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Edited Transcript of MELE.BR earnings conference call or presentation 23-Oct-19 3:00pm GMT

Q3 2019 Melexis NV Earnings Call

Leper Oct 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Melexis NV earnings conference call or presentation Wednesday, October 23, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Françoise Chombar

Melexis NV - CEO, MD & Director

* Karen Van Griensven

Melexis NV - CFO

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Conference Call Participants

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* Francois-Xavier Bouvignies

UBS Investment Bank, Research Division - Technology Analyst

* Janardan Nedyam Menon

Liberum Capital Limited, Research Division - Technology Analyst

* Jeffrey David Osborne

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Jonathan Mertens;Dierickx Leys Private Bank;Analyst

* Marc Hesselink

ING Groep N.V., Research Division - Research Analyst

* Matthias Maenhaut

Kepler Cheuvreux, Research Division - Senior Equity Research Analyst

* Stephane Houri

ODDO BHF Corporate & Markets, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Melexis Q3 2019 Results Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today.

I would like now to hand the conference over to your speaker today, Françoise Chombar. Please go ahead.

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Françoise Chombar, Melexis NV - CEO, MD & Director [2]

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Thank you, Andreas. The audience, thanks for joining the Melexis earnings call for the third quarter of 2019. Our CFO, Karen Van Griensven, will comment on the financials, and I will begin with the business update. And as said, we will welcome your questions afterwards.

Third quarter sales stands at EUR 123.3 million, which is at the upper end of our guidance. Not much change in geographical split versus the previous quarter. Amidst the continuing downward trend in global car sales and the uncertain economic and geopolitical situation caused by global trade tensions, this is a solid performance. Still, it is a decrease of 16% compared to the same quarter of the previous year. We are not out of the woods yet. The bullwhip effect we have experienced in the last 9 months is still at work, though the severe inventory corrections are clearly ebbing away. Inventories at OEMs and at our customers seem to get into a more stable state. Customer order behavior also seems to be getting better step by step, and we expect a further sales increase in the last quarter of this year, bringing full year 2019 sales outlook to a fork between EUR 483 million and EUR 489 million.

Next to the economic uncertainty, legislation uncertainties make people postpone decisions also on which type of car to buy. Pent-up replacement demand should be unleashed at some point in time, though.

Looking where we are today, year-to-date car sales worldwide is still down by close to 5%, a little better than a quarter ago with the combination of plus 0.5% in Japan, a minus 1% in the U.S., a minus 2% of European car sales, but still a significant minus in China with close to 11% year-to-date. The month of September saw the opposite of a return to growth in China despite a more benign comparison basis. As stated at our previous earnings conference, China's auto industry is suffering from the China-U. S. trade war, the recent electric car subsidy reductions and the continued absence of government incentives. Visibility worldwide does remain low as uncertainty lingers on even if there are signs of moderation in the U.S.-China trade negotiations.

Now let me take a deeper dive into 3 product lines that outperformed in the third quarter: pressure, optical and temperature sensors.

The first one, pressure sensors. They outperformed linked to electrification content growth in cars. A nice example of the innovation Melexis is bringing to market in this regard is our newly launched system-in-package MEMS solution for the reliable measurement of fuel vapor pressure suitable for evaporation systems which are designed to capture, store and responsibly dispose of the vapor, preventing it from escaping into the air. This is applied in both internal combustion engine and especially important in hybrid vehicles as more regions introduce strict legislation which prohibits the venting of fuel vapor into the atmosphere. Melexis herewith contributes to a healthier environment.

Number two, our optical sensors include automotive rain-light sensors and also the time-of-flight 3D sensors which grew nicely in the first 9 months versus the same period of last year. Also nice to see our adjacent optical products move up well again versus the previous quarter. The latter are a family of products near-infrared remote control for multiple consumer applications.

And then last but not least, our temperature sensors. They are a great example of how Melexis leverages its know-how and technology in order to grow in both its automotive and adjacent markets. Firstly, the thermocouple interface chips used as part of a system measuring very precisely temperature in exhaust systems, thereby helping again to reduce emissions of the combustion engine. And secondly, the infrared thermal array where I'd like to highlight in particular one application. Infrared array can be used to detect heat sources quickly and precisely. When combining this feature with a classical smoke detector, this results in an advanced fire prevention system which is currently being deployed in high-speed trains.

