Ladies and gentlemen, welcome to our presentation about the half-year results of 2021. I'm glad to see many attending today.

The next [Indiscernible] presentation is the usual disclaimer about forward-looking statements. Though in the first round, I will provide a short overview, then our CFO, Roland Jud, will explain to you in detail all the numbers.

And later, I will talk about our strategy and outlook before we then come to questions and answers. The first half of the year 2021 was successful, especially we had a very good gross of revenue in the amount of over 17% before impacts of foreign exchange.

Including this, we had 11% growth. That is important progress over the first half of the year 2020.

That was a strong one still before the COVID crisis really then took place. At the same time, this first half-year, very successful also at the level of gross profit.

The profit grew even more by 13%. This is as a result of various effects, mostly by product mix.

Also because our gross margin is naturally hedged against foreign exchange variations and also we were able to manage price. Then [Indiscernible] strong number.

is the EBITDA that had made progress by 20%. In conjunction also, we can reach the cash flow numbers for operating cash flows that achieved 43 million and free cash flow was positive with 28 million, both a strong increase over the first half-year 2020.

Now, why has it been so much better? First of all, of course, the top-line has still a bit more, and especially the gross profit.

But also, you remember in 2020 we have exercised the cost reduction program that, of course, has now taken effect and has helped to provide such strong numbers on the profits and especially on the cash flow side. With that, I hand over to our CFO, Roland Jud, to explain to you the details.

Okay. Welcome.

Now you hear me, I hope. Welcome also from my side.

Thomas mentioned it, the strong first-half year 2021, we've talked to the revenues of CHF 192.7 million. We had growth in all areas: In Asia, in Europe, and in the Americas.

The biggest growth in the America s with 22.4%, but also 15% in Europe and 5.4% in Asia. Gross contribution adjusted was nearly 90 million, a growth of 13.3%.

And as I said, Free Cash Flow CHF 27.7 million in the first half of the year 2021. The growth of revenue has to suffer a little bit from the negative currency impact on dollars where the average rate was lower in 2021 than in 2020.

Without this effect, we would have had a growth of 16.5% over the first half-year of 2020. The EBITDA adjusted margin was 14.9%, CHF 28.7 million in June 2021.

Geographically, 5.4% in Asia, revenue increased to 73.9 million Swiss francs which represent 38.3% of our revenues, 30.6% goes to Europe and 59.9 million is the share of the Americas, which grew with 22.4%. The growth in America and also in Europe was driven from the automotive and markets telematics, the medical and wearable application had very good growth in the first half-year 2021.

About the market trends, the revenue split over the markets remains as it was. Industrial markets were stable here, tracking and Telematics belongs to and also automation, 57.4% of our revenues come from these markets, roughly CHF 110 million revenue.

On the consumer side where we had quite a big growth, 90% growth, which represents now 12.6% of our revenues. And also the automotive market was strong with 25.1% growth.

It represents now 26.8% of our revenues. The growth is also visible on the volume side.

The module business strongly increased although the average sales price declined. We sold roughly 20 million modules in the first half of the year 2020, which is a plus 29.1% over the half-year 2020.

The average sales price for modules is CHF 7.33. On the [Indiscernible] side, even more growth.

We sold nearly 32 million chipsets in the first half-year, which is 43.4% more than in the first half-year of 2021. The revenue split between chips and modules now moved again a little bit towards modules.

23% of our revenue comes from chipsets and 76%, belongs to modules compared to 79% respectively in the first half-year 2020. Commerce [Indiscernible], gross profit adjusted, we were able to increase our gross margin to 46.7%.

These three flags the positive being back from the product mix and the revenue growth, with that we have 89.9 million CHF gross profit reached in the first half-year 2021. On the cost side, the distribution and marketing expenses amounted to 18.1 million CHF, which represents 9.4%.

This increase is mainly due to the effects of the growing revenues and contributions with that this has also an effect on the bonus of our salespeople, but this one is a good sign from our point of view. R&D expenses went up to CHF 52.3 million in the first half of the year 2021, which is 27.1% of revenues.

This increase is on one hand due you to that we brought products earlier into amortization or earlier to the market so that amortization starts earlier, which increased the amortization amount, which goes to R&D expense, and also, the capitalization was lower than before on one hand because more R&D effort is carrying agile processes which result in more expense and less capitalization. And we have also some strong efforts put into redesigning modules with respect to available components due to the components shortage we were not able to provide the market with products instead of where we get the components and not the ones where we don't have them.

On this slide, you see how the complete income statement. In the first column, you have the IFRS figures.

The second one is then the adjustments we made. The adjustments are mainly the same as in the years before.

It's share-based payments, which amount to 1.8 million. There is a pension impact of the IAS-19 valuation of 700,000.

