Earnings Call: H1 2021

Aug 12, 2021

Ladies and gentlemen, welcome to the First Half twenty twenty one Results Conference Call and Live Webcast. 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. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ulrich Steiner, Head of Investor Relations. Please go ahead, sir. Good morning, ladies and gentlemen. Welcome to ComEd's 2021 Havio results presentation also from our side. With me today are our CEO, Kevin Croft and our CFO, Lisa Petacci. The presentation that Kevin and Lisa will be giving shortly can be found on Our website along with the media release and the Javier report. Before I hand over to Kevin, I would like to draw your attention The disclaimer at the beginning of our presentation. With that, I'd like to turn the floor now over to Kevin. Kevin, please. Okay, Yulie. Thanks very much. And first of all, I'd like to say good morning to all of you and Thank you for joining our session today. Before I get into my formal comments, I would really like to make sure that I acknowledge the Comet team, they've done an incredibly good job meeting our customers' needs. They've worked relentlessly to support our customers And they've worked extremely hard to generate the results that you've seen today. So thanks to the team and thanks So can you go to the next slide please? You've already seen our First half results, they represent the best past performance that the company has seen in our history. Lisa is going to go through all the details of that soon. So I just want to comment on the left hand side of this page. First of all, it's quite clear that our performance has been driven by the boom in the semi cycle. This is as we anticipated at the start of the year and we can confirm that this will continue into the second half. I have more comments on that in just a few minutes. But also I can also confirm that as we had projected, we have seen the bottom of the aerospace and automotive industries And this has obviously affected positively both of our X-ray Systems businesses. The divisions are positioned to capitalize on their new opportunities that are out there. We've had good acceptance of the new products that we've launched in 20 And the new applications that we've launched earlier this year. And again, kudos to the supply chain management team. They've done an excellent job managing our exposure that would potentially exist in the supply chain. They've done an outstanding job. And yes, we have taken some inventory positions, as we said, at I think at our AGM. We said we were going to do that. We've done that. We have done everything we can to protect our customers as well as to protect our revenue expectations for the year. And so we progressed quite well in our programs designed to improve our organizational effectiveness, To improve our overall infrastructure and continue that whole cultural change that we embarked on a year, year and a half ago. And of course, we've already initiated a formal ESG program. Go to the next slide, please. I think it's quite clear all of the market analysts in the semiconductor space Continue to upgrade their view of the wafer fab equipment spending. Even last week, VLSI, one of the Most well recognized market analytic firms in the industry upgraded their view of wafer fab equipment Spending from 32% and now they're projecting somewhere between 35% 36% Plus other forecasters, our customers, our customers' customers, they all expect Continued growth in the semi cycle. And of course, this is important for us because this pulls our PCT business, Our plasma control technology business substantially, but also it has immediate effect on our X-ray systems business in Hamburg. In the automotive and aerospace sector, we see a good stable recovery From the bottoms that we had in 2020, don't want everybody to get too excited. It's not like we're seeing a V shaped recovery. It's the back of recovery that we Anticipated and we expected, but in fact we do see a recovery that in both of those markets. And as you know, that drives our IXS and our IXM businesses. Finally, I would say that on the security side, we do see some very modest growth in that area. This is going to be driven by air passenger mile increase as well as the increase in global trade as we come out of the pandemic. So we do see that as an opportunity on the horizon, but there's been some opportunity that we did capitalize on in H1. If you go to the next slide please, Ines. I would have to say we've seen excellent progress across all three businesses. This slide highlights some of those key wins In half 1, probably the most important item that I should note is the design wins and the application wins that have occurred In all three divisions, these are of course important for the first half, But they actually come to fruition in the second half. And as you all know, when you have design wins, you actually start to see that materialize In subsequent years. So that design win focus continues on within And I'm proud to say that the company has executed quite well in that respect. 