Earnings Call: Q2 2018

Jul 26, 2018

Ladies and gentlemen, good morning or good afternoon. Welcome to the Insicom Second Quarter 2018 Results Conference Call. I am Alice, the CarsCall 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. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Lukas Winkler, Chief Executive Officer of Infikon. Please go ahead, sir. Thank you, Alice, Christian, and good morning, everyone. Thanks for joining us today to review our results for the Q2 2018. After a very good start into 2018, we have a with a record Q1, we had a pleasant Q2 with increased sales in all markets and regions compared to the same period a year ago. You can find, as always, a PowerPoint presentation on the Investor Relations tab on our website, where you can see some graphs and a little bit more information about our performance in the Q2. Please go to Slide number 4, where we start with the key figures for the reporting quarter. In total, our revenues were 11% above last year's Q2, but close to 6% below the Q1 of this year and we finished with sales of $104,200,000 If you adjust those figures for foreign exchange currency fluctuations, the organic growth was actually 8.5%. With a gross profit margin clearly above 50% of sales and higher operating expenses, we finished the 2nd quarter with operating income of CHF 22,000,000 or 21.1 percent of sales compared to 18.4% or 19.7 percent of sales a year ago. Net income after taxes was $17,100,000 or 16.5 percent of sales. The detailed figures will be reviewed by Matthias Schwendy later on anyway. And now I go through some important highlights on our target markets first. So please turn to the next slide, which is Slide number 5, where we see the sales breakdown into the 4 key markets that we serve. On the left hand side, the pie chart shows an unchanged contribution from the different markets that we serve again compared to the same quarter a year ago. The graph on the right hand side shows the increased importance of the Asian market over the last couple of years, but also you see a much more severe reduction for the operating for the reporting quarter, sorry, where sales to the European and American customers have been more stable, but also at a much lower level. Now let's do a quick analysis market by market, starting with the smallest one. In the security and energy market, which is represented on Slide number 6, sales increased more than 50% year over year and 8% sequentially and reached US7.2 million dollars The HEP site, this is a demand portable on-site detection instrument, represents the majority of sales in this market. The 2 largest customers remain the U. S. And Chinese government agencies. Also, we had a much better start in 2018 compared to a year ago. The market trend is still hard to predict and will not become easier within the current geopolitical uncertainties. Nevertheless, we continue to develop the next generation of products to remain the preferred supplier for portable battery powered laboratories in the security market. On the energy side in this market, which represents the smaller part of our business, we see an increasing interest in new green energy technologies such as biomethane gas applications, especially in Europe, whereas in the U. S, the focus is still on fracking technologies, where one of our products is used during the drilling process for mudlocking analysis. Now moving on to the 2nd market, the refrigeration, air conditioning and automotive market on Slide number 7, where we experienced a sales increase of 3% year over year and a small increase of 0.6% sequentially, mainly driven by higher sales to European and Asian customers. Majority of the sales increase can be allocated to the automotive and after sales service market, while we have been able to defend our high market share in the refrigeration and air conditioning device manufacturers market. We continue to be the preferred number one supplier in that market. In the automotive market, we enjoy increased sales, primarily due to an ongoing heavy investments in lithium ion battery manufacturing capacities, mainly in China, but also now with plans to invest in Europe as well. With our full line of helium, hydrogen, refrigerant and multi gas leak detection instruments and sensors and modules, we can fulfill almost all customer needs for their quality inspection, safety and leak tightness applications. In this very stable market, we expect that the trend will remain positive for the coming month. Now let's go to the semi and vacuum coating market, which includes solar display, optics and semiconductor applications on Slide number 8, where sales increased 10% year over year to 47,500,000 but decreased 9% compared to the record Q1 of this year. The 2 main pillars remain the semi and OLED investments. In both markets, we have been able to maintain a high level of sales to the OEMs or equipment manufacturers as well as to the end users. Majority of the shipments went to customers located in Asia with an increasing China contribution. Investments into the new OLED flat panel display technology might peak this year since the installed capacity will soon be able to cover the current needs for new displays. But further enhancements such as flexible and stretchable displays will trigger the 2nd wave investments once those new applications will be commercially available. The demand in the semiconductor market, on the other hand side, are