As you can tell from the previous 3 product examples or product line examples, Melexis' sensor and driver components serve the long-term automotive content growth trend and new opportunities in adjacent markets. My conclusion today is pretty much the same as at the previous 3 quarters. We are realistic and not satisfied about the current situation, but we remain positive and confident about our future as our long-term growth drivers remain intact.

Karen, now over to you for the financials.

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Karen Van Griensven, Melexis NV - CFO [3]

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Thank you, Françoise. For the third quarter, so sales came out at EUR 123.3 million, a decrease of 16% compared to the same quarter of the previous year and an increase of 3% compared to the previous quarter. There was a euro-U. S. dollar exchange rate effect in the magnitude of 2% compared with the same quarter of the last year and a positive impact of 1% compared to the previous quarter.

The gross result was EUR 49.3 million or 40% of sales, a decrease of 28% compared to the same quarter of last year and a decrease of 1% compared to the previous quarter. Continued low utilization of test capacity and a less advantageous product mix compared to the previous quarter resulted in a slightly lower gross margin.

R&D expenses were 16.1% of sales, G&A was at 6.2% of sales and selling was at 3% of sales.

The operating result was EUR 18.2 million or 14.7% of sales, a decrease of 51% compared to the same quarter of last year and a decrease of 1% compared to the previous quarter.

The net result was EUR 15.4 million or EUR 0.38 per share, a decrease of 49% compared to EUR 30.1 million or EUR 0.74 per share in the third quarter of 2018 and a decrease of 1% compared to the previous quarter.

The outlook for Q4. So Melexis expect sales in the fourth quarter of 2019 to be in the range of EUR 123 million to EUR 129 million with a gross margin expectation of 40% and an EBIT margin for the year of around 15%.

I think we can now start the Q&A session. So operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Matthias Maenhaut.

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Matthias Maenhaut, Kepler Cheuvreux, Research Division - Senior Equity Research Analyst [2]

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Two questions from my end, actually. The first is actually on the product mix effect. Can you elaborate just a little bit more what is actually driving this? Seems to me that it should be mainly magnetic sensors that are growing or still contracting. And can you just elaborate a little bit on what drives this? And are you seeing some changes there in the competitive environment? And then, how is your market share holding up? And that would be my first question.

And then a second question would be on the visibility you're presently having. As inventory corrections or the effect of the inventory corrections abate and the ordering behavior becomes a little bit more stable, do you also have better visibility and maybe also a little bit of visibility also in next year? How are your customers giving their views on next year? That would be my second question.

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Françoise Chombar, Melexis NV - CEO, MD & Director [3]

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Okay. Thank you, Matthias. So on the product mix, yes, because of the fact that we have quite some inventory effect, it's very hard to take any conclusion at all on this at this moment in time. What I can tell you is that the market share, as such, has not really changed. There are always things that we lose. There are always things that we win also against competition. So we don't see a significant change of our positioning in the market.

On the visibility, does the visibility get better? Well, I wish it would, but I'm sorry to say it is not. The only thing we can say today is, whereas in the last, let's say, 9 months, we had -- and even already a little bit indications before, but let's say, certainly, the last 9 months, we've had quite some push-outs and hardly any pull-ins of deliveries. Today, the push-outs have greatly diminished in both number and value. The pull-ins, they are, let's say, up and down. So there's no real trend to be derived from that yet, but it does in combination with the distribution inventory and the consignment stock inventory that we have, of course, both a better view on than with the other customers. When we look at that, we see that it's become more stable and have become a more normalized situation which is another indication and which is why we also are confident to say that we have the feeling that the inventory corrections are slowly ebbing away. But that's all we can say right now.

For the future, the visibility remains low. The uncertainty is there. The car sales worldwide is not yet growing again though, of course, the decline is a little bit less. So you see, that's also an indication, but that doesn't mean that, yes, that it's getting better. It's just getting less worse or less bad. That wasn't good English, I think. So visibility into the next year, I think it's really much too soon to tell. And anyhow, we will give you that guidance in February as usual.