2nd, as you see on this slide, You can see that the Panang, Malaysia facility has been qualified for high volume particularly from our most important key customers and we are doing that transition into high volume manufacturing and you'll see And impact of that during the second half of this year. 3rd, we're really focused on The return on our R and D money that we spend, it's important that we see that these programs yield results. The beta site program for the RF generator in PCT is going as expected. We do have momentum in our Tier 1 and Tier 2 customers, and we are on track to deliver to the expectations that we've set. Some revenue in 2021, more revenue in 2022 with significant revenues we expect in 20 In addition, we've seen the adoption of the Mesa Focus product line that was launched or the items that were Launched in IXM primarily the Mesa focused product that continues to be strongly adopted by our customers. And finally, I would say that we have successfully launched a very new and novel application within the IXS That has direct impact and adoption in the semi space. All in all, execution has been quite good across all divisions. The team is relentlessly focused on what we have to go accomplish. There's been no deviation and we're staying the course. So if you go to the slide that says summary, I guess this really basically says it all. Our strategic growth targets Have resulted in exceptionally good first half results. PCT enjoys a position in the semiconductor industry right now That helps drive the company obviously, but we do see an upward trend in our served markets for our X-ray divisions. So we do see that that climb out is occurring. Market conditions are quite solid, particularly in the semi space. And I think that the team has done a great job managing the global supply chain. And in our case, we see no material impact Into our first half results and we think it's going to be we know it's going to be successfully managed in the second half. So those are my opening comments. With that, I'd like to turn it over to Lisa and have her walk you through the financial results. Thank you. Thanks, Kevin, and good morning to all of you. Comet produced outstanding results in the first half of twenty twenty one and achieved the highest sales and EBITDA over a 6 month period in the company's history. The company achieved sales of $248,300,000 an increase of 36.2% compared to the first half of twenty twenty. This strong top line performance was driven by several factors. As Kevin mentioned in his opening remarks, the demand for semiconductor chips has triggered a significant growth cycle in Komet's primary end market. Furthermore, as expected going into 2021, the automotive, aerospace and security markets began to show signs of recovery after a sluggish 2020. These general market trends drove demand in all three of our divisions. Notably, Comet leveraged its geographic footprint, achieving 51% sales growth in Asia 38% growth in North America compared to the same period last year. Finally, Komet's innovative solutions and customer focus led to market share gains through design and spec wins, along with continued adoption of new products launched last year. Gross margin improved by 510 basis points Compared to the first half of twenty twenty, gross margin fluctuates based on volume and product mix. In the first half, Margin expansion resulted from growth of the semi and electronics markets as well as cross divisional focus on streamlining and automating operational processes. Operating expenses in the first half of twenty twenty one We're higher than in the same period last year due to investments in growing the company. These investments include ramp up Our team in Penang, on boarding of new management and continued focus on research and development. R and D represents roughly 11.5 percent sales in the first half of twenty twenty one and remains a foundational focus area for the group, with investments focused on medium and long term strategic projects targeting the semi and electronics markets. It should be noted that net operating expenses as a percentage of sales decreased from 32.7% In H1 2020 to 28.7 percent in H1 2021. The company more than doubled its profitability as measured by EBITDA to $44,300,000 compared to $18,800,000 in the first half of twenty twenty. This represents an EBITDA margin of 17.8% compared to 10.3% at the same period last year. Strong sales growth, Product mix and operational efficiencies were the primary factors influencing the 7.50 basis point margin improvement The divestiture of the e beam segment resulted in a 60 basis point improvement on EBITDA margin. As a reminder, Comet recorded a $4,000,000 pre tax gain in net operating expenses in the second half As a result of our solid operating results, Comet achieved a net income of $27,800,000 representing a net income margin of 11.2% for the first half of twenty twenty one. This has led to a CHF2.74 earnings per share improvement compared to first half twenty twenty. And finally, one note just regarding the company's effective tax rate. The effective tax rate for the first half twenty twenty one was 20.9%, driven by the taxable profit mix generated from our international subsidiaries. We will continue to monitor the potential local tax changes of our subsidiaries, especially changes in corporate income tax related to the new administration Now let's turn to the division results for the first half twenty twenty one. As previously mentioned, strong demand from wafer fab equipment customers in the semiconductor chip manufacturing sector As well as demand from our targeted electronics fabrication customers drove the growth in sales. The aerospace, automotive and security markets Started the slow climb out from the pandemic bottom of 2020. All three divisions Achieved sales and EBITDA growth compared to the same period last year. Plasma Control Technologies Division PCT contributed the largest share of the group's sales. PCT sales increased 50.1% From $96,900,000 in the first half of twenty twenty to $145,400,000 In first half of twenty twenty one, ECT achieved sales growth across key geographic markets and with all major customers. ECT expanded EBITDA margins by 4.70 basis points compared to the same period last year, Ending the first half of twenty twenty one with a margin of 23.9% due to strong demand and production efficiency. Division results for the 2 X-ray businesses reflect signs of improving market conditions and the proceeds of strategic repositioning, productivity improvement actions and new product launches. The IX-ray Systems business IXS accounted for approximately 28% of the group's sales. IXS contributed $70,200,000 in sales, an improvement of 30.8% versus first half of the prior year. IXS sales growth was complemented by competitive wins