Welcome everyone joining us today for the Melexis fourth quarter and full year 2025 earnings call. I'm Philip Ludwig, Investor Relations Director at Melexis, and I'm joined today by our CEO, Marc Biron, and CFO, Karen van Griensven.

Earlier today, we published our press release and presentation which can be found on our website. We will start with some brief remarks on the business and financials before taking your questions, starting with Marc Biron.

Marc, the floor is yours.

Thank you, Philip. Hello, everyone, and welcome to this earnings call.

Let me start by sharing some perspective on the full year of 2025 and how we see 2026 as of today. Then we will discuss the last quarter of 2025.

Looking back at 2025, at the beginning of the year, we had entered a phase of customer inventory correction later than our peers. We are now in a period with more geopolitical uncertainties and more short-term volatility in demand.

The period of customer inventory correction was largely completed by the summer. As a result, our sales were stable or grew sequentially as the year has progressed.

High in-quarter ordering has started in Q2, which we could serve from our strategic inventory. Still in 2025, sales in our largest region, APAC, has increased as a percentage of group sales.

China has followed an alternating pattern of very strong sales in one quarter, lower the next quarter, and strong again the following quarter, as it was in Q4 when we recorded our highest ever sales in China. Now looking ahead to 2026, we remain in the recovery phase of the automotive demand cycle.

We expect that this phase will not be linear given all the uncertainties and the late ordering behavior of our customers. Following the very strong Q4, sales in China continue their alternating pattern in Q1, also influenced by Chinese New Year mid-February.

We are also facing the expected volatility in our non-automotive business such as digital health application. Finally, we have to factor in the impact of the annual pricing agreement that we have closed at the end of 2025.

Those effects translate to a similar level of sales in the first half of '26 in comparison to '25. We expect growth in the second half of '26 with a similar dynamic as in '25.

Now turning to the last quarter of '25, sales of €214.5 million means that we return to an year-on-year growth of 9%. China posted its highest ever sales, and the rest of Asia was also strong.

Total APAC sales were up double digit year-on-year and sequentially, while Europe and the Americas were lower sequentially. On the innovation front, we leverage our technology leadership with strong design wins and an expanded pipeline of opportunities across China, Europe, and South Korea.

This trend is also valid in robotic, with the pipe of opportunities up by a factor of 5 in Q4 versus the previous year. We have launched 19 new products, targeting structural growth trends in automotive and robotic.

In the last quarter, this included a game-changing inductive sensor for steer-by-wire application that simplifies design and reduces cost, paving the way for the next generation of electrified and autonomous vehicle. We have launched also a code-free driver for automotive ambient lighting, which streamlines the development cycle and reduces the cost of our customer.

We also see the high potential in power electronics, and we are extremely proud to offer a world premiere proactive protective device called a snubber. This unique solution protects and enhances power density of silicon carbide power module.

All major power electronic manufacturers have shown interest in our product. A great example is Leapers Semiconductor, a Chinese manufacturer of advanced power module, incorporating our snubber in their next generation of module.

Our new protective device family will continue to expand to meet the evolving needs of power modules and emerging power applications. We have been growing faster than many peers in China over the past 5 years, with our broad offering on high-performance and high-quality product, and our strong local team to support customer.

From my side, I came back from China 2 weeks ago. I'm really impressed how hybrid is gaining traction, and how content-rich are reaching mid-range car much more heavily than in Europe.

To continue our trajectory in China, we are accelerating the implementation of our China strategy, including localization of our supply chain. A key step is to have local wafer supply, and we are fully on track to start shipping product this summer based on the 12-inch wafers from our local partner.

We also established a dedicated robotic team in China to respond to the stronger interest with more than 60 projects currently underway. As part of our strategy to win in faster-growing markets, we are increasing our effort in India, where we enjoy strong double-digit growth.

India presents great opportunities in automotive as well as in alternative mobility, playing to our strength. We are finalizing the setup of a Melexis entity in India to show our commitment to serve customer locally, and further develop in this attractive and growing market.

I will now hand it over to our CFO, Karen van Griensven, to provide more detail on our financial results and outlook.

