Earnings Call: Q2 2018

Jul 24, 2018

Ladies and gentlemen, good morning. Welcome to the AMS Half Year 2018 Results Conference Call. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session. At this time, it's my pleasure to hand over to Mr. Alexander Ehrlich, CEO Mr. Michael Bartzler Markovich, CFO and Mr. Moritz Kumeiner, Head of Investor Relations. Please go ahead, gentlemen. Good morning, ladies and gentlemen. This is Moritz Gmeiner. I'm very happy to welcome you this morning to our Q2 and first half results conference call. As usual, Alex will give you some update on the developments in our business, while Mikael will take you through our financials in more detail. Alex? Thank you, Moritz. Good morning, ladies and gentlemen. I'm very happy to welcome you to our Q2 2018 conference call this morning. Let me first give you some key financial figures. Mikael will later take you through the financials in detail. Our 2nd quarter revenues came in at $252,800,000 above the top end of our guidance range and up 18% compared to the Q2 last year. This also means that despite the lower second quarter, our revenues for the first half were 76% higher than last year's first half. Our adjusted gross margin, excluding acquisition based and share based compensation cost, was 15% in the 2nd quarter. Our adjusted EBIT, excluding acquisition based and share based compensation cost, for the 2nd quarter was minus $48,600,000 or minus 19 percent of revenues, which was better than our previous guidance. Our business showed an overall solid performance in the 2nd quarter, which turned out better than expected. While we recorded the previously anticipated significantly lower customer volumes in our consumer business, the resulting impact on group revenues and profitability remained lower than expected. This allowed us to report 2nd quarter results above previous guidance. These results also underline the ongoing market success of our diversified and differentiated sensor solutions portfolio in the first half of twenty eighteen. Let me look at the developments on the consumer side first. Our consumer and communication business was strongly impacted in the 2nd quarter by the above mentioned substantial reduction in customer volumes for certain optical solutions. At the same time, volume shipments of other consumer products continued at attractive levels for a broad range of customers. Leading in optical sensing, we provide a wide array of high performance solutions for 3 d sensing, including VCSEL based illumination, advanced spectral sensing, true color and color display management, smaller scale advanced proximity sensing and other optical applications. We drive innovation in optical technologies while leveraging a broad and expanded portfolio of hard and software for fast growing optical applications. In the emerging growth market for 3 d sensing, we strengthened our position as a leading provider of consumer 3 d sensing technologies in the first half. We recently announced a further design win in Android 3 d sensing at Xiaomi, the fast growing Chinese smartphone vendor. We powered the first face recognition solution in Android smartphones via an AMS VCSEL array for structured light illumination and the IR flood illuminator module, which includes a further AMS VCSEL array and offers advanced eye safety. Our design win underscores the strong competitive advantage of AMS VCSEL technology in 3 d sensing applications. This success adds to the previously announced large program win for an Asian smartphone OEM, which also includes AMS VCSEL technology for illumination. We currently expect that program to start ramping before the end of 2018. The consumer three d sensing market remains in the formation phase for SAOEMs, and other participants continue to identify valid technical approaches for different market application and performance needs. We also note in emerging trends where large Android ecosystem players want to support robust reference designs to enable 3 d sensing adoption across applications and market segments. So beside OEMs, we now see major ecosystem players starting to engage with us to define consumer 3 d sensing solution in different technologies. Through our industry leading portfolio of 3 d technologies, expertise and IT, we are strongly positioned for these efforts and are able to support relevant systems for all 3 d sensing approaches, structured light, time of flight and stereo vision. We see a lot of activity in 3 d sensing space despite the different technical and implementation hurdles for these technologies, of which we are very keenly aware. Benefiting from experience and focus on 3 d sensing, we are taking multiple steps to broaden our expertise and build an even stronger position as a solution architect for different markets and customer needs. Let me run through several developments in this context. To accelerate the time to market for structured light solutions that address diverse markets requirements, we have started a cooperation with OmniVision Technologies to define and to develop tightly aligned structured light systems, which are based on both partners' technology portfolio. We have also expanded our 3 d system design and software capabilities through the acquisition of iX Lens in the quarter, a driven based expert in custom DOE dot pattern design and 3 d system solution architecting. To expand our 3 d portfolio further and leverage our existing know how and IP in the area of stereo vision, we recently concluded an equity investment into Velo3d, a U. S.