Ams-osram Stock

Ladies and gentlemen, welcome to the ams Osram conference call on second quarter 2026 results and live webcast. I am Sergen, the conference call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions]. At this time, it is my pleasure to hand over to you, Mr. Rebel, Head of Investor Relations. Please go ahead.

Good morning. This is Juergen speaking. Welcome to our second quarter 2026 earnings call. Aldo, our CEO, will comment on business performance and strategic progress, and Rainer, our CFO, will walk you through the financials. Please refer to the Q2 earnings call presentation that is available on our website. With that, Aldo, please take us through the quarter.

Thank you, Juergen, and also good morning from my side. We delivered another strong quarter, with revenue and adjusted EBITDA both landing at the high end of our guidance range, while continuing to execute on our Digital Photonics strategy. Let us turn to slide three. Our semiconductor core business grew 13% year-on-year on a like-for-like basis, driven by automotive strength and improving industrial demand. It is nearly twice the growth implied by our current midterm semiconductor model and underscores share gains.

We also delivered a record first half design-win performance to secure more than EUR 1.6 billion of future business just in the second quarter alone. Momentum is building across both our core semiconductor franchise and our Digital Photonics growth platforms, reinforcing confidence in our long-term growth trajectory. In Digital Photonics, we achieved several important milestones during the quarter.

First, we strengthened our organizational setup by creating dedicated business lines around key Digital Photonics teams, accelerating execution, enabling faster scaling of innovation. We also strengthened the team with external talent. Ashkan Shayegi from Nvidia now leads our AI Photonics business, bringing deep industry expertise and application know-how. Second, we reached key performance milestones in the development of microLED array-based light engines for next generation AI-enabled AR smart glasses, bringing the platform closer to mass production readiness.

This positions us to enable a new class of AI-powered user experiences. Third, in AI photonics, we expanded our roadmap by starting development of micro photodiode arrays for the receive channel of slow and wide optical interconnects. This broadens our target portfolio, increases our bill of material opportunity, and supports our long-term objective of providing the complete optical engine.

Fourth, on the sensing side of Digital Photonics, we secured initial design wins for our benchmark 3D multi-zone ToF platform in both robotics and smartphones. Taken together, these milestones demonstrate that Digital Photonics is progressing from technology development towards productization and commercial scale. As part of our balance sheet improvement plan, we have successfully placed EUR 1 billion senior notes due 2032 with a 7.25% coupon, replacing much more expensive '29s.

This reduces our annual interest cost by EUR 40 million. We also continued to sharpen our portfolio and capital allocation focus through the divestment of non-core businesses. On July 1st, we completed divestment of our non-optical sensor business to Infineon for EUR 570 million. In addition, we signed the divestment of our subscale CMOS image sensor business to indie, further sharpening our strategic focus and doubling down on the most promising Digital Photonics opportunities.

In summary, the quarter reflects strong execution across our strategic priorities with profitable growth in the core business, continued progress in Digital Photonics, and a further balance sheet strengthening. Let me now ask Rainer to walk you through some of the financial details.

Thank you, Aldo. Good morning from my side as well. Now turning to slide four. Q2 was another strong quarter, with revenues reaching EUR 805 million, landing well in the upper half of our guidance range. Adjusted EBITDA was close to 17%, the high end of our guidance, supported by strong performance across all three divisions. Revenue increased 4% year-on-year and 9% on a like-for-like basis at constant currencies.

Adjusted EBITDA was slightly lower year-on-year, primarily reflecting the deconsolidation of the specialty lamps business. Higher raw prices and foreign exchange headwinds also weighed on profitability. Now let's have a look at the segment performance on slide five. OS benefited from strong demand across the board. Revenues improved 11% sequentially and 6% year-on-year. In several product lines, supply remains constrained, and we are effectively sold out.

Adjusted EBITDA improved in line with operating leverage, partially offset by higher raw material costs, particularly gold. Year-on-year adjusted EBITDA declined by EUR 40 million despite higher revenue, reflecting FX headwinds, a more than 25% increase in gold prices, and product mix effects. CSA benefited from a broad-based industrial recovery, including some inventory replenishment in the non-optical sensor business prior to its divestment to Infineon. Revenue increased 14% sequentially and 7% year-on-year.

Profitability improved on higher volumes, strong factory utilization, and the favorable mix from industrial and medical applications. Year-on-year adjusted EBITDA remained broadly stable. Lamps and systems certainly requires a closer look. Sequentially, revenue declined as expected due to normal seasonality and the deconsolidation of the specialty lamps business. Year-on-year, the revenue declined a bit due to the deconsolidation effect.

Importantly, our traditional automotive lamps business delivered structural growth, supported by market share gains following the bankruptcy of a key competitor. Profitability reflected the deconsolidation of specialty lamps and lower seasonal volumes quarter-over-quarter. Year-over-year adjusted EBITDA increased 16%, driven by strong aftermarket demand and higher factory utilization.

Overall, we delivered a strong quarter across our core portfolio with all three divisions contributing to revenue growth and profitability. Turning to slide 6. Adjusted for the weaker U.S. dollar and the exited non-core portfolio, our core semi portfolio grew by a really strong 13% year-over-year. As a side note, the non-core portfolio is now largely wound down, contributing only around EUR 10 million of residual revenue. Looking at our end market. Automotive continued to perform well and increased sequentially, supported by strong order intake during the quarter.

We continue to benefit from share and content gains, although we believe some restocking also contributed against the backdrop of macroeconomic uncertainty. Importantly, our automotive LED business grew 5% year-over-year on a like-for-like basis, demonstrating the impact of the design wins accumulated over the recent years. Performance improved across all regions except China, where end market demand remained softer and competitive intensity elevated.

Industrial medical continued to recover strongly, with revenues increasing approximately 30% sequentially and nearly 20% year-over-year. We saw a strong upswing in horti and continued strength in professional lighting, where we are gaining share, particularly in mid-power applications. Order intake in non-optical sensors was also very strong, reflecting elevated customer demand ahead of the business transfer.

Overall, we continue to gain market share across multiple end markets. Consumer performed better than typical seasonal patterns would suggest. Revenue grew sequentially, supported by strong sell-through at selected customers, despite a softer smartphone market overall. Our portfolio remains focused on premium smartphones and high-end wearables. Year-over-year, revenue increased slightly despite foreign exchange headwinds and the phase-out of non-core portfolio elements. With that, let me ask Aldo to comment on design wins and the latest progress in Digital Photonics.

Thank you, Rainer, we now turn to slide 7. We have just seen how fast design wins are translating into growth, market share gains, and stronger business performance today. Our design momentum accelerated significantly in Q2. We secured more than EUR 1.6 billion of new business, bringing the first half total to approximately EUR 2.5 billion, a first-half record. The wins were broad-based, with more than 1,000 trained individual projects awarded during the quarter.

Automotive was strong once again, with demand across the entire portfolio and particular strength in advanced forward lighting. Industrial design wins were driven by professional lighting and horticulture applications. Consumer design wins included significant programs in display management and ambient light sensing for smartphones, despite ongoing memory-related constraints in part of the ecosystem. We also continue to make progress across our Digital Photonics portfolio.

EVIYOS further strengthened its position as the leading advanced forward lighting technology, with design wins exceeding EUR 50 million during the quarter. We are also seeing strong interest from new customers in China. Advanced optical sensing. Our new multi-zone ToF platform secured its first design wins in robotics and smartphones. Augmented reality. We achieved key development milestones, bringing our micro light engine platform closer to volume production readiness. AI photonics. We expanded our roadmap and moved micro photodiode arrays into full product development, further increasing our opportunity to participate in the complete optical engine in the future.

Taken together, these wins reinforce two important trends. Continued share gains in our core semiconductor business and growing customer traction in Digital Photonics. Let's take a closer look on slide 8. EVIYOS is our flagship Digital Photonics product and the market leader in advanced forward lighting.

Revenues continue to grow. We continue to secure new design wins. Beyond its contribution to our ongoing share and content gains, EVIYOS is enabling a new generation of intelligent automotive lighting applications. The recently launched NIO ET9 flagship showcases the platform's advanced projection capabilities. The system enables visual communication with pedestrians and other road users, enhances situational awareness, and contributes to improved road safety.

It also supports the driver in complex traffic situations through dynamic projected guidance information. Importantly, as OEMs gain experience with EVIYOS and software-defined lighting architectures, we continue to see new use cases emerging and addressable opportunity expanding. Turn to slide 9. Augmented reality smart glasses represents one of our most important long-term Digital Photonics growth opportunities. The market is still at an early stage.

Adoption is accelerating. First AI-enabled smart glasses with integrated displays are now entering the market. Last quarter, we outlined our potential bill of material opportunity per device. Depending on the customer architecture and component content, we estimate a potential contribution of EUR 50 to EUR 100 per smart glass, spanning sensing, illumination, and light engine solutions. On this slide, you see an Omdia projection for AI smart glasses and VR headsets. In their view, by 2030, combined unit shipments could reach approximately 60 million devices.

Importantly, the study suggests that around half of these devices could incorporate advanced display technologies, implying a market of roughly 20 million AI smart glasses with displays. We believe we are uniquely positioned to lead this opportunity. Our objective is to become the leading supplier of microLED-based light engines for the emerging AR smart glass ecosystem.

We are confident in that ambition because our microLED array technology combines superior performance, scalability, and system integration capabilities. With that, let's move to the next slide. Turning now to slide 10. Our leadership in AR light engines builds on more than a decade of innovation. The journey started with our vision to revolutionize automotive lighting to highly pixelated, intelligent headlamp solutions. That vision led to the development of EVIYOS, which today is the market-leading microLED solution for advanced forward lighting.

By extending the technology to red, green, and blue emitters and combining it with a unique eight-inch microLED manufacturing platform, we are now applying the same core capabilities to the next generation of AR smart glasses. Our solution integrates red, green, and blue microLED arrays with ultra-small pixel sizes and a CMOS backplane into a highly advanced light engine platform.

This architecture delivers several key performance advantages, up to 3x higher power efficiency, enabling lighter and more attractive wearable devices as the batteries get smaller. Significantly higher brightness, supporting outdoor use while maintaining low power consumption, and up to 2x higher angular resolution, enabling sharper images and a more natural viewing experience. These capabilities are highly relevant for the consumer adoption and represent key requirements for scalable AR smart glasses platforms.

Importantly, our differentiation goes beyond device performance. It combines proprietary microLED technology, system expertise, manufacturing know-how, and a clear product roadmap. Taken together, we believe this positions us strongly to lead the emerging AR smart glasses market. With that, let us turn to the next slide 11. Let me now move to another important Digital Photonics opportunity. We are expanding our development activities into the receive side of slow and wide optical interconnects for AI infrastructure.

