending relative to revenues in Q4, while longer term, we target the level of 12% to 14% of revenues on a full year basis. Further down our P and L, SG and A costs were $52,700,000 compared to $40,900,000 in the Q3 last year. In relative terms, we spent 8% of revenues on SG and A in the quarter, which is a strong achievement. Rather with this development and we'll continue to pursue efficient spending as longer term we target a level of 8% to 10% of revenues on a full year basis. Our other operating income of $2,200,000 for the 3rd quarter compared to $2,100,000 in Q3 last year resulted for the most part from R and D support grants from Austrian and European R and D programs, which are tied to dedicated R and D spending for these programs. As in these positive developments, our adjusted operating results or EBIT, excluding acquisition related and share based compensation costs for the Q3 also reached a record level of $177,900,000 or 28% of revenues, which was part of our previous guidance of higher than 25%. This is significant increase from DKK57.6 million or 13% of revenues in Q3 last year. The IFRS reported results from operations or EBIT for the 3rd quarter was $146,500,000 or 23 percent of revenues, strongly up from $35,700,000 in the same period 2018. Our financial result came in positive at $11,800,000 compared to $33,200,000 in Q3 'eighteen. Last year's financial result was heavily skewed by changes in the valuation of the auction element of our U. S. Dollar convertible bond, which we recorded as required by IFRS rules. In contrast, the financial results for this quarter was positively impacted by FX effects and the largest influencing factor as well as by effects from the last portion of our convertible bond buyback program, which has mainly happened in Q2. Consequently, the adjusted net result for the 3rd quarter came in very strong at $168,100,000 compared to $17,800,000 in the same period 2018. Adjusted basic and diluted earnings per share were CHF1.92, CHF1.87 and CHF1.95, CHF1.91 for the quarter compared to Swiss francs and US0.22 dollars and 0.21 dollars respectively for the Q3 of 2018. Our total backlog at the end of September stood at $253,000,000 compared to $301,000,000 at the end of Q2 and $576,000,000 on September 30 last year. In this context, I would like to mention that inter quarter order behavior is playing a meaningful role for our total business and especially on the consumer side. Now let me give you some additional figures from the balance sheet and cash flow to complete the picture. Our cash and cash equivalents put a comfortable $890,000,000 at the end of the quarter compared to $476,000,000 at the end of the 2nd quarter. This change mainly results from a very strong free cash flow in the 3rd quarter as well as the utilization of certain financing facilities in conjunction with the OSOM take away offer and the purchase of 19.99 percent of total Oksom shares. Our trade receivables stood at $280,000,000 up from $178,000,000 at the end of the 2nd quarter. Our EBITDA ratio was favorable to 35 days, down from 41 days in the last quarter and significantly down from 69 days in Q3 last year. The fee dollar level is very attractive and well within the target range I'd like to see. Inventories were also lower at $267,000,000 compared to $315,000,000 at the end of the second quarter, reflecting manufacturing efficiencies among other factors, while a finished good portion of our inventory remained at around 25% of total inventory. On the liability side, we have a current debt position of $287,000,000 at the end of September, while our long term debt stood at $1895,000,000 Our net debt position was 11 $16,000,000 at the end of Q3, including our short term financial investments, which comprise the OXXO shares we have purchased. A long term debt was generally taken on to bolster liquidity, support the major CapEx cycle in Singapore, which has been completed and to create flexibility. Our operating cash flow in the 3rd quarter showed a very strong increase to $299,000,000 which was above expectations and compared to $82,200,000 in the same quarter last year. We expect to continue to see strong cash flow generation in Q4 as well, driving a meaningful positive free cash flow for this year, which takes into account the anticipated much lower capital spending compared to last year. Based on our positive outlook, we currently target the leverage in terms of net debt EBITDA for AMS on a standalone basis and excluding any effects from awesome share purchases will decrease significantly to a level of 1.5 times or lower at year end 2019. I'm very happy to see this rapid leveraging of the AMAS business happening over the course of this year and to an even stronger extent that we had targeted earlier. Our CapEx in the Q3 was $35,000,000 66 percent lower than last year's Q3 spending of $102,000,000 As mentioned before, we expect full year CapEx for 2019 to be significantly lower than last year with the dollar and share of expense already completed the 1st 9 months of 2019. With this in mind, I expect CapEx to be around $200,000,000 for 20.19. Now regarding the takeover of Ross Run, we