more driven by clear applications such as big data artificial intelligence, Internet of Things, autonomous driving, smart cars, smart sensors and Industry 4.0 and so on and so on, as well as new materials and more sophisticated processes, but still based on a relatively old silicon wafer technology and therefore become less cyclical than it used to be. Nevertheless, for the coming 3 to 6 months, we expect a temporarily weaker demand compared to the first half year 2018. Finally, we had a positive quarter in the general vacuum market on Slide number 9, with sales of $26,100,000 which results in a year over year increase of 12% but 8% lower than in the Q1 this year, mainly due to a product shift for a large product family in Europe. We basically replaced an older generation with a new generation. So some of the volume went more into the Q1 and a little bit less into the Q2. As you know, we sell analysis, measurement and control products for many different industrial applications through private label partners, in this case, primarily vacuum pump manufacturers as well as direct sales to industrial OEMs and distributors. We gained market share with our direct sales channels, and we have been able to maintain our private label products and even get into new applications such as sterilization and life science market. Last but not least, sales of the Contura S400 leak detector for food packaging applications increased, and we have now follow-up orders from large European food companies and therefore decided to expand our market reach into the U. S. Actually earlier than originally planned. Before I turn over to Matthias, I'd like to close my part of the presentation with an outlook on Slide number 10. There are no dramatic changes in the view of how we see the next 6 months for most of our markets compared to our view 3 months ago. The only exception is the semiconductor vacuum coating market where we expect a weaker second half year of twenty eighteen. So we confirm our existing 2018 guidance of sales around US400 $1,000,000 and an operating income above 19% of sales. With that, I'd like to turn over to Matthias, who will give you more details about our financial performance. Matthias, please. Thank you, Lucas, and good morning to everyone to our Q2 call. I will cover Q2 results and also our half year financial results, also comment quickly our guidance for 2018. My commentary starts with Slide 12 on the power plant. As you also saw in our press release this morning, revenues for the Q2 of 2018 came out at $104,200,000 compared with $93,600,000 in the Q2 of 2017. Total sales increased by $10,600,000 or 11.3 percent. We had positive exchange rate effects of 2.8%, which means we had an organic sales increase of 8.5%. Looking at the end market developments, all markets increased and the refrigeration, air conditioning and automotive markets reached a new record level. The semi and vacuum coating market did grow by approximately 10%. The general regular market showed growth of 12%. And the security and energy market had a clearly better Q2 than last year and increased by approximately 58%. On a sequential basis, sales in the second quarter were lower by -5.9 percent compared with a record sales level in the previous quarter Q1. This was driven by lower sales to the general vacuum and also to the semi and vacuum coating market, while sales to the security and energy and refrigeration, air conditioning and automotive market did grow. How does the regional sales performance look like? On a geographic basis, Europe reached 28% North America 26% and Asia Pacific ended with 43% of total second quarter sales. As you can see from the chart, Asia sales did increase by 4.9%, Europe did grow by 23% and North America did grow by approximately 3%. Let's go to the next slide. The gross margin for the Q2 of 2018 reached 51% compared to 50.4% in the same quarter of last year. The margin percentage increased slightly by 65 basis points, and the absolute margin increased by $6,000,000 or 12.7%. Moving on to our operating expenses. R and D expense in the 2nd quarter reached $7,800,000 and increased by 14.2%. As a percent of sales, this represents 7.5% after 7.3% last year. SG and A expense in the Q1 was $23,300,000 or 22.4 percent of sales, an increase of $1,400,000 or 8.3 percent. The increase in both R and D and SG and A expense was influenced by some unfavorable foreign currency impacts. Further, it's also driven by development projects, headcount additions in various functions and higher variable compensation and commission spend. Turning to the bottom line. For the Q2 of 2018, we achieved income from operations of $22,000,000 or 21.1 percent of sales. This compares with income from operation of $18,400,000 or 19.7 percent in last year's Q2, which means the result is improved by roughly $3,600,000 or 19.6 percent compared to last year. Increase is driven by the higher sales volume, solid gross margin, while cost did increase under proportionately. Let's go to the next slide. In the Q2 of 2018, we recorded tax expense of $4,600,000 which represents an average tax rate of about 21.1 percent due to our profit mix slightly lower than the 22.2% recorded in the 2017 period, and the tax rate is lower due to taxable income mix of our various entities in the different jurisdictions. Finally, net income for this year's Q1 reached $17,100,000 or 16.5 percent of sales compared to $13,800,000 or 