Welcome, everyone, joining us today for the Melexis second quarter 2026 earnings call. I'm Philip Ludwig, Investor Relations Director, and with us today are 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 questions, starting with Marc Biron.

Marc, the floor is yours.

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

Let me share some brief performance highlights before handing over to Karen for the financial overview and outlook. To start, I'm pleased to see that Q2 sales has developed well and came in ahead of our outlook.

We have seen customer orders increasing as we have progressed through the quarter. We are seeing good growth, particularly in position sensors, a core Melexis strength, where we are able to address demanding automotive requirements such as steering and braking with both magnetic and inductive sensors.

Those products are also gaining traction with robotics customers. We see also growth in motor drivers for thermal management applications, in-cabin and under-the-hood, but also in robotic joints.

Next to improving top-line, we grew margin, and we are in line with our first half '26 outlook. Melexis continues to bring innovations to the market with three new products in Q2 designed to address automotive customer needs.

In automotive lighting, we have launched a chip with a DC-to-DC converter. This product architecture reduces the cost of the module of our customer and improves the module robustness against electromagnetic disturbances.

We have also launched a world-premiere switch for contactless detection of up to four positions. It can be used, for example, in seat track positioning, allowing a more accurate inflation of the airbag to protect the passenger.

It therefore contributes to the better safety. We released a digital current sensor, to ensure signal integrity in demanding, noisy environment.

It is particularly important because electrified powertrains evolves towards faster switching technologies such as silicon carbide and gallium nitride. Also in power electronics, I'm happy to see the strong interest we are receiving for our snubber.

This is a great example of our innovation team bringing solutions to customer challenges. We will continue to invest in R&D to ensure that our product pipeline continue to grow.

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

Thank you, Marc. Sales for the second quarter of 2026 were €217.3 million, an increase of 3% compared to the same quarter of the previous year and an increase of 7% compared to the previous quarter.

The euro/U.S. dollar exchange rate evolution had a negative impact of 1% on sales compared to the same quarter of last year and no impact on sales compared to the previous quarter.

The gross result was €87.9 million or 40.5% of sales, an increase of 6% compared to the same quarter of last year and an increase of 9% compared to the previous quarter. R&D expenses were 13.8% of sales, G&A was at 6.7% of sales, and selling was at 2.2% of sales.

The operating result was €38.6 million or 17.8% of sales, an increase of 8% compared to the same quarter of last year and an increase of 16% compared to the previous quarter. The net result was €30.8 million or €0.76 per share, a decrease of 19% compared to €37.8 million or €0.94 per share in the second quarter of 2025 and an increase of 33% compared to the previous quarter.

With regards to the dividend, the Board of Directors decided to pay out an interim dividend of €1.30 gross per share, and the Melexis shares will start trading ex-coupon on October 13, '26, opening of the market. The record date is October 14, '26.

Then turning to our outlook, Melexis expects sales in the third quarter of 2026 to be in the range of €220 to €225 million, and for the second half of 2026, Melexis expects sales to be between €445 and €455 million, with a gross profit margin around 41% and an operating margin around 18%, all taking into account a euro/U.S. dollar exchange rate of 1.15 for the remainder of the year.

For the full year 2026, Melexis expects CapEx to be around €40 million. This concludes our remarks, and we can now take your questions.

Thank you, Marc and Karen. For the Q&A, please ask one question and one follow-up at a time.

If you have more questions, you can rejoin the queue to pose those questions. Operator, can you give the instructions, please?

Yes, good morning, and thank you for taking my question. I just have a first question on guidance and then I'll have a follow-up.

On guidance, we see the second half guide that is nicely ahead of consensus both sales and gross profit, but less so at the EBIT level. I'm just trying to understand, is there something in the OpEx block that is holding back profitability expansion at this stage?

That will be just my first question, and then the follow-up. Thank you.

Yeah.

The gross margin is improving. Operating margin is also improving, but yeah, we have some inflation to reckon with, certainly in the wage inflation that is impacting the overall leverage possibilities, yes.

Nevertheless, we are further working on our road map for gross and EBIT margin improvement, we will see that further expand also moving ahead into next year.

That's great. Thank you.

As a follow-up, could you help us understand what's going on in terms of pricing? We saw competition raising prices earlier in the year.

Melexis had the seasonal decrease in prices in the beginning of the year. How do you see pricing evolving from here?

Do you have any prospects to raise any prices at all, or is it just flat from here on into year end? Thank you.