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Operator [4]

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Your next question comes from the line of Francois Bouvignies.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [5]

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My first question was on your comment on the order behavior that you are seeing and improving step by step, as you call it. If you compare that one to Texas Instruments that published last night, I don't know if you had the chance to look at what they said, but it's quite contradictory with what you are saying. They are talking about macro uncertainty, weakness across the board, and automotive is one of the weak spots with a decline of revenues sequentially for the next quarter possibly. So I just wanted to explain or maybe understand how come the order behavior can be different for Melexis and Texas beyond the product difference. Because I know you're not doing the same, but the order behavior should be the same because they said that the customer from 90 days ago is much more cautious, so just contradictory to what you're saying. I just wanted to understand how you can reconcile that.

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Françoise Chombar, Melexis NV - CEO, MD & Director [6]

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Yes. Very interesting question, Francois. If you would recall, it was a year ago, I think, we were also the first saying that we saw a decline coming ahead in Q4 last year. There are a couple of -- well, there is not only a difference in the products that we carry. There is also a difference in lead times. Our lead times are probably a little longer because we make quite complex products which have long cycles. And we have been -- that was also something we said already over the last year, we were somehow in allocation. And when you are in allocation, when you get in allocation, you wait a long time or every company waits a long time to tell their customers that they are going in allocation because once you are there then customers can be very unpredictable in their order behavior and start ordering more than they really need. And that's usually what you always see, which is why everybody in the industry is cautious and waits as long as possible to even speak about the word. It's like a bit recession, don't speak about it because then it's a self-fulfilling prophecy. Well, with allocation, it's a bit the same thing.

Now so lead times, allocation have an influence. That means if you have not spoken about this, then maybe there was not a need for customers to start ordering more than they need. And once you then do see a decline in your end markets, yes, it takes you -- the delay in information takes you longer. That means that, yes, Texas Instruments is apparently only now seeing a decline in their orders. That could be another reason. And we can only say what we see. We cannot speak for Texas Instruments. And yes, we've read through their PR and the transcript, but it's not something that we became wiser of. So you can read that as well.

We don't have an explanation necessarily for that other than different product mix, maybe different customers, different lead times, different supply chain.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [7]

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Okay. That's very clear. The second question I had is on the inventory situation in the supply chain. So if we look at the release, you mentioned that inventories are ebbing away. But do you expect this inventory reduction to be over by the end of the year or do you think it's going to continue still in 2020?

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Françoise Chombar, Melexis NV - CEO, MD & Director [8]

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So with some customers it might still continue, but I've said it's really diminished. So we have the feeling that we are reaching the bottom in the last quarter. But again, the future is still very uncertain. We believe that inventories in our customer base and at OEMs are relatively stable. And we keep our inventory also at a, let's say, at the same level, more or less as before because this is for us a strategic thing. It's strategic because of many factors, but definitely also because the industry allocation risk that we had in 2017 and '18 is still there. So once the market picks up again, we will see the same thing happening, and we just want to be ready for that and keep our machine oiled and greased.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [9]

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I see. And if we just dig a bit more on your own inventory situation, if the market recovers and obviously I guess you're going to use your inventories to capture the market, market share, like your strategy. So if it happens, should we expect your inventories to go down if you see a recovery?

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Françoise Chombar, Melexis NV - CEO, MD & Director [10]

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Well, that will depend. Yes. That could be but that will very much depend on the steepness of the rise. We have seen a slow decline and now maybe we will see a slow ramp up, but I cannot predict anything there. But in any case, our idea is to keep inventories at the same level because at some moment in time in the past, exactly because of that allocation and because with some customers we were living hand-to-mouth, yes, we keep our inventories or our inventories were too low in the end. So we don't feel they are too high at this moment in time. We feel they are just at the right level for the market dynamics that we meanwhile know very well.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [11]

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And the low utilization rate that is impacting your gross margin in Q3 and I guess in Q4 as well, I guess you will need a much higher production to reduce this low utilization rate. So my point is, should we expect this low utilization rate to impact for a couple of quarters still given the lack of strong recovery for now?