The amortization of intangible assets acquired amounts to 1.6 million in the first half-year and then we also have non-recurring expenses over 800,000 CHF which are taken out. With that, we get to an operating profit adjusted of 10.5 million CHF, which represents 5.5% of revenue.

The R&D expense increased as I mentioned due to the lower capitalization we capitalized in the first-half year, 15.2 million, and the higher upper amortization of capitalized R&D, which was 11.8 million in the first half-year of 2021. And also something which in this number, is the fact that we bought the rest of sub-quarter shares which leads from equity accounting to full consolidation.

And with full consolidation, the cost moves up from financial income or expense to R&D expansion which increased the R&D expense as well. In the financial cost, they consist primarily of foreign exchange losses we had to carry.

Then there is in the interest of the two bonds and it's also the result of -- the technical result of the reversal of equity consolidation of Sapcorda GmbH. And the financial income of 5 million, this mainly driven by the unrealized foreign exchange gains due to the fact that the U.S.

dollar was overall the period lower than in the comparing period of June 2020. But at the end of this period in June 2021, the dollar increased and therefore there are some unrealized currency exchange gains on the balance sheet.

For all these adjustments, we applied an accrued tax rate of 18.1%. With that, we had a net profit adjusted of 6.3 million CHF, and after minority interest of 6,270,000 CHF.

The EPS on the IFRS is $0.32 and under adjusted, it's then 9 -- $0.89. Now let's go and have a look at the financial position on the balance sheet to be -- have still a strong financial position with the liquidity of CHF 85.6 million.

In December, it was 94.4 million. The movement is on one hand due to the free cash flow of '20 is 7 million, which increases the liquidity but we repaid the first bond on 27 of April 2021 with a net of CHF 35 million.

So with that, helping this liquidity of CHF 85.6 million. Inventory decreased due to the high demand to 23.8 million.

Trade receivables were 41.3 million and capitalized R&D on now 166 million CHF on the balance sheet at 30th of June 2021. In the current liabilities, you find on -- amongst other straight [Indiscernible] there's 18.6 million CHF and also a bridge loan from the repayment of the bond of 25 million CHF.

And then the non-current side, there is the second bond we have which is repayable on -- in 2023 in April, it's valued with CHF 60.8 million and amongst others. There are our deferred tax liabilities of 1 million a day, CHF 100,000, and IAS 19 employee benefits of 21.3 million provisions of 7.8 million and leasing liabilities based on the IFRS 16 calculations amount, end of June CHF 29.2 million.

We were able again, in 2021, to increase our customer base. We are serving worldwide 10,300 customers compared to the 9,000 customers in 2020.

We have still a low customer dependency, 74 customers still are responsible for 80% of revenue, and our largest customer is only 5.6% of total revenue in H1 2021. Employee [Indiscernible], u-blox engaged end of June, 1,123 pre - FTEs, despite all the functions remains as usual.

2/3 are engaged in R&D, 756 FTEs, 16% are engaged in logistics and administration, and also 16% in sales and marketing, which represents 189 FTE s. Most of our employees are based outside of Switzerland, spread across 18 countries.

76% of the employees are outside of Switzerland. As an average number, we had in the first half-year, 1,136 FTE s engaged.

As I said, we had a strong equity base. We could maintain that our equity ratio is still 58.1% compared to the 54.6% we have in equity.

Also, the treasury shares for the option programs are still at 32 million. Without these treasury shares, the equity would have been even -- a ratio would have been even higher, 60.6% of total assets.

And for completeness on the equity ratio, we filed IFRS 16 valuations that would be 62.3% compared to 58.2% end of December 2020. On the segment information, no big change to prior years, the biggest segment still positioning in wireless products with 192.7 million revenue and an operating EBITDA of 6 million -- CHF 6.7 million, these numbers are all IFRS numbers.

Wireless services are still dominated by intragroup revenue as total revenues of CHF 17 million. It's at the moment operating profit negative, but it's mainly driven by internal calculations.

And last but not least, the cash flow statement. We managed to have cash flow from operating activities of CHF 43 million compared to the 13.9 million in June 2020.

There is a positive impact of networking capital of 8.9 million, but also from income taxes which are repaid in 2021 of 5.7 million. But also there is a big impact due to the good revenues and good contributions we made in the first half-year, which also generates cash and leads us to this good net operating cash flow.

On the investing side, we invested 15.5 million into intangibles, mainly capitalized R&D, as I mentioned. 1.9 million goes into property, plant, and equipment, so our total cash used in investing activities was 15.3 million.

You see here as well, an acquisition of subsidies, net of cash, cash inflow of 1.8 million. This is due to the Sapcorda and consolidation where now the cash of this entity also shows up here under this number.