with newly introduced X-ray systems Pointed towards semiconductor and electronics markets. In 2020, the IXS business implemented countermeasures to realign its cost structure. These measures included implementation of operational cost reduction programs, conducting virtual equipment installations, shifting our emphasis to more profitable market sectors, reduction of the product portfolio and discontinuation of low margin custom products. As a result, IXS successfully returned $4,500,000 in EBITDA compared to a loss $2,100,000 recorded in the first half of twenty twenty. The X-ray Modules division, IXM, Achieved first half sales of $37,300,000 a 23.4% increase compared to the first half of twenty twenty. EBITDA margins improved by 180 basis points to 15.8 percent in the first half of twenty twenty one. The IXM core market of non destructive inspection solutions in automotive, aerospace and security gained momentum in all regions. The division also benefited from commercial success with its new products, Ion modules for security applications and the Mezzo Focus product line targeting the semiconductor and electronics market. In summary, focus on strategic objectives, Targeted product development and improved productivity measures in all three divisions set the stage for a second solid second half. Next, I'd like to provide a few comments on the balance sheet and cash flow metrics. The solid performance of the group has continued to allow for healthy balance sheet position at June end 2021 with a cash position of $76,400,000 Comet generated $15,300,000 in free cash flow Through strong operating cash performance in the first half of twenty twenty one, operating activities generated $21,800,000 in net an improvement of $14,000,000 compared to the first half of twenty twenty. Net working capital management continues to be Komet has prioritized actions to mitigate potential supply chain disruptions and protect the company's ability to meet customer demand expectations as well as our own projected revenue streams. These actions will likely result in higher net working capital balances in the second half of twenty twenty one. Capital expenditures totaled $6,200,000 and represented 2.5% sales in the first half. Investments increased by $2,700,000 compared to the same time last year when spending was curtailed due to the uncertainty of the pandemic. First half twenty twenty one expenditures reflect investments in our strategic growth, production capacity and IT infrastructure For the full year, we still expect CapEx to be in a range of 3% to 5% of sales, Probably closer to the lower end of that range. Finally, with respect to our capital return to investors, Equity as a percent of total assets increased to from 50.1% in December 2020 52.6 percent at June period end. Our net debt balance of $6,100,000 also remains in line with our expectations. This represents a solid foundation for the growth of the company. So in summary, the company demonstrated Strong strategic focus and operational performance in the first half and is well positioned to capitalize on the increased demand The semiconductor market expected in the second half of twenty twenty one. From my side, I'd like to thank our teams, suppliers, Customers and investors for enabling us to achieve these excellent results. Additional details of Comet's first half performance And now back over to Kevin to provide context for our 2021 second half outlook. Great, Lisa. Thanks. Let's go to the next slide, please. So before I go into our full year forecast, I Just feel like it's important that I give you a bit of a fabric behind the macro environment that's driving our business And really the business of our customers and our customers' customer and I don't mean this to be a tutorial, but I think it's important for us to really be on the same page when I talk about what's happening in the industry and to go forward look for comment. We all show some variation of this slide and hopefully the message is quite clear. From that dotted line looking to the right, you can see that we've entered the data age, the data age of artificial intelligence and visual computing. I'd like to attempt to put this into context. Everything we do online and offline needs some sort of data trace. Recently, Cisco published a report stating that in 2016, the world processed 1 zettabyte Of the Internet traffic in that year, that means all data, whether it's email, whether it's file sharing, whether it's video Whether it's music streaming, etcetera, all of that happened in 2016. That's the entire world's generation of data on the World Wide Web in the previous 40 years. By the end of this year, that will be a minimum of 10 zettabytes of data, minimum. Now Cisco projects it's going to be somewhere between 13 and 15 zettabytes. By 2025, 4 years from now, We're going to be processing 150 zettabytes of data just in that year alone. This digitization of Society is driving demand for chips, for packaged chips, etcetera, across the world and across society. When I talk about the super cycle, well, I guess a year ago or maybe a little less than a year ago, this is the super cycle that we're trying to deal with. And I'm not really sure if we understand what that is. So if you go to the next slide, Vin. What that means to me, if I look on the left hand side of this page, Is that the semi industry is in this super cycle or perhaps it's a hyper cycle, What I can say is probably one that we don't fully understand and we don't fully appreciate at this point in time in our industry. But this sector, these changes drive incredible demand for data processing speeds, Faster and faster data processing speeds, more and more data storage, more and more data mining. We're seeing these start to play out in technology changes that occurred really announcements that have occurred late last year and in this year. For example, last year, you may recall I mentioned that Micron had shown a 