Ladies and gentlemen, welcome to the ams first quarter 2019 results conference call. I'm Iruna, the Chorus Call operator. I'd like to remind you that all participants will be listening remote and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Alexander Everke, CEO, Mr. Michael Wachsler-Markowitsch, CFO, and Mr. Moritz Gmeiner, Head of Investor Relations. Please go ahead, gentlemen.
Good morning, ladies and gentlemen. This is Moritz Gmeiner. I'm very happy to welcome you to this morning's conference call on our first quarter 2019 results. As usual, Alex will lead you through the key developments in our business, and Michael will give you an overview of our financial performance. Alex?
Thank you, Moritz. Good morning, ladies and gentlemen. I'm very happy to welcome you to our first quarter 2019 conference call this morning. I will now discuss our business starting with some key financial figures. Michael will later take you through the financials in detail. Our first quarter revenues came in at $390 million at the top end of our expectations, despite a sequential decrease of 20%. Our adjusted EBIT for the first quarter was $24 million or 6% of revenues, above our expectations. As you can see, our business performed very well in the first quarter of 2019, driven largely by our consumer business as the biggest contributor. We recorded these positive results despite a generally more subdued end market environment and in addition to the typical strong seasonality in the consumer market.
As a leader in optical sensing, our portfolio spans high-performance solutions for 3D sensing, including VCSEL-based illumination, high-quality display management, including behind OLED, true color and microscale proximity sensing, bio/spectral sensing, and other optical applications. We are a leading provider for 3D sensing technology, shipping in high volume to consumer OEMs. Our extensive 3D portfolio and system know-how, including 3D hard and software, covers all three approaches, structured light, time-of-flight, and active stereo vision. We support both front-facing and world-facing 3D systems with the current focus on 3D illumination. As previously indicated, the market is moving along a multi-year adoption timeline for front-facing as well as world-facing 3D sensing. The adoption of front-facing 3D is expanding at a good pace while world-facing 3D sensing, as anticipated, is seeing instances of early adoption.
As a result, we are experiencing the expected positive momentum for wider adoption of 3D sensing this year. In line with our previous comments, expected Android smartphone launches that include ams 3D technology started in the first quarter. The previously mentioned illumination solution for world-facing 3D sensing system at a major Android OEM has started volume shipments in the quarter. As anticipated, we expect additional 3D sensing-enabled Android devices with ams 3D illumination to be launched over the course of 2019. There's a range of ams 3D solutions across Android devices, which have already been launched or are expected to be launched this year. These shipping and expected solutions include several front-facing 3D illumination solutions, including iToF, the first world-facing illumination solution mentioned before, and the first use of active stereo vision.
The successes I just mentioned are expanding our customer base for 3D sensing that includes the world's leading smartphone OEMs. At the same time, the wins underline our position as a leading provider of 3D sensing across technologies. Our advanced high-power VCSEL portfolio is a core driver of our market success in 3D sensing. Because our VCSEL technology offers advantages for 3D illumination in all three technologies. Moreover, and in contrast to VCSEL-focused vendors, we are able to offer OEMs full solutions for 3D illumination. These can incorporate VCSEL arrays, VCSEL drivers, optics, module design, and/or manufacturing. As these solutions offer high differentiation and fully optimized design for performance, our capabilities create a meaningful competitive advantage. We therefore see ongoing customer traction in 3D sensing, where our portfolio supports dot and pattern projection, different types of flood illumination, and time-of-flight proximity sensing.
Based on this portfolio, we are establishing a strong market position in 3D sensing illumination. We recently launched an industry-leading long-distance 1D time-of-flight solution, which provides accurate distance measurements up to around 2.5 meters. Interest from consumer OEMs is already significant for applications such as laser detect autofocus for smartphone backside cameras. In addition, we are seeing increasing interest from other markets such as IoT. I also expect that this solution can support very interesting use cases in areas such as consumer robotics. In display management, I'm excited about our innovative solution for proximity and light sensing behind OLED displays. Shortly after launch, this technology has already become a resounding market success. We allow OEMs to place light and proximity sensing invisibly behind the OLED display. We thus help to maximize screen-to-body ratio and enable bezel-less phone designs.