14.8 percent in the same quarter last year. The increase of close to 24% compared to last year is driven by the higher operating income with a slightly lower tax rate. 1st, the 2nd quarter net income equates to earnings of $7.09 per diluted share compared with net income of $5.72 per diluted share in the same period last year. This represents an increase of 23.2%, which is in line with the net income development. Now let's move on to the balance sheet highlights on the next slide. Our net cash position was $45,700,000 which represents roughly 17% of our total assets. This compares with $85,000,000 at the end of last year, which means we see a decrease of about $39,000,000 The cash position is mainly decreased due to the close to $50,000,000 dividend payout in April this year, which and is partially compensated, of course, by new cash flow generation. Operating cash flow, which you can also see on that slide, did increase from previous levels and reached good $21,700,000 For Q2, our days sales outstanding, DSO, slightly increased and reached 50 point 9 days compared to 50.3 days at the end of last year. Inventory levels did increase, partly reflecting strategically higher inventory levels, and therefore, returns decreased to 3.5%. And as a consequence, the working capital ratio did slightly increase to 25.1%. On the balance sheet graph, on the left side, you see the structure and composition of assets and liabilities. The equity ratio reached 71.2% in Q2 after 77.1% in Q4. No material long term liabilities and the gross cash position of $66,000,000 confirm a solid balance sheet structure. With that, I covered our current quarter results. Now I wanted to give some comments regarding our half year performance. Net sales for the 1st 6 months of 2018 reached $214,900,000 compared with $182,100,000 in the same period of last year. This represents an 80% increase and includes a positive 4.2 percent impact from foreign currencies. With that, sales increased organically by 13.8%. In the first half of twenty eighteen, sales to all end markets and also in all regions did increase. Refrigeration, air conditioning and automotive sales reached $41,700,000 and increased by 7.5%, mainly due to higher sales to customers in Asia. The sales in the semi and vacuum coating market increased by 19% due to an increased demand from OLED displays and semiconductor and equipment makers in Europe and in Asia. Sales in the general vacuum market increased to €59.95 $1,000,000 or 19.7 percent, reflecting a more favorable economic trend in Europe and Asia. The security and energy market, where we have a more long term and project business related environment, the sales surged 43% or $4,200,000 primarily due to higher sales to U. S. Military and governmental customers. From a regional point of view, the majority of sales we drove to Asia, where we reached $97,000,000 of sales and approximately 45% of our worldwide sales. 2nd largest region is Europe, where we had $59,000,000 of sales and a 29% growth, and the Americas had a 13% growth and a 26% share of the worldwide sales. We reached for the first half of twenty eighteen operating income of $46,600,000 or 21.7 percent after $36,200,000 or 19.9 percent last year. This is an increase of 29%. Higher sales, a stronger gross margin percentage and higher but from growth operating expense did drive this improved result. Our balance sheet continues to show a strong structure with approximately 71% equity ratio, and we have no long term borrowings. As mentioned earlier, the complete half year report 2018 is available now in the Investors section of our Intricom website. I'll conclude my portion of today's call with our guidance Very short, after this good start into the New Year, we can confirm and we confirm our guidance for the full year of 2018. Sales are expected around $400,000,000 and the operating income margin should exceed 19%. The last slide shows our corporate calendar and the upcoming dates. This concludes now my part of the presentation, and we are ready to take your questions. Our first question comes from Jorn Ifert, UBS. Please go ahead, sir. Yes. Hello, and thanks for taking my questions. And the first couple of questions is linked to the semi end market. Yesterday, your peer MKS was saying to expect quarterly revenues to decline by around 15% in Q3. This implies for semi, this can be down up to 30% the decline quarter on quarter for Q3. Is there any reason why we should see a different dynamic on your side? 2nd question would be, please, again on semi. Do you see any particular weakness at end users or OEM? And is this Q21 customer or is this broad based? And third question again to Sameer, I know it's early and visibility is limited, but do you have signs that Q4 already can accelerate versus a weak Q3? Or would you expect that Q3, Q4 is roughly similar? And then the last two questions and sorry for the amount of questions. For General Bakum, do you have any signs for a macro slowdown, for macro weaknesses, tangible signs? And the last question is on gross profit margin. Will the gross profit margin remain above 50% according to expectations in the second half? Thanks very much. Quite a lot of questions. I'm not sure if I can remember all of them, but I'll try. Good morning, Ernst, on the semi side, do we expect a 15% decline just in 1 quarter? Not necessarily. Now why should we be a little bit different than MKS? There are two reasons. The