With that we reached free cash flow after our acquisition of 27.7 million, so we were capable to turn that into a positive number -- a positive number, again, after the period before where we have a negative 21.9 million CHF fee cash flow, we're now again positive -- back to the positive figure. On the net cash used in financing activities, 39.8 million Swiss francs are used here.

The main number here is the 35 million, which is not used for the repayment of the first bond in April 2021. With that we -- and we come from 93.9 million beginning of the year to CHF 85.1 million cash.

And with that, I give back over to Thomas for the business review.

Thank you, Roland. So the result is [Indiscernible] as mentioned, by a very good expansion in all markets, in all applications and we had a very, very strong quarter intake and unfortunately, we're not able to really exploit the great potential.

We are highly limited by component constraints that we are able to manage where we have taken many measures to remain a good supplier to our customers. But its effect, our current order book is 7 times the amount it was a year ago and also what it was normally in the past.

This tells you how strong our bookings are and of course, in the part, we have excellent visibility into the future. Only it is hard to predict in what timeframe we can finally manufacture because our suppliers do not give precise indications and they have more or less constantly re-plan manufacturing to optimize output.

In return, we also have made strategic progress. We acquired the ownership of the support of the Joint venture.

This is the leading provider of advanced GNSS augmentation services. This is a data service that makes [Indiscernible] positioning receiver delivering very precise information, so down two centimeters, and it is made to serve a mass market.

This is an important step to align all the offer and solution capabilities for our customers to make the solution out of one hand. And the outlook for such solutions with high precision is excellent because of the intention to make more and more vehicles automated, especially the cars, but also in the industrial domain, there is a lot of activity to make such vehicles that are driving more or less automatically.

Though this complements our services offer, we have made continuous expansion in vehicles available via our 63 platforms, and the service of Sapcorda is just another addition to this platform. On the side of hardware products, we have also launched many of them, more than 20 new product types into the market.

This is all the result of earlier efforts to create new platforms and finally, also make products. Most importantly, they rolled out the ALEX-R5.

This is a sale R module in a very-very small form factor that is very or capable to make because we are the owner of the chipsets and we can very densely integrate into such a package and make this available mainly for applications where space is of importance. You can imagine this could be, for example, any wearable device.

For short-range area communication, we have also continually expanded our offer following the latest trends with standardization, but also to make sure we can really solve any problems a customer has to connect wirelessly a device on the short-range. Note, either with Wi-Fi or with Bluetooth, what we show here is just one example for a module called MAYA for Wi-Fi connectivity.

In positioning, we launch more products that are based on the Number 9 platform. You remember, we also have only the 10th platform in the market.

But the Number nine is mainly made for high performance and high precision. And this is also the case for timing, so for providing precise time information made for network components and other frequency critical applications.

So this is especially a good way forward to more and interesting business for 5G because the 5G base stations have higher requirements with regard to precision in the time domain. And finally, I mentioned already, our Thingstream platform, we have added auto services.

CloudLocate is a service that computes position out of the information they gather from several stations from the mobile phone antennas, and they are -- such a service is very helpful to diversify positioning information, to make more robust, or to run it even without a GNSS a receiver, and make it available at a very low power budget for such applications that are in [Indiscernible] over many years. So all these initiatives, of course, develop new business, create new interest, and finally are propelling us forward.

That we have a strong gross of bookings, it's not that customers just double and triple order, no. It is mainly driven by the new products that we launched a time ago, and of course are launching now to create new applications, new projects and a new business with our customer.

And from that, we have intense demand, and we have -- a large number of customers are ramping up their products. Of course, in a market like [Indiscernible] and where every such customer likes to participate [Indiscernible].

And here are 2 examples of how we realized new applications. This is our 10th generation of GNSS receiver that was created to run at a very, very low power budget, it's about three times less than the previous or the 8th generation and it's of course an excellent solution whenever the product is just running from a battery like the cycling computer.

And it's not only that it is a low power device, but it is also a [Indiscernible] that has excellent capabilities, especially for such wearables that are either here on the bicycle or are on the person, for example, for jogging, but you also need a good receiver capability or otherwise you lose track and the consumer will be disappointed. So it all comes together very nicely.

This is a very strong product and we have high expectations in Europe for growth. Another example comes from the automotive space.

We have told you many times that electronics content is increasing in the car. And the major driver is that cars become automated, which are assisting driving systems being integrated into the car.

Here, our 9th-generation high-precision receiver. These devices that such automation can happen and the car is, in fact, ready to follow a route, can change lanes, can also select optimal routes while driving.

And this of course increases the comfort and all the newer platforms of the car become more or less the standard. So what are we doing to -- going forward?

We have, of course, looked for expanding via our organic growth and investing into technology and finally to platforms and products. But also, we are accelerating this inorganic growth and acquisitions.

