Hello, welcome to the fiscal year 2024 Q1 revenue conference call. My name is Sharon, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator. I will now hand you over to your host, Mr. Pierre Barnabé, CEO, to begin today's conference. Thank you. Hello, everyone, welcome to Soitec's conference calls, dedicated to the publication of the revenue for the Q1 for fiscal year 2024. This is a quarter covering the period from early April to the end of June 2023. I'm Pierre Barnabé, Soitec's CEO. Together with me on this call are Léa Alzingre, our CFO, and Steve Babureck, our SVP, Strategy. As usual, we will start with a few comments on our figures, after that, we will open the floor to question. After a record Q4 2023, our Q1 2024 revenue was down 23% year-on-year, in line with our expectations. As we commented in our previous disclosures, we expect the ongoing inventory corrections across the entire smartphone market supply chain to impact our first two quarters of fiscal year 2024. This inventory correction is only affecting the performance of our RF-SOI product. More importantly, the impact of this inventory correction is temporary. The long-term growth trajectory in mobile communication remains intact. We recorded a strong performance in our other two end markets, continuous sharp growth in automotive, industrial, and smart devices. Looking ahead, Q1 is our bottom. We confirm we expect H1 to be down around 15%, which implies a material improvement in Q2 with a sequential growth above 50%. After that, we continue to expect a strong recovery in H2, as we confirm our guidance of stable revenue in fiscal year 2024 versus fiscal year 2023. Let me now outline our Q1 figures. Revenue reached EUR 157 million. This compares with EUR 203 million achieved in Q1 2023. As I said, it represent a 24% decline on an organic basis and a slightly positive currency impact of +1% year-on-year. Looking now in more details at our Q1 revenue by end market, let me start with mobile communication, our largest division, which accounted for 57% of our revenue in Q1 2024. Revenue in mobile communication reached EUR 89 million. This represents a 43% decrease, excluding currency impact, against Q1 2023. As mentioned earlier, in the context of a global smartphone market slowdown, our RF-SOI product has been strongly impacted by the significant inventory clearing, which is still taking place across the entire smartphone value supply chain. Therefore, the drop in revenue is essentially reflecting lower volumes, but more importantly, we expect RF-SOI activity to resume shortly. As for the sales of FD-SOI wafer that are used in front-end modules, the momentum remains positive. As we see ongoing adoption of our products across a diverse set of application for 5G, sub-6 GHz, 5G millimeter waves, as well as applications beyond mobile, such as satellite communications. POI wafers, which are dedicated to RF filters for 5G smartphones, delivered a significant contribution to our mobile communications revenue. We are now delivering POI wafers to several customers, and we continue to work on qualifying different design architectures with new customers. The revenue already achieved in Q1 2024 is a strong testimony of POI's added value. Overall, our efforts to develop new products for mobile applications, such as FD-SOI and POI, are paying off despite a pause in the RF-SOI long-term successful story. To summarize, once this temporary inventory issue is cleared, we expect to resume our robust growth trajectory in mobile communications. Beyond mobile, let's turn to our two other divisions, automotive, industrial, and smart devices. Automotive, industrial represented around 24% of our total revenue in Q1 2024. Revenue reached EUR 37 million. This is a sharp 57% revenue growth year-on-year, excluding currency impact. Growth was essentially driven by volumes, also by some positive price mix effect. We continue to see growing demands for automotive, driven by the increase in semiconductor content in the new generation of vehicles, either ICE or EVs. We are talking here about substrates for applications related to infotainment, to multipurpose gate drivers, to autonomous driving and battery management systems, with, for all of them, functional safety as a key value. In terms of products, growth in automotive and industrial was supported by Power-SOI, which continued to deliver a strong level of growth. FD-SOI, which also recorded higher sales than in Q1 2023, enabling more connected, more autonomous, and safer cars. We also recorded further sales generated by our SmartSiC technology. We are on track with our roadmap. We continue to benefit from our cooperation agreement with STMicroelectronics. We are delivering SmartSiC wafers to more than 20 players across all geographies. Overall, we