Several major smartphone platforms that were launched by different Asian OEMs in the first quarter already used our behind OLED sensors, and shipment volumes are expanding. Removing bezel placed elements from the front side has become a trend in smartphones. Customer traction for behind OLED continues to be strong, and expect adoption to broaden from this into next year. At the same time, we are shipping significant volumes of customized true color sensing for advanced display management. Another new area showing good momentum in customer adoption is flicker detection for smartphone cameras. We have started high volume shipment of these sensing solutions to Asian OEMs this year. Positioned next to road-facing picture cameras, the sensor detects flicker from artificial lighting, which can then be eliminated from the picture. With this technology, we enable even higher picture quality in all lighting conditions.
We continue to focus development efforts for new optical sensing technologies and see increasing customer traction for our highly differentiated biosensing solutions. Here, we offer fast, high-quality measurement of blood pressure, which is a very valuable health indicator and which we complement by heart rate and a range of additional personal health parameters. Our solution provides a comprehensive set of personal health data and is able to support next-generation wearables and other mobile devices. As a result, we are pursuing several OEM engagement in this area for the coming years. We also pursue regulatory certification for medical-grade blood pressure measurement in the United States and expect to complete it this year. Besides this positive development in multiple areas, I also want to comment on a less favorable development. In the customer project for consumer spectral sensing solution, we have unfortunately encountered difficulties at an advanced stage.
These are related to matching a highly complex emerging technology to evolving use cases envisaged by the customer and their volume implementation in a mobile application. Efforts to take these customer and technical requirements into account have resulted in unplanned delays. As a consequence, we and the customer have moved beyond a desired time window for implementing the current project. We would have expected a revenue contribution from this project for this year, but given the very strong dynamics we gained over the last few quarters, we do not expect a negative impact from this on the total revenue for this year. We continue to pursue the mass market readiness and implementation of spectral sensing for consumer use cases, given its application potential and attractive capabilities. In this context, we continue discussions with OEMs and are currently discussing another consumer spectral sensing opportunity at an earlier stage.
Next to our optical sensing business, audio sensing showed a good performance in the first quarter. We have presented our latest innovation in active noise cancellation, which enables high-quality noise canceling for smaller size wireless earbuds. This is difficult to achieve due to the relatively open nature of these earbuds and their significant space and power constraints. I'm happy to share that we are already seeing strong OEM interest and volume opportunities for this solution. Let me now look at the other non-consumer areas of ams. Our automotive, industrial, and medical business performed in line with expectations in the quarter. In automotive, we are seeing a less favorable market environment as demand trends continue to be mixed across world regions. However, given our focus on safety, driver systems, autonomous driving, position sensing, and chassis control, we cover a range of applications, Tier 1 suppliers, OEMs, and market segments.
Significant R&D investment for the reported major 3D LiDAR program continue this year, supporting advanced solid state LiDAR architectures. Here, we provide a high-power VCSEL illumination system for a large-scale deployment. Our VCSEL illumination capabilities for LiDAR applications are attracting strong interest from a number of major automotive players. As a result, we are actively pursuing several LiDAR engagements in different geographies. We also note increased traction for our VCSEL technology for alternative LiDAR architectures, such as macro-mechanical spinning solutions and MEMS micromirrors. For these architectures, our VCSEL can help solve systematic challenges, giving them technology advantages. New optical 2D and 3D sensing applications inside the vehicle are gaining momentum in the market. We are engaged in multiple design activities in this field, which we believe can offer leverage opportunities for our portfolio.
In addition, we see potential to complete global shutter image sensors in upcoming automotive optical sensing. I'm also glad to point out the attractive growth market for automotive projecting lighting. In this new area, we are expanding our market position in safety and comfort applications such as light carpets outside the vehicle. Here we offer advanced illumination modules which leverage our VCSEL optics and manufacturing expertise. Our industrial business showed an attractive performance in the quarter, reflecting a limited impact from a less favorable demand situation in the industrial market. As a leader in industrial sensing, we serve a wide range of applications in industrial and factory automation, hardware, industrial imaging, and related areas. This expansive portfolio and application base is proving supportive to our business in the current environment. We hold a leading position in high-performance global shutter solutions for industrial imaging.