Our long-term ambition is clear: to participate in a complete optical engine covering both the transmit and receive functions. This vision is illustrated on the left side. Over the last quarters, we have systematically expanded our development roadmap. We have initiated programs in micro emitters, micro optics, and now micro photodiode arrays, while continuing to evaluate the remaining building blocks, including CMOS ASICs, advanced packaging, and testing.

Step by step, we are broadening our technology footprint and increasing our opportunity to participate in a larger share of the optical engine value. With that, let us move to the next slide. On slide 12, let me highlight another interesting Digital Photonics opportunity in multi-zone Time-of-Flight sensing. Our multi-zone Time-of-Flight platform is setting a new benchmark for high-resolution depth sensing with up to 48 by 32 pixels. This performance makes it particularly well-suited for robotics applications.

We have already secured design wins in household robotics, including autonomous lawn mowing systems, as well as advanced four-legged robots. The higher depth resolution enables safer and more reliable autonomous navigation. The same performance advantages are relevant to smartphones, where more accurate depth-sensing support enhance imaging capabilities. Importantly, we have now secured our first design wins in both robotics and smartphones, demonstrating the versatility of the new platform and validating our technology leadership. With that, let me hand over to Rainer for a deeper look in the financials.

We start with free cash flow. That was at minus EUR 19 million. I think I announced last time that we will be reducing factoring. The operating cash flow was at minus EUR 77 million. Part of that was because we built up working capital ahead of the smartphone and lighting seasons. We had EUR 40 million reduction of factoring. We have the annual bonus payouts, as well as net interest payments of close to EUR 40 million. CapEx remained fully in line with our full-year guidance of approximately 8% of revenue.

Now let's have a look at Simplify on page 14. Simplify is designed to reshape our operating model and deliver EUR 200 million of additional annual savings by '28. Cost, speed, and agility are our guiding principle. Implementation is progressing as planned, we have already realized approximately EUR 10 million of annualized savings.

An important milestone in the continued execution of the program was reaching an agreement with the German Workers' Council. By year-end '26, we target around EUR 30 million of realized savings. By end of '27, we expect to have delivered approximately half of the total program or around EUR 100 million of annualized savings. The program remains an important lever for improving competitiveness, increasing agility, and supporting future margin expansion.

Let's look at liquidity and capital structure on slide 15. We made significant progress, as you know, on our balance sheet optimization in the second quarter. We successfully replaced EUR 1 billion of senior notes due '32 as a coupon at 7.25%. The transaction was very well received by investors. Demand exceeded the initial offering by 6x, allowing us to increase the issue size to EUR 1 billion.

We used the proceeds to fully redeem the 12.25% U.S. dollar senior notes in 2029 and partially redeem the 10.5% [year] 18:32 senior notes due 2029. Following these transactions, EUR 725 million of the '29 senior notes remain outstanding. We repurchased EUR 127 million of our '27 convertible notes through bilateral transactions at a price well below par.

After these transactions, we maintained a strong liquidity position. At quarter end, cash amounted to approximately EUR 1 billion. Including the revolver, total liquidity stood at approximately EUR 1.5 billion. Following the closing of the non-optic sensor business divestment to Infineon a day later, on July 1st, cash increased to approximately EUR 1.6 billion and total liquidity to approximately EUR 2.1 billion, including our recently extended revolver. The outstanding balance of the convertible notes has been reduced to approximately EUR 430 million.

We have also updated the maturity profile to reflect our current expectation that any potential tendering of the remaining Osram shares is more likely now to occur in 2027, potentially during the first half of the year. The liability associated with the Kulim-2 sale and leaseback remains largely unchanged with small quarterly accruals broadly offset by the movements in the currency basket.

Overall, we have meaningfully strengthened our capital structure, reduced financing costs, and increased financial flexibility. With that, let us have a closer look at the coverage of our upcoming maturities on slide 16. July 1st, we received EUR 570 million from Infineon upon closing. As a result, we currently hold EUR 1.6 billion cash. This fully covers all foreseeable near-term funding requirements, and that is the remaining EUR 433 million of the outstanding '27 converts.

Following the closing of the divestment, we have 120 days to make a mandatory offer relating to the guarantor assets. The offer will be in the range between EUR 120 million and EUR 150 million. Second, the expected transition effects in 2026, including lower adjusted EBITDA from the divested business, stranded cost transformation expenses related to the Simplify program, the repayment of approximately EUR 100 million of customer prepayments, and the planned reduction of factoring of the order of EUR 100 million.

Excluding disposal proceeds, we currently expect free cash flow to remain more than EUR -100 million in 2026, excluding the disposal. However, we continue to expect a substantial improvement in free cash flow in 2027. Assuming business trends remain broadly consistent, we see a clear path to a positive free cash flow, excluding, again, any future disposal proceeds which are not planned.

Third, the expected settlement of the remaining Osram minority shares following a final court decision. For planning purposes, we currently assume that this will occur in the first half of 2027. Even after covering all these items, we expect to retain a meaningful cash buffer. Let me reiterate the key point. All foreseeable near-term funding requirements are fully covered by existing liquidity. This allows us to remain focused on further optimizing the cost and maturity profile of the remaining '29 EUR senior notes. We will keep you updated on our progress.

On the outlook for the third quarter. Turning to slide 17. We expect revenues of EUR 770 million-EUR 870 million and an adjusted EBITDA around 16 ±1.5 percentage points based on Euro-U.S. dollar exchange rate of 115. In semis, we expect the underlying business to continue growing both seasonally and structurally. However, please have a look at the right side.

Following the divestment of the non-optical sensor business, reported revenue will be lower as we will now record only a manufacturing source margin from Infineon, which is obviously much lower, rather than the full revenue contribution. This will reduce quarterly revenue by approximately EUR 40 million and EBITDA by approximately 1.5%. This is illustrated on the diagram on the right. Order intake remains healthy, and our book-to-bill ratio supports a solid third quarter.

In lamps and systems, we expect the traditional automotive aftermarket business to show its usual seasonal recovery. For the full year 2026 outlook, that remains broadly unchanged. The revenue modestly lower due to the portfolio divestments and foreign exchange effects. Adjusted EBITDA is somewhat lower than last year, reflecting the divestments, stranded cost, precious metal prices, and other transition-related effects.

The net results, they are expected to be positive in the high double-digit million Euro territory, supported by a high gain from the sale of the non-optical sensor business. Net result, positive. Looking ahead to 2027, we continue to see a clear path to positive free cash flow, excluding any future divestment proceeds. Our core semis business is growing, our Digital Photonics opportunities are gaining traction, and our capital structure is significantly stronger than it was a year ago. With that, let me hand back to Aldo for some final remarks.

Thank you, Rainer. Let me summarize the key messages from today's call. I am on slide 18. In Q2, we delivered revenue and profitability at the high end of our guidance range. Our core semiconductor portfolio grew 13% year-over-year on a like-for-like basis. We secured more than EUR 1.6 billion of new semiconductor business, reflecting continued market share and content gain. In Digital Photonics, we aligned the organization around key growth teams through dedicated business lines, accelerating execution and scalability. We achieved important development milestones for the microLED-based light engines for AI-enabled smart glasses, bringing the platform closer to mass production readiness.

We expanded our AI photonics roadmap by adding micro photodiode arrays to our optical engine development activities. We secured the first design wins for our high-resolution multi-zone ToF platform in robotics and smartphones.

Together, these milestones demonstrate continued progress in building the next generation of Digital Photonic growth opportunities. We executed at the same time our balance sheet improvements as intended. We completed the divestment of our non-optical sensor business, Infineon, and received the proceeds. We signed the divestment of our CMOS imaging business to indie Semiconductor. We successfully placed 1 billion of new senior notes at a coupon of 7.25%. We redeemed the expensive U.S. dollar senior notes and part of the EUR senior notes due 2029, reducing annual interest expense by approximately EUR 40 million. Before we continue with the Q&A, I would like to briefly note that as announced last week, the supervisory board has extended my contract to 2031. I appreciate the trust placed in me and the continued support from our investors and stakeholders.

Together, we've built a strong foundation, and I look forward to executing the next phase of our strategy and capturing the opportunities ahead. With that, we're happy to take your questions now.

[Operator Instructions] Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. We have the first question coming from Janardan Menon from Jefferies. Please go ahead.

Hi. Good morning. Thanks for taking my questions. I've got two. One is on the smart glass microLED project. You've said you have achieved milestones towards mass production. I'm just wondering, are there further milestones that are still to be achieved on the smart glass side, both on your part as well as with your customer? Are we sort of reaching the end of the development process, where, if all is well, we can move into commercial production? The second question is on the optical opportunity. You've started development work on the photodiode array, as you had said you may do in your previous call. I'm just wondering, regarding the revenue opportunity from this, is it significantly more than just the emitter side? Will it be 20% or 50% higher? Any kind of indication?

I know it probably gets covered in the triple-digit million EUR number that you've already indicated, but just how much it enhances it. Is there an opportunity to sell this in your initial development with your first partner that you announced a few months ago? Thanks.

Yeah. Thanks, Janardan, for those questions. Let me perhaps start with the second one. You're right. The photodiode is not of the same value as the microLED array. At the same time, it is, I think, a very important part also towards our optical engine ambitions. We feel there's a very nice opportunity for us as a company that combines III-V and CMOS capabilities to do more than just a component, but to integrate those components into a larger subsystem that then can be used by our customers. To optimize the photodiodes towards the emitter, we feel is a natural extension, and we are looking at further extensions as we go. Yes, it is still a nice additional revenue, but it's also especially a way towards higher system integration on our side, and with that, a more stickier approach.

On the smart glass topic, we are progressing well. There's still work to be done, both on our side as well as on the customer side, but things are progressing well. As we said already in the last call, EVIYOS is kind of the technology of today. The opportunity for tomorrow is in smart glass. The opportunity for the day after tomorrow is in the data center space. Yeah, we continue to work on our roadmap here and are making progress to mass production here.

On the Omdia numbers that you showed on the AI smart glass, do you think the display part of that forecast can be captured by your microLED solution? Or will the microLED be more sort of on the high end of that display part of the market, and some of the others will be captured by LCOS, or micro OLED, or other display technologies.

Well, yes, you're right. There are some alternatives, I think the technology we are developing is quite superior in terms of picture quality, energy efficiency, and brightness. I do expect that this goes pretty broad into this market. This microLED is, in my mind, the winning technology for this application.