-based3dsoftware specialist. Bellas3d developed active stereo vision reference solutions for front facing 3 d sensing in smartphones, which will include AMIS proprietary patent projector. Promoting these reference solutions to Chinese smartphone OEMs through Phase plus plus Velo3d enables cost efficient implementations for a worldwide leader in semiconductor and software solutions for consumer devices engaging with us to explore new reference solutions for stereo vision systems. These build target cost efficient three d sensing for a wider range of consumer devices and smartphones. We are also in discussion with a leading software provider for smartphone platforms to cooperate on new reference solutions that should enable faster time to market and easy adoption of stereo Vision 3 d in Android smartphones. As you can see, we are actively driving the evolution of 3 d sensing technology, while we, at the same time, focus on market layers and application we feel most appropriate and attractive for AMS. We also hear a lot of discussions about advancing fully software centric solutions for 3 d authentication, where we believe the performance, AP infrastructure and cost requirements are not lining up to allow competitive smartphone implementations. This reminds us of previous discussions some years back about realizing other smartphone applications entirely in software where the concept sounded very exciting, but the actual processing mix and other needs inside the smartphone turned out to be strongly underestimated. Besides 3 d, we also pursue major developments for other optical sensing, spectral sensing and multi sensor solutions for consumer applications, which include audio. Our audio sensing business continued to expand through the first half of twenty eighteen. Here, our developments for audio and pressure sensing combinations for mobile devices are continuing. In consumer spectral sensing, we are progressing on the 1st smartphone implementation of a spectral sensing application and expect volume shipments to start within the next 6 months. And finally, our other consumer product lines saw attractive volumes at a wide range of device vendors in the quarter. Let me now switch to other nonconsumer business. Our industrial, medical and automotive business performed well and in line with expectations in the second quarter and first half. We see a continuing positive demand environment in our nonconsumer end markets as we enter the second half of the year. Our industrial business recorded attractive results in the Q2 as automation, HABA, industrial sensing and industrial imaging all contributed to our performance. Showcasing AMS leadership in global shutter technology for demanding applications, our latest generation award winning image solution for the industrial market entered volume production in the quarter. A key supplier to industrial OEMs worldwide, we are known to enable new sensing functions for high quality data acquisition in manufacturing, harbor, industrial IoT and other industrial applications. Our medical business continued to be successful in the 2nd quarter and first half with good volumes in digital imaging for computing tomography, digital x-ray, mammography and miniature camera applications. Our market position in Asia is expanding while we see OEM interest for multiple end markets in the area of biosensing where our unmatched capability includes high quality blood pressure measurement and biodata analysis. Our automotive business recorded another positive quarter as attractive demands for our automotive solutions continues across product lines. We focus on applications in safety, driver assistance, position sensing and chassis control, where market interest remains high on a global basis. Besides the previously reported major program win for VCSEL illumination in a solid state LIDAR system, we see growing interest in our autonomous driving portfolio as industry leaders recognize our outstanding expertise in laser systems and LIDAR. Here, we have a global pioneer in autonomous driving platforms engaging with us to explore innovative technical solutions for solid state lidar based on our leadership in optical technologies. In addition, OEM interest in other automotive suite resensing application, such as in cabin monitoring, continues to solidify. We are also engaged in advanced OEM discussions for very new application of hands on off detection in the context of autonomous driving, where the car needs to detect whether the driver is actually holding the steering wheel or not. We have created a very attractive solution based on capacitive sensing and see interesting market opportunities for this in capping sensing function. More so, as we do see potential for this functionality to become mandatory through regulation. Moving to manufacturing operations. We have expanded our Singapore facilities to support capacity requirements for the current production ramps in consumer optical sensing. We also expect further investments into our production infrastructure in the second half of twenty eighteen. The investments into our internal VCSEL production line in Singapore continue to plan with volume production scheduled for next year. In addition, we