This is an expanding market and offers attractive growth opportunities for us going forward. Our medical business recorded another solid quarter focused on medical imaging for computed tomography and digital X-ray, as well as microcamera endoscopy. Our market penetration in Asia is expanding further as we added another program win at the medical imaging OEM in Asia. We are the leader in microcameras for next-generation medical endoscopy, and we see continued growth in the market for disposable endoscopes. Implementing last year's strategic decision to de-emphasize our environmental sensing activities, we recently announced the creation of a joint venture with Wise Road Capital for our environmental flow and pressure sensing. We will transfer IP, sensor products, relevant customers, and employees to the joint venture, and expect the transaction to conclude in early fall.
Looking at our operations, we have implemented a range of cost improvement measures in our Singapore operations since the beginning of this year. We have started to recognize positive effects from these efforts and see ongoing benefits from better cost efficiency in our Singapore manufacturing. These include lower staffing levels together with overall improvement in the utilization. Regarding our VCSEL needs, the attractive volumes we anticipate for this year will be fully supported by our outsourced supply chain as expected. Our internal VCSEL production line for new differentiated designs is on track for completion and its planned ramp for around year-end. We combine scalable outsourced and internal VCSEL capacity, which puts us into a very nice position for expected volume growth in the future.
Our capital expenditures are developing fully in line with expectations, we are on course for a significantly lower CapEx, which we expect for full year 2019 compared to 2018. Let me now come to the outlook for our business. For the second quarter 2019, we expect a positive development of our business as the consumer market environment appears to have stabilized, the smartphone demand is expected to show lower seasonal impact. In addition, we have started to ramp design wins of the recent months and quarters, which drive broadening engagement across our Android customer base. Our other end markets generally reflect a less favorable macroeconomic environment and a higher level of cautiousness, we expect them to continue their positive contribution.
Based on available information, we expect second quarter revenues of $390 million-$430 million, which translates into a sequential growth at the midpoint and a very strong year-on-year increase of 62%. The adjusted operating margin for the second quarter is anticipated to increase strongly to around 10%, benefiting from further improvements we expect in our manufacturing operations. Let me now hand over to Mike for a different look at our financial results.
Thank you, Alex. Good morning, ladies and gentlemen. As usual, it is my pleasure to give you an overview of our IFRS and adjusted numbers for the first quarter 2019. Let me start with our P&L and top-line development. As Alex already mentioned, our first quarter group revenues were $390.2 million, just above the top end of our previous guidance. We are happy about this performance, which we achieved despite a more subdued market environment and characteristic first quarter consumer seasonality. Q1 revenues decreased 7% compared to last year and 10% sequentially from the fourth quarter 2018. Our adjusted gross margin, excluding acquisition-related and share-based compensation costs, was at 32% compared to 36% in Q1 last year. This gross margin development reflects certain product mix effects and relative revenue contributions given the more difficult environment across a number of end markets.
Our IFRS reported gross margin was 29% compared to 33% in Q1 last year. Our R&D spending was $79 million in the first quarter 2019, in line with our plans, but a significant increase from $56.8 million in Q1 last year. In relative terms, we spent 20% of revenues on R&D in the quarter. Our continued strong R&D spending supports a range of platform developments and large product opportunities, including our automotive LiDAR and consumer optical sensing activities. There are always quarter-to-quarter movements in R&D spending. We expect lower levels of spending relative to revenues going forward, as we want to get back to a level of below 15% of revenues for R&D. Further down in our P&L, SG&A costs were $44.3 million compared to $40.4 million in the first quarter last year. In relative terms, we spent 11% of revenues on SG&A in the quarter.
Here, we also expect an improvement relative to revenues going forward. As you know, for our SG&A spending, we work towards a level of well below 10% of revenues on a full-year basis. Our other operating income of $4.1 million for the quarter compared to $3.7 million in Q1 last year resulted almost part from R&D support grants from Austrian and European R&D programs, which are tied to dedicated R&D spending for these programs. Given these developments, our adjusted operating result or EBIT, excluding acquisition-related and share-based compensation costs for the first quarter was $23.5 million or 6% of revenues, which was nicely above our previous guidance. It decreased, though, from $71.4 million, or 17% of revenues in Q1 last year.