We did not increase our price indeed earlier in '26. We have now just starting the price negotiation with our customer and yeah, it's about price and volume.

We want to give priority to volume. For the time being, yeah, before the end of '26, we don't plan to increase the price because we want to honor our engagement with the customer and we value, let's say, the long-term relationship.

Thank you very much.

Hi, good morning. Thanks for taking the question.

When I look at your guidance for the full year, it's still relatively low growth compared to some of your peers what they're reporting in their automotive business. It's still only around 3%, and even by Q4, you're guiding only at about 6% year-on-year growth.

However, your tone has clearly become more bullish in this set of results than in previous quarters. I'm just wondering, do you think that you're just starting your engines a bit late in terms of your recovery from the inventory correction, and do you see this momentum continuing to build as you go through?

Like many of your peers, yesterday NXP reported 17% year-on-year growth on automotive, do you think you can, as you recover from an inventory correction, you could hit higher numbers in coming periods? I have a follow-up.

As you mentioned indeed, the momentum of '26 is better, let's say. We have, I would say, less headwind now than in the past.

The inventory headwind has faded away. We have a smaller cost of yield, then we have a better cost of the product.

I think we are also gaining new business clearly on the position sensor in automotive in the position sensor for the steering and braking. I do believe that in the near future, we'll also gain new business on the lighting product and on the driver's product.

As you mentioned, we are more optimistic now than six months ago.

Let me ask in terms of, is—

Yes, go ahead.

Carry on. Go on.

No, is the order momentum strengthening every month, or has it strengthened and sort of staying at a higher level right now?

The visibility of the order did not improve. It's still four, five months.

We see also more dynamic in the order. For example, we don't see any push-out.

We see more pull-in than push-out. From this perspective, let's say, the order dynamic is more positive.

Understood.

And— The cycles don't run always at the same time. We usually tend to get out of a cycle later than our peers.

That is also correct.

Understood. Then on the humanoid robotics side, you made some very encouraging comments on your first half sales and your second half order trend.

Given your design wins and the fact that some of these companies are finally converting those designs into orders right now and revenue, do you think robotics could become a meaningful contributor to revenue next year? When I say meaningful, let us say at least €10 million of revenue as a starting point.

Do you think that's a possibility looking at the current trajectory?

For sure, since since Q2, we have now real real business, we have real order. As you mentioned, the the opportunity has been is translating in design win and now the design win are translating in real revenue.

This is this is fact. We see that Q3, in term of order, Q3 is higher than Q2.

I think the the positive movement is is ongoing. Now when you say €10 million in 2027, I would say it is a bit early to say.

For sure, it is it is moving up.

Understood. Thank you very much.

Thank you. I just had one on what you're sort of seeing from the distributors and Tier 1s, what they're sort of actually consuming versus what they're ordering from you.

How wide is that gap right now? I think we've seen a bit of a sector recovery because of restocking rather than very very strong end demand.

The question really is, how do you see a bit the sell-in versus the sell-through at this point?

From what we see from the distributors is that the inventory is quite flat. There is no increase of inventory.

The inventory are, I would say, low and flat.

The same is true for our direct customers.

Okay. All right.

Then regarding inventories, I guess these came down to €270 million from €300 million at the end of last year. I think in April, you were quite clear that you expect inventory to build in volume terms through '26 because I thought you mentioned there you were competing for some test and assembly capacity because of AI server demand.

With inventories down, curious what has sort of changed. Did some of demand pick up some of the stock, or that capacity worry has faded, yeah, what changed?

The inventory went a bit down for two reasons. The first reason is yeah, we have adapted, let's say, the inventory to the wafer price.

The second reason is, indeed, we had a bit more order than expected and we have consumed the inventory. I would say for the reduction of inventory, half is due to the consumption and half is due to the adaptation of the— Devaluation.

—the

revaluation, thank you, of the inventory. For the future, we will probably re-increase the inventory to come back to the previous level.

Okay. Just a final question regarding China.

Can you just give us a sense of how the region performed year-over-year in the second quarter and whether the volatility you talked about earlier this year has now settled down a bit?

Q2 was quite good in in China, even very good in China. From what we see in Q3, it will be even higher than Q3 Q3 will be higher than Q2, even probably a record level, let's say, in China for for Q3.

What is at least for me important to note is that the the increase in our China business is mainly, if not only, for Chinese customer. Then those are really the the local customer that are driving the the growth in China.

