Hello, and welcome to the X-FAB Q3 2023 results conference call. Please note this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. I will now hand you over to CEO, Rudi De Winter, to begin today's conference. Please go ahead, sir. Thank you. Welcome to the Q3 conference call of X-FAB. So we have in the conference room here, Alba Morganti, CFO, and myself, Rudi De Winter. So the Q3 was again characterized by several new records. We recorded total revenues of EUR 234 million, up 24% year-on-year, and up 3% quarter-on-quarter, and in line with the guidance of EUR 225 million-EUR 240 million. A portion of the revenue, namely EUR 10 million, was attributed to recognition of revenues over time, in accordance with IFRS 15, as announced in the previous quarter conference call. The revenues in X-FAB core markets amounted 206 million, up 31% year-on-year, representing now a share of 92% of our revenues. Demand in the key end markets remains strong. Q3 bookings were $208 million. While this represents a decrease of 4% year-over-year and 6% quarter-over-quarter, the order intake does not fully reflect the demand due to the long-term agreements. Due to the high backlog, which amounts to $484 million at the end of the Q3, the LTA customers prefer not to place purchase orders too far in advance while having secured their capacity via the long-term agreements. Demand for the 200 mm capacity, demand for the silicon carbide and microsystems remained strong. The demand for the older 150 mm CMOS technologies is on a gradual downward trend, and this already over the past 10 years, so this is nothing abnormal. We are replacing this business in our factory in Erfurt by microsystems business and in Lubbock, Texas, by silicon carbide business. This is part of the long-term execution plan for the respective sites. In the Q3, our automotive business continued to grow strongly with a record revenue of EUR 135 million. This is an increase of 40% compared to the same quarter last year, primarily driven by the production ramp of our X-FAB 180-nanometer automotive process in X-FAB, France. In the Q3, 91% of the revenues generated by the French site were based on X-FAB technologies, compared to 56% in the Q3 last year. In addition, a car headlight application was a main contributor to X-FAB automotive growth in the Q3, boosting automotive prototyping revenue for safe launch production start. We offer the full range of technologies required for power systems, including high voltage CMOS and silicon carbide application, and we are well positioned to support the transition to electric vehicles, a long-term growth trend for our automotive business. Industrial revenues for the Q3 were EUR 54 million, up 15% year-on-year, all driven by more electrification. Q3 silicon carbide revenues totaled EUR 19 million, an increase of 7% year-on-year, whereas silicon carbide wafer shipments went up 38% year-on-year. The stronger increase in wafer shipments is not reflected in the top line year-on-year revenue due to the higher portion of customers that source their own silicon carbide raw substrates and consign them to X-FAB. Since the value add up by X-FAB remains unaffected, this results in a slightly lower, well, in a lower billing, but slightly higher profitability. In the Q3, medical revenues were EUR 17 million, up 26% year-on-year, primarily driven by DNA sequencing application. We are leveraging our MEMS expertise in combination with CMOS for this type of applications, and the MEMS business evolves towards higher value add microsystems, integrating a variety of functions. This enables the miniaturization of large diagnostic equipment to handheld or tabletop size. In the Q3, X-FAB microsystems business set a new revenue record of EUR 24 million, an increase of 33% year-on-year, demonstrating that the realignment of this business unit towards systems integration is gaining traction. Q3 CCC, consumer revenues, amounted to EUR 17 million, down 44% year-on-year. This overall evolution is a result of our transition plans and market demand. Prototyping revenues in the Q3 came in at EUR 27 million, up 20% year-on-year and flat sequentially. On the operation side, we can report that we see continued strong demand, particularly for 200 mm CMOS, silicon carbide, and MEMS technologies. Operational excellence and productivity improvements remain the key to reliably serve our customers. A major operational focus is the execution of the capacity expansion programs across all sites. Although lead times for new equipment are still long, all projects are on schedule. In the Q3, capital expenditure came in at $84 million, down 20% against the previous quarter. Considering the planned equipment deliveries in the Q4, total capital CapEx for 2023 are expected to come in at approximately $350 million. Major expenditure in the Q3 include the capacity expansions and building in X-FAB, Sarawak in Malaysia, the capacity conversion of X-FAB France, as well as the expansion of the silicon carbide activity in Texas. With this, I would like to pass to Alba for the financial update. Thank you, Rudy. Good evening, ladies and gentlemen, and now let's talk about the financial update. I would like to start this financial section by highlighting that the Q3 was another very good, good quarter. As Rudy already mentioned, we had, again, some all-time high record numbers. We achieved an EBITDA of $65.7 million, with an EBITDA margin of 28.1%, slightly above the guidance range of 24%-28%. As already reported in the last quarter conference call, we are now