The IFRS reported result from operations or EBIT for the first quarter was negative EUR 4.5 million, or -1% of revenues, down from positive EUR 43 million in the same period 2018. Our financial result came in at negative EUR 2.8 million, compared to positive EUR 29.7 million in Q1 2018, which was heavily impacted by a positive accounting effect from last year's revised earn-out structure in conjunction with the Heptagon acquisition. The financial result also reflects non-cash valuation adjustments for foreign currency balance sheet items and interest expenses. The adjusted net result for the quarter came in at minus EUR 9.5 million compared to plus EUR 92.3 million in the same period in 2018. Last year's result was very positively impacted by accounting adjustments due to valuation effects of the issued U.S. dollar convertible bond.
Adjusted basic and diluted earnings per share were CHF -0.12 and -0.12, compared to CHF 1.20 and 1.12 in Q1 2018, or U.S. dollar -12 and -12.12, sorry, compared to U.S. dollar 1.15 and 1.08 respectively for the first quarter 2018. Our total backlog on March 31st, 2019, stood at EUR 288.4 million compared to EUR 331.4 million we showed at the end of last year, and EUR 319.6 million on March 31st, 2018. In this context, intra-quarter business has come to play a more meaningful role for our total business, especially on the consumer side. I would like to give you some additional figures from the balance sheet and the cash flow statement to complete the picture.
Our cash and cash equivalents stood at comfortable EUR 647 million at the end of the quarter, compared to EUR 710 million at the end of the fourth quarter last year. This change mainly results from the planned repayment of certain debt facilities and the acquisition of treasury shares. Our trade receivables stood at EUR 126 million, down from EUR 137 million at the end of the fourth quarter. Our DSO ratio was a favorable 35 days, down from 44 days in the last quarter, and significantly down from 55 days in Q1 last year. I'm very happy about this positive development where, as previously anticipated, we are seeing a solid decrease in our DSO. Inventories were also lower at EUR 325 million, compared to EUR 352 million at the end of the fourth quarter, while the finished goods portion of our inventory remained at around 25% of total inventory.
On the liability side, we have a current debt position of EUR 250 million, while our long-term debt stood at EUR 1,801 million at the end of March. Our net debt position was EUR 1,404 million at the end of Q1. Our long-term debt was generally taken on to bolster liquidity, support the major CapEx cycle, which has now been completed, and to create flexibility. Apart from the two issued convertible bonds, the debt mainly consists of promissory notes and unsecured bank loans of a long-term nature. We have initiated a buyback program for a portion of our outstanding convertible bonds in March. We have successfully repurchased EUR 19 million in nominal value at market prices, predominantly of the U.S. dollar 2022 maturity bond. We continue to be open for further repurchase of our convertible bonds.
In case we should have funds remaining from the total amount earmarked for the convertible bond buyback, we plan to use this for other forms of debt reduction this year. Our operating cash flow in the first quarter showed a very healthy increase to EUR 96.1 million, which was well above expectations, up from EUR 52 million in the same quarter last year. This positive development was mainly driven by working capital management and changes in inventories, as well as higher depreciation from CapEx spending and mandatory IFRS rule changes. We expect to continue to see strong cash flow generation over the course of 2019, driving a good positive free cash flow for us this year. Against this anticipated backdrop and based on current expectations, I expect a strong improvement of our net debt to EBITDA ratio by year-end 2019 to a level I can feel highly comfortable with.
Our CapEx in the first quarter was EUR 88 million, 45% lower than last year's spending in Q1 of EUR 161 million. As mentioned before, we expect full-year CapEx for 2019 to be significantly lower than in 2018, but the spending is somewhat front-loaded this year. With this in mind, I expect a quarter-to-quarter decrease in CapEx for the remainder of the year. With that, I would like to thank you for your attention and would like to open the floor for questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You'll hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are asked to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question from the phone comes from Andrew Gardiner from Barclays. Please go ahead.
Good morning, gentlemen. Thanks for taking the question. I just had a couple on the second quarter outlook, if I could. Firstly, on the top line, you're clearly a bit more optimistic than we had anticipated and I think most were anticipating earlier in the year, talking about sales up sequentially now back in normal seasonality. You've highlighted that some of that is due to the stabilization, improvement in the core of the business, as well as the new customer ramps. Can you give us a sense as to the magnitude of those? How much is stronger business in the existing core consumer business versus the new Android ramps? Then I have another one on the margin front afterwards.
Andrew. Alex here. Thank you for the question. As mentioned in the call, it is a combination of, we see a more stabilized consumer demand and smartphone demand. There is a strong or meaningful indication of all the design wins we indicated last quarters to you, which are materializing in revenue in the first quarter and certainly increasingly in the second quarter and to the rest of the year. We feel very comfortable with our penetration in the Android market with our light solutions.