All right. That's it for me.

Thank you.

We see really the results of our what we call the China strategy, where we optimized our support to the Chinese customer, we localize our supply chain in China. We see that this is bringing results.

Also

in design wins.

Design wins

is also going very strong.

Okay. Great.

Thank you.

Hi. Thank you for taking my question.

My first question is just on the competitive dynamics. How would you say in the quarter, and how you're seeing it for the rest of the year, the competitive dynamics have been?

We've seen a few of your peers acquiring some sensing portfolios in the past sort of 12 months. Are you seeing any impact on that?

How is that impacting your outlook as well?

From a competition perspective, I don't see big change. If we compare the competitive aspect versus six months ago, it did not change, I would say.

As we mentioned, the main new competition is in China, as I just answered, and we see good results in China. As Karen mentioned, good design win level.

We are following the expectation for the design win in China. We will probably reach the target.

Q2 was good, Q3 will be good. Then from a competition perspective, I don't see a big change.

Amazing. Thank you.

Then just secondly, on terms of the cost of yield, I'd wonder if you could quantify how much benefit you saw in the quarter and how much is implied in the second half guide, and just how much of that do we still have to work through with the inventory and sort of roughly how long you feel it will take to work through the impact of the cost of yield?

The big increase, or the big move up, was in Q1, and we are benefiting from this throughout the full year, in the first place. There is still potential to further improve our cost of yield in the next year, we are continuously working on that.

What we guide for now is what we have already reached. It's not really at risk.

With what we know today, this is the result.

Amazing. Thank you so much.

Does that answer your question?

Yes, perfect. Thank you.

Thank you very very much. I just wanted to come back on China, that you see strong momentum in Q3.

Can you clarify a bit what products do you see particularly doing well in China? When we look at the end demand in China, the domestic Chinese car sales, whether you look at EVs or non-EVs, are down significantly in H1.

Of course, you have these overseas exports doing well, but even if you combine both, it's barely growing. How do you translate this strong China numbers with actually the end demand?

Do you think it's market share gain or refill of inventories because they were low? It seems very difficult to believe when we look at H1 end demand data.

Is that makes sense?

It makes sense. That's a good question for sure.

I confirm that indeed, probably overall in China, there is no growth. The export compensate more or less, barely, the internal market.

We see different aspects. We are gaining some market share in China.

I have clearly some example as position sensor that we have been able to increase since the beginning of the year. As I mentioned, I do believe that before the end of this year, we will also gain market share in lighting product and also in driver's product.

Current sensor is also quite promising in China. It's also linked to the energy problem.

We see a big growth in the solar panel business in China. You probably remember that we deliver current sensor for the solar panel business.

Those are the different areas where we are growing in China.

The sales in China are much more built on the growth drivers. We have a much bigger share of our growth drivers in China than in the rest of the world.

Obviously, these growth drivers grow faster than the rest of the business, so that helps a lot.

Great. How much of your China production is done in China actually today, or maybe this year and next year?

How much are these China for China is actually happening?

We should separate the answer in two. There is first what we call the OSAT, and the assembly and test.

For the assembly and test, we have more and more product that we assemble and test in China, mainly our lighting product and our latch and switch product. The second aspect is wafer itself.

For the wafer itself, we are much lower. We are using one wafer fab in China, and on this wafer fab, we have one current sensor, which we are finalizing the qualification at the customer and at Melexis, and we will launch it second half of this year, after summer.

Then for the time being, actually, today, the ratio is quite limited, especially for the wafers, but the idea is to grow it during the next years. It's a kind of journey, I would say.

Is that fair to say that the benefit will be more therefore, maybe next year and on two years rather than now, because it's actually not happening yet?

It's happening for the assembly and the test. For the wafer, it's not yet happening.

It will start to happen later this year. As you mentioned, it will grow up year after year.

All right. Thank you.

What is important for us is that our customer recognize that we are, let's say, serious with our China strategy and that we are building up this China strategy concretely.

Makes sense. Thank you.

Yes, thank you. My first question is actually following up on the gross margin.

I think, for the long run, you always have a target of around 45% gross margin. Now you see the improvements on the yield and also a bit on the volumes and first benefits of China, how do you see the building blocks to get from the 41% in the second half of the year towards the 45% into the more longer term?

What still needs to happen for you to get there?