And in the [Indiscernible], we have again made a step with the quarter, and before the previous year, it was Thingstream, I have spoken about this. So we are, of course, continuing to make sure we do both the organic and inorganic growth.

They both help us to expand and especially increase the capability to solve problems for our customers. Now, I turn to the outlook, and we are updated in our guidance here slightly to what we had provided in June already based, of course, on the current results but also on what we see as going forward business.

Mainly that the sale continued very strong growth in automotive and the industrial IoT. I mentioned the very high order intake we continually have and the steep ramp-up based on our new products.

We have implemented cost improvement measures last year that are fully being exploited this year and the only problem at the moment is, it's relatively hard to this relatively narrow band of outlook because the availability of components is hard to predict and of course, is not endless. Also, in this guidance, we have, of course, take into account that we have sub-quarter acquired that at the moment has an effect on OPEX, mainly not so much on topline yet.

And also, we have explained that R&D accounting has some impact this year. Two things would come together, some lower capitalization, but also increased amortization from trenched processes, but also from launched products.

So this provides all these results in these numbers as you have probably already received. So next communication, we will again, run Analyst Day on the 23rd of November this year.

Our full annual results are then available at the beginning of March and our Annual General Meeting is again programmed for April. With this, I thank you for your intention, and I invite you for your questions.

Hi, everyone. Thank you very much.

The first question I had is on the gross margin that is quite strong in the first half of the year. And we hear a lot of shortages and more and more pricing increase in terms of manufacturing of chips.

And more recently, the foundry players are -- seem to increase. And the last one as we can see at the last earnings calls, that they said that they will increase the pricing in this second half of the year.

So I just wanted to understand with Jud, is it something that will impact or how should we think about the gross margin in the second half of the year if TSMC and other foundries are increasing the pricing. So just basically the sustainability of this gross margin would be great.

And the second question is on the capitalized R&D. So I understand you, we should expect lower capitalization going forward, can you give us some sense around the absolute number we should expect from now.

I mean, you're going to decrease from each one or is it going to be stable just to get direction, there would be helpful? Thank you very much.

Thank you Francois for these questions. So about impact of costs from the supplier side on our gross margin.

First of all, fortunately, they have a long value chain. So an increase on a chip cost is of course, we bring through the value chain.

But finally, we are selling a [Indiscernible] so far that, of course, dilutes that increase. That's the first good effect and the other is we will, of course, increase prices vis -a - vis customers.

And in this environment, we have quite a high price-setting power and we believe that is corrective in our sense. The capitalized R&D as we have explained was mainly impacted by a change in how we run processes so we have started to do it more agile.

Agile mean you try to make product [Indiscernible] to market in the sense of what is called a minimum viable products and then you increase thereafter via software upgrade to higher functionality levels. But that means of course, such upgrades are made as an expense and no longer as a capitalized effort.

This is the reason why the ratio has been changed. But of course there's also a single R event and I hope it remains more single R event.

We had to redesign quite a number of products to cope with the shortages in the component markets you have selected different suppliers, and that, of course, we design under the qualification such effort should go away and no longer to create extra expense. So in the thought, two effects.

So from change in processes to the rather decreasing rate. On the other hand, you must take out the special effect of these component shortages effects.

Thank you and if I may have a follow-up on these answers, when you talk about the gross margins going out for the year and they are moving parts, your guidance for full-year '21, did you include some price increase from the foundries or is it something that you either see or you didn't see any price or cost increase on your side?

Yes, of course, we see costs increased, but not only from foundries, from potentially any supplier, but because of course, the shortages always has the seller the power for price-setting and so far we must expect price increases across the board. It's not dramatic.

But of course we follow closely and make sure we protect the margin.

Thank you. That's clear.

Yes. Good afternoon, gentlemen.

Thanks for taking my question. I've got also two on the bookings side, I mean, you increased booking sevenfold.

Can you indicate where the book-to-bill ratio was and how long these bookings [Indiscernible], are the revenue progression going forward and also properly, what could you have basically generated the level of revenues if the constraints are not tiered. That's the first question.

And the second question is, when do you expect the supply chain to normalize? Is that -- has the steam here reversed or do you foresee same problems going forward?

And can you give a bit more color on the measures that you try to mitigate. 3 things.

One was for redesigning, but I was wondering also with the redesigning, can you use that to increase your own chipset content with this redesigning in the modules. Thank you.

Sure. Thank you, Mr.

Muller. So just to clarify, our -- let me give a number that our overbook has increased 7 times.

We have not actually given our bookings number, but I mean from that, of course, you can derive that the bookings have been very, very strong and our over the book, of course, [Indiscernible] very much into next year and is course, in the far, something that gives us a very strong basis for going forward. And also, if you have no component constraints how much more [Indiscernible] we you would have been able to make, I mean, you can take any number you want.