first reason is that our market share at the OEM side is not as high as they are. We are only number 2. And we are mostly on newer tools, not necessarily in older ones. And as obviously, most customers still usually they sell even the big OEMs try to sell the newer tools first before they sell the old ones. So we do not expect such a sharp decline. Secondly, we have about the same amount of business that goes to the end users, which has usually a time lag between the OEM business and the end user anyway of between 3 to 6 months. And the third reason, and this is not necessarily exactly what you have asked for, but we show semi and vacuum coating as one market. And in the and we have a larger contribution coming from OLED investments than MKS has because we have a product line, which we own and limited competition there. So therefore, the that part of the business will not be that dramatically compared to some of the semi. So yes? Sorry, Lucas, just to interrupt here. I was speaking about a decline of 15%, 1.5%, not 5.0%, 15% to 30%. Okay. So and you were saying the 15% at MKS, this could be a tick more softer for Infycon. So not 15, but then we If you would just look at the pure semi numbers, there might be a similar figure. But we also have some mixed in with some OLED investments, so it might not be dramatic. And secondly, we are working on some newer applications. We only go into really new stuff, and they will not be affected by the CapEx cycle. It's more a consumption driven part of the business. Now is it related to specific customers? But no secret that at least one customer in Korea and one in Taiwan, they basically talked about some push outs. One is more driven, I would say, economically. The other one is more driven from a technology base because it's not that simple to make 7 nanometer structures. And so therefore, they are struggling from the technology side and the other is clearly push out based on some economic reasons. What we don't see yet is a slowdown in the Chinese market. So obviously, they just stick to their plans and continue to invest. Now if you ask me how far do we see further out into Q4, I here have to really rely on what we hear from our direct customers on the OEM side, and they predict a already better Q4 than a Q3 a little bit. So Q3 might be the low point and Q4 might go up a little bit. But that's based on information. And as you know, and Matthias mentioned it in his call, we invested strategically a little bit in inventory just to make sure that we have the shortest lead time in the market. And the customers take benefit out of the short lead times, they also pretty late. So we have no orders yet that would be shipped into Q4 into that market. So the information I gave you is based on some forecast but not on real orders. Now in the general vacuum market, we do not see any slowdown. There might be some slowdown, which if there is one, there might be more in China, not necessarily in Europe, but they have no indications yet. Because China and if you look at our chart, there was a sharp decline in Q2 in Asia, but that's not China, that's Taiwan and Korea. So China continued to grow even in Q2 versus Q1. And if we would see some macroeconomic slowdown, it might come from China, not necessarily from Europe. On the gross profit margins, that really depends on the product mix. I do not expect to go below 50% based on what we see as of today. And I'm pretty optimistic that we can keep the 50 plus percent gross profit margin even if there is some weakening over the next 3 to 6 months. All right. That's very helpful. Thanks very much. Thank you. The next question comes from Reto Ann Stalten, Baader Helvea. Please go ahead, sir. Yes, good morning. A few questions from my side. First, on your guidance for the full year, implying that second half is about 10% to 15% lower in terms of sales compared to the first half. Can you give here a bit maybe even a bit more detailed indication what could be the quarterly sales run rate going into the Q3? Are we here closer to €90,000,000 or €100,000,000 You also indicated a book to bill ratio close to 1, but maybe you can give here some more insights. Then the second question or topic on the slowing semiconductor cycle. In the Q2, semi related sales declined 9%, but can you give you some indication which business segment has driven this? Is it more the display overall? Or is it more the semi related business, the OEM and end user? And how do you see the slowdown for the second half? What is the main factor for this slowdown? Is it display or the semi part or actually rather both, I think here the same negative trend here to this? Thank you. Thank you, Reito. Now we do not disclose quarterly forecast figures. So if you ask about Q3, Q4, the indication that I would rather give you today, which is not an exact figure, but based on what we hear and what we see, the Q3 might be weaker than Q4. How weak? Hard to say. Because as I said, we have a close to 1 book to bill ratio, But our backlog is not huge, especially in certain areas that are OEM related products. The backlog is actually rather small. So we basically ship usually within weeks. And therefore, the backlog would not be enough yet to exactly precise give you a number about Q3. Now is it $100,000,000 or $90,000,000 I don't know, most likely something in between. But Q3 might be weaker than Q4. That's what we expect. Now is it more semi? If