Okay. It sort of feels like tens of millions, multiple tens of millions a quarter from those Android ramps. Is that a reasonable starting point?
It is a meaningful contribution.
Okay. Perhaps one for Michael, just on the margin guidance for 2Q. You have highlighted a step-up there from 6% in the first quarter to 10%. Given what you are describing around OpEx trends on an absolute basis, is more of that sequential growth driven by gross margin?
Hi, Andrew. Michael. Yes, clearly we have our OpEx well under control, I can say. Clearly we expect further improvement in our operations.
The next question from the phone comes from Sebastien Sztabowicz from Credit Suisse. Please go ahead.
Hello. Thanks for taking my question. You mentioned in the prepared remarks that your integration rates have improved in Singapore in Q1. Could you please provide a little bit more color on the pace of improvement from, let's say, Q4 to Q1? Or tell us a little bit where was the 1% gain in the first quarter in Singapore? Also, looking at the competitive landscape in the VCSEL market, because we had a couple of big M&A sector, notably involving Lumentum and II-VI. Have you seen any change in the market dynamics in the VCSEL market over the last few weeks or months? Thank you.
Yes. This is Michael. Happy to take your first question. Clearly we saw a productivity improvement, mainly in our Singapore operations. Some cost down measurements obviously were taken. We had strong yields. Overall, very solid performance, I can say, and we take it from there, and we'll improve it further.
Yeah, to the question related to VCSEL. Yeah, we certainly see changes in the market, but clearly to our favor. When you look at the wins we do in the Android space, when you look at wins we announced in the automotive space, it's across all market segments. We are winning with all VCSEL business, which is a proof point of investing in the right technology.
The next question from the phone comes from Robert Sanders from Deutsche Bank. Please go ahead.
Yeah. Good morning. My first question was just to get an update on how you're thinking about your content for the upcoming product cycle at your largest customer in smartphone.
I remember last year, 12 months ago, you weren't able to pre-build Singapore owing to the spec release not happening till July. Is that less of an issue in Q2? Are you able to start loading up your facility earlier? I have a follow-up. Thanks.
Yeah, Rob, Alex here. Thank you for the question. As you know, we cannot comment on specific customers. That's not possible. What I can see is that we feel very comfortable with the view of a strong second half of this year.
Got it.
Yeah.
Following on VCSEL, how do you think about your design win share in VCSEL at the moment, both in smartphone and in automotive? Could you just talk a bit about the key attributes that you think are driving that success, whether it's small footprint, lowest power, or something else? Thank you.
Yeah. Absolutely. I can tell you we are very excited about the design win rate we have in the Android space. We announced a few design wins there. We are even more impressed about automotive business, which is a new business for VCSEL for us. The reason is exactly as you said, why we're winning is, in the Android space, not only because of technology that we have, the high power, high efficiency, but also the knowledge of the system architecture of all these devices, of all the solutions, which a VCSEL-only vendor cannot have. That's why this is a strength we have with the complete value chain, from the optics, from the packaging, from VCSEL, wafer-level optics. We have the complete solution. That's why we are very successful in Android space.
In automotive, on top of that, this high power capability we have with the acquisition of Princeton in the U.S., help us tremendously for long-range LiDAR business. Of course, the automotive experience and automotive qualification of our manufacturing sites brings us to a very strong supplier for automotive customers. We are very excited about this.
Thank you.
We will take the next question, which comes from the line of Sandeep Deshpande with J.P. Morgan. Please go ahead.
Yeah. Hi. Thanks for letting me on. I was just wondering, you've talked about various wins. Have you got any roadmap from your customers in terms of the ramp-up of those wins in Android in particular? Would you say that given that you're seeing a big improvement into the second quarter, that this sequential improvement from the Android camp continues into the third and the fourth quarters of the year based on the pipeline that you see at the moment? I have one follow-up.
Yeah. Thanks for the question. Yeah, absolutely. We have a roadmap for our customers. We work with our customer base together to create this roadmap. We have visibility on them. Of course, when we run the process together, there is exchange of information. We do see increasing business and more design wins in the course of the year and in the course of quarter to quarter. We are very positive about this. We are consequently executing our strategy to expand our 3D sensing and time-of-flight solutions in all mobile phone OEMs.