For sure, we would have been able to double the output or triple running. It is such a difference between bookings and billings.

Now, the critical question, the difficult question is about when will supply normalize? This is in fact, very hard to say when we listen to our semiconductor fabs than they say it takes at least two years because they can not more quickly build out capacity.

Buying machines and manufacturing these machines takes a lot of time, and also there is limited capacity. But of course, the other question is when is overall be [Indiscernible] changing.

You also need to imagine a lot came from consumer goods. A lot came from people that had to sit at home, that could not spend money elsewhere.

Of course, will be better treatment for communicating through the Internet and so on. And the old industrial demand has suddenly strongly increased.

But all that we know, I mean such cycles are someone turning the difficulty is to find out at what point of time these turn into a downturn in this situation. So the methodology to manage supply is to indeed diversify components.

These are more the standard components. And making sure we are not dependent on one supplier.

The other is that with our fabs, where we make our own components, our own integrated circuits. We, of course, look for long-term commitments for very good support.

We are fortunately together with these partners for a very long times, 15 years or so, and have very good also personal connections that help to negotiate that we are well served and that we can at least deliver an amount to our customers that keep them in the production they're in.

Okay, Thank you very much.

Hi, Thomas. I have a couple of questions.

So based on those stock market's response to today's results, there's clearly a difference of understanding in what you're talking about in the financial results and the analyst's understanding of them. If you could walk us through the R&D spending, the budgeting process for that, how we determine the vitality of the investment we're making.

If we're getting a return on the money we're spending, the dollar amount this quarter for this half of CHF 52 million is an alarmingly high number. Just wanted to understand why the number jumped as much as it did especially given the robustness of sales, of percentage -- is 27%.

I was expecting that number to be declining at -- given some revenue leverage to R&D spend. Can you just explain the R&D process, how we allocate money in that category, and how we determine whether the money's being wisely spent or unwisely spent?

Yes, David, thanks. That's a crucial question and often misunderstood.

When we say R&D spending, then we have to clearly distinguish between what is the cash spent, and what is showing up in the accounts. We explained for many, many times and many, many years that we are driving our R&D only with the cash view.

So finally, it is about how much cash can we spend for R&D, for fulfilling our overarching goal to create positive free cash flow. And indeed, also, this has been well-managed, we -- the cash basis and together with cost improved measures we have made, our cash spent on R&D has constantly decreased since 19 -- I think 2018 and has of course, helped that we make a strong positive cash flow for this first half of the year.

What you'll see in the accounts, in the income statement, is of course all driven finally, by IFRS accounting rules, especially about amortizations and capitalization. An interval is often misleading.

This is so. I mean, IFRS tries to make cost numbers coincided with income numbers, with revenue numbers.

But this is -- I mean, a methodology that sometimes is a little off. It's not really delivering the result or an indication for just the financial performance.

So we have not spent 27% in R&D. This is just what it is, as accounting does on the cash basis.

You can backwards compute it's just above 20%.

And that's reducing the reported number by the amortization amount that you're running through as a non-cash charge?

Yup, indeed.

And then what are we directing that 20% number to, over the next couple of years, are we looking to manage that down to 15% or below based on growing revenues? How do we determine whether that even 20% is a very high number.

How do we determine we're getting a high -- an adequate return on those R&D dollars being spent?

Look, the -- of course, we cannot squeeze the lemon without putting us into danger. I think a 20% number is what our business needs to remain competitive.

We are all highly research-intensive, the wireless technology is not a simple thing. But also, we have to return from the market, I mean, we have almost 50% gross margin and this is for costs we need to grow in size and again, the gross margin and the cash from that gross margin is telling us how much we can finally spend on R&D with the goal to generate free cash flow.

And this is what we constantly manage, what we try to balance in the medium-term. We had of course years where then, we had headwinds on the top-line, that made it difficult to keep the balance.

But it's equally important to not go away from an intention, from a plan, from a long-term view of how we make the next step in our product offering, the dilution capability. And I think we did very well.

We have so much gained in the possibility to help our customers and it's precisely this reason why we have such a strong booking number over the last 12 months.

So if I take this, the summation of those two comments together, the 27%, which is obfuscated by the amortization, you're suggesting it would be approximately 20%. We will be generating hopefully higher revenue from that R&D spend.

When will we see the R&D on the income statement -- may I address this to Roland, getting to a 20% reported number where the amortization expense equals the spend?

Of course, the Qlik also is when our capitalization amount is the same as amortizations. But it's a little difficult to predict because our R&D projects have sometimes a very long run-time, 3 years or even 4 years.