179 layer NAND device, NAND memory device. Just 2 weeks ago, Samsung announced a 200 layer NAND device. In addition, in the first half of this year, you've Seeing that TSMC and IBM have been going head to head on News G2B, have the fastest microprocessor at the smallest design world, 2 nanometer design wall, that's 10 atoms that we're talking about here. This is important for comment for really two reasons. To be able to deliver chips that function at these design levels requires more and more precise control of plasma. And that's really the real mission of our plasma control technology team. Small perturbations in plasma can lead to yield problems for our customers' customers. The second reason these trends are important in the semiconductor space is that these devices have to be packaged And they have repackaged in architectures that allow for speed. The traditional packaging methods Are becoming obviated and they require unconventional means of inspection. Traditional means and inspection don't necessarily provide the data necessary to understand yield results. This means that IXS, for example, the use of X-ray technology to look for design defects or to look for device defects is particularly at these package device scales. So that's pulling our X-ray IXS business Into the semi space. Now in the middle of this page, we talk about the automotive and the aerospace sector. I'll just reemphasize. We are experiencing a steady, slow but steady recovery in those industries. There is demand for electric vehicles, of course, and everything associated with them, Batteries, for example. And we're also seeing domestic coag production even in combustion engines start to move, Particularly in China and in Japan, but we can see that also occurring in the U. S. And in Europe. And that drives our IXM and our IXS businesses. In the aerospace sector, again, slow steady climb out, as Lisa already mentioned. We do see a return in The passenger air miles, which is important particularly for the IXM portion of the business, and we also see an increase In global trade, which will also drive IXM because the ports of the world Are looking for inspection techniques that rely on X-ray. So we're starting to see that pick up in the global economy, Particularly in goods trade that is pulling the security sector along. For the second half of this year, we expect the momentum to continue. We see Strengthening areas in the automotive, aerospace and security sector, and we're going to have to ride the semiconductor sector In every way we possibly can. If you go to the next slide, please. And what this trend relates to is really captured in the headline here. We have to be relentlessly focused on execution and that's our mission. We have to drive for share gains. We have to continue to increase our operational excellence. Some of that is starting to manifest itself. You've seen that in the numbers that we presented earlier, but that trend is going to have to continue and we need to be Absolutely focused on it. Now within each of the divisions, you can see some of the primary objectives here. Obviously, for PCT, it's Bill Tanane as fast as we possibly can, make sure that we execute on the beta program for the new RF generator. In IXS, it continued to gain market share, particularly in the semi space, in 3 d packaging applications, But also in our traditional served markets and to continue to streamline our product portfolio. Now on IXM, nice little business. We need to continue to harvest the fruits of the investment that we made last year In R and D and get these products continuously embraced by our customers. And we can say with confidence that that's happening at this point. We do have an initiative to look at best cost regions of supply for that division. That's also an area of focus to Improve our overall profitability within IXM. We've got a lot of work to do, Not over yet, but we do have a lot of work to do and you can see the major initiatives that are here on this slide. Now with that, I'll move into the outlook. We've already published the outlook that you see here on this page. We do expect sales to improve such that we will deliver between CHF 480,000,000 CHF 500,000,000 In total revenue and an improved EBITDA margin that ranges between 18% 20%. The most important thing for us is that we prioritize the safety of our employees and that of our customers. We know the pandemic is a nova. We need to make sure that we manage that situation accordingly, but that's an obvious. We will do that even at the risk of revenue if it ever came down to it. But we have to continue to work on our growth strategies, Our cultural change and well continue to ride the semi cycle as it moves and And lastly, the last one maybe probably one is we'll probably get some questions on that, I imagine, is that We need to make sure that we continue to focus on our supply chain, continue to manage the supply chain effectively And make sure that we are able to protect our revenue line and our customers' needs. So we're going Running that fine line between balances of what's our inventory tolerance, what's the impact on net working capital, our cash flow generation And the assurance is to make sure that we make our revenue line. Personally, I know that's under control, but it's something that we continuously monitor. So I would say outlook for the second half is quite positive and you should expect a really good result from the Com Hem team by the end of the year. And with that, I'll open it up for questions and answers. We will now begin the question and answer session. Question is on the phone. I requested to use only handsets and eventually turn off the volume from the webcast. Webcast viewers may submit their questions or comments in writing by the relative field. The first question comes from the line of Michael Firth with Sontobel. Please go ahead. Yes. Thank you. Good morning, everyone. Three questions from my side. You