including some revenue recognized over time in alignment with the IFRS 15 clause. If we exclude the portion of revenue related to IFRS 15, the EBITDA margin of the Q3 would have been 26.8%. Gross profit in the Q3 amounted to almost $70 million, with a gross profit margin of almost 30%, which would have been 29.1% without revenues recognized over time. Besides the still ongoing good trend, our profitability in the Q3 was also driven by economies of scale, a favorable product mix, and last but not least, a good cost control. Now let's go back to the more financial part of our press release. Thanks to the natural hedging of our business, our profitability was unaffected by exchange rate fluctuations. At a constant US dollar, euro exchange rate of 1.01, as experienced in the previous year's quarter, the EBITDA margin would have been 0.3 percentage points lower. Our cash and cash equivalent at the end of the Q3 amounted to $391.3 million, showing a decrease of 11.4% if we compare those numbers to the end of the previous quarter. But actually, the Q2 of this year has been extraordinarily strong, as we cashed a major portion of the prepayment received from our customers with long-term agreements. Furthermore, this decrease in cash and cash equivalents reflects the cash outflow related to investments to sustain our expansion projects made in the Q3. And to conclude this financial section, I would like to share the guidance for the next quarter. We forecast our revenue to be in the range of $230-$245 million, with an EBITDA margin in the range of 25%-29%. We don't expect any additional portion of revenue recognition over time in Q4. Taking into account the year-to-date result and the Q4 guidance, we end up for the full year, including IFRS 15, to $900 million-$915 million revenue, with the range, and within the range, and with 27%-28% EBITDA margin, slightly above previous full year guidance. The aforementioned guidance is based on an average exchange rate of 1.06 US dollar to euro. And now I would like to give the word back to Rudy. Thank you, Alba. So to summarize, the Q3 was characterized by strong revenue growth in X-FAB key end markets, with our automotive business again leading the way with 40% year-on-year increase. The successful transformation of our business keeps contributing to increasing profitability, driven by economies of scale and a favorable product mix. A highlight of the Q3 was the record sales in Microsystems business, and I'm very proud of the system integration capabilities and the expertise that we have built up. It is now starting to pay off and offers great opportunities for future continued growth across various end markets. Operator, we are now ready to take questions. Thank you, sir. Ladies and gentlemen, if you would like to ask a question on today's call, please press star one on your telephone keypad. To withdraw your question from the queue, please press star two. So again, that is star one for your questions today. And our first question comes from Michael Roeg of Degroof Petercam. Please go ahead. Yes, good evening. First of all, I have two questions for Alba. The first one is on the remark you made, that there will be no additional sales recognition over time. Right. Do you mean to say that it will remain at EUR 10 million in Q4? No. Or that it will be 0? No, it will be zero in Q4. Your guidance for sales suggests, at the midpoint, a small increase quarter-over-quarter, but if you look at the underlying trend, it's actually better? Yes. Good. Clear. That's interesting. Then the second one is about, well, that subsidy of EUR 80 million. The press release reads that it will be over a period of five years. Yes. So, if I make a calculation, on average, EUR 4 million per quarter. Can you tell us what the timeframe of the payments will be and how you will account for that in the P&L? Is it revenue or is it a deduction of your gross R&D costs? Yes, it's a reduction of cost. Okay. So basically, R&D, what you have today, minus 4 on a quarterly basis. It's a reduction on the production cost, actually. You read the, the, all the subsidies are going to decrease our production cost. Well, it is a bit of a mixture. What the IPCEI is, there are elements where there are equipments purchased, and in those cases, it indeed helps, reduces a bit the cost of production, depreciations, and then there are R&D programs, and then the staff is then deducting the R&D cost. Okay, and- Do not assume that it will be additional reductions versus the current, because also today, we have R&D subsidies left and right, that then also are also included or method into the R&D cost of today. Okay, clear. Should we assume that this $80 million will be smoothly paid out over that five-year period, or will there be bumps from now and then, with zero and large numbers? There will be bumps from now and then. I could not be able to answer right now exactly how that looks like- Okay. - over the next five years. I think it's maybe also a bit more towards the end than the beginning. I think it's more backloaded than, Okay. That's, that's very helpful. Then a question for, for Rudy, on your business outlook. Several IDMs and, and, fabless companies recently reported their Q3 results and outlook for Q4, and there is quite a slowdown across some end markets. You're pointing to growth in Q4, further growth, and even underlying stronger than what the year, you know, when you adjust for those contracts over time. Are there any pockets of weakness that you see when you're talking to your customer? Well, it