That means our long time need to capitalize, and therefore you have distortions between capitalization and amortization. And I think that's not void at all.

It will be easy if infrequent times it would be short like for a year then of course the difference is much more easy to manage.

Okay. And lastly, the sub quarter consolidation, how much did that increase reported expenses in the quarter or the half, excuse me.

Roland, you [Indiscernible] give the answer here?

Yes. I cannot give you it right -- in detailed numbers, because we cannot disclose that, but you find on the -- in our [Indiscernible] report, you find a figure about some quarter costs or about the losses.

So overall, I could say that the [Indiscernible] cost will increase over the -- in the [Indiscernible] in the first year roughly 3.5 million. Cost coming to the addition in the balance sheet -- in the income statement.

Okay. And that was for the full year or for the half?

That was only for the half.

Was that contemplated in your updated guidance from June or is that just something we recognized we needed to increase and could have led to a decrease in the reported EBITDA and EBIT margins.

It is partially already in the June guidance, but of course now in the August guidance, we get the real figures and this is of course reflected in the new guidance we give.

Thank you.

Hello, gentlemen. Thank you for taking my questions.

Two questions. One, as you made a good focus on the cost savings, and I wonder have you now completed everything or by doing this assessment, you're seeing that there are other possibilities that may be usually increase it.

Maybe start with effects. Thank you.

Sure. Rolf, thanks for the question.

So cost savings have all been implemented already last year. So our improved effects, this year and as I said this is of course one of the reasons why we were able to generate strong positive free cash flow.

Thank you, sorry. But in doing that because as we're seeing it says more potential for that, or if you would go further with that it's getting into the golden of R&D like?

No, no, it's not that it eats into the bone. Of course, we have lowered the cost path, so to say and again, we managed constantly our OPEX in line with what is the top-line expectation.

Great thanks. And then other question.

Maybe in these times with shortage of supply, it's difficult to say, but will be great to your view on the market share developments. And especially how you're making focus with cellular.

Thank you.

Yes. Thank you.

So of course, everybody is cooking with the same water so the supply constraints are affecting all the participants in the market. I think we have quite an advantageous position, especially as -- when we talk against the module competitors because, to a large extent, we make our own chipset and we have a much better supply situation than, probably, our competitors that have to share the output of fabs with many other module makers.

And that counts also for our [Indiscernible] lower module, we have very good progress with our [Indiscernible]. We are the leader for category M in the market.

And the [Indiscernible] we know the old chipset also has a positive effect when you talk market share.

That's great. Thanks.

No more questions.

Thank you.

Yes. Good afternoon, gentlemen.

I would have about four question and I would ask one by one. So the first one is a little bit about the guidance, which have narrowed, that's fine.

But the question for me is, what has to happen that you can grow by 19% of the margin to 20%, and what would keep you back that you would grow only by 15% with a margin of 16. Could you please help us to understand what are the factors?

Again, how many extra sectors have and also sectors you can manage?

Yes. Thank you.

The question points to our business model and of course, our mechanisms we have. And so, any growth we make will create additional gross margin that goes more or less directly to the bottom line.

And the reason is because we are a fabulous Company. We have no cause for expanding the capacity and the output.

So in the fall, of course, it's sensitive for top-line, the more we have additional growth, the better is the bottom line.

Okay, that's sounds simple. Given your backlogs you have.

Yeah.

Okay. Probably the next one, you said that you have brought products earlier to the market than expected and also probably we start some technologies.

And so I'm wondering, you made quite a substantial impairment last year, does this have an impact on these developments, you have impaired? And what does this mean technically going forward?

Of course, these two events are independent of each other. Launching products and as I mentioned impairments.

Impairments is the past. I'm not quite sure what you mean, technically, going forward.

You're going to see -- if you have [Indiscernible] now, a productive development, the research and development and now you can use the product and you have a stream out of these development and how does this work?

Of course, there are certain products that are still being sold and they so far generate margins without -- that there is amortization that is correct. But the impact is not that large on the numbers.

So would you have [Indiscernible] there is nothing at the horizon that you can use it now or in the near future?

Yes. I said we have certain products that we are still selling without that we have to amortize.

But revenue from these products is not so large. It's not a predetermined --

Okay. Is this -- okay.

I always understood that this is for future product. But then this is for old products.

This is correct.

Impairment, yes.

Okay. This was misunderstood.

Then I have a question for the CFO. I was surprised about the financial results of the high-interest income.

Could you explain it to us and what does this mean for the second half? And probably the same is true for the interest expense as you have now repaid a bond On the other hand, you have a breach loan.

If you could give us some guidance here.

Yes, you are talking not about interest expense, but about financial expense and financial income. Because the financial income is not interest, it's just currency gains -- unrealized currency gains on the dollar.