were talking about market share gains in semiconductors, and I was wondering if you could be a bit more Specific in terms of in which applications you are seeing market share gains? And also if you can eventually Quantify those comments and tell us what sort of market share levels in semi we're talking about. The second question would be regarding the margins. So we see a Nice development in EBITDA margins, but we're still quite far away, especially in PCT and in iXm From the historical EBITDA margin levels, although revenues are at very, very high levels, so I was wondering what needs to happen For those margins to go back into, let's say, the 25% plus area. And then the final question is on IXS. You're talking about the sort of beyond inspection And AI applications there, if you could give us an update on the road map, what's the current status there On those programs and then what milestones should we be looking for in the coming 12 months? Thank you. Great. Thank you, Michael. This is Kevin. I'll take on 3 out of your 4 questions. I'll turn the gross margin one over or the margin one over to Lisa and Maybe I'll kick in with some comments. Thank you for your question though. So relative to market share gains, Most in terms of PCT, I think is what your the context of your question was. We Continue to win in RF match applications with really the Tier 1 and Tier 2 Customers, it's kind of across the board. You may recall that last year we indicated that we had 1, I think, 26 design and specification wins last year. We're on track, we believe to do something quite similar at the same level, I would say. So this is in primarily this The RF match base. We continue to maintain our share in the vacuum cap The back end cap market and well, we know that we've taken share as well within IXM, particularly because of the And maybe one last comment, if you were to look at the Forward generated by VLSI for component market share comment was attributed with 36% share in the RF Match space, that's a number one position relative to Our nearest competitor, which had 31% share. Hope that answers that part of your question, Michael. Yes, very well. Thank you. The second question, I think I missed my notes here. You said to quantify Or maybe it was actually part of the same quantify. Yes, that was what you just said, the 36% Rx match. Okay. Thank you. And then I'll take on the IXS question where you asked Beyond inspection and artificial intelligence applications, actually the application win that I referred to As much to do with the use of AI or machine learning applications to look at yield and yield enhancement possibilities. So it's early days, but I can say that that activity is going forward. We launched our first Joint workflow between ORS, the Object Research Systems Group that we bought in Canada, we launched that first workflow With the IXS team in June, it's having incredible interest from customers as well. So I guess my comment will be steady as she goes. And as we've said before, we don't really expect to see That compendium to actually yield real tangible results until next year. We can say that we've got the first path finding activity going on at the moment. Now I'll turn your margin question over to Lisa and I'll Chime in if I have anything to add. Okay, perfect. So just to provide a little bit of color on the margin development for PCT, I think there's a few factors that we just need to make sure that all of us kind of keep an eye on as We execute going into the second half. The first one is that we expect to see contribution from our P'nyang facility really in that second half. So that's a lower cost manufacturing environment that should provide some lift to the PCT business going into the second half. And then obviously, there's a product mix element and then the production volume with our RF matches are going to be critical for us in order to achieve The numbers that we hope to achieve with PCT. Ultimately, I mean, the other thing I think to say too is that, Just generally speaking, if we look at the history of PCT and even in context of some of our strategic focus, We did divest that EDIM business last year. It has provided us an opportunity to focus more on what our strategic objectives are And some of our major objectives in PCT from an investment standpoint are with respect to the RF generator and the So we'll continue to invest in this business, but we have a fairly positive outlook going into the second half for PCC. I'll make a comment or 2 there as well. Remember also, Michael, that we invested Quite significantly in creating manufacturing capability for the RF generator in Aachen as well as Setting up the new Pan Am facility, I think that if you think about historical performance of the organization, PCT Specifically, we should be demonstrating in the second half a significant improvement half over half. Lisa just mentioned that. And I think you'll say, okay, maybe they're going to be in a position later to exceed Historical highs and maybe look a bit different in the future. Second thing I would say relative to IXS, IXS, we will demonstrate good performance this year. As you know, that's been a reorganization that's going on. I think we've got another year before you'll see us operating at the historical levels and I would say that that's still not good enough by a long shot. So we got work to do. That involves changing the service markets, changing the product mix continuously And keeping an absolute dead focus on operating expenses. Okay. Thank you. Thank you very much. Thank you for the questions, Manx. The next question comes from the line of Serge Rotser with Credit Suisse. Please go ahead. Yes. Good morning, everybody, and many thanks for taking my questions. I have several ones and I will ask them 1 by 1. So the first one is based on your guidance, let's take The up range is €500,000,000 You already achieved half of that. So this tells me that there is