are on time on all aspects. The fab will soon be ready for first productions in Q3 fiscal year 2024. The ramp-up in production is still expected in fiscal year 2025. Moving now to smart devices, which represented 20% of our total revenue in Q1 2024. Revenue from smart devices reached EUR 31 million. This represents a 10% organic growth compared to Q1 2023, mainly reflecting higher volumes. Demand remains supported by higher connectivity, embedded intelligence, edge computing, cloud computing, more complex sensors, and the need for lower energy consumption. This applies both to consumer products and industrial sectors. Sales of FD-SOI wafers were higher than in Q1 2023, supported by the need for edge AI applications. Sales of Imager-SOI and Photonics-SOI were lower than last year, impacted by a phasing effect. Photonics-SOI wafers remain a promising product to provide high-speed connectivity solutions for artificial intelligence in the cloud and at the edge. Turning now to our fiscal year 2024 outlook. As indicated earlier, we confirm, we expect our fiscal year 2024 revenue to be flat on a like-for-like basis, with an anticipated 15% organic decline in H1 and a strong rebound in H2. The inventory corrections in the smartphone market, which is going to last another quarter, will continue to wait on our mobile communication business in Q2 2024. We however, believe that RF-SOI sales bottomed out in Q1, which means we expect Q2 to be significantly better than Q1. We will also continue to benefit from the deployment of 5G infrastructure, the resilient sales of high-end smartphones, as well as the improvement of 5G smartphone sales in China. On the two other divisions, we expect revenue growth in both automotive and industrial and smart devices to remain strong. In addition, we also confirm expecting our fiscal year 2024 EBITDA margin to remain at around 36%. Finally, as discussed during our Capital Markets Day last month, we still aim at ambitious target by the end of fiscal year 2026. These growth target are supported by our strong portfolio, both from existing product, FD-SOI, RF-SOI, Power-SOI, and Photonics-SOI, and new products, especially SmartSiC, POI, and GaN, which will serve our three end markets: mobile communication, automotive, industrial, and smart devices. This ends my opening remarks. Thank you for your attention. We are now ready to take your questions. Thank you. Thank you, Mr. Barnabé. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. We'll now take our first question from Aleksander Peterc, from Societe Generale. Your line is open. Please go ahead. Yes, good morning, and thank you for taking my question. I just have two to start with. The first one would be on the handset market, and you touched upon this on in your opening remarks already, Pierre. We've seen the recent news flow that indicates that the expected recovery has slipped by around six months from starting in H2 2023 into end 2023. We've had the negative comments from TSMC, from ASML as well, on the end market outlook. Now, has your view changed on the handset market at all for the year in terms of overall units and 5G units versus what you've presented to us at the Mobile World Congress in Barcelona earlier this year? Does this outlook change in any way, your outlook for the year? Is it a little bit weaker as a result, or no change, and why? Second question is really regarding the dynamic of Q1 versus Q2. Now, Q1, as you did indicate previously, is weak at -23% to -24% year-on-year. In the year ago quarter, you also had production disruptions, so the comp was a bit easier, which means that the underlying decline in the Q1 versus the normalized production rate from the year ago quarter would've been a lot worse. Your Q2 guidance implied in the -15% to -4% H1 is, if I'm not mistaken, around -9% to -10%, around there. It's quite a lot better than the Q1, and I'm just wondering, what's driving this improvement in decline sequentially? Is it really an improvement already in your mobile businesses or are other businesses really accelerating? What's going on here? Thank you. Hello, Alex, thank you for your question. Let's start with the handset market first, as you mentioned. We see, as you see, this smartphone market in a flattish minus zone. This is what we were expecting. It's in line with what we said during the Capital Markets Day. As we said, despite this weak signals, we see elements that are, let's say, keeping us confident in the deliveries of a flattish year for us, for many reasons. The first reason is that the high-end market in the smartphones segment is quite strong and is resilient. People still continue to buy smartphone, high-end, let's say handsets. That's the first element. Second element, are contents continue to