The fact that the U.S. dollar increased quite a lot comp -- in June.

Towards the end of June, we have 92 roughly And these gives us some of unrealized foreign exchange gains on the income side, it's mainly that. So for the second half, you can tell me how the dollar is end of December, I can tell you what this number is.

but just we don't know. And on the finance cost side, in there you have some realized foreign exchange losses as well.

But the bigger part, year is accounting tactical losses from the deconsolidation of Sapcorda and then full consolidation of Sapcorda, which are put into these numbers So for, let's say from the -- for the second half should be it, so there is not to be expected that you get a lot more here, at least not from the consolidation or deconsolidation of legal entities. So then there remains just the interest of the bond and the interest of the bond at the end which comes in the second half.

Okay. Got it.

And can you tell me what you're breaching, actually. Is it breach to cash or breach to new loan?

Not to a new loan, sorry, breach to a new bond.

At the end, we just have a bridge loan of 25 million. Now in the books or short term there has to be taken a decision, if it's still needed at the moment, or if we payback.

Then this decision is not taken yet, but will be taken soon. And then it's either a bridge to cash, so we pay back or a bridge to then maybe a new bond.

But this which will then --

You would use it operationally or strategically, this money?

Then we would -- if we issue a new bond, we would use it operationally and to get some operational certainty if we need the money, yes. But --

[Indiscernible] Strategic [Indiscernible]

-- at the moment we are -- sorry?

The strategic pipeline is empty, that's what I said.

Pipeline [Indiscernible].

[Indiscernible] larger acquisitions on your [Indiscernible] --

It's never empty.

No, but you told me that you would use the money for operational issues and --

Today, we don't use it. At the moment we don't use it for operational issues so we could pay it back.

Depending on the strategic pipeline and depending on these decisions, we will decide what we do with the trend with the Bridge (ph) loan. Either put it into another bond or pay it back.

Okay, many thanks, Jud. I'm fine.

Thank you.

Hello. Thank you for taking my questions.

I am a little bit surprised to see these guidance which have been changed. In June, not so long ago.

And now, to this much lower level. How is that possible?

All what you have explained makes a lot of sense to me. The R&D question, the purchase.

But that you knew or know also in June, I'm really surprised that this coming on, on the EBIT margin.

Of course, you can look at it this way, that you should have known. Perhaps it is true.

But finally, you only know the numbers when you have close to the books. As things are already dynamic at this time, and especially also what efforts we had to spend in R&D.

What type of efforts and what changes we made that of course makes predictability then very hard. In the past, we have probably know everything understood.

Already in June, how much change is happening with regard to how cost or financial we have encountered.

I think that's the main reason why the market is reacting today like that.

Yes. But again, I mean, it's old trust accounting.

I can only emphasize at the cash level it has been very good in controlling OPEX and in expanding our gross margin. Inter-parties is a misunderstanding in the market because it's all driven by accounting regulations and not so much by the operational result you have created.

Maybe no, you have create it in a view of again not really. Not really the transparent with this upgrades and now downgrade.

I mean, that's very disturbing. Put it this way.

Yup, you talk about transparency. I think that the two updates is precisely to provide transparency.

Of course foreseeing the future, especially at these times is extremely difficult.

I agree. Okay.

Thank you.

Thank you.

Thank you for this question, Mr. Sauter.

We are not delivering guidance on such numbers, but obviously, you know why do you have the reason for the [Indiscernible] shows or the CapEx numbers so [Indiscernible] an indication for the future.

Yup. We have already provided an indication on how much OPEX is at the moment creating.

But we are not guiding on the business numbers, business success here. Of course obviously, these are not available.

Thank you for all these questions around guidance. I think I made a statement before.

It's very hard to predict the future in these times. We have almost no reliable information from what we can make revenue in the next future.

And also we have made quite some adaptations in this regards to cope with the situation. Again, it's hard to make provisions and in the sense of transparency, we give update as much as we can.

This is also why we have given a third update on the guidance into as far, I mean, everybody -- should we use expectations about accuracy. Also you see the guidance as quite a span because the visibility into the future is highly, highly limited.

And finally, I think -- well, just overall to the year means we have been successful in creating top-line growth in expanded gross margin, and especially we have delivered a very positive, free cash flow.

Yes. Interesting questions around the supply chain.

Of course, we have inventory, and they're quite a strong inventory in front of crisis. But of course there's a limitation to the inventory.

I mean, it needs cash and also you have uncertainty, you cannot precisely know what component amounts you need in the future. Though this is, of course, where you have to find the balance.

And also every inventory has somewhere an end. This has happened now -- overall with the supply chain, nobody has inventory today anymore and most suppliers live from hand to mouth.