Understood. Thank you so much.

Sure. Welcome.

The next question comes from Sébastien Sztabowicz from Kepler Cheuvreux. Please go ahead.

Yeah. Hi, everyone. Thanks for taking my question. On the free cash flow side, you had, again, a quite substantial cash burn in Q2. Where do you see the cash burn for the full year '26, including net interest and excluding the divestment on the business? Attached to that, on the CapEx front, you forecast 8% of sales for this year. Is it a run rate that we should expect for 2027 onwards? A second question is linked to the smart glasses again. When do you expect to record the first significant revenue? Because it seems you have progressed well. Is it something for '27, or is it early, more '28 and onward? Thank you.

Yeah, Sébastien. Starting with the free cash flow. This year, excluding the proceeds from the divestment, I guess it will be negative, a bit more than EUR 300 million. That is really why we are putting everything into this year. We're reducing the factoring by a good EUR 100 million. We are repaying the EUR 100 million customer payment. We are paying a lot of the restructuring expenses and everything else that should be paid to clean up, to have a proper start into next year. Obviously, the free cash flow, including the disposal proceeds, will be significantly positive this year. Going into next year, CapEx. Yeah, CapEx might be a bit higher, certainly, for the new opportunities. It's not that we pay all of it so far.

I think although at [chiplet], we are sharing a lot of the cost, both on the R&D side and also on the CapEx side, with the customers, and we expect that also for the futures, that we share the risks and the opportunities with our customers. On the smart glass timing, like I said before, we're making good progress. We are not allowed to share the details of the launch, but yeah, still a bit of work to do, but have progressed very well overall.

Okay. Last one on the AI photonic. You mentioned an expansion of your bill of material. What kind of bill of material do you have in mind for this kind of optical engine for you in the next few years, for instance?

Yeah. We haven't shared the details of that yet. We do see that overall, if this market scales, this is overall a triple-digit million EUR opportunity in the end of the decade type of timeframe. How exactly that will ramp is to be seen. It's still early days. And of course, the more value we can capture, the bigger that number gets. It's something where we feel excited about. We feel the technology has a place here that we're offering. But, yeah, it's still also a journey, and we will see this business develop nicely over the next years.

Okay, thank you.

The next question comes from Didier Scemama from Bank of America. Please go ahead.

Hi, thank you for taking my question. It's Amelia Banks. Just one question on automotive. I think it came in really strong in the quarter, but just some commentary around this. We've been hearing from peers, some attributing it to content growth, some restocking, some citing pull-ins ahead of maybe shortages. Just what you are seeing around here. I saw it was very strong in semiconductors, but maybe in lamps and systems. Is it just really because of seasonality, or is there a bit of a weakness there in the end markets for lamps and systems? Thank you.

Yeah. That's right. The two businesses have different reasons to show these very nice growth rates. The semiconductor side, I think it is a lot about share and content gains. The EVIYOS platform is a much higher ASP than our conventional LEDs. That category is growing, as an example. It's also about share gains. You might remember that one of our competitors, Samsung, has exited the market, or mentioned it already about a year, a year and a half ago. We won a lot of that business, and that is now, as he's pulling out, also coming our way. That's also kind of a special positive effect in that we are gaining a significant share, is our feeling, in these markets.

On the lamp side, it is the case that our main competitor, First Brands, that is using the Philips brand in the retail channel, fell apart about nine months ago or so. You might recall the scandals around that. We, of course, are asked by their customers to help them in this period, and we're happy to do so. Of course, looking also to longer-term commitments in this context. To make sure that it's not only short-term help but also long-term business. We are very successful in that. We are expanding our share significantly in this market at the moment, and will defend it going forward. It's an extraordinary opportunity, and it's really because of the strength of organization, the strength of the brand, that, yeah, this business comes our way.

Thank you.

You're welcome.

The next question comes from Craig McDowell from JPMorgan. Please go ahead.

Hi. Good morning. Thanks for letting me on. My first question was on the hire of a new lead for the AI photonics business. I'm wondering, could you elaborate more on his role? What are the priorities that you've given him for developing that business? Is it R&D focused or business development? If you maybe just elaborate on his priorities and then perhaps on what prompted him to leave NVIDIA to join ams Osram. Then I've got a follow-up as well. Thank you.

Sure. Yeah. Ashkan joined us now a bit over a month ago. He came from NVIDIA, where he was instrumental in optical interconnect revolution that is now going on at the moment. I think he felt really attracted and inspired by the technology that we have in stock for the next coming revolution in this space, and wants to be part of that. In a somewhat different role at NVIDIA, he was the enabler, and the technical, yeah, mastermind, if you will, beyond many of these things now in our organization. He's able to actually run a P&L on this business and make a real business development out of it. We have chartered him with, of course, now at the moment, defining a product roadmap going forward and building the customer relationships that are necessary to make this a broad-based success. It is also an ecosystem play.

It's not only about our technology, but also about how to interact with the people around us in the system to make this overall success. I think, yeah, him joining is for us extremely helpful as he's very ingrained in this whole ecosystem, knows the ins and outs, knows the application super well. That really helps us to focus even more on our development activities, and with that, get to market quicker.

Very clear. Thank you. My follow-up, I wanted to ask on the comments around supply constraints in the OS business. Maybe you could just elaborate on what products that might relate to and whether you see that as temporary or structural. How quickly or easily can you expand capacity to meet demand? Thank you.

I think that the ones that we're referring to are temporarily in nature, mainly. On the one hand, we are positively surprised by how quickly the EVIYOS is adapted. We got some pretty positively chunky orders, especially from China. We need to quickly expand here and pull in some of the capacity expenses. We're anyway planned already, pull them forward. The other part that at the moment is in high demand is our horti LEDs. Here again, it's always a performance race. We can have the winning product, that translates also into high shares. That's also a quite impatient market that you need to fulfill demands in quickly. We're doing so. That's at the moment fully loaded, but under control. Those are two good examples, here and there. There's some other product lines, but those will be the main categories at the moment.

Very clear. Thank you very much.

Sure. Welcome.

The next question comes from Harry Blaiklock from UBS. Please go ahead.

Good morning. Thanks for taking my questions. I'm wondering if you can give a bit more color on your comments around weakness in China. It's kind of consistent with the weakness we can see in auto unit sales numbers. A lot of your semi-focused peers have been reporting pretty strong numbers in the China market. It'd be helpful to get a bit more color on what's driving that for you.

Yeah, it is the combination of, I should say, lower built volumes, that of course, kind of pulled down everybody. Plus, a lot of price pressure that is going on the car OEM side already. They're fighting to somehow fill their factories on the one end by export, of course, but also by local demand. That filters through. We also have to make sure that we counter those pressures by optimizing our portfolio, by introducing now several eco lines to be able to also compete at lower price points at healthy margins. So far we're holding up, I would say.

The losses on the low end are not that large, and we're more than making up for it by gaining share against internationals in China, broadly, but also specifically in the EVIYOS platform that, as I said before, is doing very well in China and where I should know we and Nichia are the only games in town. That is definitely helpful. China used to be very strong, and compared to that, it's a bit weaker now, but it's still by far not a disaster. It is a market that we're fortunately quite strong in. As we are quite strong in that market, our market share similar to that of Europe, 35%-40%. We also kind of fluctuate, of course, with the build volumes. There's no real way to escape that, to some extent.

Got it. Makes sense. Then a follow-up on the microLED optical interconnects opportunity. Just wondering what metrics you're tracking to decide whether to shift the other components within the optical engine into the development stage. Then also what the content uplift would be for you if you were to also include the [CMOS] driver as well.

It's a bit of a step-by-step approach. I think it's important that we get the core pieces where we are super differentiated right, and that's especially on the mirror side, clearly the case. We want to make sure that happens and that is the entry into this space. Then we will stepwise expand this as we explained now on the receiver side and then stepwise into further components. On the one hand, the more we can do there, the better it is. At the same time, I also want to make sure that we don't overextend ourselves and can deliver on our promises. Give it a bit of time to figure that out step by step. It's a very active area where we're putting a lot of resources on.

Of course, the opportunity increases significantly the more driver content we also include to this. Let's take that step by step, and we'll keep you posted as we go along the journey.

Great. Thanks, Aldo.

You're welcome.

[Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Oh wait, we have a last-minute registration from Robert Sanders from Deutsche Bank.

Oh, hi there. Yeah, could you just talk a bit about the cash burn in Q3 versus Q4, and how we should think about that into the first half? Thank you.

Yeah, Rob. Yeah. The cash burn will continue to be quite a bit in the second half of the year. We will continue to reduce. factoring, we will also have quite some significant payouts for restructuring. As I said, for the entire year, excluding the proceeds from the divestment, I expect it to be a bit more than EUR -300 million. Again, including divestment proceeds, quite positive.

Into the first half of next year?

Next year?

Yeah, the first half. The first half next year.

Yeah. We're not guiding further over the second half, but next year we continue to see a path towards a free cash flow.

Okay. Thanks a lot.

There are no more questions at this time. I would now like to turn the conference back over to Juergen Rebel for any closing remarks.

Thank you, operator. Thanks everyone for dialing in, for your questions and for your continued support. If you have further questions along, reach out to us in investor relations or we'll see each other on one of the roadshows and conferences during the quarter. With that, have a great day and speak to you next time. Thank you.

Ladies and gentlemen, the conference is now over and you may now disconnect your lines. Goodbye.

Good day, and welcome to the ams-OSRAM Q1 '26 Results Credit Investor Q&A Call. My name is Regina, and I'll be your call coordinator. The format of the call includes prepared remarks from the company followed by a question and answer session. [Operator Instructions].

At this time, I will turn the call over to Juergen Rebel of ams-OSRAM. You may now begin.

Hello. Good afternoon, everyone. Good morning to the [indiscernible], if you're already up. This is Juergen speaking. Welcome to today's call on our first quarter '26 results, specifically for credit investors.

With me is Rainer, our CFO, who will walk you through the Q1 earnings call presentation. Rainer, the stage is yours. How did we do in Q1?

Yes. Thank you, Juergen. Good afternoon or morning. Yes, how did we do? If you look at the share price, we obviously did pretty well.

Now we will quickly go through the presentation. Let's start with Page 3. Overall, we delivered a very strong first quarter and made further tangible progress towards our ambition of becoming a focused digital photonics powerhouse. On a like-for-like basis, our semiconductor core portfolio grew by 9% year-on-year, clearly underlining that our strategic focus is the right one. Group revenue came in well above the midpoint of our guidance range. Adjusted EBITDA reached the upper end.