One question which comes up on the 3D sensing is that you have a bunch of design wins in the Android camp, but not all the phones will be successful. When you're talking about this ramp into the second quarter, are these on the back of new phones or those phones that you're already seeing having been successful?
I think you gave the answer to the question. We cannot anticipate every phone will be successful, but this is a matter of discussing with our customer base. Our strategy is to be as broad as possible, that if one platform is less successful, someone else will pick up the market share. As long as we have similar market shares across the customer base, one platform lose a bit and the other wins. We participate.
Thank you.
The next question from the phone comes from David O'Connor with Exane BNP Paribas. Please go ahead.
Great. Good morning. Thanks for taking my question. One or two from my side. Maybe firstly, Alex, the world-facing 3D sensing system win that you talked about in the release. Can you just talk a bit about this win and the primary application? Help us understand, is this for camera assist or is this to actually capture images in 3D? That's my first question. Also related to that, maybe how do we think about the content of these 3D sensing wins relative to, for instance, what you ship today in structured light, for instance, just to make sure we have the baseline there correct. Lastly, one last question on structured light. How should we think about the ASP as we go into the back half of this year? Can we expect ASP reset or classic ASP erosion? Thanks.
David, thanks for the question. For world-facing, one application is certainly, as you mentioned, camera assistant. There might be more in the future, but it's certainly one of the leading ones. About the content, it depends a little bit on the project, but it can be very similar content-wise. The third one, on pricing, we cannot comment on that specifically.
The next question from the phone comes from David Mulholland with UBS. Please go ahead.
Hi. Thanks very much. Following on a little bit from the last question, it's something you've been investing in quite a lot for the last year, has been on the software side and helping to make sure the ecosystem is there to really help make use of 3D sensing. I wonder if you could just give us an update on how you feel about the ecosystem readiness, I guess particularly in the Android camp at this stage, for really being able to use 3D sensing and deploy applications.
Secondly, I know you're kind of trying not to comment too much on this, it'd be really helpful if you could just give us some steer on how you feel about the kind of half-on-half increase this year, given all of the comms you're giving on ramps versus what might be going on at your largest customer. Some color there would be really helpful. Just finally, one clarification for Michael. On the last call, you had pointed to a run rate of somewhere around EUR 380 million, or at least that was my impression, for R&D this year. Is that now running a little higher?
Similar question on a CapEx basis, obviously coming down each quarter through the rest of the year, if you can just help us understand what you think that might be for the full year, it'd be really helpful just to keep us on the right line.
David, thank you for the question. I will take the first two. The question about software, I can tell you it gets increasingly more important. This was also helpful for multiple design wins we did within Asia. This is a combination of our own software activities, our initiation of several sensing software company, also with partnership. We have multiple partnerships in the industry. For example, the partnership we have with Face++ and Qualcomm to drive the Android business further. The software is increasingly important, I can tell you not only for the Android, it's get even more important for the non-consumer business. Automotive is a key area for us for future growth. There, the software capabilities for new technology, which are totally new for the automotive industry, is extremely important and very helpful.
On your question on the second half, as I mentioned in the call, we see a very strong increase in the second half compared to first half of this year. We feel very comfortable there, and that's why we are seeing it very positively.
On a similar order of magnitude to last year, or?
We see it very positively.
Yeah, David, Michael. Hey, good morning. Thank you. R&D and CapEx question. As I mentioned and as you have always seen, there is some lumpiness in our R&D numbers based on where we are in the project phase. Clearly, we see that, obviously, with the revenue increase quarter-to-quarter, a relatively lower R&D spending in absolute terms, as I mentioned it earlier. Roughly EUR 280 million, maybe EUR 300 million is what we expect for the year. In CapEx, I also mentioned it. We have kind of a front-loaded year this year, which is the outcome of what we have invested the last two years. There's kind of a lagging cash out for it. Clearly, with this in mind, we expect a quarter-to-quarter decrease in CapEx for the remainder of the year into that range that we indicated before.
Yes. Thanks very much.
The next question from the phone comes from Janardan Menon with Jefferies. Please go ahead, sir.