Thank you, Marc. Sales for the full year 2025 were €839.6 million, a decrease of 10% compared to the previous year.

The EUR/USD exchange rate evolution had a negative impact of 2% on sales compared to 2024. The gross result was €324 million, or 38.6% of sales, a decrease of 19% compared to the last to last year.

R&D expenses were 13.8% of sales. G&A was at 6.5% of sales, and selling was at 2.4% of sales.

The operating result was €134 million, or 16% of sales, a decrease of 39% compared to €219.9 million in '24. The net result was €112.5 million, or €2.78 per share, a decrease of 34% compared to €171.4 million, or €4.24 per share, in 2024.

Sales for the fourth quarter of 2025 were €214.5 million, an increase of 9% compared to the same quarter of the previous year, and stable compared to the previous quarter. The EUR/USD exchange rate evolution had a negative impact of 3% on sales compared to the same quarter of last year, and no impact on sales compared to the previous quarter.

The gross result was €82.3 million, or 38.4% of sales, an increase of 6% compared to the same quarter of last year, and a decrease of 1% compared to the previous quarter. R&D expenses were 14.5% of sales.

G&A was at 6.7% of sales, and selling was at 2.5% of sales. The operating result was €31.5 million, or 14.7% of sales, an increase of 14% compared to the same quarter of last year, and a decrease of 17% compared to the previous quarter.

The net result was €22.6 million, or €0.56 per share, an increase of 24% compared to €18.3 million, or €0.45 per share, in the fourth quarter of '24, and a decrease of 18% compared to the previous quarter. Now turning to the dividend.

The Melexis Board of Directors approved on February 2, '26 to propose to the annual shareholders meeting to pay out over the result of '25 a final dividend of €2.40 per share, which will be payable after approval of the annual shareholders meeting. This brings the total dividend to €3.70 gross per share, including the interim dividend of €1.30 per share which was paid in October 2025.

Now for our outlook. Here Melexis expects sales in the first quarter and first half of 2026 to be around the same levels as the previous years' year.

Sales in the second half of 2026 are expected to grow compared to the first half of 2026. For the first half of 2026, Melexis expects a gross profit margin around 40% and an operating margin around 17%, all taking into account a EUR/USD exchange rate of 1.17.

For the full year 2026, Melexis expects CapEx to be around €40 million. Our outlook includes the first benefits of our cost actions taken in 2025, such as improvement in the cost of yield.

We remain disciplined in executing our cost improvement roadmap, for example, a shift in some operations to be closer to customers in Asia, and this to keep moving towards our long-term margin objectives. This concludes our remarks.

We can now take your questions.

Thank you, Marc and Karen. For the Q&A, we'd ask you to pose one question and one follow-up each time to give everybody a chance to ask questions.

You can always rejoin the queue after your first set of questions. Operator, can you now give instructions and open up the Q&A?

Yes, good morning, and thank you for taking my question. I think the first one will be pertaining to your guidance.

As last year, this year you also refrained from a full-year guidance, but you give us a bit more color. Just help me understand if I got this right.

H1 flat, and then I think, Marc, you said in your introductory remarks that second half should be higher than first half in a similar manner to what we've seen in '25. Is it then right to assume we're looking at a ballpark something about flattish for the full year?

I'm not trying to extract a full-year guidance for you, I'm just asking if the math is correct here, and then I have a quick follow-up. Thank you.

I confirm your understanding. In my introduction speech, I have indeed mentioned that H2 will grow in a similar manner than H2 last year.

We can indeed also add yeah, that volatility remains very low. If you look purely at Q1, we see that mostly Asia is staying behind.

Asia was very strong at the end of last year. We see the order intake there is much lower than, for instance, for Europe.

Europe is actually increasing. It's all attributable to Asia, and particularly also China.

We know that in China there is a lot of volatility in order behavior and also very late ordering. I want to put that also in that perspective.

Thank you very much for your color. It's very useful.

Thank you. Then secondly, on China versus Europe.

We have a lot of debate going on about Chinese vendors, automotive brands, gaining share in Western markets. What does this imply for your market share?