Design win momentum continues unabated across all end markets. From a Digital Photonics perspective, we achieved 2 important milestones in the quarter. And the first one, we are in the process of expanding our portfolio of optical components that are decisive for the system performance of AI-enabled augmented reality smart glasses covering key functional building blocks. And second, in AI Photonics, we signed a development agreement for highly parallel micro-emitter array-based so-called slow and wide optical interconnect targeting hyperscaler AI data centers.

In parallel, we advanced on execution topics. The Simplify transformation program is well underway. Our balance sheet deleveraging plan progressed as planned. The sale of the Entertainment and Industrial Lamps business to Ushio closed in early March and cash proceeds were received. The divestment of our non-optical sensor business to Infineon remains well on track with unchanged timing for midyear '26.

Finally, we delivered positive free cash flow in Q1. As expected, divestment proceeds offset the seasonally high interest payments that typically occur in the first quarter.

Now let's look at the details on Page 4. Q1 performance came in stronger than initially expected. Group revenues came in with EUR 796 million, well within the upper half of the guidance band and adjusted EBITDA reached 16.5% at the upper end of the guidance, driven mainly by the OS division and a very strong Automotive Lamps performance. Year-on-year revenues declined slightly, entirely due to the weaker U.S. dollar with a top line impact of roughly EUR 50 million. On a like-for-like basis at constant currencies, the group would have grown by approximately 8%. Adjusted EBITDA declined modestly year-on-year solely due to the deconsolidation of the Specialty Lamps business despite the FX headwind.

And on Slide 5, OS held up very well in the typically soft first quarter. Revenues were almost flat quarter-on-quarter. We experienced supply constraints in selected product lines due to the short-term order increases. Without those, even the sequential growth would have been possible. Margin declined sequentially due to higher gold prices, annual price downs effective January 1 and FX effects. However, it was 2 percentage points higher year-on-year, reflecting higher production volumes that are not fully visible in reported revenues due to the weaker U.S. dollar.

CSA delivered a solid performance in the seasonally weakest quarter. Results were driven by continued strong demand for custom sensor products in consumer handheld and a recovery in Industrial & Medical. Revenues were slightly lower year-on-year solely due to the declining contribution from exited noncore portfolio activity. Profitability followed typical revenue pull-through dynamics, however, was down year-on-year, which is due to higher R&D expenses to fund growth projects and FX headwinds on top.

Lamps & Systems again delivered a very strong quarter. Aftermarket demand remained elevated, including short notice orders following financial difficulties of a competitor. Specialty lamps contributed for only 2 months because we sold them. The deconsolidation explains why reported revenues did not increase year-on-year. Strong production loading in Q1 supported profitability. Overall, it was mostly a strong quarter across the portfolio.

Then on Slide 6. Adjusting for the weaker dollar and the exited non-core portfolio contribution, the clean core portfolio in semiconductor grew 9% year-on-year. The portfolio is now largely wound down with only residual contribution of the order of EUR 10 million contributing. Looking at the markets, Automotive was broadly flat versus a typical seasonal slowdown. After a lackluster start early into the year, we saw a clear ordering uptick in February and March. Given the declining underlying vehicle production outlook, we interpret this as partial restocking after a prolonged period of very lean inventories, combined with some level of precaution due to the turbulences in the Middle East. All regions performed sequentially better, except China, where end market demand remained softer and competitive intensity is elevated.

Industrial & Medical showed a clear recovery. Horticulture had a seasonal low point, but professional lighting demand was solid. Order intake improved materially and order patterns at the end of the quarter point to a solid seasonal upswing into Q2. Consumer followed typical seasonal pattern sequentially. Year-on-year, the decline is explained by FX and the phaseout of noncore portfolio elements.

Now Slide 7. Q1 is typically the weakest quarter for design win activity, yet momentum remains solid. Total design wins amounted to around EUR 850 million. Naturally, design wins are geared towards automotive, but the other verticals also contributed well. In our classic semiconductor core business, Automotive remains the backbone with triple-digit million euro contributions across the portfolio and strong momentum in forward lighting. Industrial showed very good traction, particularly in professional lighting with customers in the U.S. and Europe, while horticulture performed materially better year-on-year.

Consumer continued to see recurring sensor design wins in Android-based smartphones, particularly in display management. On the Digital Photonics side, progress was equally encouraging. The buyers continue to add platforms, taking the number of awarded platforms to well above 60 and interest for new designs remain strong, especially in China. Augmented reality, several of our existing components such as ambient light and spectral sensors are already designed into smart glasses models available in the market. In AI photonics, product development for micro-emitter arrays for highly parallel AI optical interconnects have started. Hence, we are not doing this alone. We signed a collaboration agreement with a strong AI infrastructure partner.

We will now look at these Digital Photonics themes in more detail, turning to Slide 8. Augmented reality smart glasses are key Digital Photonics growth theme. While the category is still at an early stage, adoption is accelerating even with today's limited functionality. AI is a game changer, making these glasses potentially the midterm replacement of our smartphones. Some of our sensors and LEDs are already designed into several commercially available smart glass models.

Our current and future portfolio covers key functional domains, being health and well-being, sensors enabling measurement of parameters such as melatonin levels via blue light, heart rate and UV exposure. Privacy and camera performance, spectral and flicker sensors as well as high-performance LEDs. And then probably most important, the display engine. Today, our LEDs illuminate LCOS displays. Going forward, microLED arrays can enable substantially higher brightness, resolution and power efficiency.

World sensing comprises gesture and 3D Time-of-Flight sensing. HMI, today, we supply our proven proximity sensors. Tomorrow, we have a super tiny optical force sensing buttons in store. And eye tracking can be done with our integrated optical sensing solutions. This illustrates our strategy of focusing on decisive system components built on our core technology. Content estimates naturally vary depending on volumes, life cycle stage and customer implementation choices. For this, we see content potential between EUR 50 and EUR 100 per device, which underpins the triple-digit million annual revenue opportunities we outlined when launching our Digital Photonics strategy.

Now on to our next highlights of today, turning to Slide 9. Our progress in AI Photonics is accelerating. I have 3 slides for you. First, where our products will sit in the data center; second, how do we fit into the architecture; and third, which components are we targeting. We believe that the so-called slow and wide optical interconnects based on highly parallel micro-emitter arrays can play an important role in future AI data center architecture. Though slow is relative as we are talking about 8 gigabit switching speed and hundreds of parallel channels. Initially, the focus is on shorter distance scale-out interconnects, between racks and scale-up connections within racks, replacing copper over distances of up to several tens of meters. Over time, chip-to-chip connections, for example, between the GPUs and high-bandwidth memory could become addressable as well, a really great market potential for us.

Now Slide 10, probably a bit more complicated, but very important to distinguish between integration concepts on the top and the optical engine technology itself. On the integration side, today's solutions on the upper right rely on pluggable transceivers or active optical cables with energy consumption of up to 30 picojoules per bit, so quite high. In these solutions, not only the longer copper traces, but typically also signal shaping chips consume quite a lot of power. And in the center on the top, near port optics can reduce this to roughly 5 to 10 picojoules per bit. The optical engine moves much closer to the ASIC. And then finally, on the left, the co-packaged optics, CPO promises further reductions towards 1 to 5 picojoules per bit over time. The optical engine moves as close as possible to the ASIC. Put simply, the closer the optical engine fits to the chip, the lower the electrical losses and the associated thermal load.

The slide illustrates this through distance comparisons. Independently of the integration approach, optical engines can be implemented either as fast and narrow or slow and wide solutions. Fast and narrow is today's established technology based on indium phosphide lasers, often EMLs and silicon photonics integration concept. We believe in future slow and wide architectures, highly parallel micro-emitter array based optical engines that transmit light pulses at chip speed without the need for power hungry serializers and deserializers. Key advantages include substantially higher bandwidth density, very low power consumption per bit and inherent redundancies through parallelism, 1 micrometer fills, no worries. There are enough channels for backup, an important consideration for hyperscale customers.

Now on Slide 11. On the left, you see our prototype, which helps accelerate the signing of a development agreement with our ecosystem partner, a leading AI infrastructure supplier. The table in the center illustrates the simplified technology stack for highly parallel optical interconnects. In essence, you can think of the transmitter side, the receiver side and the advanced packaging technology that glues everything together. Our current development focus is on the transmitter side, microlens and micro-emitter arrays. Given our CMOS and sensor capabilities, we are also evaluating opportunities beyond on the receiver side. We will keep you updated as development progress.

Let us now look at selected financials, slide 12. Generated EUR 37 million free cash flow in Q1, which includes EUR 90 million divestment proceeds. Cash inflow from the sale of the Specialty Lamps business was received early in March. Operating cash flow at breakeven, reflecting seasonally high interest payments on our senior notes, higher, as you know, than a year ago after the EUR 500 million tap last summer. CapEx remained disciplined and well below our full year guidance of 8% of revenues.

With that, let us take a quick look at our Simplify program that we launched with Q4 announcement on February 10, and that is on Slide 13. Last quarter, we reported that Re-establish the Base has delivered the savings 1 year early. The implementation of the remaining measures that had been identified will continue. The Re-establish the Base program delivered EUR 230 million of savings, which is really a great success. In February now, we launched a successor program called Simplify, which is a broader transformation program, aimed at reshaping our operating model and delivering EUR 200 million of additional annual savings by '28. All savings measures have been identified and 90% have high maturity level.

Cost speed, agility, are our guiding principle as we reshape our operating model. Implementation started immediately. And after just 1 quarter, teams have already delivered EUR 5 million of realized savings, demonstrating disciplined execution continuity.

Now let's look at liquidity and capital structure on Slide 14. As you know that very well, in Q1, the interest payments for our senior notes due with the cash proceeds from the sale of the specialty lines, the free cash flow was positive, such that the cash on hand position only reduced because we paid back EUR 200 million nominal of the convertible note, which -- and the cash now stands at around EUR 1.3 billion end of March. With that, available liquidity position closed accordingly at EUR 2 billion, which is the cash revolving credit facility and bilateral lines. The sale-end leaseback moved up a little with currency swings and with the quarterly interest accrual.

With that, let us zoom in on the coverage of the upcoming short-term maturities, very important slide, Slide 15. So we have EUR 1.3 billion cash on hand. And when we enrich that with the EUR 570 million from Infineon at closing somewhere midyear, then the amount is close to EUR 1.9 billion in pro forma cash. This company will cover all near-term maturities. And that is the outstanding '27 convertible, which now stands at EUR 560 million. We received the money from Infineon, we have 120 days to offer the amount related to guaranteed assets at par to noteholders of approximately EUR 130 million.