We are actually further executing our roadmap that we also presented on the Capital Markets Day. We will see some further results in '27, for instance, moving our footprint east is adding cost in '26, but we will see the benefit of this move, the financial benefit, in '27.

Cost of yield is another parameter we continue to work on. The product mix is also gradually helping to improve our gross margin.

Year after year, we expect some further improvement in gross margin based on all the activities we are working on. Then, of course, some operating leverage, as we grow, will help as well.

That's clear. Then my second question is on the difference that you see in inventories at your customers depending on the drivetrain.

Is there major differences given what we see in end markets?

At least not visible to me. I don't see the difference indeed from a drivetrain perspective.

Okay. Thanks.

Yes, thank you. Most of my questions were answered.

I have three small add-ons. First is on your order book.

Do yourself have the feeling that your visibility is improving and can you give us an indication to what extent? The second question was on one of the previous questions, you mentioned design wins on lighting.

Do you mean interior lighting or also exterior lighting? The third question is on robotics.

You mentioned specifically substantial growth in both China and the U.S. You think first time you mentioned U.S.

here, can you elaborate a little bit on this? Thank you.

Yeah. On the first question about the visibility, no, I would say the visibility does not improve.

It's still four, five months. We don't have full visibility till the end of the year, I would say, then no real change on this, still very short-term.

We also don't have allocation issues like some of our peers. From that perspective, we don't see yet order behavior changing very much.

Yeah. On the lighting, on the design win or the market share increase, it is interior lighting.

It's only interior lighting, I would say. On robotics, yeah, indeed, and the opportunity and the design win and the sales, it's China and U.S.

The real increase that we see in Q2 and Q3 is even more coming from the U.S., which is, I think, one of the first design win that we have received one year ago, I would say. It was, I think, in September last year.

It is for a humanoid robot coming from the U.S. This is mainly on this aspect, this design win that I refer to, it's a position sensor for the joint.

We know that in the humanoid robot, there is a huge multiplication factor because there are a lot of joints in the robot. Then we benefit from a big multiplication.

This is for this product. We see also growing the drivers for the joint, because the joint must be actuated, and we provide driver to actuate the joint.

We have also some business growing for these drivers. Now finishing with the tactile sensor to give the sense of touch of the robot, we are still in opportunity and design win phase.

We have different maturity level, let's say, in the pipe. The position sensor and the drivers, we are at design win status and revenue.

For the tactile sensor, we are more one step behind, opportunity increase and design win. Does it answer the question?

Okay. Yes, thank you.

Good morning. First question is a follow-up on the inventories question for Ruben.

Did I understand correctly that there was a €10 million inventory writedown in the second quarter?

Inventory writedown? No, there is a revaluation, but that's not an inventory writedown.

Revaluation at new prices.

Is that meaning that wafers were originally at a certain price in your inventory and then later on at a different price, and that is a €10 million difference?

Exactly. Indeed.

Yes.

Okay. That's clear.

Good. Just wanted to clarify that.

The second question I have, your receivables went up in Q2 by almost €20 million. It suggests perhaps that the second quarter sales were stronger towards the end of the quarter than at the start of the quarter.

If that would indeed be a nice exit rate, then I'm a bit puzzled by your modest growth in Q3.

We have gradual ramp-up. June was particularly strong, but that also has to do with with holidays and so on.

Q3, we have quite some Yeah, there is seasonality a bit. It's not always spread equally month from month, I would say.

It's just monthly swings that cannot be extrapolated in terms of growth for Q3, apparently. Is that the case?

Fully. Fully.

Okay.

We will continue growth,

eh, quarter

after quarter. How strong that will be exactly, yeah, we've given a range,

eh, so— No, that's clear. No, it's just that I felt, well, with the receivables trending up, that maybe there is some sort of an interesting exit rate.

You alluded that it was indeed swings from time to time. That's it from my side.

Thank you.

Thank you.

good morning. I have a quick follow-up on pricing.

I think you said that you're not raising prices this year because you want to honor agreements with the direct channel. Correct me if I'm wrong, 30% to 35% of your revenue is still going to the distribution channel.

I think others in the sector have said that it's easier to push through price increases in this channel. Can you maybe provide a little bit of color if that's something you intend to do, or if there's other factors to take into account?

Thank you.

It's something that we did not do. As I mentioned, we are in this pricing negotiation and volume discussion that we are just starting.

We will wait the end of all those negotiation and discussion to decide.

For the time being, no

decision has been taken.