no growth half over half And now we also have been guiding for a steady recovery in the X-ray business. So this would tell me that then Sales in PCT business would be probably even lower than in the 1st 6 months. Is this correct? And can you explain me that or in general the seasonality of the different businesses probably also in relation to the margin as you Already answered Michael's questions about PCT margin. This will be the first one. Do you want to take the I'll start with that. So I think there's a couple of comments that I would make there. First of all, I don't want to be accused of sand. There is a potential of Actually exceeding that range, but I also have to make sure that we communicate clearly that we are taking into account Our supply chain situation, which we know is managed, But more importantly, what's our customer supply chain look like? If there is a risk at all that Our bigger customers are not going to be able to ship because of other issues in their supply chain. We need to be cautious about that. So it's more of a second order effect what's happening with our customer situation. And that's maybe the area that I would say we're being a little bit cautious on and we wanted to make sure that that was factored into our thinking first half to second half. We will see some incremental growth in PCT. We will see growth in IXM and we'll have to see how we're able to manage our IXS revenue Because of the need for deploying field service engineers to actually be able to do installations, So that might be a more of a flattish looking business half over half. The order book will be there. The question is revenue generation. And as you know, IXS has roughly Generators is quite has a certain correlation. So can you give us an update? What you believe in what kind of market share you can build up Going into 2022, 2023, 2024. Okay. First of all, I have to say from your lips to God's ears, So as long as we continue to gain RF Match share then perhaps that will be the footprint to allow us or the foothold to allow us to move Into a generator relationship as well. Unfortunately, in this industry that doesn't always happen. It does sometimes, but not as a norm. But I'll write that comment and say yes, The generator market is The generator market or I should say that the RF systems market is growing really as Currently as you see the wafer fab equipment market grow, in fact it probably grows a little bit in excess of that. Our challenge at common is to make sure that these beta sites that we have ongoing And the future beta sites that we put in play that this generator does what we say it's going to do as advertised. And so currently I can say that the generator is working. It is doing what we say it's going to do, but we're still quite a ways out of getting qualified. Now if this product does perform as we think it Will and as we've demonstrated so far, then our 10% market share target for 2025 Probably is an understated goal. We're not prepared to go and revise that yet until we see 1st revenue and see all the qualification acceptances occurring as we see fit and as we expect. So I think the bottom line on that is we're confident of the generator. It is performing to our expectation and more importantly to our customers' But we're not viable in that marketplace yet. If it works, Then that 10% goal is more than achievable in terms of share. Hopefully, that helps. That helps. Yes, many thanks. And then probably the last one now, it's about you mentioned some Important design wins, can you tell us a little bit more about that? Is it on new products, existing products from the application or new customers? Well, gosh, that's a little bit of a follow-up question to Michael's and that's great. I will start off We are First of all the design wins Actually yes with new customers, primarily customers that would classically be referred to as Tier 2 customers. And by the way, Tier 1 and Tier 2 only has to do with how big are these customers, what's their revenue line. And If they're in that $500,000,000 or $1,500,000,000 they're typically classified as Tier 2. For us that's a very big customer. Of course, the other customers of Tier 1s are in multi billion, the multiple double digit billion. So we've had design wins in RF matches in Tier 2 customers. I won't go into specifics there Because of course that's competitive information that we just don't want to divulge. We also Have recorded design wins within our top tier 1 customers That is clear. Again, these are RF match design wins And we expect that to continue during the second half of the year and into the future of course. That's our bread and butter as a company or as a division within PCT. There are multiple wins. I think the last one I remember the number is 10, I believe it's 10 new customers for the major focus products from IXM. I have to go and confirm that number, but I think it's in that range. Most of that's in the security sector, if I remember correctly. And within the IXS business, There has been one significant brand new customer in the packaging space that we I have recorded our first hard copy PO with. We are engaged with that same customer on multiple other opportunities And in fact they've been influencing other companies in the outsource assembly and test arena. So that's sort of a watch this space, but we've proven first principles that we can be successful in that market sector. Probably a follow-up question, but what does this tell me about the competitive situation? Because you are in oligopolistic or duopolistic markets, Like in matches, you and Altium Defense G cover 80% of the total market. Do they step back or do they have a problem with the product or Is your product much better or will they strike back or how can I put this in relation? It'd be interesting to hear AE's perspective on this as well of course. First of all, we're in Where we get a design win, we expect to keep that design win. So