And second, the business needs in gray for the transition effect in '26. Now what is that? That is lower adjusted EBITDA because we're selling businesses, and we have stranded costs that we will start cleaning up after it is closed. High transformation costs from the Simplify program. We will have quite some cash outflows this year for Simplify. And then we will be repaying USD 100 million in customer prepayments this year. And we also will reduce factoring by about EUR 100 million.

Now excluding disposal proceeds, expect something triple-digit million negative. Now putting as much as possible into '26, starting clean into '27, the '27 free cash flow will be substantially better. In this, if business remains strong as we see it today, we expect the free cash flow to move to positive territory, excluding disposal proceeds and even that we need to repay a similar amount of customer prepayments.

Now and third, it will cover the tendering of the OSRAM minority shares after final verdict. We assume that for the second half of the year, so it could slip further out. And after all of that, that should leave us with around EUR 500 million in cash.

And now this is, I think, very important when you look at that slide, all upcoming near-term maturities are taken care of. We have the funds available. And then thinking ahead, this allows us to focus conceptually on optimizing the cost and maturity profile of our 2019 senior notes. We will keep you posted what our plans are.

Now summarizing, on Slide 16. In Q1, we beat again our revenue profitability guidance. The semi core business grew 9% like-for-like. Free cash flow was positive, completed Re-establish the Base and started executing Simplify. In Digital Photonics, we continue to progress on a comprehensive component portfolio for AI-enabled smart glasses, giving us a content opportunity between EUR 50 and EUR 100 per smart glass. And we initiated the product development of micro-emitter-based AI optical interconnects together with the commercialization partner. We also progressed on balance sheet deleveraging, especially Lamps transaction closed, proceeds were received. The Infineon transaction remains on track, no changes to the indicated closing time line mid of the year.

And now finally, the outlook for the second quarter. We expect revenues between EUR 725 million and EUR 825 million, adjusted EBITDA around 15.5 plus/minus 1.5 percentage points at an exchange rate of 1.17. Now the traditional auto lens business will show the usual seasonal slowdown in view of the overweight in the aftermarket. Remember, all non-automotive business transferred to Ushio. We still had EUR 10 million revenue in Q1 and 0 in Q2. That obviously EUR 10 million reduction is part of the guidance. Semis will make a step forward in Q2 more than typical seasonality. We see strong order intake and book-to-bill higher than previous quarters.

Now our full year '26 outlook remains unchanged. Group revenues modestly softer given the divestments and the exchange rate impact. Adjusted EBITDA also around 15.5% plus/minus 1.5 percentage points, assuming the FX at 1.17 million. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments, stranded cost, precious metal prices, particularly gold and the other factors. Free cash flow, certainly well above EUR 300 million, including the divestment proceeds. And into '27, we see a path to positive free cash flow without, and not counting any potential divestments. Even that we still have to repay a similar amount, roughly $100 million of customer prepayments.

And with that, we are happy to discuss your questions.

Our first question is a live question from Marco with Innova Asset Management.

I have a couple of questions, if I may. So the first one is just on the RCF. Were you able to extend RCF because last time you guided for mid-2026 for the kind of extension. So if you could just provide some color there?

And the second question is on the one-off cost for 2026. I heard earlier you mentioning EUR 100 million. Could you just confirm if it's EUR 100 million or EUR 150 million for this year?

And then the third question is just on the AI data center opportunity. When do you expect to see sales potentially? Like if you just provide some color?

And then also a follow-up will be the TAM. Like what sort of TAM could you -- like, if you could just provide some color for the AI data center.

Starting with the one-off. So overall, we believe that the program will have one-off roughly EUR 150 million. Of that, we already booked some last year. A smaller portion, quite a bit will come this year. And now I'm talking about the expense, right, booking the reserve. And there will be a bit more to come in the next year.

Now the other question is how much of that is cash out. And we believe that the cash out for the program this year should be somewhere between EUR 50 million and EUR 100 million. Now the revolver, I would say we are in a very progressed negotiations with the banks to extend that, final steps.

Then the AI data center opportunity, yes, I think it's very exciting. It will certainly be before 2030, hopefully before '29. And then the size of the opportunity, I mean, that is a bit of a difficult question depending on how much of the value we will add if it is just emitter or if it is more a system. It is certainly a 3-digit million opportunity in 2030 and beyond with a gradual ramp. But in case, we would do more, we would do also the photodiodes, we would do the driver or even the amplifier, then it could be obviously a much, much higher number. We're discussing with a lot of different partners now, and there's a lot of different positions where we could play a role.

Just one quick follow-up in terms of like the development cost for this AI data center opportunities. Like, who would usually show the cost? Would it be you guys or the client or is it both? Could you just share that?

Yes. I mean in the case now where we work with a partner, there we share the cost. We get NREs, but we are certainly also developing quite a few other things where we currently pay the cost ourselves.

Our next question is from Laura with MFS Investment Management.

Just a few, please. So regarding the senior unsecured notes, you said you'll keep us posted. I think previously, you mentioned you would look to refi these in sort of early 2027 when the coal price steps down. Is that still sort of your base case? Or are you potentially considering addressing these earlier?

Then secondly, just regarding the converts, for EUR 130 million, I think you need to tender for, will you try and tender for more? Or are you just going to leave the remaining portion outstanding up until maturity and then redeem them with the liquidity that you have?

And then 2 final questions. Pro forma EBITDA, I think previously, you guided for EUR 533 million that was based on financial year 2025, where reported was EUR 608 million. So for 2026, should we expect this to be sort of lower because of obviously the cost overhang that you mentioned from the divestments?

And then lastly, the Kulim plant, if you could just give an update on any discussions you may have or timing or what do you think is possible there with regards to an exit?

Yes, it was really a good quarter. Now the senior notes, we are obviously strategizing what options we have. 2027 is kind of the base case, but we are certainly looking at the alternatives and kind of breakeven calculations. But we will talk about that when we have a conclusion.

On the convert, it is -- yes, we have to make an offer of EUR 530 million at par. We will -- yes, we already made an offer earlier this year at a bit lower price, EUR 200 million were offered. We certainly want to optimize at what price we pay that back, we will probably make an offer, certainly not at EUR 100 million. And yes, if an amount develop, we will just let us then expire in September 2027.

On the EBITDA, so yes, there is a few things that are against us. The one thing that we said is the businesses we are selling, which is roughly EUR 75 million EBITDA on an annualized basis, but the stranded cost, maybe EUR 100 million together. And then we also have the headwind from the precious metals. On the other side, obviously, we also have a business that is developing nice, but it will be quite a bit lower compared to last year and maybe it's a good idea to have a look at the consensus.

Now Kulim, 2 updates, yes, it's now almost 2 years, and a lot of parties look at that. We are not at the point where somebody made a concrete offer, still talking currently to a few interested parties. It's nothing that we would sign within the next few weeks. But we see that the momentum in the whole semi industry, particularly in the areas where companies might have interest in our facility is picking up. So we remain optimistic that we will be able to resolve that.

Great. Maybe one follow-up just with regards to the Kulim plant. In terms of timing, you obviously said like not in the coming weeks, but you're confident to resolve this. So do you think realistically speaking, it's more likely to be like a 2027 event? Is that fair?

Laura, I mean, it's not fully in my hands, right? So we need a buyer who is willing to write a check. So I cannot give you any additional details on timing other than that the feedback we are getting remains to be very constructive and that we are positive that one day we will get such check.

We have 2 written questions from Christian with BlackRock. The first question raised on the FY '27 FCF outlook, how much of this target depends on a successful refi of the [ 2029] ? Or can you achieve it with current coupons?

The second question is on factoring. What is the current level of nonrecourse factoring? And by how much do you plan to reduce usage of factoring?

I'm trying to understand the question. Yes, go ahead, Juergen.

Yes. The first question regarding the free cash flow outlook, then obviously, we're looking at refinancing the main part of our bond that the plan what we mentioned. And obviously, we need also to have better control. So with the current coupon, obviously, that will be a stretch to get there. So that's the first question.

Second question regarding the factoring. Currently, we are at EUR 150 million roughly. And we mentioned that over the course of the year, we are going to reduce the factoring level by roughly EUR 100 million. So that's basically also costs we have to pay and that will also reduce our interest cost going forward.

Our next question is a live question from [indiscernible].

I wanted to ask about the AI optical solution. Is that being contemplated for a CPO solution? And could that potentially be used in kind of MPO as well?

Yes. This is Juergen. I can answer that. I mean, as we tried to illustrate in the slide, in principle, this can be used in various integration opportunities that are shown on the top slide. We can't go into very specific details right now, but what I can say, it's probably not going to be a CPO solution at the beginning. So the customers we're currently working with, probably looking at different integration opportunities.

And following up on that, I think you mentioned you are in discussions with other parties. Are those parties at a similar part of the ecosystem as your current partner? I know I think it was asked on the earnings call, you can't specify exactly who it is, but are you getting inquiries from kind of different areas?

Thanks for the appreciation that we cannot be very specific who it is and also not give too strict guidance that you might be able to single out. But what we can firmly say is it's not only on a similar integration level that we are speaking, but basically, we're speaking with everyone because, I mean, all these optical interconnect technologies that affect various levels of the AI ecosystem and the infrastructure. So we're not restricted to one level of integration, but there are many discussions going on.

And then lastly, you did mention some supply constraints on the optical side. What is the magnitude? I think you said optical will be positive sequentially if those resolved. But what's the magnitude of the supply constraints? And when should we see those resolved?

Yes. There were on some automotive products where we were for automotive emitter products, automotive LED products on the classic side. And we've got basically a lot of surprise orders. And as Aldo mentioned earlier on the call today for the equity analysts that we probably also saw a little bit of ordering driven out of fear with all the Middle East crisis going on. And then we couldn't react as fast. So you asked about the order, probably a couple of million as we indicated in one of the comments that could have pushed OS even in a growth quarter-on-quarter.

It's not lost business, right? It goes into backlog and it gets shipped with a slight delay. I mean when customers come with the short-term orders, I mean, that's what sometimes happens. But actually, we were surprised by the amount of orders. And there are certainly areas where we need to expand the capacity.

We have a couple of questions from Julian. First is, could you please quantify the impact of FX headwinds on the semi segment EBITDA? And could you please quantify the impact of the gold prices at group level?