announced on Friday, I would like to confirm that we expect the previously mentioned cost and revenue synergies with an expected pre tax run rate of at least €300,000,000 On the financing side, the offer is based on a fully underwritten purchase facility of €4,400,000,000 which will be refinanced through a combination of equity and debt issuance. We intend to raise €1,600,000,000 of new equity in Swiss francs. This level is unchanged from the one in the expired offer. The equity issuance, which has been fully underwritten to our banks, will be primarily in the form of rights issue and other equity linked instruments. We expect that the transaction will result in a pro form a December 2019 leverage of approximately 4.5x net debt to EBITDA, assuming 100% of the Ostrum share tendered or approximately 3.4x net debt to EBITDA adjusted for the mentioned run rate cost and revenue synergies. More importantly, at the time of expected closing, we expect pro form a leverage already lower at a level below 4x net debt EBITDA excluding any synergies given strong cash flow generation at AMS. We then expect to deleverage quickly over the next 3 years based on the expected strong cash flow profile of the combined group, again along the same path as outlined for the expiry also. Implementing the envisaged portfolio changes for the combined group would clearly result in a meaningful impact improvement of the balance sheet ratios, but we would not be able to speculate about the oscilloscope or expected timeframe at this point in time. Important is that we have to put in place a sustainable capital structure supporting this offer exactly like what is prior offer with clear potential to improve faster as we move along. And with that, I would like to thank you for your attention and open the floor for questions. Yes. Hello, everyone. Thanks for taking my question. First question would be on the Singapore fab. What was is it fab loading in Singapore today or at the global level at AMS? And do you see any upside to the fab loading going forward? Or you are close to the maximum today? And same question on gross margin. Do you see some upside on gross margin beyond the high level you already reached in Q3? And the second question is on your behind the LED display light and proximity sensing business. How many design wins do you have today in hand? And also on your ASPs, does it compare to your traditional, I would say, ASPs on traditional products? Have you seen any change when you are ramping the volumes with the first projects right now? Thank you. Yes. Good morning. Hi, this is Michael. I'll take your first question. Yes, absolutely. We saw significantly higher loading in our Singapore manufacturing than previously, but we're still not full. So some improvements obviously from the capacity side are possible. Also on the our operating efficiencies and productivity improvements, we will it can always be better and we see upside to gross margins and operating margins therefore going forward. And that's what we also indicated in our outlook statement for Q4 that we see at least the same or even better profitability in the Q4. Yeah, Alexia and your question regarding design wins for behind OLEDs and the night fencing and proximity, We have increasingly a number of design wins, so multiple compared to last quarter for the Android smartphone companies. Important for us is that those products have a much higher contents than the products from us. They are succeeding them. So we see a very strong momentum for additional design wins at significantly higher content compared to the replaced products. Thank you. Next question please. The next question comes from Sandeep Biswan from JPMorgan. Please go ahead. Yes, hi. Thanks for letting me on. Couple of questions if I can. First thing, regarding you've seen strong sales in the product offering guiding also strong sales in the 4th quarter. How should we look to pay utilization in your Singapore facility into the second half of this year compared to how you saw it in the second half of last year? And how that loading is making a difference to the gross margin? And secondly, regarding these new 3 gs sensing products, how do you see their ramp into 2020? Hi, good morning. It's Michael. Happy to take your question. As mentioned before, the utilization significantly improved compared to last year, although there is some space still, so which clearly shows that our strong margins and our strong result we presented with a not fully utilized manufacturing. And as said, we still see some upside potential here. But certainly, I cannot comment on 2020 yet. It's clearly too early. In terms of sorry, let me ask a question, Raghav. In terms of the second half is always a better half is always a better half in terms of the utilization. Do you have a countercyclical customer to help your utilization in the first half of next year? Okay. The utilization now is higher than it was previously, and we see still some improvements possible from here. I cannot comment on next year. Thank you. And your question on 3 d sensing, obviously, as I mentioned before, we have a very good traction on design wins