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Karen Van Griensven, Melexis NV - CFO [12]

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It's clear that sales growth indeed will increase, I mean, the load in our factory. There is a direct link, yes.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [13]

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And you still get 40% gross margin next quarter, yes?

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Karen Van Griensven, Melexis NV - CFO [14]

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In the short term, indeed, it will not play so significantly, indeed. Well, yes, in the short term not, but in the longer term, for sure, the utilization rate will increase. It also depends a bit how inventories will move up and down.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [15]

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Okay. And can we know exactly the impact on the utilization charges this quarter on your gross margin?

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Karen Van Griensven, Melexis NV - CFO [16]

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The impact?

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [17]

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Yes.

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Karen Van Griensven, Melexis NV - CFO [18]

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Yes. That's in the range. Versus a year ago, that's in the range. That's more than 3%.

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Francois-Xavier Bouvignies, UBS Investment Bank, Research Division - Technology Analyst [19]

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Percentage points. Yes. Okay.

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Operator [20]

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Your next question comes from the line of Janardan Menon.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [21]

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I just would like to go back to this, the recovery, and you're saying that orders are now sort of showing some improvement step by step and the inventory severity has ebbed. In your experience, how does order behavior typically behave over the next few quarters, say, a couple of quarters from this stage of the cycle? I completely agree that this cycle maybe or the shape of this recovery may be completely different from previous recoveries. But if you were to generalize, I mean, is it that you would normally see quite a quick acceleration from this point onwards, say, over the next 3 or 4 months where you sort of get back to the kind of revenue levels that you left before you started the slowdown or would it take more time than that looking at past experience?

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Françoise Chombar, Melexis NV - CEO, MD & Director [22]

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Yes. You are right that every cycle has its own dynamics. Now what is clear is that as long as car sales is still in a downward trend, it is very hard to compensate that completely or even exceed it with content growth. So I think a steep recovery could only be possible, in my opinion, in my humble opinion, it is only possible if there is a steep recovery of car sales.

And as I said in my introduction, car sales is still in a declining mode, though the decline in Q3 is a bit better or is not as bad as it was before. Now content growth goes much slower in the end, but content growth is much more robust as well over time. So in that sense, I think we really have to see what comes to play now. It's hard to speculate.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [23]

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And do you think to get a proper sort of strong recovery, you need to see car sales globally grow again or is it enough if you reach sort of a 0 level stabilization and then the content plays in? Would that be a sufficient scenario for the industry to start showing a proper recovery? You may not necessarily get back to the same level of revenues if you've lost, I don't know, 6% of car volume over the course of the last year, but is that scenario good enough to sort of get you back to normal recovery mode acceleration?

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Françoise Chombar, Melexis NV - CEO, MD & Director [24]

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Well, in an ideal theoretical scenario, if you would say it's flat sales then, of course, you would see content growth, yes, increasing the demand. But the problem is that it is not linear. It is not theoretical. And so it depends on so many factors. And as you know, the automotive industry has such a long value chain and a long supply chain, one of the most difficult ones or the most complex ones in the world with a lot of back-and-forth shipping everywhere, plus the automotive industry adopts very slowly new programs because they do a lot of testing and qualification, et cetera. So you have a lot of delay factors on the line.

So nevertheless, even if content growth is a long-term growth driver, and that remains definitely for Melexis fully intact, you will need to see at least stabilization of the car sales or a slight growth in order to really set the whole machine in motion again. That's what we believe.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [25]

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And regionally, one of your competitors recently said that they're seeing stabilization in the U.S. and Europe, but still it's quite a difficult situation from an inventory perspective in China and from an order perspective. But your current order book suggests that the recovery is sort of uniform in all regions of the world, is it?

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Françoise Chombar, Melexis NV - CEO, MD & Director [26]

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Yes. You could say that more or less, yes. Because I think that the recovery we're seeing today has more to do with inventory corrections than with demand corrections, right? So it's logical that it would be then across the board.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [27]

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Okay. And just a last question on the gross margin development. You're guiding at 40% roughly into Q4 as well. Is that because the adverse mix continues into Q4? Otherwise, I would have thought that you would have got at least about 1 percentage upside if the mix had sort of rectified itself into Q4.