Yes, sure, we can. I mean the impact of the gold price group level, we said that in the last call, we expect that headwind this year to be around EUR 60 million year-over-year headwind. We currently see it, yes, we currently see that the gold price have come down a little, so it might be a little less. And the first question, the impact on FX, why only on the semi segment. In a simplified way, we typically say that EUR 0.01 for the full year is around EUR 20 million of revenue. And the fall-through of that is kind of for the portion is somewhere EUR 5 million, EUR 6 million or so percent. And that is true for all segments together.

Our next question is a follow-up question from Marco with Innova Asset Management.

So just one quick clarification. So your smartphone business and exposure to shortage earlier on the equity call, you mentioned that the impact is minimal. Is that correct?

Yes, that is correct. I mean there's -- yes, you always read that the memory shortage reduces smartphone sales, but kind of as our products are very overweight in the high-end models, and we haven't seen any impact of the memory shortage on the high-end models. So we really don't see on the staffing.

And just in terms of numbers, [ 600 million ] from smartphones.

Yes. Well, take the consumer share on the semi side, and there are probably a high majority is on the -- from smartphones, but there is also a decent share of variables and then a long tail of smaller ones, but it's certainly fully overweight on the commercial side.

Okay. And I'll just squeeze another one in. So in terms of the coupon that you're looking to lock in on the refi for the 2029 bonds, is it fair to assume that you're looking for 5% to 6% coupon?

I mean as we said, I mean, we haven't taken a decision when to go ahead. And then if we were to decide, we will certainly test the market and see what we can get.

Our next written question is a follow-up question from Julien. In 2027, do you expect to receive a large inflow from customer prepayments similar to what it received in Q3 FY '24?

The customer prepayment thing in '24, that was a onetime thing. Now we have to pay it back between Q1 '26 and mid of '28. That is not something that we see frequently in our business.

It appears there are currently no further questions. Handing it back to Juergen Rebel of ams-OSRAM for any final remarks.

Thank you, operator. Thanks, everyone, for dialing in, for the interest and the questions. If there will be any further questions, reach out to us at Investor Relations. With that, we wish you a great day and speak to you soon or latest next quarter. Thank you very much.

This concludes today's call. Thank you, and have a great day.

Ladies and gentlemen, welcome to the ams-OSRAM Conference Call on First Quarter 2026 Results. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. This is Juergen speaking. Welcome to today's call on first quarter 2026 results. Aldo, our CEO, will comment on business performance and our strategic progress. Rainer, our CFO, will then walk you through the financials. Please refer to the Q1 earnings call presentation that is available on our website.

Aldo, how did we perform in the first quarter following the launch of our Digital Photonics strategic realignment?

Thank you, Juergen, and good morning, everyone. Turning to Slide 3 here. Overall, we delivered a very strong first quarter and made further tangible progress towards our ambition of becoming a focused Digital Photonics powerhouse.

On a like-for-like basis, our semiconductor core portfolio grew by 9% year-on-year, clearly underlining that the strategic focus is the right one. Revenue came in well above the midpoint of our guidance range. Adjusted EBITDA reached the upper end. Design win momentum continues unabated across all end markets.

From a Digital Photonics perspective, we achieved 2 important milestones in this quarter. First, we are in the process of extending our portfolio of optical components that are decided for the system performance of AI-enabled augmented reality smart glasses covering key functional building blocks.

Second, in AI photonics, we signed a development agreement for highly parallel micro emitter array-based so-called slow and wide optical interconnects targeting hyperscaler AI data centers. In parallel, we advanced on execution topics. The simplified transformation program is well underway, and our balance sheet deleveraging plan progressed as planned. The sale of the Entertainment & Industrial lamps business to Ushio closed in early March and cash proceeds were received. The divestment of our non-optical sensor business to Infineon remains well on track with unchanged timing for mid-'26. Finally, we delivered positive free cash flow in Q1. As expected, divestment proceeds offset the seasonally high interest payments that typically occur in the first quarter.

With that, let look at the details. Turning to Slide 4. Q1 performance came in stronger than initially expected. Group revenue came in with EUR 796 million, well within the upper half of the guidance spend. Adjusted EBITDA reached 16.5% at the upper end of the guidance, driven mainly by the OS division and a very strong automotive lamps performance.

Year-on-year, revenues declined slightly, entirely due to the weaker U.S. dollar with a top line impact of roughly EUR 15 million. On a like-for-like basis, at constant currencies, the group would have grown by approximately 8%. Adjusted EBITDA recently declined modestly year-on-year solely due to the deconsolidation of the specialty lamp business despite the FX headwinds.

Let's turn to segment performance on Slide 5. OS held up very well in a typically soft first quarter. Revenues were almost flat quarter-on-quarter. We experienced supply constraints in select product lines due to short-term order increases. Without those, even the sequential growth would have been possible. Margin declined sequentially due to higher gold prices, annual price downs effective January 1 and FX effects. However, it was 2 percentage points higher year-on-year, reflecting higher production volumes that are not fully visible in reported revenues due to the weaker U.S. dollar.

CSA delivered a solid performance in the seasonally weakest quarter. Results were driven by continued strong demand for custom sensor products in consumer handheld and a recovery in Industrial & Medical. Revenues were slightly lower year-on-year solely due to declining contribution from exited noncore portfolio activities. Profitability follows typical revenue fall-through dynamics, however, was down year-on-year, which is due to higher R&D expenses to fund growth projects and FX headwinds on top.

Lamps & Systems again delivered a very strong quarter. Aftermarket demand remained elevated, including short notice ordering following financial difficulties at a major competitor. Specialty Lamps contributed for only 2 months. Please keep that in mind. The deconsolidation explains why reported revenue did not increase year-on-year. Strong production loading in Q1 supported profitability. Overall, it was mostly a strong quarter across the portfolio.

Turning to Slide 6. Adjusting for the weaker dollar and the exited noncore portfolio contribution, the clean core portfolio grew 9% year-on-year. The noncore portfolio is now largely wound down with only residual contribution in the order of magnitude of EUR 10 million. Looking at the markets, Automotive was broadly flat versus a typical seasonal slowdown. After a lackluster start early into the year, we saw a clear ordering uptick in February and March.

Given the declining underlying vehicle production outlook, we interpret it as a partial restocking after a prolonged period of very limited inventories, combined with some level of precaution due to the turbulences in the Middle East. All regions performed sequentially better, except China, where end market demand remains softer and competitive intensity is elevated.

Industrial & Medical showed a clear recovery. Horticulture had a seasonal low point, but professional lighting demand was solid. Order intake improved materially and order patterns at the end of the quarter point to a solid seasonal upswing into Q2. Consumer followed typical seasonal patterns sequentially. Year-on-year, the decline is explained by FX and the phaseout of noncore portfolio elements.

Turning to Slide 7. Q1 is typically the weakest quarter for design win activity, yet momentum remains solid. Total design wins amounted to around EUR 850 million. Naturally design wins are geared towards automotive, but the other verticals also contributed well. In our classic semiconductor core business, automotive remains the backbone with triple-digit million euro contribution across the portfolio and strong momentum in forward lighting. Industrial showed very good traction, particularly professional lighting with customers in the U.S. and Europe, while horticulture performed materially better year-on-year. Consumer continued to see recurring sensor design wins in Android-based smartphones, particularly in display management.

On the Digital Photonics side, progress was equally encouraging. EVIYOS continued to add platforms, taking the number of awarded platforms to well above 60. And interest for new designs remain strong, especially in China. Augmented reality, several of our existing components such as ambient light and spectral sensors are already designed into smart glass models available in the market. AI photonics, well, product development for micro-emitter arrays for highly parallel AI optical interconnects has started. And we are not doing this alone. We have signed a collaboration agreement with a strong AI infrastructure partner.

We will now look at these Digital Photonics themes in more detail. Turning to Slide 8. Augmented reality, smart glasses are a key Digital Photonics growth theme. While the category is still at an early stage, adoption is accelerating even with today's limited functionality. AI is a game changer, making the glasses potentially in the midterm a replacement of our smartphones. Some of our sensors and LEDs are already designed into several commercially available smart glass models today. Our current and future portfolio covers key functional domains, health and well-being, sensors enabling measurement of parameters such as medicine levels via blue light, heart rate and UV exposure.

Privacy and camera performance, spectral and flicker sensors as well as high-performance LEDs. Display engine, today, our LEDs eliminate LCOS displays. Going forward, micro LED arrays can enable sustainably higher brightness resolution and better power efficiency. World sensing compromise gesture and 3D Time-of-Flight sensing. HMI, today, we supply our proven proximity sensors. Tomorrow, we have super tiny optical for sensing buttons in store. And eye tracking can be done with our integrated optical sensing solutions. This illustrates our strategy of focusing on the size of system components built on our core technologies.

Content estimates naturally vary depending on volumes, life cycle stage and computer -- customer implementation choices. For this, however, we see content potential between EUR 50 and EUR 100 per device, which underpins the triple-digit million annual revenue opportunities we outlined when launching our Digital Photonics strategy.

On to the next highlight today, turning to Slide 9. Our progress in AI photonics is accelerating. I have 3 slides for you. First, where our products will sit in the data center; second, how do we fit in our structure; and third, which components are we targeting. We believe that the so-called slow and wide optical interconnect based on highly parallel micro-emitter arrays can play an important role in future AI data center architectures. And here, slow is relative as we're talking about 8 gigabit switching speed and hundreds of parallel channels.

Initially, the focus is on short distance scale-out interconnects achieved between the racks, then scale-up connections within the rack, replacing copper over distances of up to several tens of meters. Over time, chip-to-chip connections, for example, between GPU and high-bandwidth memory could become addressable as well, a really great market potential for us.

Turning to Slide 10. It's important to distinguish between integration content and the optical engine technology itself. On the integration side, today's solutions on the upper right rely on pluggable transceivers or active optical cables with energy consumption of up to 30 picojoules per bit. And these solutions, not only longer -- the long copper traces, but typically also signal shaping chips consume quite a lot of power. ToF sensor near port optics can reduce this to roughly 5 to 10 picojoules per bit. The optical engine moves much closer to the ASIC. Co-packaged optics shown on top left, promises further reductions towards 1 to 5 picojoules per bit over time. The optical engine moves as close as possible to the ASIC.

Put simply, the closer the optical engine sits to the chip, the lower the electrical losses and the associated thermal load. The slide illustrates this distance comparisons. Independent of the integration approach, optical engines can be implemented either as fast and narrow or slow and wide. Fast and narrow is today's established technology based on indium phosphide lasers, often EMLs and silicon photonics integration concepts. We believe in future slow and wide architectures, highly parallel micro-emitter array-based optical engines that transmit light pulses at chip speed without need for power hungry serializers and deserializers.