for 3 d sensing. And without commenting on 2020, it's obviously a very strong market trend and a ramping business for us. Thank you. Next question comes from Andrew Gardiner from Barclays. Thanks for taking the question, guys. First on backlog. Michael, you mentioned in your prepared comments that sort of in the quarter, the behavior was playing a factor here in the movement in backlog. Interested in a bit more detail there. In the numbers, it's dropped to $253,000,000 at the end of 3rd quarter. It's the first time, at least in recent memory, that we've seen a sequential drop in the Q3. It's also down a lot year on year. So can you give us a bit more insight as to what's happening within the orders to drive that decline and whether you have less visibility into Q4 and Q1 than you normally would at this time of the year? Thank you. It's like I mentioned, we it's simply different order behavior. Customers are ordering more and more short term, especially on the consumer side. And as you obviously have seen that our that the levels are lower at the beginning of the quarter. But still, we guided for a stronger business in the Q4. And obviously, we could not do that if the orders were not here yet or we would have a very strong forecast for this Q4. But you I mean, as you said, I mean, the guidance, the revenue guidance for Q4 is still strong. So in terms of what is there a distinction here in terms of what you can see the customers planning for? But in terms of the actual order signing on the dotted line, as it were, that's perhaps coming a little bit later or in yes, sort of closer to shipment? Exactly. That's exactly what happened. Orders came later or are coming in later and closer to the need for the customer. It's general trend we see, especially in the consumer business, but also in all other businesses. It's more short term ordering behavior. Okay. And then if I could ask another one on the Osram side. Alex, you mentioned the discussions around the cooperation agreement continuing. Osram themselves, about 10 days ago, when they held a conference call, sort of referred to that as well. They, in those statements, suggested that the discussions you were having would lead to lower synergies, particularly because of the points that they had been pushing back on the manufacturing front. Can you shed any light on that today as to sort of how you're finding a middle ground there? And when do you think we could see finalization of the cooperation agreement? That going to be in place before the offer would actually launch to the market? Thank you. Yes. Thanks for the question. To answer the last part of your question first, yes, that's we expect to have agreement in place before the offer launches. We will communicate the changes the moment we have done them. But to be very clear, the financials we have indicated to the capital market and the synergies remain the same. And we were looking into details how to comment this with the OSA management. It's a very constructive discussions, but the financials we have communicated will remain the same. Okay. Thank you, guys. The next question comes from David O'Connor from Exane BNP. Please go ahead. Great. Thanks for taking my question. A couple from my side. Maybe firstly, Michael, can you give us any detail around the timing of the capital raise? Is that still Q4? Has that been pushed out at this point? And second question for Alex. In producing structured light technology and high volume out of 3 generations of smartphone, how does that technology develop over time from here? And then the third question on the VCSEL, the ramp up in Singapore of the 2,000 wafers per month capacity. Is that more qualification despite or is there enough capacity there to support a high volume ramp? Thanks guys. Yes. Hi, good morning. It's Michael. Obviously, we had to wait for the outcome of the offer. So at least until the end of the offer period before we can make any comment around the timing of the capital raise. But obviously, as you have seen, we want to do this process as fast as possible to concentrate on our business and the great outlook. Okay. Alex here, let me take the second part of your question on structured life. I think we're doing very good progress. And obviously, we are the technology is evolving and is always upgraded for newer generations based on capabilities we have. Important to know is that structured light is only one of the areas we are addressing. We see the same trends in time of flight and active stereo vision. So in all of these areas, we are obviously with our innovation drive performance on the way forward. On top of that, we I mentioned this in my speech before, we're working also on very interesting innovation to bring 3 d sensing behind the OLED or around the OLED. So this is a new way to drive a much nicer display for smartphones or other devices. On the capacity related pressure for VCSELs, as we mentioned, we have a hybrid model. We use the internal manufacturing for more differentiated VCSEL and use our foundry partners to drive also volume shipments what we're doing currently. But in the future, we continue to have a hybrid model