concluded agreements with Taiwan based VCSEL vendor HLJ Technology in order to strengthen and expand our external VCSEL supply chain. Supporting this relationship, we also retain a meaningful shareholding in HLJ Technology. On a side note, I would like to add that I'm very happy to continue to drive Aemet's strategy forward in the coming years as the Supervisory Board and I recently extended my contract until 2021. Let me now come to the outlook of our business. We see a steep sequential growth in the Q3 2018 as we are ramping very high volume smartphone sensing solutions, and our other end markets continue their positive contribution. Based on available information, we expect 3rd quarter revenues to grow strongly to $450,000,000 to $490,000,000 up 78% to 94% sequentially and 46 percent to 59% year on year. This expected positive relevance reflects the ramp up nature of the 3rd quarter as production and shipment volumes in our consumer business continue to expand through the second half of this year. Driven for these large scale consumer rents, we currently expect a record level of revenues for the second half of twenty eighteen. The adjusted operating margin for the Q3, excluding acquisition base and share based compensation costs, is expected to show a significant sequential increase to a low teens percentage. This development is predominantly driven by the ongoing improvement in capacity utilization. In addition, we have recently initiated a strategical view of specific business areas, taking an active approach to align our business portfolio for long term attractive growth, profitability and end of market diversification. Simultaneously, we are actively evaluating strategic expansion opportunities in line with our strategy to build the global leader in sensor solutions, a strategy that is based on our focus areas, optical, imaging, environmental and audio sensing. We are focused on enhancing AMS' long term positioning and expect to provide an update on both developments in the Q4 of this year. While taking into account potential effects from possible future changes to our business portfolio, we endorsed our growth target for AMS revenues of 60% CAGR for the 2016 to 2019 period. At the same time, we are convinced of the long term strength of our business model and committed to driving balanced profitable growth. We therefore also endorse the target of reaching 30% adjusted EBIT margin for AMS in 2020, where we prudently take into consideration potential financial effects that could result from possible future changes to our business portfolio. Let me now hand over to Mikael for more details on the financials. 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 consolidated numbers for the Q2 2018. Let me start with our P and L and the top line development. Alex already mentioned that our 2nd quarter group revenues came in at $252,800,000 which was above our previous guidance of $220,000,000 to $250,000,000 We recorded a healthy 18% year on year growth, while we saw the expected sequential decrease compared to the previous quarter. As mentioned by Alex, the expected customer volume effects played through in our consumer and communications business. However, the impact on group revenues and profitability remained lower than expected, allowing us to report 2nd quarter results above previous guidance. Our adjusted gross margin, excluded acquisition related and share based compensation costs, was 15% compared to 41% in Q2 last year. This gross margin development particularly reflects the expected underutilization in our production facilities in Singapore during the quarter due to the mentioned customer volume effects. Our IFRS reported gross margin was 9% compared to 35% in Q2 last year. Our R and D spending was $60,000,000 in the Q2 2018, a decrease from $63,200,000 in Q2 last year. In relative terms, this means 24% of revenues, which is well below last year's Q2 level of 30% of revenues. While there are always quarter to quarter movements in R and D spending, we expect a similar level of spending for Q3 in absolute terms given our focus on R and D to drive innovation. We expect continued meaningful levels of R and D spending for a range of platform developments and major product opportunities we're working on for the coming years. We also see our long term target for R and D spending at well below 15% of revenues, helped by business growth we target for the coming years. Further down our P and L, SG and A costs were $41,900,000 compared to $40,500,000 in the Q2 last year. In relative terms, we spent 17% of revenues on SG and A in the quarter, which is below the level of last year's Q2. Here, we also expect a roughly similar level of spending in absolute terms for the Q3. Looking forward, we have already updated our long term target for SG and A costs to well below 10% of revenues, and we continue to work towards that. Our other operating income of $2,500,000 for the Q2 compared to $5,400,000 in Q2 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. Given these developments, our adjusted operating result or EBIT, excluding acquisition related and share based compensation costs for the Q2, was a loss of $48,600,000 or minus 19% of revenues, which was better than our previous guidance. This Q2 result decreased as expected from $1,600,000 or 1% of revenues in Q2 last year. The IFRS reported result from