Key advantages include substantially higher bandwidth density, very low power consumption per bit and inherent redundancy through parallelism. If one micro-emitter fails, no problem, there are enough channels for backup, an important consideration for hyperscale customers.

Turning to Slide 11. On the left, you see our prototype, which helped accelerate the signing of a development agreement with our ecosystem partner, a leading AI infrastructure supplier. The table in the center illustrates the simplified technology stack for highly parallel optical interconnects. In essence, you can think of the transmitter side, the receiver side and advanced packaging technology that glues everything together.

Our current development focus is on the transmitting side, micro-lens and micro-emitter arrays. Given our CMOS and sensor capabilities, we're also evaluating opportunities on the receiver side. We'll keep you updated as development progresses.

With that, let me hand over to Rainer for an update on selected financial aspects.

Thank you, Aldo. Good morning, everyone. I'm on Slide 12. We generated EUR 37 million free cash flow in Q1, which includes EUR 90 million divestment proceeds. The cash inflow from the sale of the specialty lamps was received early March. Operating cash flow was a breakeven, reflecting the seasonally high interest payments on our senior notes. Higher than a year ago after the EUR 500 million tap we did last summer. CapEx remained disciplined and well below our full year guidance of 8% of revenue.

With that, let us take a quick look at the Simplify program that we launched with Q4 announcement in February 10. Turning to Slide 13. Last quarter, we reported that the Re-establish the Base delivered savings 1 year early. The implementation of the remaining measures that had been identified continued. Re-establish the Base program delivered EUR 237 million savings, really a great success.

Now in February, we launched a successor Simplify program, which is a broader transformation program aimed at reshaping our operating model and delivering another EUR 200 million of additional annual savings by '28. Happy to announce that all saving measures have been identified and at least 90% of those have already today a high maturity level. Cost, speed, agility are our guiding principle as we reshape our operating model. Implementation started immediately. And after just 1 quarter, the teams have already delivered EUR 5 million of savings, demonstrating disciplined execution continuity.

Now, let's have a quick look at liquidity and capital structure on Page 14. In Q1, the interest payments for senior notes were due with the cash proceeds from the sale of the specialty lamps, free cash flow was positive such that our cash on hand position only reduced because we paid back EUR 200 million nominal of the convertible note. And the cash position now stands at EUR 1.3 billion at quarter end. With that, the available liquidity position closed accordingly at EUR 2 billion. It is backed by a diversified mix of instruments, cash revolver and bilateral lines. The sale and leaseback value moved up in line with currency swings and the quarterly interest accrual.

And with that, let us zoom in on the coverage of the upcoming short-term maturities on the next slide, which is Page 15. Now we have EUR 1.3 billion cash on hand, and that will be enriched with EUR 570 million from the Infineon deal upon closing somewhere midyear. That gets us to a total of EUR 1.9 billion pro forma cash, and that completely recovers all the near-term maturities, and that is the remaining outstanding convertible bond, which as we paid EUR 200 million is now sitting at EUR 560 million. When we received the money from Infineon, we have 120 days to offer the amount related to the guarantor assets as part to noteholders approximately EUR 130 million.

And second, there are some business needs for the transition effects in '26. Basically saying the cash flow will be negative. The EBITDA will be somewhat lower because we are selling business, and there will be some stranded costs that we will be cleaning up. And then there's quite a bit of transformation costs and talking cash flow, the cash outflows from the Simplify program. And then we will be repaying USD 100 million in customer prepayments, and we will reduce because we have so much cash, roughly [ USD 100 million ] in factoring.

Now excluding the disposal proceeds, expect the cash flow to be something triple-digit million negative. However, and once we are through that in '27, the free cash flow will be substantially better. And if business remains strong as it is, we expect it to move to positive territory, excluding any additional disposal proceeds and even that we also next year, still have to repay a similar amount of customer prepayments. So excluding disposal proceeds, we expect that next year to be in positive territory.

And third, what we will be paying from the existing cash on hand is the tendering of the Osram minority shares after the final verdict, there's no news, but we still have it -- assume that it will come this year. And that should then leave once everything is taken care of at least EUR 500 million cash on hand. And that is the very important point. All upcoming near-term maturities are fully covered. And that obviously then now that is covered, we now have started to focus conceptually on optimizing the cost and the maturity profile of our '29 senior notes, where, as you know, the interest rates are higher than I would love to, and we will keep you posted with what our plans are.

And with that, let me hand back to Aldo for the summary and the outlook.

Thanks, Rainer. And let me summarize today's call. I'm on Slide 16. In Q1, we beat again our revenue and profitability guidance. The core semiconductor business grew 9% like-for-like. Free cash flow was positive at EUR 37 million. We completed Re-establish the Base with EUR 237 million savings a year early and started executing Simplify.

In Digital Photonics, we continue to progress on the comprehensive component portfolio for AI-enabled smart glasses, giving us a content opportunity between EUR 50 and EUR 100 per smart glass. We initiated the product development of micro-emitter array-based AI optical interconnects together with the commercialization partner.

We also progressed in balance sheet deleveraging the Specialty Lamp transaction closed and proceeds were received and the Infineon transaction remains on track. No changes to the indicated closing timeline of mid of this year.

Now to the outlook for the second quarter. We expect revenues between EUR 725 million and EUR 825 million, with adjusted EBITDA around 15.5% plus/minus 1.5 percentage points based on euro-dollar of 1.17. The traditional auto lamps business will show the usual seasonal slowdown in view of the overall rate in the aftermarket. Remember, all non-automotive business was transferred to Ushio. We still have EUR 10 million revenue in Q1 and 0 in Q2, obviously.

Semis will make a step forward in Q2 more than typical seasonality. We see strong order intake and book-to-bill higher than previous quarters. Our full year 2026 outlook remains unchanged at the moment. Group revenues modestly softer given the divestment and FX. Adjusted EBITDA of around 15.5%, plus/minus 1.5 percentage points, assuming euro-dollar of 1.17. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments, stranded costs, precious metal prices and other factors.

Free cash flow, we expect above EUR 300 million, including divestment proceeds. Into 2027, we see a path to positive free cash flow without any divestment proceeds even with repaying a similar amount of customer prepayments.

And with that, we are through the presentation, and we're happy to take your questions.

[Operator Instructions] And we have the first question coming from Harry Blaiklock from UBS.

The first one is just on the micro LED optical networking opportunity. I think previously, you said it's kind of a 2030 plus revenue opportunity for you. But given the announcement today and then also kind of industry announcements about commercializing solutions as early as 2027. How are you thinking about the timelines on when you could see revenues?

Yes. Thanks, Harry. That's a very good question. The industry is hyper quick and really waiting for solutions here. We're working very hard on those solutions together with our partners. And I think timing-wise, we are definitely before 2030. Whether it's as early as 2027, I can't tell you yet, but we definitely see this as an opportunity in the next few years, not in the far future.

Okay. Great. And just maybe a follow-up on that. It was good to see that you're addressing kind of multiple elements of the full solution. If you look at kind of the elements that you have in development and consideration, so the emitter, the lens and the diode array, how -- are you able to give kind of like a rough split of like what your -- like what percent -- so yes, the relative kind of content size for you of each of those? What would be the -- yes, what would be the biggest content for you?

Well, let me answer it this way. I think we have said that by 2030, we see this as a triple million dollar opportunity, and we continue to see that at least. And that was a statement based on just the micro-emitter array and the micro lens array on top. So if we actually add more to that, if we also do the photodiodes or the amplifier or the driver underneath the LED, that would be further revenue potential for the group.

Super helpful. And then just maybe a quick one on the short term. The guide for Q2 of typical seasonal decline in the semiconductor business, given the portfolio changes over the years, it's kind of tough for us to know what exactly seasonal is. Wondering whether we could get a little bit of help on that.

I think automotive will do quite well in the second quarter. Also horticulture will start to pick up ahead of the season. So those are positives. And also with the little precaution that we also mentioned in the text before that at the moment, we are still a bit uncertain on how to interpret this good order intake at the moment. The number of cars, of course, are not going up, it's going down probably being built globally. Yes, content per vehicle is rising, but the order intake at the moment is quite strong. So we do think that it's part of restocking and not taking risk out of the supply chain given the global uncertainties. But at the moment, encouraging, and we hope it continues that way.

Obviously, consumer goes down quarter-on-quarter, that is normal and then Q3, of course, being usually the strongest quarter for consumer. Professional lighting, pretty steady, I would say, and lamps, automotive lamps, in principle down. I mean the lighting season is over. Obviously, that is always Q4, Q1. So Q2 will be lower there. But here, we benefit from the financial troubles of our major competitor and also see here additional orders coming in that might limit the negativity of the normal seasonality in this.

The next question comes from Sebastien Sztabowicz from Kepler Cheuvreux.

You mentioned in the press release some tough competition in the automotive business in China. At the same time, we are seeing capacity getting a bit tighter in many areas of the market and some peers raising prices. I'm just curious about how do you see prices trending at AMS for the coming months?

And the second one is on the free cash flow. You mentioned for this year free cash flow to be significantly negative excluding divestments. Could you please help us quantify the kind of cash burn we can expect for this year? Do you have some building blocks to understand a little bit the magnitude of the range of negative free cash flow we can expect for 2026?

Yes. On the pricing side, I would say on the one hand, competitive pressure in China is increasing. Our customers are under a lot of pressure. Vehicle volumes are going down, so that puts them even more under pressure. And of course, they're looking to the supply chain as well to contribute. And that has somewhat limited our ability to pass on the cost increases that we also spoke about last quarter.

At the moment, we see in the LED space, neither from us nor from others price increases, but we do see more limited price declines than we otherwise would have seen. So kind of an indirect effect that you see there. In the sensor business, actually, we are selectively raising prices like others as well. And also in the automotive lamp business, we are selectively raising prices for increased input costs. So that's kind of the overall pricing dynamic, I would say.

Towards China, perhaps important. The remark I made before on the vials, I think that's really nice to see. Yes, of course, on the more standard parts, there is competitive pressure. However, China is also now really an innovation-driven market for us and our innovations like these high-pixelated headlamps are really designed in much more widely also in China now, and that gives us good hope that we will continue to see a strong market position for us in China.

On top of that, by the way, we, of course, are also grabbing share, mainly from our international competitors. You probably know that the Samsung has exited the market. We've got quite a bit of share there. Also, other American competitors are struggling, and that helps us to expand our position. In that sense, we look with confidence in the future. But it's -- yes, at the same time, not an easy market.