you look at the development between Q1 and Q2, what caused some of the decrease, and I like to go back to what I told you 3 months ago that we had some pretty quarter end shipment in Q1. And I mentioned at the conference call that they could have gone into Q2, but they happened to be in Q1. Therefore, you should not read too much into the decline because it was basically a timing issue, not necessarily a pure business issue. But what we clearly see, if you look in the auto trend, then it is right now currently more semi driven than OLED driven. So if you ask for which one declined more, it's clearly semi declined more than the OLED currently. But that is for 2018. If I look further out, then I expect then the semi will come back, whereas OLED might then go down eventually, But did not happen in Q2 yet. Can I just explain your questions? Yes. Thank you. You're welcome. The next question comes from Michael Frut from Vontobel. Please go ahead, sir. Yes, good morning. Thank you. Obviously, most of the semi questions already addressed. My question is, you were mentioning that you see a peak in the OLED investments for the current needs. Do you already have any indications for sort of next investment cycle in OLED flexible displays and so on? Or is that really much too early to say? That would be my first question. And then the second question is, you mentioned that you will enter the U. S. Market with the food packaging applications earlier than expected initially. My question is, can you tell us a bit how you are going to address the U. S. Market and how fast do you expect this market then to develop? Okay. Now, Steve, your first question was referring to the semi and the next OLED kind of wave. Do I have any indication? I would say there are 2 indications that we have. 1 is more end user driven. We know that some of the Korean OLED manufacturer are already investing in preproduction tools for the next generation of flexible displays. And the second indication that we get is from OEM. There are more OEMs actually now considering entering the OLED market than probably 2 years ago, which is an indication that everybody expect a second wave. Now will it come next year? I don't think so. Might it be more into 2020. But and that's why I said for the current needs, I believe we probably will see the peak this year and then having a weaker 2019 and then going back up in 2020 because I don't think they are ready for commercial products yet. Now on the food side, first of all, the reason why we decided to go to the U. S. Is that we believe now that we have reached a level of confidence in Europe within those customers that we serve that the technology is now accepted. If people start to book follow-up orders, that's a clear indication now that the technology works. They believe in that technology. Now they go into the next phase of moving from just doing some sample testing, going to more sample testing and then eventually go to some in line testing. And therefore, we decided to go to expand our distribution network into the U. S. Now how do we do that? We probably or not we probably the plan is to use the same approach that we did in Europe. We hired 3 guys in those areas where we have the highest density of food companies in the U. S. And do the same type of missionary work that we did in Europe, really just going from customer to customer, do presentation, do tests and convince them that this technology actually is much better than the water bubble tests. And that's the real competition is not a real competitor. The real competition is a technology. And in that case, it's the water bubble test. And it will take probably similar timing as in Europe, 2 years before we can see the first real I mean, we will get some onesies and twosies, but before we actually convince customers to do follow-up orders, it will take at least 2 years. Okay, excellent. Thank you. Maybe just a follow-up here on the food packaging. Are you still only addressing the food companies? Or are you also starting to address the basically machinery companies, food packaging machinery guys? Only indirectly. We don't address them directly, but we get referred from the food companies to their preferred equipment manufacturers. Okay. But we don't do it directly, only indirectly. Okay, excellent. Thank you very much. You're welcome. The next question comes from Philippe Saliba, HSBC. Please go ahead. Yes. Hello. I was wondering, you mentioned China a couple of times. In general, how would you describe your exposure to the local producers when it comes to the semiconductor production, your exposure to the local fabs? And then also my understanding is that in H 2018, we should see more OLED projects from Chinese producers. So maybe some idea on that. Then secondly, you had mentioned signs for a recovery of photovoltaic solar in your report. Any indication where this would come from? My understanding is that China, after the subsidy cuts, is rather sluggish for the next for the time being. And then thirdly, also talking about the CapEx, what are your plans for the full year? Thank you. Okay. First, regarding China, the easiest way to answer the question is that is a very simple one. Our exposure in China and our position in China is very well, let me say it that way. Why? First of all, we have been in China for a very long time, and our brand recognition in China is excellent. And we have been there before the pump