operations or EBIT for the Q2 was minus $76,100,000 or minus 30 percent of revenues, down from minus $25,300,000 in the same period 2017. Our net financial result was exceptionally positive at plus $43,900,000 showing a very significant influence from changes in the valuation of the option element of our foreign currency convertible bond, which recorded as required by IFRS rules. This figure compares to $7,300,000 in Q2 last year. The financial result also reflects noncash valuation adjustments for foreign currency balance sheet items and interest expenses. Adjusted net result for the Q2 stood at minus $103,500,000 compared to minus $20,900,000 in the same period last year. This development was driven by the expected underutilization and the mentioned significant change in valuation of the option element of the convertible bond, which is excluded in the adjusted net result. Adjusted basic and diluted earnings per share were CHF 1.24 and minus CHF 1.19 compared to CHF minus CHF 0.23 and minus CHF 0.22 in Q2 2017 or US dollar minus $1.24 and minus $1.20 compared to US dollar minus $0.25 and minus $0.25 for the Q2 of 2017. Our total backlog on June 30, 2018, stood at $549,900,000 significantly up from $330,700,000 we saw at the end of the Q1 of 2018 and also well above the $247,900,000 on June 30, 2017. The current backlog is on a similar level than at the end of June. Now let me 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 $246,000,000 at the end of the quarter compared to $475,000,000 at the end of the first quarter. This change results from the further expansion of our Singapore manufacturing facilities for 2018 needs as well as dividend payment for 2017. Our net debt position was $1563,000,000 at the end of Q2, reflecting the convertible bond issues last year and this year, which partly also supported our CapEx investments in 2017 2018. Our trade receivables stood at $294,000,000 down from $302,000,000 at the end of the Q1. Our DSO ratio was 80 days, up from 44 days in Q2 last year. This increase is due to certain individual payment agreements with our largest distribution partners, and we expect this value to decrease substantially in the coming quarters. Inventories were $337,000,000 compared to $287,000,000 at the end of the Q1. This development mainly resulted from changes in work in progress levels in our manufacturing to prepare for a ramp up in the second half, while the finished goods portion of our inventory was slightly below 20%. On the liability side, we have a current debt position of $215,300,000 while our long term debt stood at $1594,000,000 at the end of June. Our long term debt was generally taken on to bolster liquidity, support CapEx investments, past acquisitions and potentially future M and A. Apart from the recently issued convertible bonds, the debt mainly consists of unsecured loans of a long term nature. Operating cash flow in the Q2 was minus $72,300,000 a decrease from minus $38,900,000 in the same quarter last year. This development was mainly driven by the expected significant underutilizations of our manufacturing capacity as well as the mentioned change in inventories. Our CapEx in the Q2 was again significant at $163,000,000 and almost unchanged from $162,000,000 in Q2 last year. This comprises further planned investments for identified capacity expansion needs, which include the ongoing product ramps for the second half of twenty eighteen onwards. Looking out to the longer term, our target CapEx to sales ratio is expected to be between 10% 15% to support the further growth of our business. As mentioned, a dividend of €0.33 per share was resolved at our AGM in early June and was paid out shortly thereafter. And with that, I would like to open the floor for questions. Thank you very much for your attention. We will now begin the question and answer session. First question comes from Sandeep Deshpande, JPMorgan. Please go ahead. Thank you for letting me on. Maybe you can comment on how you see the trajectory Android world, do you see that you are in discussions with multiple parties at this point and there could be further wins to be announced at some point later this year or into 2019? Thank you. Yes. Thank you for the question. As I mentioned, the Q3, we consider as a ramp up quarter. So we have a very positive outlook on the second half of this year, very, very encouraging. On the discussion with multiple parties, yes, as you can see on the we are talking to multiple customers, OEMs, but also with partners, system integrators, software companies, reference design companies. And we are expanding this network extensively over time just to ensure that we define future architectures, enable and support our growth ambitions and make sure that we drive the ecosystem in the direction we want to have it. And certainly, we will announce this in the next quarters and give you more insights as soon as we can talk about it. Thank you. The next question comes from Andrew Gardiner from Barclays. Please go ahead. Thanks very much. I have a couple of questions in similar areas to Sandeep's. Just in terms of the second half outlook, you guys have changed the language a little bit in terms of how you're talking about it. Earlier in the year, you were saying significant 2H on 1H growth sort of similar directionally to what we saw in 2017. And at the time, you were suggesting sort of