in internal manufacturing and external. And we feel very confident that both capacities internal as well as external will support our growth for the VCSEL business. Very helpful. Thank you. The next question comes from David Moulan from UBS. Please go ahead. Hi, sorry. Can you hear me now? Yes, we can. Just a couple of quick questions for me. Firstly, obviously, this year, you're seeing quite a big quite decent ramp in the Android space for some of the behind OLED business. But can you give us an update on where you expect to be this year in terms of your largest customer exposure? And then secondly, just as a follow on, what visibility you have today on how that passes into next year with that largest customer? Yes. Eiry, thanks for the question. As you know, we cannot give detailed numbers, but of course, our exposure is large. Is a high exposure. And obviously, we cannot comment on 2020 yet. But we are seeing a very positive trend. Okay. Thanks. The next question comes from Jurgen Bergner from MainFirst. Please go ahead. Yes, good morning. Thank you for letting me on. I have a follow-up on the margin. In Q4, you have flat sales, that indicate a rising margin despite weakness in outdoor and industrial, which has been historically the higher margin product for you is or can you conclude that the consumer is more profitable? Or are the efficiency improvements just overall more significant than expected. And the second question you talked a lot now about 3 d behind OLED, how different would be such a module or product behind display compared to those we use today? And how much of that could be in theory supplied by IMS? Thank you. Yes. Good morning, Michael. Happy to take your first question and Alex will take your second question. Well, as I said before, we see very positive developments in our teen house manufacturing operations with increased productivity, higher yields, very positive effects on staffing and on material and also higher loads and which obviously is coming from the consumer side, but therefore, is driving the overall profitability higher and said there is still room for improvement. And the second question on behind OLEDs for amyloid sensing proximity as well as 3 d. Obviously, and the good news is this is a very highly complex technology. Just to give you a reference, if you take AMOLED light sensing behind OLEDs, only 4% of the lights, which usually gets when the sensors are all visible from the OLED, Only 4% of the light goes through the OLED screen. So we apparently need a very sensitive light sensor, which is really our sweet spot of technology. And that's why we feel very comfortable there to create a leading role. Related to 3 d, there are multiple ways to address this, but obviously we can't share this right now. But it's again very complex technical data, which again plays to our strengths and that's why we believe we will be clearly leading in this field as well. And the delta in terms in theory, in terms of potential ASP, would it be similar to normal behind OLED ambient light sensor versus the legacy one or Yes, it's too early to speculate, but you can easily imagine that there is a content increase associated with it. The next question comes from Achal Sousania from Credit Suisse. Please go ahead. Hi, good morning. Just trying to touch base more on the direct time of flight architecture. You talked about active product developments in that space. Can you help us understand a bit more as to what areas in there are you actively working on? Is it with cell and with cell drivers? Is it a combination of and optics? Does it include the time of flight sensor as well? Any color around those R and D projects would be helpful. Yes, thanks for the question. Well, our time of flight is certainly the complete illumination, which is VCSEL or the optics and we are going the way to being able to offer the complete solutions. But it's still too early. Okay. And just to follow-up on the OpEx side. Just looking at the numbers, your R and D has been coming down in a few terms over the last 3, 4 quarters. SG and A has actually been going up. Can you help us understand like how should we think about those 2 items going forward? Well, I think I mentioned what we expect going forward. And clearly, there is a few there is a small effect already from the Oksond transaction in our SG and A spending in the Q3. And obviously, also the very strong business led to higher number in for commissions, for example, in bonuses. And this is also reflected in the number. But overall, we clearly see a very positive trend and expect that our both R and D to sales and SG and A to sales as a percentage of sales is coming down. Okay. Thank you, Michael. Thank you very much, everybody. With this, we would like to conclude today's question and answer session. We thank you very much for joining us this morning, and we look forward to speaking to you again following our next set of results. Thank you very much, and have a good day. Ladies and gentlemen, the conference is now over. Thank you for choosing TransCore and thank you for participating in the conference. You may now disconnect your lines. Goodbye.