And this is unfortunately no longer the solution. And the question about what types of components are short, I can only say all components are short to a more or less extent and every component can create huge disturbances.

You can imagine, if you assembled a product, then if one component is missing, you cannot go into production because you need all the components at once, And that makes it so difficult, that long disturbing fact is created quite a high effect. And unfortunately, it's not only production capacity, you must imagine also transportation is affected by capacity, but also by sheer availability.

You know that ports have been closed, that flights are canceled, and all these create these supply disruptions.

Yes. Again, the supply chain.

I have seen that our eventer went down once more, but we can probably say you can't go down much more because this is both -- as the inventor, we need to run the production cycle and on the other hand, working capital is tied to top line with regard to accounts receivable. And of course equal to accounts payable, but this is a fixed ratio and so far, no surprises that must be expected.

Yes, we could say cycle indeed. The order book is as mentioned 7 times higher than last year, but it's equally the same number for comparison against 2018 and 2019, we had orders about a similar order book in these years are relatively smaller, covering a few months because customers were used to order on short notice.

And this has completely changed of course. This is -- for the book you mentioned, is at seven times higher level of order book because we had such strong bookings.

And indeed it is correct what you hear if we had unlimited supply, it would have been easy to double the output.

Okay. So the split between the three product types, these regulatory be the same forever.

So we do more than half in positioning. We do about 70% in cellular and 20% in short-range radio.

But these are not [Indiscernible] different types of businesses. I'd like you to remind you, we mostly sell several products together throughout customers as a solution package.

With regard to size and number of customers, it is important to increase our foot in the market. This is also reason to our growth, or at least more customers, we have gained a lot traction.

And of course, by such a strong increase of customers, the average is decreasing, this is unavoidable so to say, but this is all potential. The smaller customers today are probably either in early stage with their products for our future potentials for expansion because they could be start-ups or just new ideas.

And what very important is the broadcast method base to capture old and new development. Of course, we are not handling old customers ourselves.

We have base channel structure, the focus on the large accounts, what we call the A and the B customers that have sizable amounts of businesses that are strategically important that cover to important application areas, that we focused on. But if below in size we cover via distributors that are keen on 2Q18 that are also handling relatively larger accounts just below where we cut off from our own activities.

And then for the very small ones, we have what we call Capital distributors. They do supply very small quantities to a very large customer base that are equally important because they are the leaders.

They create the interest, and often are the basis for a new idea.

Yes. Thanks for these questions.

Of course, let me talk on reaching targets. Again.

it's very hard to make predictions so we have to give a broad span of what we think is feasible and finally, what the overall and decisive factor is how much components are supplied and how many disturbing events are finally making the output difficult. So the more details here is that you see we have strongly increased volumes for all modules and for chipset that gives you an indication.

So we were able to manage supply, we were able to source components in quite a strong manner. Of course the comparison is against the first half of year 2020 that was already hampered by COVID.

But also without the effects. Of course, it tells you we were well supplied.

In general for the future, they need to take into account that inventories along the supply chain are empty. So it's harder to get parts.

It's all entirely depending on output from factories. And so far, again, difficult to say what is the future.

Ahold leveled the question about wafers and technology. You can know that we use a range of technologies in our chipset, going from 28 nanometers to 65 nanometers.

Yeah. We hear this question often, but again, we are not business centers by technology.

We are making different types of solution components that are belonging to our technology of course, but the only -- overarching view we have is on the customer, how much profit we make with each customer.

Thank you for such a question. I think the strong bookings we have is the best proof that our strategy works.

It's unfortunate that we the ore in a phase supply shortage that we cannot bring it to bottom line, so to say, to cash. But it'll probably solve by itself.

It's a matter of time. Importantly, the success we have with customers that they give us preference over the competitors and the strong increase, again, of bookings is a result of the successful strategy to provide solutions that are attractive to our customers and that help them to bring their product into the cloud.

Yes. I think we explained quite a few things around Sapcorda.

Of course, the half-year is [Indiscernible] off and the full-year is seven. We have not intend to make this Company completely different.

And any acquisition has risks, especially at the top line. We have seen that certain piece at least take longer to materialize.

This is of course the major problem we have. We need a little more patience, but it's on a very good track.

It makes -- we have seen excellent response from the market with this acquisition.

I wonder what they are relating to, probably to the news that we have won IPR court case against the Chinese competitor. Of course that is, first of all, a proof of how we protect our IP.

But also that we do well manage such issues, that we a performing team that can also handle such difficult issues in such a place of business.

[Indiscernible] I thank you for your attendance, for all the many questions that I have covered many of our -- of aspects of our business. Should you have a need for more information, please let us know and I look forward to meeting you sooner or later, hopefully in person.

Thank you very much and goodbye.