Do you have your market share with local Chinese players that is similar to what you have in Europe, or is there a discrepancy there? Thank you very much.

Looking at the past 5 years, the CAGR of Melexis grew by 10%, a bit more than 10% over the last 5 years. In China, the CAGR grew 14%, which is higher than the majority of the peers in China.

I do believe we are gaining market share in China if we compare to the CAGR of Melexis with the competition. There is nothing structural that would tell me that this will change in short term.

I would say in a longer term, when we consider our design win, our pipe of opportunities, we see also that those design win and the opportunity pipe is increasing faster in China or in Asia than in Europe.

That's very useful. Thank you very much.

Thank you. My first question is just on gross margins.

You sort of said last quarter that you saw around cumulative sort of 4 percentage points of temporary headwinds stemming from yield issues and wafer inventory revaluation. I'm just wondering if you could maybe break down what you were seeing in Q4, and then also in terms of bridging sort of how you're seeing that guide to get to 40% in H1?

Thank you.

We still had that same headwind in Q4 indeed because of inventory revaluations. We also still had high cost of yield.

Particularly cost of yield is what will drive margin improvements in 2026. It will be a major contributor, and that's the reason why we expect around 40% gross margin in the first half of the year.

Okay. Is that largely just reliant on sort of revenues picking up and demand picking up to get sort of through the wafers that you're seeing in your inventory?

Is that the main sort of driver of that?

No, it's not. It's that we get more material out of one wafer.

It's not volume related.

Okay. I just remember last quarter you were saying about how you have sort of yield issues in one of your fabs, and that's led to sort of impacted wafers in your inventory that you're still having to work through.

Is that still relevant?

Most of that material is now out of the inventory. We now have in inventory wafers with higher yield, and that is helping us to improve the margin.

Okay. Perfect.

Then just my quick follow-up, just on the sort of annual price resets. I was just wondering if you could maybe guide on what sort of ASP change you've been seeing in '26 sort of versus 2025?

I believe the average selling price in '26 will be close to the '25 average selling price. That is the expectation today.

Okay. Thank you.

Good morning. Thanks for taking the question.

I'm just looking for your second half guidance and just wondering what is giving you the confidence that you will see the kind of increase in the second half like you saw last year, especially given your commentary on quite a lot of volatility in the China market? Are you expecting that market to stabilize over the next couple of quarters and therefore give you some upside there?

Just associated with that question is we just came off the Infineon call and they said that perhaps because some of the customers including in automotive and other areas is concerned about strong AI demand giving rise to supply tightness even in areas outside of AI, customers are willing to put more longer-term lead time orders now just to avoid any future capacity tightness. Is that something that you're seeing which is also giving you some confidence on the second half of the year?

Thanks.

I think there is indeed multiple reason for this statement on the second half of the year. First, we know that the inventory at our disti in Asia, in particular in China, is very low.

We know that they will reorder yeah, later in Q1 or in Q2 because the inventory is really low, especially in China, and especially for the magnetic product, I would say. A second reason is we are in many big customer, we are changing the version of the product.

This change of version will happen in Q2, Q3. It's why our customer are now busy to reduce their inventory of the previous version before they order the new version, let's say the more modern version.

This is clearly visible for driver product, but also for some ASIC. In our price negotiation that has been finished in December, we have also received the forecast from our customer.

Clearly the forecast are stronger in H2 versus H1. Those are the different reason, let's say, that bring this comment.

To follow up on your question about the let's say the supply problem, we have some sign, let's say, for example, of assembly house where indeed those assembly house are moving, let's say, their capacity to different kind of package, yeah, more complex package in order to incorporate those complex AI chip. We have this view, let's say, from the assembly house.

Can no really yet consequence on Melexis, no real consequence on any allocation. There is indeed this trend, which is a bit more than the noise, I would say.

Understood. Thank you very much.

I have no other questions.

Hi there, morning. Thanks for taking my question.

The first one, I'll just go back to the gross margin. Just can you help us understand the step-up from Q4 into Q1?