varies to end markets. The automotive, in general, remains strong. The medical is also mainly driven by new, new applications, new that are ramping up. On the, let's say, more, the consumer is indeed weak. Well, it works well because we are transitioning our capacities to more automotive core business. On top of that, the consumer demand, I must say, also remains weak. We do see here and there customers who maybe overestimated their demand a year ago. Considering the strong demand overall, we still see we are able to reallocate those capacities to other customers who have maybe been more into the allocation. That is readjusting. Net, we still see good demand going forward, so we will keep a good utilization of 200 mm CMOS capacity in the silicon carbide and the MEMS. However, that's it, we do see here and there customers who do not take their initial forecasted volumes. Now, if we look to next year, customers remain positive, and they expect that these things are coming back. Now, if you see across the industry, you see also that in many areas, business is weak, and people think they are kind of across the, in the consumer and field, experiencing now the peak weakness. I'm positive going forward. Of course, there's a lot of uncertainty in the world. It is kind of hard to predict how that all plays out. Okay. And then you mentioned allocation. Is there still a lot of allocation, or has it come down much in the past three months? There is, we still have here and there, customers who say, if you would like to have more than what we can produce. So yes, there is still allocation, but it is, the gaps are getting smaller. Okay. Clear. Well, my final question before I leave the floor to others. A bit of a... Yeah. Throughout this year, you- when you've given your guidance on a quarterly basis, the gap between the low end and the high end was $15 million, one five. Last year it was only $10 million, and the year before it was sometimes even smaller. Why, why have you actually increased that, that guidance range this year? Well, the overall revenue is also going up, so in as a percentage, it's not changing that much. Yeah, but your backlog is quite big, so you should have some, yeah, quite some good insights into your supplies. All the tolerance, yeah, is mostly driven by the operational execution. There is, it's not only the demand that is playing here. The biggest portion of the uncertainty is the operational execution. Depending on how well the factories are running, that determines the revenue more or less. Yeah, beside a bit of demand side for the 150 mm older CMOS technologies. Okay, clear. That's it for me. Thanks. Thank you. Our next question now comes from David O'Connor, from BNP Paribas Exane. Please go ahead. Great. Thanks for taking my question, and good afternoon, Rudy, Alba. Maybe two on my side. Firstly, Rudy, just going back to that kind of gap that you still have between supply and demand. How many more quarters do you think, given the orders that you're seeing, how many more quarters before you think that? Well, it is hard to predict. If we look at the forecast that our customers gives, Yeah, then it, we're, we're ramping up production, but the forecasts are going up, and so we're kind of just on the verge where this, demand and remains strong, and then we're kind of just in line with the supply or just below. So, so that's, we'll have to see how our next year turns out, but based on the forecasts, this is still tight. Thank you. I think we've lost the connection to Mr. O'Connor. Just as a reminder, to ask a question today, please signal by pressing star one. That is star one for your questions, and we'll pause for a brief moment. Now we'll wait a bit until David O'Connor is back. Once again, that is star one for your questions today. David is back. Hello, David. Okay, your line is open now again, sir. Thank you. Yeah, hi, guys. Sorry about that, call dropped. Maybe I'm not sure if anyone subsequently asked it, but I just wanted to ask around the gap between supply and demand that you're seeing, Rudy. Just wondering how many more quarters before you see that kind of abating, and pretty- Yeah, so as I said before you dropped out, based on the forecasts, we see continued increasing demand for next year. So in some cases, customers tell us, "Okay, we take a bit less in now in Q3 and Q4, but next year it's gonna be again up due to inventory corrections. We can reallocate those quantities to other customers who still have gaps. And so but for next year, demand is expected to continue to go up. And so in line with our capacity expansion. So I think that we're just on the verge, and it's hard to tell whether there is still allocation or not next year. Thank you. We have now a question from Johannes Ries of Apus Capital GmbH. Please go ahead. Yes, good evening. Maybe one or two short questions. First, for clarification, if I go on the presentation, you still have the old guidance with this wide range of EUR 808 million-EUR 960 million in sales, and margin 23%-27%. But if I got it right, the presentation, if I sum up Q4 guidance, I come to closer figures, EUR 880 million-EUR 905 million, and margin above 27%. That is right? Yeah, yeah, so- Yeah, yeah. There's still the old guidance in there, so it's a little bit misleading now, mm-hmm. Yeah, but yeah, if you take the year to date numbers and you add the guidance for Q4, you end up with what Alba told before. Yeah. Only for clarification, it's clear. Yeah. Maybe a question on your fab in France. Yes. If I got it up right in my head, you