increase, and we are still expanding our RFSOI, FDSOI, POI footprints within many phones models, and again, high-end phones models. This is the second, the very important point. The third point is that we see applications continuing to rising up, and we see adoptions of applications that is sustaining these content expansions. If you cumulate the three elements, it is helping us. Taking into account, of course, the 5G and the penetration rate within the smartphone industry is still very, very high and on a good trajectory, it is keeping us confident in the first of all, the recovery of Q2 and beyond, reaching a flat fiscal year 2024. This is the signals we have noticed, and we disclose to you during the Capital Market. They are intact, and I would like to say, even reinforced, and it's really very important to underline that point. Second point on your Q2 rebound. Clearly, we see a sequential, above 50%, growth between Q1 to Q2. You did by yourself the math, it means, ±8, -9% for Q2. This is really, what we expect to be at -15%. This is, of course, sustained by clearly a rebound in RF-SOI, for sure, to accompany this, let's say, growth sequentially, but also a continuity in growth in all the other segments. As you understand, except RF-SOI, all the other products across the divisions are growing. Okay? More or less, but they are growing. Some are growing very fast. That means that FD, POI, Power-SOI, all these products will continue to sustain and to accompany the sequential growth. Thank you very much. Next up, we have François-Xavier Bouvignies from UBS. Your line is open. Please go ahead. Thank you, very much. I was just wondering on the 5G penetration, first of all, because Pierre, you mentioned content and high-end phone being sold. What's your 5G penetration for the year, now and versus maybe 3 to 6 months ago? How is it evolving? It would be interesting to know. The second one is, I mean, you mentioned as well, FD-SOI and POI in the wireless market getting some traction and growing fast. Can you maybe tell us or give us an idea of how much of revenues it represents, roughly? How much is it growing today, big driver of POI, specifically, you know, customers or anything around that would be very helpful. Thank you. Okay. On your third question for 5G, as we said, we expect, and we foresee a 60% penetration rate, maybe slightly above that percentage, but this is what we see. Quarter after quarter, this percentage is clearly confirmed. Of course, as you understood, it is sustaining, it is bearing our recovery trajectory and plan. For your first question? The millimeter wave, maybe if I can sneak in a quick one on the millimeter wave. In the millimeter wave. Yeah. In the millimeter wave, it's, we expect we see 15% penetration rate in the domains. That is also confirmed through other, let's say other models, where announcement has been made to introduce millimeter wave. That means that the 15% is, we see in some region countries is clearly confirmed. Of course, other applications gonna pop up, and we expect Wi-Fi. We expect 5G plus. We expect different type of applications to really continue to entertain the RF-SOI development, but this is really in line with what we have already announced during the Capital Markets Day. Regarding wireless business and beyond mobile, of course, it's quite limited, but it does exist, and it's growing. I've mentioned that we made some sales for satellite communications application. This is add-on to the mainstream of mobile communication RF-SOI outcomes. This is something we see more and more, the use of 5G, not only for mobile, but for other wireless application overall. Regarding POI, we are not disclosing, let's say, precise figures on POI, but you understood that we have several customers today that we are also in the prospections with additional customers. It's a sustained growth. We clearly see an adoption of our product, and we clearly see that we are gaining market shares in the filters business overall. Great. Thank you very much. Mm. Next up, we have Sébastien Sztabowicz from Kepler Cheuvreux. Your line is open. Please go ahead. Hello, everyone, and thanks for taking the question. Could you please help us understand the level of inventories today at your main customer? Where are we standing right now? Are we almost back to normative level? You seem confident that the inventory correction will be completed during Q2. What kind of visibility do you have there? That would be the first question. Second one is more on the margin side for each one, because for top line, -15% organic in H1. What should we expect in terms of EBITDA margin development for the first part of the year, if you can help us modeling a little bit? Thank you. Thank you, Sebastian. For your first question regarding