high double digits, half on half or sort of around 80%. Now we've got the 2 quarters of results. We've got the 3rd quarter guidance and yet today you're not willing to use that same language around half on half growth. I'm just wondering what has changed there in terms of absolute units or pricing that has led you to adjust the way that you're talking about that? Yes. So thanks for the question. I think nothing changed there. So we gave guidance for Q3 today, which is a significant sequential growth and I think even more important significant year on year growth. I also indicated that we see a strong growth for the 4th quarter, and the second half will be a record second half for us. So we see it extremely positive. Okay. I suppose just to follow-up quickly there. You'd also been willing to say that you anticipated with the 2nd generation of obstacle sensing solution that pricing would rise. Is that still the case? We can't give any price indication on specific I suppose it does seem though as the 3 d sensing ecosystem is evolving in the it does seem though is the 3 d sensing ecosystem is evolving in a slightly different fashion than we may have imagined this time last year. If I go back to the way you guys talked about it at the Analyst Day in December, there was an idea that the very high end of the market would choose bespoke solutions and most of the rest would opt for a module. We haven't really seen that latter come through. And I know you guys have been working on it and it was really going to be a 2019 event for you. There has been another competitor in the market who has failed to bring their product to market on time and the Android solutions we're seeing so far, everyone's taking a slightly different approach and you guys are involved, is great, but it does seem as though the approach is being taken by the OEMs are different than we anticipated. Is that is it those developments that are causing you to take this sort of strategic action and sort of perhaps adjust the strategy a little bit? No, no. This has nothing to do. So 3 d sensing is totally out of this discussion. And actually, I don't see such a big difference. As you recall, Our strategy always was that we are the lead and 3 d sensing, which implies all functionality, structured light, time of light and stereo vision. We still have the same opinion that structured light is the high performance solution. We see these trends ongoing, but we also indicated that a lot of OEMs are still uncertain which area they go based on their own capabilities, cost position, performance requirements and the application they want to address. And therefore, we also indicated that we see the ramp only happening end of '18 and predominantly in 2019. So our anticipation for the market did not change significantly, not at all. Okay. And which of course we take I think it's important we take all steps to get the market going. We keep all options open for us because as a leader, you have to play in every single place where you want to where you decide to play in. And we keep those options open with our own investments, with partnerships, with relationship with system integrators and so on. Thank you, Alex. The next question comes from Achal Sultania from Credit Suisse. Please go ahead. Hi, good morning. Two questions from my side. First, so if I look at the margins, the way you're guiding for Q3 EBIT margins and your comments, Michael, on OpEx roughly flat, Seems here the gross margins are going to be around 30% give or take in Q3. So I'm just wondering like how should we think about gross margins going forward? Is this the right level of gross margins at when volumes have ramped up? Or is there a big underutilization charge still that you're seeing in the quarter? Any comments on that would be helpful. Thanks. And then I have a follow-up on your auto, industrial and medical business. It seems your H1 revenues are actually down year on year slightly. We have always thought that this should actually be growing double digits. So can you comment on that, why revenues are down in AIA? Thank you. Yes. Thank you for the questions, Michael. I could just take it. We see as Alex pointed out, we see strong ramp in the quarter, and this is ongoing. But clearly not be completed this quarter. So these ramps are driving a very strong upswing in EBIT margin, around 30 points in 1 quarter, a magnitude which is fully in line with what we had expected previously. This upswing clearly also shows the positive effects of capacity utilization coming back and how quickly this translates into better financials. But still, we're in a ramp up situation this quarter. It's on a very large scale and across different products. It may also see somewhat different ramp up curves, so volumes, capacity utilization, efficiencies, etcetera. And as you know, we cannot guide for further quarters in the future, but we generally expect positive further positive development from the expected increases in utilization, clearly. And then on your second question on the automotive business, well, the quarterly distribution depends a little bit on individual projects. But I think it's important to understand we have 2 different kind of automotive business. 