On the face of it, the sequential improvement, I think around 150 basis points, it looks quite difficult given softer volumes, annual price negotiation kicking in, currency likely worse. Just trying to understand what's going to get us that sort of 150 basis points step-up in the face of those headwinds?

Thank you. I've got a follow-up as well.

I can only repeat. The biggest reason why that will happen is indeed that we have gone in inventory through most of the products with high cost of yield loss.

As you remember, that was a high contribution of reduction in gross margin in '26, close to 2%. As we are now leaving that mostly behind, we will see improvement as of Q1 already.

Thank you.

That's despite the erosion that we also see in Q1, of course. We still expect a step-up because of this big improvements in cost of yield.

Thank you. Then just a follow-up.

I realize it's early, but appreciate your thoughts on the acquisition announced of ams OSRAM's sensor portfolio by Infineon. Just wondering your reaction and how that might change competitive dynamics in that segment of the market where obviously you're strong.

Thank you.

In our let's say product scope or application scope, yeah, OSRAM is not a real competitor of Melexis, meaning that I think this acquisition will not change a lot for us.

Perfect. Thank you.

Thank you very much. I have actually really one question.

When I look at your revenues, you mentioned flat year-on-year in Q1 and Q2. Now when I look at your competitors like Allegro, for example, which I think is the closest, they are growing their auto revenues by more than 20% year-on-year in December quarter, and March by the look of it is still 19%, 20% year-on-year.

They are really growing significantly. You mentioned China growing 14% in the last 5 years, but I would imagine that the growth in China was actually higher than 14%.

Given all the EV growth that you have seen, the car sales as well in there, the content and the growth in China was actually higher than that. What I'm trying to understand is, is there anything structural here, a bit more because it feels a bit more than inventory correction, especially when you compare the growth with some other peers?

Even NXP is growing 11% in autos. TI is growing low teens.

STM is growing mid-teens in March quarter. You seem to be well below the others.

I'm just wondering why is that?

I think there is for sure nothing structural. I repeat that I was in China 2 weeks ago.

My conclusion from the trip, which was the same when I was in China in November. I think that the Chinese customer, they like the Melexis product.

They have a lot of trust on our quality. They like our support, technical support, which is very important in China.

Then I confirm there are no structural problem in China, also not in Europe. We are facing this volatility.

The order in China was very high in Q4. In Q1, it is lower because of this Chinese New Year, also because the incentive scheme for EV in China have changed yeah, from '25 to '26.

From my perspective, we still have the same traction. When we refer to the design win or when we refer to all the pipe of opportunity, the discussion with customer, I don't see any problem there.

I also want to add that Melexis started the cycle much later than all the other players in the market. Usually, we started later, but we also come out later in general

if we look back. I understand that.

Versus Allegro, I would say why they would see differently than you? They do similar things, not only the same.

What is your revenue in China in Q1? How much down it is China you would expect to be?

China, [unclear]. It will be down quite a bit based on the order intake we have now, because January was still strong.

February, March is obviously still order intake. February looks quite weak, but that's probably a lot to do with Chinese New Year.

March, yeah, orders are still coming in. It's also even in Q1, it is difficult to predict where exactly we will be landing because of yeah, the very late in order intake, certainly also in China.

It's particularly low compared to Q4. As I mentioned, there is no reason to believe why that wouldn't throughout the year pick up again.

Q1 tends to be always a lower quarter, well not always, but usually a lower quarter in China anyway.

On a year-on-year China, what do you expect to guidance?

On a year-on-year, yeah, it will be probably close to what we had a year ago. It might be slightly lower if, like we said, order intake is coming in quite late.

François, maybe just to come back to some of your comparisons. It's Philip here.

Allegro, I think the 5-year CAGR is 2% to '24. We can update for '25 as well, whereas ours is 14%.

In China, we outgrow Allegro as well over a 5-year period. I know we look ahead.

Of course, we also look ahead. I think if we look over time, as Karen mentioned, the quarters are not always in sync.

I think the long-term growth track record of Melexis stacks up well versus many, if not majority of our peers.

Thanks a lot.

Sorry. The line just went bad.