inventory within the overall supply chain. What I can tell you as a general comment, is that it is clearly improving. The digestion is ongoing, there is no doubt. That said, it's really depending on products at customers, okay? In some products with some customers, I can tell you, we need to deliver, and we have appeal for even doing more. In some other areas, with some other customers, there are still a lot of inventories. It's really an average, I can tell you, an overall view, but what is clear is that there is an improvement. Step by step, this digestion is ongoing and we see progresses weeks after weeks, that's for sure. Regarding our backlog, we slightly improved our ratio of coverage. We are around 80% today compared to the Capital Markets Days. Step by step also, we are building this coverage than we are today, end of July. The 80% is more or less in line with what we were observing in normal years, meaning in 18, 19. This is exactly this type of percentage we're observing to reach a year. We are announcing to the market. Regarding the EBITDA, H1 and full year, I would like perhaps Léa to take that point. Yes, of course. We are not giving any guidance for H1 EBITDA margin. For sure, this EBITDA margin will be affected by the level of the revenue, despite the strong cost control measures we implemented. We expect a seasonality effect in the EBITDA margin. Okay, thank you. Next up, we have Olivia Honychurch from Jefferies. Your line is open. Please go ahead. Morning. Thank you for taking the question. I have a couple, if that's okay. Firstly, on another question on POI. I know you can't give specific customer names, but broadly wondering if the strength you're currently seeing is mainly coming from China, which is what we're hearing elsewhere, or is it more broad-based geographically? On the Sonics partnership, what is the timeframe on that ramp? I know you said in the announcement, that it would be volume production starting in H2 2023. Is that still the case, and can we expect it to be quite a sharp ramp once that begins? I have a follow-up on SmartSiC, but I might ask that after. Okay, Olivia, thank you for your for your question. I hope that I caught the second part of the question, regarding POI, then, we are setting really something new in the filtering world by having new type of architectures that are more open, more standard. That means that we have starting to get a success in this domain, we are serving any geographies. You mentioned China. Yes, there are other geographies where we are delivering our products. It is starting clearly to become a global success because the customers we have today are really have a global reach and a global coverage. Your second question was regarding a rebound on H-2 smartphones. That's it? no. Okay. The question was on the Sonics partnership, what the timeframe of the ramp via that relationship would happen. Well, it has started. You know, because when you are working with foundries and partners like Sonics, you need of course to enter into a qualification phase. We are preparing the ground to expand more and more the adoptions of our POI product within different platforms, mobile communication platforms. Having a partnership with Sonics, that is a reference in this domain, is reinforcing, of course, our level of qualification. It's a way also a way to get feedbacks on our architectures and to continue improving, because as you know, we're investing in innovation in all our product to have different versions and evolutions, and this is really the nature of this partnership. That's great. Thank you. Just one more on SmartSiC, if that's the case. I'm just wondering if you can give us an update on the engagements that you're seeing there. You said you're sending wafers out to 20 customers. Obviously, STMicro is the first to be officially confirmed. Can you give us an idea of how close you might be to signing a second customer? Separately, how many more customers you might need to fill your current capacity plans out to 2026? Thank you. On the SmartSiC, first of all, what is very important, there are two mainstreams where we are focusing our energy. The first mainstream is to serve the number one in the world, that is STMicroelectronics, with which we have an agreement. To serve, we need to be on time in terms of innovation, evolution, 150 and 200 mm, and to be on time in the way to deliver the products. That means that we need to consolidate agreement in poly-SiC supply chain, consolidate agreement in mono-SiC supply chains, and to have the BERNINA 4 manufacturing units ready. That's the first focus. On which I can tell you that the team is fully mobilized to be on time, because it is where we are engaged and committed. We want absolutely to be perfect in the deliveries of this