are close to reach break-even there. You more and more fill it up now with higher margin business, automotive, and industrial and so on. Therefore, I think, primarily automotive, as I know. So, how maybe is the steps now to bring it to the average margin? What means it for the average margin at all? It must go up now? Yeah, we are still on that slope to improve the profitability of the fab in France, which comes with economy of scale and more volumes out of that fab. We're still in, yeah, we're still on growing that business. The output of the factory in France is now back at the level where it was maybe four years ago, when it was running a lot of, or only, consumer business. We have gone through that transition, but now we are at a point where we have to continue to grow the output, and the output still needs to double over the next two to three years. That gives you the... an indication of, yeah, the economy of scale that is still there and still has to come. Mm-hmm. And if you double the output, then you come also to the average margin of- Yeah. The rest of the business. Okay. Yeah. That could lead also maybe your total business above 30% EBITDA margin, like you have got. Yeah, so that is, maybe of course, we are investing, so this is- Yeah. Growth in capacity comes also with all the equipment we are installing, so that increases the depreciations. And therefore, it's important that also our EBITDA targets continue to go up to, because our depreciations will also continue to go up. On the silicon carbide, you explained there's a mix in how the business is done. So you got the wafers from the customers, therefore you have maybe higher profitability, but no huge top line growth. But since maybe this transformation will be open sometimes, therefore, what is the whatever the growth we can expect for the future? Because you have very ambitious targets. I can remember figures of 200, and longer term, EUR 400 million- Mm-hmm. in the silicon carbide business. Yeah, so the, we expect that this mix change between consigned wafers and and X-FAB acquired supply chain, that will not further swing into the direction of more consigned. I think we reached a point where from now on, the growth in wafer output and revenue will be more more. The growth in wafer output will also be reflected in the revenue growth. Superb. And still, your—so these figures are not wrong. I said here now for mid- and long-term ambitions in this business, yes? Yeah, we remain very excited about the silicon carbide business. You know, we are in, we're in, in a 150 millimeter, which is maybe the, the more traditional node for, for silicon carbide, but we have very good yields, and our customers are very excited about, the die yield and so forth, that we achieve. So we have here a, a great advantage versus the early adopters of, of 200 millimeter. Great. And, Gallium Nitride, you also produce, but it's not so important. I saw elsewhere that you're also in this business, which have- Yeah, we are. higher growth rates than Silicon Carbide. ... Yes, but the market for Gallium Nitride is way smaller than Silicon Carbide. We are in two of our sites into Gallium Nitride in one site in production and the other site in development, where we expect to ramp up first production second half next year. Small but strong growing. Yeah, but be careful, the gallium nitride market is significantly smaller than the silicon carbide market. So, there will be strong relative growth, but on the top line, it will not have such a big impact. The silicon carbide impact will be way stronger than the gallium nitride impact. Got it. Thanks. Maybe final question. From a pure capacity, what is at best possible to produce next year, huh? Let's assume stable pricing, what is right? Or maybe let's start first with the pricing topic. I was also on the calls of some, a call with Infineon Automotive and this morning in ST. They seem more normalized pricing, but no pressure on prices. That's also what you're seeing? Yeah, that's also what we expect for next year. Yeah, no exceptional pressure on pricing. It will be hard to push through further price increases. Yeah, correct. We expect pricing to be stable through next year. So coming back to the question I want first to ask, the final one for me. Given what your plan on CapEx and maybe stable pricing, what is maybe at best the revenue from a capacity side you could maybe achieve next year now? What is maybe the limitation from your production capacity? Yeah, I would prefer not to answer that question. Okay. Also, well, you know, we always said, "Okay, we want to exceed EUR 1 billion in 2024. Mm-hmm. We're building up capacities that we set in our capital market days. That should bring us, over time, to EUR 1.5 billion in 2026 from a capacity perspective. So we will continue on this path. But yeah, as we are growing, the slope, so every quarter there will be we expect gradual increase quarter-over-quarter. But we will report on our expectation for 2024 in the next conference call. Clear. Fair. Thanks a lot. As a final reminder, that is star one for your questions today. We will pause for a brief moment. Yeah, if there are no further questions, then maybe we- We have no further questions at this time, so I'll hand it back to you, sir. Okay, thank you very much, everyone, for joining the call today, and we look forward to hear you 8th February for the full year review. Thank you and have a nice evening. Thank you. Goodbye. Thank you. That concludes today's call, ladies and gentlemen. You may now disconnect.