companies showed up in China. So therefore, if people talk about vacuum, they think Infikon first before they talk about pumps. Secondly, they are the since we have a very nice network of sales companies in China with a very long standing staff, almost no turnover, Our network is excellent. And so China really enjoyed a huge growth over the last 2, 3 years and the size of our revenue going into China almost reached now the level of sales that we have in the U. S. So it will pretty soon be our largest sales territory. Based on the fact that we have been there for a very long time, never disappointed our customers, even in some downturns, having a very loyal staff and employees there with people who have been in the company for more than 25 years. And that really helped us put us ahead of the competition, primarily because of our brand and image and our reputation. Now and therefore, we have an excellent relationship to many, many local OEMs, which actually helps us to gain market share in those newer type of OEMs much quicker than at existing OEMs outside of China because they do not have any kind of history. So they usually take what where they get the products from the best supplier with the best relationship and that's what we do. 2nd question was regarding some solar and you will be surprised most of our renewed solar business is actually coming from China, although they cut back on some subsidies. But the capacity that has been installed in the year 2011 2012 to cover the worldwide need for silicon based solar panels is almost used up basically that they have to invest more to just cover the needs from for silicon based wafers around the world. So we mainly ship to manufacturers who are in the silicon based solar panel manufacturing, not silicon based solar panel manufacturing. In terms of CapEx, I don't know exactly the figure, but it might be in the neighborhood of a total of €15,000,000 plus for the full year, maybe actually going close to €20,000,000 The reason is that we are currently working on a new type of product line going into semiconductor market that requires a little bit higher CapEx than our traditional product line. Okay. Thank you very much. You're welcome. The next question comes from Martin Kontes from Berenberg. Please go ahead. Yes. Hi. With most questions already answered, I just want to briefly touch on the automotive or e mobility market that you mentioned. Could you give us some more color on where this market is going and what you see in terms of future potential? Sure. And there are 2 directions and the one hurdle is much more dynamic than the other one. The traditional directions is where we actually compete with the number 1 there, which are on a simple application that check the leak integrity of any component that touches kind of fluids or pipelines or containers that need to be perfectly tight. Traditionally, talking about airbags, fuel tanks, piston injection, pistons and fluid containers and so on and so forth. Here, we simply are in a direct competition with a French company. And whenever the requirements are increasing, usually we get the business. If it's a low end type of application, then there is a pure competition. But the real dynamic right now currently is in the market for lithium ion batteries and driven by the Chinese e mobility that triggered a huge wave of investments into battery manufacturing places to come up with enough battery capacity to cover all the needs of the future e car volume that the Chinese expect to sell. And as you probably have heard, even they now are thinking of expanding into Europe and starting to build factories in Europe as well. That and that this lithium ion battery production capacity actually opens a lot of business for us for leak detection applications. And since not only cars need lithium ion batteries, but a lot of other devices such mobile phones and tablets and so on, they also need lithium ion batteries. So there is a huge need to cover increased security needs for lithium ion batteries that now all the manufacturers of lithium ion batteries have to do a certain type of leak checking before they are able to sell those products. And here, we enjoy a very nice number one position, and we can clearly get the benefit out of being the first or having been the first company in the market to actually realize the needs of leak checking for those batteries. Okay. Maybe just one quick follow-up question. In the Q1 call, you mentioned that you added a new white label customer to your general vacuum division. Could you maybe briefly give us an idea of how this has developed in Q2 and if you see like a stronger order intake from that new customer? No, not yet. The development is as expected, starting with relatively low figures, But now we see the trend goes in the direction that we expected, starting with 1 to 2 per month. And now we are reaching double digit figures per month. So it's going nicely, but you don't see millions yet. But the 3 new white label customer is one competitor. Yes. So for the general vacuum for the next half of the year, for Q3, Q4, is that more numbers in the line of Q1? Or would you say it's more towards Q2? Probably you have to make the average out of it and then you see what we have. As I mentioned before, there was some switch from with one product change that we had from an older to a newer generation. We had some last time orders higher than expected in