I didn't hear the answer to the last question. Did you say the year-on-year decline in US dollars or euros for Q1 China alone?

Did you answer that?

Like I said, order intake is very late. There could be a decline in the first quarter, although in January we haven't seen it yet.

That's the reality. February and March is still in orders.

Very difficult to predict even in one quarter where we will land, particularly for China.

Got it. My question was more around in the medium term.

You've seen a lot of the BEVs being canceled by Western OEMs, more than 30% of launches have been canceled. It looks like BEV demand is just not flying without big fingers on the scale.

Now that they're taking away subsidies in the US and China, it just doesn't seem to be as strong. You're going to see a lot of people moving back to plug-in hybrids and zonal architectures as a kind of bigger source of differentiation.

Does that affect your TAM growth? Because if I remember rightly, you brought it down at the CMD, your long-term growth.

Does it affect how you think about that, or are you kind of agnostic still to that trend?

I share your view indeed that hybrid, let's say, seems to be the preferred option for many of the customer and many of the manufacturer. Hybrid is great for Melexis, because there is an electric engine and a combustion engine.

Then we let's say we win two times, because we contribute to the electric engine and we contribute to the ICE. Then for us, it's the best of both worlds, the hybrid motorization.

I repeat what I say during the introduction speech. In China, I was really impressed how much those hybrid were taking over, because initially let's say the hybrid had a battery with let's say 50-kilometer range, but now it's 100, 150.

And 100, 150 kilometer in Shanghai, for example, it's more than enough to move in the city during one day. It's the reason why this hybrid is gaining traction.

What do you see at the Western OEMs? Obviously, they're restarting their development.

A lot of their combustion engine R&D was shut down. Now they're restarting those teams.

Is that a good thing for you, because they will get more involved in the engine management side, or is it perhaps there's a short-term issue because of cancellations and then a long-term gain because of plug-in hybrid ramps?

Discussing with with our customer, the the Tier 1, the Tier 1 have faced indeed in in '25 a lot of or some cancellation of platform. I think it's also one of the reason of the of the current situation.

They all told me that '27 will be different. In '27, they they they forecast a lot of new platform, which is one aspect.

To answer your to answer your questions, for Melexis what is important is that either the electric engine or the combustion engine come with a new platform, because a new platform is is usually much more electronic-rich with much more comfort, much more safety features. Then those new platform are always a benefit for Melexis.

Could be combustion engine or electric engine, it does not make a lot of difference for us, because we are we have the same the same kind of contribution in both both type of motorization. I repeat my previous answer, but hybrid is the best of both worlds for us.

Got it. Thank you.

Yes, thank you. My question is on the inventory level of €300 million plus.

We see it increasing quarter-over-quarter. How comfortable are you with this inventory level, and do you expect that we are now on the peak?

Yes, it's indeed a peak level. As we progress in '26, we will probably keep it around that level, maybe a bit lower.

We don't have the intention to further increase it.

I think this this this inventory is is a strategic asset for Melexis, because we have a lot of in-quarter in-quarter order. We can respond positively to those in-quarter order because we have the inventory with with the right products.

When the when the business will pick up anytime soon, we'll be ready to to ship to our customer thanks to those this inventory. Then we really see this as a as an asset.

I think it's much much more expensive to lose business in the future than to keep this this inventory as it is today.

Correct.

Yeah. A follow-up question on your sales in Europe, which is just above €50 million in the fourth quarter of '25.

I think you have to go back to COVID times to see this kind of level. What could be a turning point for your European sales?

Can you elaborate a little bit on that?

The center of gravity of the business is indeed, for the time being at least, moving from Europe to China or to Asia. That being said, yeah, Europe remains very important.

Also US remains important. This move from Europe to China is indeed the trigger for us to focus our organization on China.

At the end of '25, we have updated our organization in China in order to give to this organization in China more autonomy in the business aspect, to give them the opportunity to answer very quickly to our customer, because we do realize that in China speed is really an essence. We should avoid the communication flow between China and Europe.