1 is the, I would call it, the more traditional ones where probably you refer to the position sensors. But the really exciting part is the new automotive business, which is based on partially on optical sensing, whether it's 3 d LiDAR, the in cabin 3 d sensing, what I just mentioned, or the steering wheel application with capacity sensors. I think this is a significant growth opportunity for us for the coming years, and this will be just significant. And all the efforts we are putting in place is mainly on the future automotive business because this industry is changing, and we take advantage of it. Your next question comes from Jonathan Menon from Liberum. Please go ahead. Hi, good morning. Thanks for taking my question. I just wanted to talk a little bit about your stereo vision assets that you've talked about in your press release and in your introductory remarks. One change is when you were talking last year at the Capital Markets Day, etcetera, there was not a lot of talk about stereo vision, but now you seem to be talking quite extensively around that technology. I was just wondering, is it because is it being mainly driven because the cost of structured light is too high? Or is it because the difficulties of implementing structured light is too high? And if you were to take a sort of a guess at it, what would be the percentage of stereo vision adoption in the Android market, let's say, by 2020 or so? Would that be a meaningful amount given that you're going you're sort of suggesting it will be adopted in the value end, which could be quite high in terms of volume? And the last question there is also, what is your sort of value proposition there? You've said that you will contribute a proprietary patent projector. Is that similar to the value that you will be contributing, say, on structured light from a VCSEL plus WLO kind of combination? Or will it be higher or lower than that? And is there a difference between active, Stereovision and passive Stereovision and the kind of solutions you're looking at? Yes. I think your last statement was the key one. So first of all, we see as I mentioned multiple quarters ago, we see multiple systems valid in the market, Structured lights with the strong advantage of very high performance, it's very, very clear. But we see also stereo vision as one of the valuable solutions. But the key difference now is the introduction of active stereo vision, where the dock projector is part of it, as you correctly said, which makes it more reliable and a better performance system. The share of those systems in 2020, that's hard to predict, but we are very flexible. We participate whatever customer needs. And depending on the application, we are supportive for all the projects. And at the end of the day, it also depends which application you want to do and therefore the performance and therefore the differentiation for these projects and this determine the margin and ASP. It's hard to predict, but we will play in all the segments equally. And just as a brief follow-up, can you also comment on the world facing side? There's been some talk of stereo vision in that side, but your previous comments has been more sort of in the time of flight direction. How do you see that playing out over the next couple of years? Yes. It's very similar to the front facing. It's there are multiple opportunities, multiple technical solutions for that. It depends on the customer and their application. A different application, what you do is wall facing and depends which main application you choose. You choose the hardware. Again, in this place also, we can participate in all the system solutions possible. The next question comes from Robert Sanders from Deutsche Bank. Please go ahead. Yes, hi. Given the upcoming strategic review, there is a worry in the market that you're kind of doubling down and potentially like overreaching in consumer and perhaps pulling back on some profitable businesses that are slower growing in automotive, medical, industrial. So can you please reassure that's not the case? My second question is around the sales target. Can you just reassure us that on an organic basis, assuming you don't do any deals, that number is still 60% CAGR out to 2019? And then last question would just be on the M and A side. Your debt headroom is very, very limited. So would you consider only smaller deals that are funded out of debt and disposals? Or would you consider larger deals like I'm talking about above $1,000,000,000 Thanks. Yes. Rob, thanks for the question. So first of all, a strategic review is certainly to continue to improve the positioning of AMS as a company within our strategic cornerstones of optical imaging, audio and environmental. And certainly, what is important for us is the growth, but also profitability, which should answer partially your question, but also areas like differentiation and diversification. So the cornerstones of our strategy will not change. But of course, there might be potential change in portfolio, which we will investigate this quarter, plus potential options we see in the market we may execute. And so the general strategy will not change, so I can confirm this. And we want to have a balanced portfolio of fast growing and mid growing product portfolios with an acceptable profitability for the company. And Robert, to your M and A question and debt question, it's Michael, we clearly see that our net debt position is high, no doubt about it. But we would generate a very strong cash in the second half of this year, which