contract, whatever the product is brand new and the technology is quite innovative. The second mainstream, where we are focusing a lot of energy, is to get additional customers and business contracts. As you have seen, as I said during the introduction speech, we have delivered close to 1,000 prototypes in the world. We are working with top-class, top-notch 20 players in the SIC world. That means that yes, we expect, and this is what we already said, we confirm what has been said during the Capital Markets Day. In fiscal year 2026, we'll have several customers in SmartSiC, and we expect to be in a position to announce at least one before end of fiscal year 2024. This is what we are working on, but we are extremely active in this domain and in some areas, very advanced. Cannot tell you more. That's great. Thank you so much. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Next up, we have Lee Simpson from Morgan Stanley. Your line is open. Please go ahead. Hi, good morning, everyone, thanks for letting me on the call. Really just trying to understand some of the underlying dynamics in mobile in particular. If we look at Q1, down 23% year-on-year, obviously a well-flagged inventory correction that seems to be settling on RF-SOI. Do the numbers suggest perhaps that RF-SOI was next to zero in Q1, and so much of that 50% growth Q and Q could come from just a snapback there, you know, helping perhaps with Wi-Fi 6 coming in? As we look into the second half, the recovery subsequent to that, I mean, are we expected here to model POI to be the main carrier of growth in the second half? Do you think it's an actual snap back in the overall volumes in the market second half? You know, it's a simple question, but it's a very complex answer I will give you. You know, it's not that simple. RF-SOI will rebound, of course, from a very bottomed out Q1. RF-SOI will rebound because as we said, we see a more or less flattish smartphone business, more and more high-end phones, 5G penetration, and so on, everything I already said. That means that RF-SOI will continue to rebound, and of course, Q2, H2, then, of course, H2 will be higher than H1. It will, of course, be, it will reflect, to some extent, the RF-SOI curve. What is very important, and finally, you mentioned it, you underline it during the answer, the other products are growing very fast. I mean, you named POI, but don't forget FD-SOI also growth. We see growth of FD-SOI everywhere in all the divisions. In mobile communication divisions, because the sustainability of new applications, even millimeter wave being one of it, but others. POI, as we said already, of course, the Power-SOI for automotive, but also FD-SOI for automotive, FD-SOI for smart devices. This is really a complex, let's say, mechanisms, where the main RF-SOI engine gonna rebound. All those engines around, I would like to say, the Soitec models, business model, is accelerating. This is really what we observe, what we have started to observe clearly on Q1, that gonna continue in the coming quarters. This is the reason why, of course, it's a complex answer, but we are modelizing on a weekly and monthly basis, these different, let's say, increased rates and these different needs by the customers to deliver more and more of our products. Okay. I mean, I think that was a very full answer. Thank you very much. Yeah, I, I guess I'm hearing in here that we really should be doubling down on work on FD-SOI, that POI is still yet to really hit a sizable portion of mobile. Yes, there is a rebound in RF-SOI. It's the main forms of the business, basically. FD and RF, basically. Yeah. It's RF, FD, POI, and Power-SOI. Gotcha. Okay. Maybe just... I think it was quite clear, you mentioned that some of the deliverables for SmartSiC, as it relates to STMicro, was as much to do with you, consolidating the supply chain or consolidating some of the efforts in securing that supply at volume. If we look to maybe the end use case for STMicro, do they have to re-qualify wafers, SmartSiC wafers with OEMs on an individual case-by-case basis? Well, I will not tell you the way STMicro is certifying and getting qualifications by the OEM. That you will ask them this question, Lee. What I can tell you is that we are in a process of qualification through STMicro to many OEM we don't know, and that means that by fiscal year, end of fiscal year 2024, then by mid of calendar year 2024, we expect to be certified in 150 and 200 mm by STM to really expedite the deliveries of SmartSiC wafers to them for, of course, producing of devices and diodes. Perfect. Thank you very much. Welcome. Next up, we have Robert Sanders from Deutsche Bank. Your line is open. Please go ahead. Yeah. Hi, good morning. I just had the first question was just around your loading of your