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Karen Van Griensven, Melexis NV - CFO [28]

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Yes. We assume today a more or less similar mix. Of course, it can always be different from what we have seen today because it moves. I mean, order behaviors still can change somewhat, but that's our best assumption today.

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Operator [29]

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Your next question comes from the line of Stephane Houri.

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [30]

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So yes, well, some of the questions have been asked already, but sorry to come back on 2020 visibility. But when we look at the market research analysis for next year, we see that, at best, the market, the car market will be flat. So in your experience and given the discussion that you can have with your customers, do you think that growing double-digit next year is a potential, is a possible assumption as this is what the consensus is looking for? That's the first question. And further also, how do you see your CapEx budget for the end of the year and how do you evaluate your CapEx for next year with this lack of visibility?

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Françoise Chombar, Melexis NV - CEO, MD & Director [31]

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Okay. Well, I think that the analyst predictions are as good as mine. So if they say it will be a flat car market, I think they're probably right. That then comes back to how much content growth we'll be ramping up. And we cannot provide that guidance at this moment in time. That is a bit too soon to tell. We see Q1 BOM is maybe also not too bad. But again, it's really because of the low visibility, the high uncertainty, everyone being cautious though positive. So customers are not negative at all. It is too soon to tell what it's going to do. So I cannot tell you whether it's going to be single-digit growth or double-digit growth or growth at all for the time being. And then on the CapEx, maybe I relay to Karen.

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Karen Van Griensven, Melexis NV - CFO [32]

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Yes. On the CapEx, we assume EUR 40 million, EUR 45 million. Of the 3 quarters we have now, just above EUR 20 million. The main reason of delay is our expansion in Sofia which has delayed. So that's the main reason. Also, we have a little bit less manufacturing investment due to the sales that came down throughout the year. It's clear that the investment for Bulgaria will move -- I mean whatever is not spent this year, it will be then spent next year. So that's a delay that's spread over 2 years now.

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [33]

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Okay. And the expansion delay, it was because of a technical reason or it's a decision that you made?

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Karen Van Griensven, Melexis NV - CFO [34]

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Technical reason. Yes, permitting, things like that.

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Françoise Chombar, Melexis NV - CEO, MD & Director [35]

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And we didn't push, of course.

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [36]

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And so for next year, what do you foresee at the moment?

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Karen Van Griensven, Melexis NV - CFO [37]

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That's too early. We will give guidance on that when we give the guidance on the full year 2020.

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [38]

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Okay. So it means that in February next year you will give a guidance for the full year, right?

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Karen Van Griensven, Melexis NV - CFO [39]

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Yes, including CapEx.

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Operator [40]

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Your next question comes from the line of Marc Hesselink.

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Marc Hesselink, ING Groep N.V., Research Division - Research Analyst [41]

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First question, I would like to come back on the gross margin and on the mix comment. And the change in the mix is that something that is very temporary or is it also to do with some of maybe your lower gross margin products have been growing a little faster and so that they might lead to higher growth products in the future or is it, yes, was it simply a temporary thing?

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Karen Van Griensven, Melexis NV - CFO [42]

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Well, the guidance for next year, we will give in February. In general, there are so many items at play in the product mix and in the gross margin that it's difficult to give any further guidance on that. What is an item that is relatively new and that I do can add is that today we sell more euro than in the past. And this means that we are, in absolute terms, fully hedged today. And that means that if the dollar goes up, it's beneficial for our sales, but it's a negative impact on our gross margin. And that is one effect that we see today as well that is playing also on the gross margin today. So yes, if the dollar would further strengthen, then our gross margin will be negatively impacted today.

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Marc Hesselink, ING Groep N.V., Research Division - Research Analyst [43]

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Great. And the second question is also something you discussed in previous calls is the relatively high level of R&D that you are doing for clients for new applications. And could you tell a little bit what's the progression there or what are you seeing? Is that still the case or is it the high level of applications that are coming to the market in the coming quarters?

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Françoise Chombar, Melexis NV - CEO, MD & Director [44]

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Well, we have continuously new applications ramping up, new products ramping up. And that also plays, you are right, that also plays in the product mix in some quarters. So from one quarter to the other, if you have a difficult product ramping up, yes, it could be that there are some yield issues in the beginning, et cetera, that play in there. But in fact, we rather continuously have new applications coming on board. I don't know if that answers your question, Marc, or if you need more there?