Then the autonomy has been given to the China team to be on top of the business discussion. I think this is very important asset for the future to strengthen our China team, because indeed for the time being, and I repeat, for the time being, the business is moving to China.

We also see that in the expectation of the OEM, the European OEM in '26, but even more on '27, they will launch more and more new car with new platform, EVs cheaper. Then it's not impossible that, yeah, a kind of rebalance will happen later this year or later next year.

I just want to repeat that Europe had a strong start, Q1 is higher than Q4.

Yes.

Operator, could we take the next question?

Yes, thanks. First, I would like to still come back a little bit on the volatility that you call out on the revenue, because I think the fourth quarter was a bit below what you initially expected, then another step-down in the first quarter and a quite significant step-up in the second quarter sequentially.

Just trying to understand that a bit better. What changed there?

Because I think earlier we talked more about small sequential improvements quarter-over-quarter, and now you suddenly see this volatility. I think you discussed it previously, but just really square what is really happening causing this volatility?

Like we mentioned, the drop is fully for Asia. Then also particularly for China.

China from one quarter to the other also last year can really move up €10 million in one easily move up, yeah, close to even €10 million for one quarter to the other. We don't have really another reason than there is huge volatility in China in general, and that it is obviously also impacted seasonally by Chinese New Year.

It has been also amplified by the change of incentive scheme in China at the end of '25.

Okay. Then the second one, I'd say clarification on what you said on the pricing, because I think you said that the ASP will be very close '26 level to the '25.

You do call it out as one of the reasons for maybe a bit slower revenue in the beginning of the year or no growth in the first half of the year. Just wanted to understand that.

If you like product-for-product, are the ASPs stable? As in that would be probably a bit better than what you initially guided, which was the normal decline of 3%, 4%, I guess.

No, we need to clarify that. Stable ASP doesn't mean that we don't have price erosion.

Price erosion, it's mid-single-digit expectation for '26. The product mix has a positive effect in '26.

This can vary from one year to the other, the product mix effect.

Okay. Yeah.

Thanks.

Yes, good morning. I have a question about the China business, which was very strong in Q4.

Do you have sort of a crude estimate how much of your products end up with the top five Chinese carmakers and how much ends up with all the other names?

On the top five carmaker, I cannot answer. What we know is that, let's say, half of the Chinese business is for Chinese OEM and the other half is for the European OEM.

Within those Chinese OEMs, you do not really have a good view on how much ends up with sort of the big companies, the familiar names, and how much ends up with that very long tail?

No.

Okay. Do you see a risk that if there eventually will be a shakeout of all those smaller players, that eventually their car volumes will move to the big players, the big domestic players which have much better pricing power than those smaller players?

Have you done scenario analysis for that, how much that could impact your business?

The consolidation will indeed happen. There are a lot of OEM in China, then for sure consolidation will happen.

We don't have an accurate answer to your question. I think indeed innovation will also help.

At the end, it's all about new product that we bring on the market to compensate this price erosion. We have in the product that we have launched recently, we have product with much more ASP, much more margin.

I don't see any reason why this consolidation will be negative, because on the other hand, having a lot of small customer, it's require a lot of effort to support all those customer, especially in China. We have a lot of application engineer working with all those small customer.

Then there is also a very negative effect to have so many small customer. I could also add that it's the case in Europe.

In Europe, we have a lot of big customer and a very limited number of small customer. Then it will probably indeed move in this direction in China.

We are able to manage it in Europe, then we will manage it in the same way in China.

My impression was that the bigger OEMs in China have much more favorable purchasing conditions so that if the volume were to move to them, that it could affect your overall ASP in China. You think there will be some compensation in being able to lower your OpEx.

I think it's the same in Europe. Our big customer in Europe have also a better pricing than the small customer.

It's why also we like this long tail for the reason you mentioned. It will be the same in China and we will manage the situation in the same way.

I think that the price matrix is always high volume, lower price.

Overall we expect higher price erosion in China than the rest of the world. That is calculated in our model.

Yeah.

Okay. Very clear.

Thanks for the feedback.

Yeah.

Hi, good morning. Thanks for letting me ask a question.