I believe gives us room to maneuver. Sure. And just on the 60% compound target, I read your the press release rather it was a bit muddled in how I read it. So maybe you could just clarify, even if you don't do a deal in the second half, you're still believing in the 60% growth out to 2019? We believe in the growth. So as we stated today and as I mentioned that the structure of the business might change, but we believe in a 60% growth, as we said. Okay. Thank you. The next question comes from Michael Firth, Bank of Tobel. Please go ahead. Yes. Hi, gentlemen. I had a question also on the guidance longer term, but on the target longer term, but rather the margin target. You say here that you prudently take into consideration the financial effects that could result from portfolio changes. Is this prudently taking into account? Do you mean that you're taking a sort of a conservative approach to that 30% margin? Or does it mean that if things change in the portfolio, then eventually that margin could be lower? Yes. Michael, it's Michael. There will be temporary as we saw it also this quarter that could be or it could be more temporary effects that kind of made this small push out necessary in our intention. Okay. But you still believe that your I still believe clearly Your underlying margin is And we still believe clearly And we still thought about We still believe clearly. Your underlying margin is We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe clearly. We still believe we still believe we still believe we still believe we might see again. Okay. So no structural reason to lean? Absolutely. No, absolutely not. Okay. Good. Thank you. The next question comes from Lee Simpson from Stifel. Please go ahead. Great. Thanks for letting me on. Just 2 or 3 quick ones for me actually. Just trying to get a handle on the timing of the ramp with Android players. And just in particular with that Tier 1 engagement or major ecosystem player that you mentioned in the prepared text, just if there's any sense of ramp there, that would be fantastic. Secondly, on the spectral sensing ramp for the next 6 months, just wondered if you can maybe just let us know if that's with an existing customer and or if that is a new customer that you've managed to put that into? And thirdly, rather, you've mentioned quite a lot of partnering in the prepared remarks. And at this stage, could we think of such partnering as being a heavily used feature in the 2020 time frame for world facing solutions? Thanks. So thanks for the question. The ramp, as we indicated, we see a ramp for Android in the end of 2018, as indicated, and of course, continue strongly in 2019. Spectral sensing, yes, it's an existing customer, and this is related to our strategy to expand also within our existing customer base with a broader portfolio. It's actually very, very exciting. The last question is we don't know. That's hard to predict. And just going back to Android question, the ramp there in 2018, is that with the major ecosystem player? Or is that more of a 2019 event? Thanks. With the major ecosystem player, this is a different story. That's on top. Thanks so much. Okay. Thank you. The next question comes from David Mulholland from UBS. Please go ahead. Hi, thanks very much. A couple of questions. Firstly, on the spectral sensing design win, can you just help us understand what we should be expecting in terms of ASP for that as it ramps? And also how you feel about the volume ramp? Does this become tens of millions of units or more quickly? And then secondly, just coming back on the margin question as we and the kind of shift from 2019 to 2020, do you still think you can achieve eventually when things settle down 30% margins at €2,700,000,000 of revenue, which is kind of what you'd implied before? Or does it now take higher revenues? Or just how should we think about squaring away margins versus revenue going forward? Yes, David. On the spectral sensing, it's as I mentioned, the ramp will happen end of the year. The volume is in the initial phase lower, but the ASP is very attractive. And as you may know, the spectral sensing device is highly, highly differentiating. We don't see competitors out there with the performance and the form factor we are able to provide to customers. So it's a very attractive business. And I personally see this as a start of a new trend coming up in the consumer space. Is that $2 or $3 or is that a high single digit? Multiples dollars. I would say multiple dollars. So it's a significant value. Okay. And then on the revenue versus With regard to the operating margin, we simply want to be very prudent how this develops. As Alex said, we see potential for changes in our business portfolio, and this is driving this. But I'm sorry, just to clarify, do you still think you could do a 30% margin at €2,700,000,000? Or is the reason you've changed it because potentially it now takes higher revenue? I understand this thing is changing kind of from a strategic perspective potentially over the next couple of quarters. But just in the way that you're thinking about that, is it because you think you might need to be different sized to get there? Or kind of what drove the change? It will depend on the business mix, very simple. Okay. Thanks very much. Your next question comes from David O'Connor, Exane BNP Paribas. Please go ahead. Good morning, gentlemen. Thanks for taking my questions. 