Let's say if you'd take a decision, would it be fair to say that the direct channel is more of a annual first-quarter cycle, while distribution can be a little bit more tactical? It's more in your end to make a decision, push it through, or again, am I just misinterpreting something here?

Thank you.

I agree with you that for the distributor, we are a bit more in the driving seat. At the end of the day, we need also to have volume.

Then at the end, there is also a end customer after the distributor, and we want to grow our volume and we want to be market competitive to grow volume. Yes, we are a bit more in the driving seat, as I mentioned, but there is always an end customer who needs to accept to pay.

Little follow-up. For the—

Right. Of course.

Maybe a quick one again, pricing. I think last quarter, you came out and sort of talked about pricing and lighting being a bit of a headwind.

Is that something you expect to continue in the second half and into next year just because of maybe comps, might have to do with that revaluation of inventory, etc.? Any color there would be helpful.

Your question is on the headwind that we don't have more leverage, or—

Sorry, maybe the pricing in terms of the lighting products. I think last quarter and increasingly, it seems like that is maybe a more difficult spot in the portfolio in terms of price competition.

I just wondered if there's any relation to that revaluation of inventory, and if we should expect headwinds to continue in this particular part of the revenue base.

There is no relationship, let's say, between the revaluation of inventory and the pricing of the lighting. The revaluation of the inventory is really revaluation given the new wafer price.

For the lighting product, indeed, there is competition. If we come back on the competition, there are competition.

We are also proposing now product with a better cost structure because we have designed a new product. If you can refer to the product launch that we have made recently, we have launched some new product in those domain with a better cost structure, and with those product, we are gaining market share.

That's

also

where the comment is coming from that our product mix will also help moving up the gross margin, because we launched products with better margins for lighting.

Understood. Thank you very much.

Thank you.

Hello, Martin?

Sorry. I was on mute.

Hi everyone. Thanks for taking my question.

My first question is on capacity. Do you feel that your customers are more worried about some tightness in the automotive segment because AI is taking some capacity away?

How do you think you are positioned with X-FAB as your main chipmaker if, let's say, AI creates more tightness in the industry? I have a follow-up.

We have indeed some question from customer about our capacity, because indeed, some of our peers have some difficulties, I would say. Then it's indeed an increasing concern.

We are very well positioned with X-FAB because X-FAB is mainly an automotive supplier. We have, if you remember, we have financed capacity increase with X-FAB some years ago.

Then we have some capacity available at X-FAB in the different technology, I would say. Then there is, from Melexis perspective, no concern about the wafer capacity.

About the assembly, it's a bit more tight, but we give good forecast with our assembly partner. We have good relationship.

Also we have pay attention to move our own inventory after assembly to make sure that we have enough product and we have enough headroom, let's say, related to this assembly.

Our strategically high inventory is definitely also an asset, capacity, wafer capacity, together with an strategic inventory is definitely helping us a lot today. When we have heard, I would say,

four, four, four, four months ago, six months ago, when we have heard the first warning signal from the assembly house, we have paid attention to move all our inventory after this bottleneck.

That's also why

we expect our inventory to increase. There was a drop now, but strategically, we want to keep it at high levels, higher than what we have today.

Very clear. Thank you.

My second question is on the data center opportunity. Could you maybe give a bit more color on how meaningful the opportunity for current sensors for power application in SiC and GaN is?

Is it, for instance, materially more meaningful than the opportunity for fan drivers for cooling, for instance?

We are launching many products for the data center. In Q1, we have launched a smart driver for the data center.

In Q2, we have launched a pressure sensor for the data center, and this pressure sensor will be used or can be used in all the water cooling or liquid cooling thermal management. In Q2, we have also launched another drivers for the data center for the thermal management.

Those are all for data center, what we call 12-volt, meaning the traditional data center. Begin of next year, we will launch a drivers 48-volt, which more fit the AI data center.

I should not forget the snubber, because we have also a lot of traction for the snubber in automotive, but also for the AI data center. Then I do believe the snubber will be also an important pieces for the data center in the future.

In term of— Thank you very much.

—opportunity, it is meaningful. In term of revenue, not yet, but we are working on it.

Very helpful. Thank you.

Thank you, operator. To summarize, we are seeing good momentum in '26, with positive trends in customer demand and share gains.

We see growing opportunities in automotive and in robotics, and we are making progress on our cost roadmap. We look forward to updating you on our next results to be published on October 28.

Thank you for joining the call, and goodbye.