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Marc Hesselink, ING Groep N.V., Research Division - Research Analyst [45]

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Yes. I saw a little bit the rate of the -- if I look to your R&D cost, which I think you kind of thought that you would not really stabilize on that. I think in the last quarter, you discussed that you still continue to invest heavily in R&D, but you are more scrutinizing that they don't -- careful and stuff like that. And it continues to be, yes, very much under control. So just looking if there is something that you're delaying there or there's nothing like that.

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Françoise Chombar, Melexis NV - CEO, MD & Director [46]

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No, we're not delaying. I think we're keeping the costs under control and of course, being very cautious in the choices we make. But indeed, we have not -- I mean we will not sacrifice the short term for the -- sorry, we will not sacrifice the long term for the short term. So our R&D projects, they continue to go on. They are important for our long-term growth path.

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Operator [47]

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Your next question comes from the line of Jeff Osborne.

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Jeffrey David Osborne, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [48]

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Most of them have been asked, but just a few quick ones. As customers are getting re-engaged, is there any change in the discussions around pricing relative to 3 or 4 quarters ago?

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Françoise Chombar, Melexis NV - CEO, MD & Director [49]

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In automotive industry, there is always pricing pressure. And the pricing pressure is high in good times and it's equally high and sometimes higher in bad times. So yes, pricing pressure will always be there and everybody has it difficult. Everybody is being squeezed certainly with the tariffs that have come on board, with the disruption that these tariffs have created in the supply chains, new qualifications weigh sometimes heavily on the engineering resources that you have to spend because if customers change their supply chains, they, of course, have to requalify. And what we see, certainly, our customers who are global, they try to -- now with the, let's say, this closing doors scenario, you could say, where they try to have in every region, they are manufacturing to service the region in itself. But of course, they come from a previous situation where the whole world was used. And with the tariffs, that has created quite some disruption. So yes, there is cost pressure in the whole supply chain. And yes, that creates tensions everywhere, for sure.

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Jeffrey David Osborne, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [50]

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Makes sense. Several questioners asked about this for next year. I understand you're not giving guidance. But just as we think about what the pressures are on gross margins, you've obviously got pricing, you've got mix that was addressed. How do we think about Sofia ramping up and the impact of that new facility on margins?

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Karen Van Griensven, Melexis NV - CFO [51]

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Sofia ramping up, yes, we will only take the factory into use in the second half of next year so the impact will still be relatively small. Furthermore, equipment will only be purchased at need basis. So it's mainly infrastructure now that we invest in.

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Jeffrey David Osborne, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [52]

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Got it. That's helpful. And then the last question I had is just, you mentioned in the prepared remarks that the time-of-flight 3D sensors were up nicely. Can you just talk about what specific application those are being used for that you saw the strength year-over-year that you called out?

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Françoise Chombar, Melexis NV - CEO, MD & Director [53]

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Yes. For this time, the time-of-flight is still gesture recognition in cars mainly.

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Operator [54]

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Your next question comes from the line of Jonathan Mertens.

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Jonathan Mertens;Dierickx Leys Private Bank;Analyst, [55]

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I have a question about the dividend yield. So even if the results do not improve materially in 2020, will you still increase the dividend next year?

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Karen Van Griensven, Melexis NV - CFO [56]

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Well, we will continue to pay out a high portion of our profit. We already set a high precedent with the interim dividend of EUR 1.3, which means that we have belief in the future anyway. Of course, how much the exact -- we don't have a fixed rule of how much percentage we pay out. That is at the discretion and opportunistic decision of the Board. Yes, but at least for the interim dividend, we actually went along as we did before.

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Operator [57]

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There are no question at the moment. So please, speaker, go ahead.

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Françoise Chombar, Melexis NV - CEO, MD & Director [58]

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Okay. Well, thank you, everyone, for your questions. Our next earnings conference for the full year 2019 will be on February 5, and we hope to welcome you all again then. Goodbye for now. Thank you. Operator?

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Operator [59]

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That concludes the conference for today. Thank you for participating. You may all disconnect.