I don't and I cannot imagine a situation where we'd be kicked out. So we're doing our best to either win head to head on new product designs with our customers Or in a few cases, displace our number one competitor and the other competitors in They're existing customers. So I think you have to address the question to them. We do watch our competitors of course, but really we need to keep our head down, our butt up. We got to keep moving and just keep Okay. We leave it there. Thank you so much. Thank you. Thanks for the question, by the way. The next question comes from the line of Michael Inouwen with Stifel. Please go ahead. Yes. Good morning, everyone. I have also a couple of questions. Just one short one. So I'll have actually So the first one is a follow-up on Serge on Advanced Energy and MKS is the other one actually. They are both We're not doing very well also share price wise. But is it fair to assume that if you're winning market share from them Or if you would win market share from them, it's actually too early to say because they have problems in supply chain, they were not able to deliver, They would probably lose their clients not already now, but potentially later. Yes, very difficult to sign them out. So that's just a follow-up question maybe as the first one. I can also give you the other three ones, so you can probably take them 1 by 1, if that's okay, Kevin and Lisa. Yes. Go for it. Okay, perfect. So the next one will be also on the guidance, but on the midterm guidance. Maybe it's a bit more for Kevin because actually that midterm I mean, not for Lisa, but the midterm guidance was Done when you were both not with ComEd. And looking at the numbers right now, it looks as It would need a little bit of tweaking at least in the divisions. Do you think that something that we could expect there a fresh look at this midterm guidance going forward? And maybe let me take just one more question that I think would be probably interesting to understand. So we hear a lot about new technologies, smaller architectures, the 3 d stacking of products And now the emerging EUV technology also moving into memory production. So I was Wondering, is there any technology somewhere in the near or longer future out there that actually puts RF power or the plasma based technologies at risk, so that we could, let's say, EUV potentially need less plasma based products. So is it a problem for comment, something like that. I was just wondering if it's if there's anything we have to be worried about technology wise? Let's talk about the midterm guidance question first. We're constantly looking at what our guidance is going to look like for the out years. I wouldn't If we're going to update our mid term guidance you'll see that during our Capital Markets Day and that's really all I can say about that at this We're sticking currently today to the 15% compound annual growth, 25% EBITDA target and the 30% ROCE. And yes, it's always constantly under review. I can understand The desire for us to update and we are looking at that on a regular basis and if we choose to that will be at the Capital Markets Day. So that's where we are on mid term guidance. In terms of new Basically you're asking about technology threats and you really mentioned primarily EUV. In reality right now, first of all EUV has no material impact whatsoever on whether you're using an RF based Technology solution or not, it really doesn't have an impact. So that's not a technical threat. Even when you look at how The 2 nanometer design rule products from TSMC and from IBM were created Or when you look at the MAND layers coming from Micron and from Samsung, for example, It's a massive use of plasma based technology. So I don't see that need And the anytime in the near future in this industry, not at this point. And even people start talking about Quantum, Well, that's still decades away to be quite frank. So I just don't see it. I think you'll get that same answer from just about everybody you talk to. Yes. It was just a kind of confirmation. Thanks so much. Yes. The next question comes from the line of Sebastian Vogel with UBS. Please go ahead. Hello. Can you hear me? Yes. Yes. Perfect. Great. And I'm coming back to the RF generator. If I recall correctly, what you initially were or during the call today, you're sort of alluding to what is the sort of the trajectory for the revenues linked to the app generator. It seems like pretty much the same sort of trajectory that you have outlined in the past, meaning that you're pretty much exactly on the plan, no much acceleration, but not much on the delay side. Is that true? That's absolutely accurate, yes. Got it. Then the second question is, if I recall correctly on the Capital Markets Day, you were outlining that The Tier 2 customers and the sort of beta phases are usually lasting between 6 9 months and your beta phase has started in January. That would mean that we are already pretty much in the 6 to 9 months period. So in that sense, how high are the Probability that disqualifications of some Tier 2 guys are just around the corner? Yes. So Very, very clearly, we are on track to the plan that we have in place. I think that Sebastian maybe it's Best to think in a couple of different forms. I've said with the Tier 2s, 6 to 9 months can take as long as 12 months, but I think that we're In pretty good shape on that 9 month window at least for 1 if not more than 1 of the Tier 2s to come across. In the Tier 1s, I'll reiterate it takes usually 18 to 24 months for them To actually go through a qualification period and then of course at times that needs to be qualified as their customers as well. So it's a bit of a longer road, which is why we changed the focus to be not just putting all of our eggs in the Tier 1 basket, Actually start really engaging in the Tier 2s as well. So again we're on track to our plan. Our customers need to finish and wrap up their qualification activity. And by