Yeah, hi. Good morning. Just going back to the Android sort of momentum that you're seeing in the second half. Can you give us a feel for, in terms of just the number of models, and I completely understand that number of models will not equate to volume because of different models having different volumes. But is it like you have around 5 models launching in the first half, and that can rise to, say, 10 models in the second half? Is that the sort of magnitude of acceleration within the Android space that you're seeing with the like? And then just going back to your point about spectral sensing sort of being pushed out right now. I was just wondering in terms of new revenue opportunities outside of your existing area, you have biosensing, automotive, and still the spectral sensing.
Can you give us a timescale for when you would see the first revenues now on each of these? Is that all three of them, is it a 2020 timescale, or will it be into 2021?
Thanks for the question. On the Android topic, as we indicated, we have several OEMs and several modules design wins, and you can expect that in the second half, you will see additional models contributing to our growth in the second half. That's a very positive development we are seeing there. On the spectral sensing, we mentioned the one design win which didn't work out because of complexity. We have discussions with multiple other OEMs. We will see opportunities. I would say this is more a topic of 2021 for revenue. The biosensor, I would
I would consider as a topic on 2021 as well. Automotive, of course, is more a topic of 2021 and 2022. For us, it's important that we generate new revenue growth engines for the company for the years to come. This segment is certainly one of them.
Understood. Thank you very much.
The next question from the phone comes from Juergen Wagner with MainFirst Bank. Please go ahead, sir.
Good morning. Thank you for letting me on. I have a follow-up on R&D. You gave us the number for the full year. What would be a number post your exit of the environmental business, and would that be enough to meet the 15% ratio you mentioned at the beginning? You discussed the spectral sensing delay. You also in the past mentioned this power system ramp in the second half. Is that still on track, and what magnitude we'll be looking at for the second half? Thank you.
Hi. The 15% of revenue is a target. Obviously, as I said, there's some lumpiness in the business, and then depending on revenue, obviously, it's a target for a full year. That's where we want to end up with. On the power question, yes, the power business we indicated is on track, and it's ramping. It's continuing to ramp into the second half.
Maybe a third question. You postponed the listing in Hong Kong. At what point would you reconsider that option? Thank you.
Thanks for the questions this morning. I think we will look at that as we go through the second half of the year, from today's point of view.
Okay. Thank you.
The next question from the phone comes from Achal Sultania with Credit Suisse. Please go ahead.
Hi. Good morning, everyone. Just trying to understand the wins that you're having in the Android camp. I guess we've seen a number of phones which have been launched, which have the front-end TOF solution. Can you help us understand what exactly are you winning in these Android projects? Is it the VCSEL? Is it the whole flood illuminated solution? Is it the TOF solution integrated along with that? Just trying to understand what exactly are you winning and how that thing evolves going into the second half. Does it change in terms of your content win? Does it go up as we go into second half? Thank you.
Thanks for the question. Yeah, the majority of the wins is the illumination system within the TOF solution. This is where we focus on, and this certainly includes the VCSEL. That's why it's so crucial for us to have the VCSEL capabilities. As I mentioned before, we expect more models to be launched within this year with our solutions inside, and certainly interesting to look at those phones.
Yeah, Alex, just a clarification. I guess you're doing most of the illumination work. Clearly TOF sensor is coming from other suppliers. Are you indifferent to who the TOF supplier is? Like, your solution can actually work or integrate well with any of the TOF solutions out there in the market?
Yeah, that's right. That's correct.
Okay. Maybe a follow-up on the cost side, just for Michael. Can you help us understand, obviously, I think the headcount in your Singapore fab has actually gone down significantly, I think, in the last six months. You already mentioned that cost has been taken down. Can you help us understand the magnitude of cost cutting that has happened, either in terms of, say, your fixed cost that has come down or the number of employees that have actually come down over the last six months, 12 months? Any color on that would be helpful.
Yeah. Unfortunately, we cannot break it out, I guess you see it in our margin trend. With the guidance for the second quarter, this is somehow a hint to that.
Can we expect the headcount to come down further, or you feel like you are already at a reasonable level going forward, you've already done enough on that side?
Unfortunately, we cannot comment, but you can imagine that as Alex indicated, with a significantly stronger second half of the year over first half, obviously, there will also an increase in production volume.
Okay. Thanks, Michael.
Thank you very much, everybody. This concludes our question and answer session for today. We thank you very much for joining us this morning, and we look forward to speaking to you again with our second quarter results end of July. Thank you very much and have a good day.
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