I just wanted to talk about the growth or the guidance for the full year, which is flat, maybe not comparing it to others which have indeed sort of implied some growth. You guys aren't able to.

How do I sort of get from I think in the past you would say on sort of zero SAAR growth still penetration would add what, high single digit? Let's say that's mid-single digits today.

You said pricing in the mix is kind of flat. There's no real inventory digestion going on.

How do I get from let's say mid to high single-digit volume growth to zero on the euro side? Is that the dollar?

Is that sort of headwinds from the non-automotive business? Is there mix?

Could you just give us some more color or the building blocks how to get down from a volume number to revenue numbers in euro? That's my first question.

Thank you.

It's a mix as you mentioned. We did not discuss in the Q&A about the non-automotive business.

I mentioned it in the introduction speech. One of our big non-automotive customer has decided to alternate their supplier.

I think it's quite normal. We had the chance to be during 3 years in a row in the application.

In '26, they have decided to make the alternance, which affects our revenue. I think again, it's not abnormal.

We have good hope that we will come back in the next years. We have good technical features.

This is indeed in the mix of answer. This is one of the reason that we did not mention in the past.

As it's great that we receive one of the reasons. Can you quantify the impact, and also give us just a bridge?

I've covered the company for quite a while. It's always been volume growth.

Used to be teens, then high single digit. I think it's now mid-single digit, but still this is a material step-down.

I don't have any ways to calculate that, and it would be super helpful. Very helpful for you guys to give a little bit more disclosure and color on how to model the business into '26 and what are the moving parts.

Our customer and probably also OEM are navigating through cautious recovery in auto, and it's why this volatility in sales order is coming. I think it's difficult to give more color, and really to give the building block for your answer because of this high volatility.

No, but the whole volatility is in the near term, and now I'll move on after this one, but I do want to try again. It's for the full year, it's not exactly normalized, but it's not the month-to-month volatility that you point out.

I fully comprehend that. It's just compared to peers and also compared to the growth model that I'm used to, this is very different.

I could have understood it. It used to be that the bullwhip inventory effects that is a big impact, but that doesn't seem to be driving it.

I need to update my understanding about how I model your top line, I think, and it would just be helpful if we can get a little bit more color on that.

In the longer term, we confirm our high single-digit growth. What we have mentioned to the CMD is still fully valid.

We have the design win. We have the opportunity pipe.

We have in our development the relevant product to reach this growth. In long term, I think the model did not change.

In short term, we have this volatility that we mention. We have the price erosion that we have mentioned, mid-single digit, low to mid-single digit.

This is the reason of the change. I repeat, in long term, we are fully confident that what we have said to the CMD is still valid.

We need now to face the short-term headwind.

Okay. More math now on the gross margin.

Karen, you've talked about the potential of sort of 4 percentage points worth of idiosyncratic or self-help or specific items. I think 2 percentage points related to the yield improvement.

I think that's probably what we're seeing in the first half if I'm not mistaken. Then on top of that, there was potential further improvement, or the dollar I think some normalization would have helped.

You've mentioned a restructuring impact of about a percentage point before. I'm just trying to get to the full-year gross margin.

It seems like given there's no growth either, we probably should assume 40% for the full year. Can you maybe elaborate a little bit if that's the correct way of thinking, or is there an element missing?

Yes, that is correct indeed. We need more operating leverage to push it beyond that 40%.

Okay. Maybe then just a quick follow-up.

You've guided first-half gross margin, not first quarter. I think it's just how you usually talk to the market.

Should we assume that improvement towards 40% in the first quarter, or is it more towards the second? We step up from, I don't know, 39.5% and then

As from Q1, we expect.

As from Q1. All right, that's very clear.

Thank you.

Thank you, operator. To summarize, 2025 was a year of navigating through cautious and choppy demand while maintaining our cost discipline.

In parallel, we have introduced many innovations for automotive application, grew business opportunities, accelerated our China strategy, and took action to improve margins. These efforts will start to deliver in '26, and we will continue to build on them to further strengthen our business and to move toward our long-term objective.

Thank you for joining the call, and goodbye.