the way, we're going to ship more beta units Late this year and into next year, this is an ongoing process. It's not the work of a moment and it's not a single product that we're testing here. Remember this is a platform. It's an RF generator platform that is going to have multiple players, flavors, power, Frequency, etcetera. So it's not probably more like a multiple set of Just to be clear, then you meant When you said that you have a couple of smaller clients being potentially quite well on shape to stick to these 9 months, so that means you're actually sort of For at least 1 or 2 close by to finishing the beta phase, is that the proper understanding of what you just said? I'll try to make it even more clear. We said consistently we expect to generate first revenue in this product this year and we will generate first revenue in this And then one follow-up question, how much time you normally have between finishing a beta phase and realizing profit already realizing orders? Is that really happening on the next day or is it does it normally necessarily take 1 or 2 months or something? Yes, Sebastien. Normally it takes The actual terms of the data agreement that you have in place, in some cases the data agreement is If it works, you buy it and it's an immediate flip to a hard copy PO. In other companies when you engage with them they're going to look for a beta unit that works, that gets qualified And then they return that particular unit and issue purchase orders for follow on generators or RF matches or what have you. So it just depends upon what customer you're engaging with and what the contractual terms And agreements are in place with them. So there's not one thing that fits everybody's business model. Got it. And then one just very quick follow-up. I mean, the point was coming up already a little bit earlier in these conversations With regard to some of your peers struggling, in particular, some of the peers that are quite active being on the off generator side, do you see that impacting also potentially That the demand for your beta phases and the product overall? In a concrete way, we can't say, we cannot point to This competitor having a delivery problem with this customer resulting particularly generators resulting in a new opportunity for us. We honestly can't say that. It may have happened, but it wouldn't have happened because we're aware of it. On the other hand execution typically at the supplier level has to do with do you have the right quality, do you have the right performance and do you provide the right service to our customers and if you miss on any three of those points That offer and you probably have to miss it a couple of times, that offers an opportunity to go and perhaps Open the doors for another competitor to come into play. Of course there is a 4th possibility and that is that A supplier takes their product off the market to declare end of life and that ends up creating a problem For their existing customers which forces those customers to look for an alternate pretty quickly. So any 4 of those factors could turn into an opportunity for Comet for RF generators or for matches Or for the IXM modules as well. And I can say in that case, yes, we've seen opportunities from across because of that. Got it. Perfect. And then very sorry, one really quick follow-up last question. I got at least as an approximation, the FX impact on PCT being quite massive On the negative side, somewhere around like 5%, 6%, 7%, is that also something what you have seen? Yes, I mean, on the FX side, obviously, I mean, if you look at our numbers and what we've disclosed, we have a large percentage of our revenue is generated in U. S. Dollars, and there is a mismatch obviously with the cost base there. So, I mean, what I can say is At the group level, half 'twenty to half 'twenty one, sales impact is about $7,500,000 negative at the group level. And then that represents about 1.1 percentage points in EBITDA margin. Got it. Many thanks. Thank you, Sebastian. There are no more questions from the phone at this time. Okay. Thank you, Alicia. We have two questions In writings, the first from Jonathan Herbert, Colony of Iber has been answered, I think, with Tier 1 and Tier 2 clients. Yolanda Stalman at Capital Tree wants to know a little bit more about the formal ESG program we started So I can jump in there and Kevin if you want to add anything, We'll go for it. So yes, we did we are very excited about the ESG program that we have launched in 2021. We don't have too many details to disseminate to the market at this point, but I think that you can expect A bit more of an update on that at our Capital Markets Day, and we should be prepared to disclose at least our progress towards Certain priorities in the annual report for 2021. Yes, I think that sorry, Lisa, I think I'll jump in there and say we do expect that we will issue In our report this year in the GRI format, that's going to happen. It is a formal multi phase program that we have in place at the moment. We will be coordinating what our KPIs are going to be and what we're going to sign up for. We have to, of course, get that approved by our Board of Directors. This isn't lip service. We want to make sure that we have clear, measurable, executable KPIs, Not fluff that our teammates, our customers and our investors can hold us to Because it will have a material impact on the company as well as more than likely on our compensation as well. So This is a really critical program for us and you'll hear a lot more about it when we get to the end of the year. Hopefully that answers your questions We don't have any questions Okay. So no questions, then I think we And conclude the call. Thank you for participating in today's webcast and conference call. Whenever you have additional questions, you have the number or the contact of Ladies and gentlemen, the conference is now over. 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