Q1, which did not get in Q2. And so therefore, the Q2 number were probably a little bit too low and Q1 number was too high. So if you take the average, then you probably get a good feeling about where the market should be. All right. Thank you. You're welcome. The next question comes from Michael Inouwen, Credit Suisse. Please go ahead. Yes, good morning, everyone. Thank you. Just a couple of questions as well. Of course, many have been answered. But I was just wondering, there is currently surely a fear in the market that these pushbacks that we hear, particularly from Samsung or TSMC CapEx costs, how big is the risk that a pushback becomes a cancellation, at least for the for your clients in the OEM space and then also, of course, for Samsung and TSMC? Then I was also wondering, now that almost everyone in the chain is suffering a little bit in H2, is there any pricing fight going on? Because I would assume that when you have lower volumes that some of your competitors would like to try and get maybe in your market space with lower prices? Is that something that we see? And thirdly, on again, on the semi, the audit and semi mix, if we look into 2019, I think the Applied Material was pretty negative on the OLED cycle into 2019. And on the semi, we see now expectations that, say, the wafer fab equipment spending might go up slightly in 2019. So if we assume that wafer fab equipment would likely go up in 2019 and OLED would really go heavily down in 2019 as AMET expects, what would that actually mean for your semi and vacuum business for 2019? And maybe just a last one on the general sorry, on the refrigeration, air conditioned automotive market. Is it fair to assume that the growth that we see there in this business is mainly driven by your automotive products? Or is that a wrong assumption? Thank you. Again, lots of questions. I hope I'm sorry for that. I made the right note here. So first question, what is the risk of a push out going into cancellation? Our experience, looking back the last close to 10 years, the risk is close to 0 because of two reasons. First of all, if it comes from the end user side, and that's where it usually starts, as I mentioned before, the one of the push outs is more economic driven, the other push out is more technology driven. And it's a clearly push out in the past. They always started then to make the fab even they had a delay of whatever, even up to 1 year sometimes, but they never really canceled it. And on the OEM side, and since we are used now to very, very short lead times and are fully integrated in the supply chain kind of scheduling of our OEMs. We haven't seen any cancellations over the last couple of years because everything is so tightly linked to each other that nobody will actually need to cancel anymore. They just push it out and wait and there might be some temporary buildup of inventory, but no real cancellations at all. So I see the risk relatively small because on the overall unless we don't have another Lehman crisis, but nobody expects that. Now on the does that trigger some price fight? The answer again, on the OEM side, no. On the end user side, eventually there is some, especially since the Chinese government wanted to have some open bidding for most of the critical components for their government sponsored semi investments. There, there's clearly some price kind of fight, but it has nothing to do with the push outs or weakening in the demand. It's a thing that happens anyway. On the OEM side, it's relatively small because usually you work on design wins. And once you're designed in, you have a certain price arrangement and everybody sticks to We expect OLED being down and we expect semi coming up. We expect OLED being down and we expect semi coming up. What will be the impact for us? We don't know yet 100% because we also have some consumption driven business in the OLED market, luckily, I have to say. So we do not yet the full impact. But if worst comes to worst, and I mentioned that in, I think, last call already, OLED could go down by over EUR 20,000,000 for us. So we need to compensate that by the increased semi exposure, and I think we can do that. We have a pipeline of new projects, and I'm quite optimistic that we can get there. On the RSC side, is it more automotive driven than RSC driven? If you just look at the percentage of revenue, the answer is probably yes. And inside the automotive, it's even more linked to e mobility, the lithium ion battery applications. We did defend nicely our very high market share in the pure REC manufacturers market, and we have seen some recovery in China, interestingly, and not necessarily a stagnation, but they invested again in additional manufacturing capacity, but the majority was coming from lithium ion battery applications. Perfect. Thank you very much. You're welcome. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Winkler and Mr. Trembler for any closing remarks. Simply, I have to thank you for being that patient. You had many, many, many questions. Obviously, we are living in an interesting time environment, but I remain quite optimistic about the mid- and long term perspective, although we might have some weaker Q3. But if I look beyond 2019, 2020, I'm pretty optimistic. And I'm looking forward to talk to you again once we disclose our Q3 figure end of October. Thank you very much, and have a nice day. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.