factories and whether you would be keen to sort of build inventory in light of the big snapback. Just interested in how you're thinking about, you know, managing your own on-hand inventory, and I have a couple follow-ups. Thanks. Hello, Rob. I will let the floor to Léa for this question. Thank you. Yes. Hi, Rob. Every year, we have a seasonality effect between H1 and H2, and we are used to build the inventory in H1 to prepare for H2. Of course, it will be the case this year. We are producing only if we have enough visibility on customer needs. We will not take any risk of over inventory or obsolescence for sure. In terms of the loading of our fab, we are managing our, especially our people from one fab to another, to fit the best as possible in terms of production needs and to keep agility based on the visibility we have on the customer demands. ... Got it. Just a second question, just on the long-term agreements you have with your foundries, like, GlobalFoundries, Tower, et cetera. As I understand it, those were, deals struck with, like, minimums and maximums, so they had like a corridor, but they were obliged to take, minimums or they were, obliged to pay money. Have you effectively waived the, that deal, given the correction, and so you're not entitled to a cash payment? Is that how we should think about it, or have you instead kind of extended those long-term agreements into the future, waiving volume for a quarter or so, but, you know, obviously not price, not opening up price as a negotiable point? Thank you. Well, Rob, I mean, it's not an easy answer because there are many, many different type of models, and depending on the customers, we have different, let's say, clauses. As a whole, we have a frame, a multi-years frame, and in this frame, we have different flexibilities. At the end of the day, there is a, let's say, targeted volumes and value. That's it. Afterwards, the different elements are really depending on by customer, by customer, and I would like to say also product by product. Got it. Thanks a lot. Once again, ladies and gentlemen, please press star one to ask a question. We now have a follow-up question from Sébastien Sztabowicz from Kepler Cheuvreux. Your line is open. Please go ahead. Yeah. Thanks for the follow-up. Do you see any potential impact from the upcoming export restrictions around gallium and germanium from China? Also on the SmartSiC business, how do you see the revenue build up in the coming quarters? We understand that you're gonna ramp FT maybe from mid-year calendar 2024, but should we expect something more or less linear from 2024 to 2026 to reach your objective in terms of revenue in SmartSiC, $200 million, or it is more backend loaded evolution that you forecast for SmartSiC? Thank you. Okay, Sébastien. On the first question, we, as we already said, we monitor what is going on between China and U.S., U.S. and China. The recent restriction regarding gallium is not impacting us from a point of view. Overall, you know that we have announced our SmartGaN product we're gonna put to the market in the next years, okay? Beyond, of course, fiscal year 2026. You know, with our capacity to cut 10 times any materials, we believe that Soitec could bring solutions to scarcity if it continues. It's, we even can see that as a possible opportunity, but short-term, long-term, we don't see any impact for us. Uh, regarding, uh, uh, Smart, uh, SmartSIC, um, uh, targets, uh, to the, to the, to the revenue fiscal year 2026, as we said, we believe that, uh, 10% of our, uh, fiscal year 2026 revenue will be SmartSIC. That means that we, we, we see a very strong ramp up, uh, next year and the year after, of course, fiscal year 2025 and fiscal year 2026. And the, the, the, the supply chain is prepared, uh, to absorb, to absorb this ramp up and to reach, uh, the 210, around EUR 210 million in SmartSIC by fiscal year 2026. And everything is, is ready, and we are working on to really, uh, achieve this, uh, this, uh, this v- very rapid growth. Okay, thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Ladies and gentlemen, if you have any question, please press star one on your telephone keypad. It appears that there are no further question at this time. I would like to turn the conference back to Mr. Barnabé for any additional or closing remarks. Thank you very much, operator, and thank you to all of you, for your questions, for your interest, and for your attention. The next date in our agenda will be the combined release for Q2 2024 revenue and our H1 results on the 15 November 2024, after market close. I wish you a happy holidays if some of you are taking some, and this ends our call for today. Thank you. That concludes today's conference. Thank you everyone for your participation. You may now disconnect.