1 or 2 from my side. Maybe firstly, if we look at the new Xiaomi solution where you have the VCSEL wind, that's the Mi 8. Just thinking that structured light solution doesn't appear to have any wafer level optics. So just want to get your thoughts on what this means for the wafer level optics opportunity for MAS in Android. And what do you have a competing and cheaper solution that can match what they use today? That's my first question and follow-up. Thanks. Yes. So it's difficult to go in detail for specific custom projects. So obviously, I can't comment on this. But again, the answer for us is always the same. Whatever the customer needs for the structure which is and the concept which is best for them, we will supply. And it doesn't matter whether wafer level optics is included in this case or not. We will provide a solution the customer requires. And if that requires wafer level optics, we do. If they don't, we don't. And you will see multiple solutions in the markets, very, very different by customer. And that's the beauty of the market. We take advantage of it. It's an asset, not a liability. Okay. Thanks for that. And maybe another one. When you look at the acquisitions that you've announced in the Q2 release, a lot of them focus on structured life. At the same time, you see a lot of Android OEMs talking about time of flight. And I'm just thinking for AMS, what does that mean for time of flight going forward? Does that are you already have all the IP for time of flight? Do you require to as part of, for instance, a strategic review, do you need to free up some equity or some cash flow that we can go after and chase those time of flight opportunities or IP opportunities as well? Any thoughts around that should be great. Thanks. All right. So to be very, very clear, we are the leader in this field, and we will do everything necessary to expand and accelerate the position we have today. Structured Light, you're right, we did acquisition there. In the past and potentially in the future, We are active with Bella 3d, which is more related to active stereo vision. Every and we have our own development in time of flight. So every possible structure possible in the market, we will make sure we will have the leading portfolio, yes? And this is more the matter of time and not if, yes? So we will be active in all the 3 keys, very clearly. And the key thing is why I believe we are so strongly positioned is that we are the solution architect in the field. We understand the hardware. We understand the software. We understand how the whole system works. And that's why we are in a very strong position to discuss with customer what is the best for their application and for their platform. And that's why we are reaching out in multiple areas within the industry. We don't we keep every option open for us. Okay. That's helpful. Thank you, Alex. And maybe one just last one. As part of the strategic review, how much just wondering how much of the business you consider core today or cornerstone to the business? Just wanted to try and get a sense of how much room for divestments is there. Thanks. We can't comment on that. But as you can imagine, we're executing our strategy indicated on the 4 pillars, and we continuously to sharpen it to make it more successful in the future. And we balance that. So that's all what we can say about it. Very helpful. Thank you. We'll cover the last question for this morning now. The last question for today comes from Jurgen Wagner, MainFirst Bank. Please go ahead, sir. Yes, good morning. Thank you for taking my question. You announced in your prepared remarks the cooperation with OmniVision. And what exactly is coming from them for your structured light solution? And how does that impact your cooperation with Sony Optical and Mentis? And coming back to your strategic review, you already focused quite a lot. So why again, why was there a need for a strategic review now? Thank you. On Omnivision, their contribution is the sensors in that sensor. It has no impact on other cooperations we have done. And as I mentioned before, nothing is exclusive. We will partner with every company where it makes sense for us and, of course, then also for them. We keep all the options open, and we build up a network, which is unseen in the industry, to be frank, to strengthen our continue to strengthen our position. What was the second question? On your timing of your strategic review, why is there a need for this at this phase? Okay. Well, because we see opportunities which are currently involving, and we want to take potential advantage of it. And that's why we're looking we have regular reviews, certainly, but they are not always the same opportunities we're seeing currently. And that's why we're looking in sharpening our portfolio to the next level. So it's a bit more pronounced than, let's say, now than, let's say, half year ago, the opportunities you see, right? Is that a Yes. That's why we And that's why okay, okay. Yes. We'll talk about this. And we also, of course, record market trends, and we adjust to it. Okay. Thank you. With this, we would like to thank you very much, ladies and gentlemen, for joining us this morning for this results conference call, and we look forward to speaking to you again following the results of the Q3. Thank you very much, and goodbye.