Yes. And Sebastien, on the cash flow. So maybe if you try to build a bridge compared to last year, first of all, I mean, the public funding will be significantly less. Last year, we got like 2 tranches. This year, we only get one. Number two, we're repaying customer prepayments, which is roughly $100 million or EUR 80 million. Number three, from the new Simplify savings program, where we want to achieve EUR 200 million of savings. I mean that also comes with a onetime cost of more than EUR 100 million. I mean trying to pay as much as possible of that this year, so to have as much as possible behind us. And finally, then the factoring, which I mean cost a lot of money also given the high cash position, we want to reduce that. Let's say the EUR 100 million, and that is obviously also then an element of the free cash flow.

Then when it comes to the business, yes, the EBITDA will be down, and that also certainly then ends in a bit lower cash flow. That is from the divested businesses, right? We said that the divestment of those businesses plus the stranded cost would be on an annualized basis, something like around EUR 75 million. The stranded costs we are obviously working on. But then on the positive side, as Aldo pointed out, the business is certainly improving. I think the guidance for Q2 is quite optimistic if you compare it to the last year Q1 to Q2 bridge, right? So business is running well. We are getting NREs from customers. So there's also a lot of positives in there. But I mean, if you count it together, free cash flow will be significantly negative this year.

The next question comes from Janardan Menon from Jefferies.

I just have -- I have 2 questions, one on your AI-related photonics business and one on your AR glasses. On the AI side, on your press release, you -- on the front page, you had said that you have signed a development agreement with a leading AI data center infrastructure partner. And on the second page, you've said that you've signed it with a leading AI photonics industry partner. I'm just a bit confused because when I hear the word AI data center infrastructure partner, I sort of think of a hyperscaler. And when I think of an AI photonics partner, I think of someone like a Lumentum or maybe even [ CNM ] or someone like that. So can you give us some clarity on what exactly is the nature of this partner that you have got a development agreement with?

And secondly, in a development agreement, is it that they pay you money and you do all the development? Or is it that you're sort of sitting in their premises as well or they're doing half the development, you're doing half the development. Just an understanding on how that works. And I have a follow-up on the AR glasses.

Yes. To start with the second part of your question. I mean all these systems are still so new that it requires development on both sides. I mean we have to optimize and design our part of the system and develop that to the right performance and reliability levels. At the same time, it needs to be well integrated into the larger solution to really be effective. So in that sense, both parties have to contribute here and be in close alignment. And that's why in these new fields, it's so important that you find lead customers that you can together design and optimize the systems with that just tremendously increases your likelihood of success and your ability to be fast.

Much more detail on the kind of partner that we have, we cannot give. But obviously, it is about photonics. We are about photonics. It's clear that the data rates and the energy they require is a major topic. So anything we can do to optimize that, this is highly welcome, and we expect also then this technology to scale with other partners as well in the future.

Yes. So you can't give a nudge on whether this partner is someone who builds the data center.

Sorry.

Okay. And then on the AR glasses, you're saying that you already are shipping some of these components into the market right now. So I'm just wondering what needs to change when you are going to get that triple-digit million euro kind of revenue number? Is it that you need a big customer to start volume production with your components and today, you're selling to smaller customers? Or is it that you need the microLED array itself to start shipping because that might be a high-value component in contrast to LCOS trajectory or something like that? I mean what is the change that we're waiting for to get that triple-digit million euro?

Yes. Both factors will kick in. We will -- for the LCOS, we supply some high-power LEDs. That's nice, but it's not a major value driver yet. The move to microLED-based engines will be the major step-up for us. And of course, I mean, these glasses are now in being utilized more and more, and there will be a significant demand increase, we feel with next-generation smart glasses. They just are getting better and better from generation to generation, more and more attractive.

So we expect the volumes to go up significantly. And at the moment, the majority of AI glasses is sold without a display. Now, our first simple displays with LCOS are being sold with the microLED, we think that the glasses will gain a lot of more momentum with picture quality being better, bigger field of use and so on, smarter designs. So we think this category will do quite well. And with the rising volumes and a higher content per phone, that will help.

However, at the same time, I think also beyond that, there's interesting potential as we outlined. It is not only the light engine. Also other parts we feel we are quite well positioned in. And they, of course, will also then scale with more customers and higher volumes of the sales of the smart glasses in total.

And again, any kind of time horizon for the triple digit? Is that -- is there a chance that, that could happen in '27? Or are we looking beyond that?

I can't really comment on that because as you can understand, our customers are always quite tight on timing of their launches. But it's going to be good this decade.

It's definitely closer than the AI.

Yes.

The next question comes from Craig Mcdowell from JPMorgan.

My first one was just a reminder, please, on your smartphone exposure. It seems to be an end market that could be challenged in '26, maybe '27 as well. Just if you could give your revenue exposure to smartphone and then how that is trending?

And then my second question, just on the Kulim-2 sale process and just any update there? It seems like the industry is scrambling for capacity, and this seems like it could be an interesting asset for a buyer. But if you're able to give any update on the process, that would be helpful.

Yes. If you -- on the smartphone side, we're probably talking EUR 600 million, EUR 700 million revenue that is tied to that space. We have to now at the moment, look very much of who is getting memory and who isn't. And you can imagine that the top cell phone makers that we often bet with are the ones that are getting the memory and the lower and midrange phones get less of it or struggle more with the prices that memory at the moment commands. So yes, I agree with you, there might be somewhat of an impact. But so far, we're not really seeing it given the positive customer mix in this aspect.

On Kulim-2, yes, nothing really changed. We keep having inbounds. We keep having good discussions, but we also cannot say that the timing is around the corner. So yes, we'll inform you as soon as something gets more tangible. But yes, at the moment, no real change to versus what we've said last quarter.

And can I just -- sorry, a brief follow-up, but just can I ask on the Q2 guidance, whether that includes any divestment from the Infineon disposal? Or is that only impacting Q3?

Yes. Craig, the guidance assumes the closing of the transaction midyear. So the impact of the disposal would then be seen in Q3. The Q2 guidance, though includes the disposal of the traditional lamps business, right? So in a way, if you subtract the revenue that we are losing from the traditional business and you look at midpoint compared to Q1, you could say that it's more or less flat.

The next question comes from Robert Sanders from Deutsche Bank.

Maybe just a question on the AI opportunity. I mean, obviously, there's a lot of development happening on co-packaged optics at the moment. I would say most of those solutions are relatively mature, so probably a bit more insertion for you guys. Is the idea to -- in the CPO side to insert in a later version? Or is it more as we transition to optical IO that you're going to get sort of broad-based adoption?

And then just secondarily, in terms of your thoughts about triple-digit million by 2030, is that based on a couple of hyperscalers that are clearly championing microLED? Or is it based on a portion of the indium phosphide market that you think you're going to penetrate?

Well, I think the overall AI opportunity is huge. And there's a lot of, I would say, sub applications or spaces where optical technology will be helpful in getting higher bandwidth at lower energy consumption. Obviously, CPO and indium phosphide lasers are the coming waves that are heavily being invested in. However, we feel that not all of the system -- not the whole system architecture can be optimally addressed with that. So there will be significant pockets that we feel this technology that we are developing will find a place besides or beyond fast and narrow.

So it's -- the estimate of the revenue contribution really comes from us finding the right spots in this overall market. And the customer discussions show that clearly that they also see that indium phosphide is a good solution, but there are places where narrow and wide has a limit and where wide and fast actually can play out the advantages. And especially, I think in the longer term, the chip-to-chip communication, I think this is definitely a space where slow and wide can do a lot of good.

And would you be open to a kind of strategic relationship like you had with your microLED relationship in the past on the consumer side? Or is this something you just want to sell lots of merchant LEDs to different players like Avicena and others that are creating the module?

No, we want -- we clearly want those relationships ourselves. Besides my private life, I'm very open for multiple relations. And here, we -- I think we'll see that different -- first of all, it's important that we find the right lead customer for the right type of application. In the AI space, I think we will see different parts of the application being potentially spearheaded by different people. So also in that case, even within AI, I can imagine that at the end of the day, we will have one with several partners to develop specific solutions for specific parts of the whole chain.

Once we normally develop with our partners, then of course, we first want to fully support them and scale with them. But usually, we have a common interest to scale beyond that first partner because that brings overall volumes up and cost down, which is then good for everybody. So that's kind of the thought model that we have been using already in the early days in automotive, are now using it in the AR opportunities, and we'll do so also with the opportunities in AI in a similar fashion.

There are no more questions at this time. I would now like to turn the conference back over to Juergen Rebel for any closing remarks.

Yes. Thank you, speaker. I'd like to thank everyone for dialing-in today. Thanks to the analysts for your questions. And as always, we are ready for follow-on questions from the Investor Relations team, just reach out to us. And with that, we wish you a great rest of the week and speaking to you soon or latest in the next quarter. Thank you, and goodbye.

Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Debt Investor Conference Call and Live Webcast on Fourth Quarter and Full Year 2025 results. I'm Serge the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. [Operator Instructions] At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead.

Hello, good afternoon. This is Juergen speaking. Welcome to today's call on our Fourth Quarter and Full Fiscal '25 results for credit investors. Rainer, our CFO, will walk you through the Q4 earnings call presentation that you can find on our website as well. Rainer, stage is yours.

Thank you, Juergen, and good afternoon, everyone, from my side. Let's start on Slide 3. '25 was another year of disciplined execution. We built a stable foundation for further expansion as a leader in Digital Photonics. Our core semi portfolio grew 7% year-on-year underlining the strength of our focused positioning. And importantly, for the first time ever, ams-OSRAM holds the #1 position in the global LED market, a significant strategic milestone. .

Design win traction remained excellent with more than EUR 5 billion in new lifetime value added to the pipeline. Profitability improved again. Adjusted EBITDA margin up 1.5 percentage points year-on-year. driven by accelerated execution of the reestablished base program despite significant cost headwinds 1 year ahead of plan.

We also delivered EUR 144 million free cash flow, including interest paid. On top of that, our deleveraging plan progressed strongly. Two portfolio transactions announced as of last week with proceeds of EUR 670 million and pro forma leverage at 2.5x.

On to Slide 4. Q4 was a strong quarter. Revenues and adjusted EBITDA came in, in the upper end of our guidance, a clear beat, thanks to the super strong aftermarket lamps business. Revenue stayed almost compared to last year flat at first glance, but bear in mind, the weaker dollar cost us around EUR 55 million top line versus last year. Adjusted EBITDA increased 7% year-on-year despite FX headwinds driven by the continued cost savings of Re-establish the Base.

Let's move to Slide 5. Looking at the segments. OS held up okay in a seasonally weaker quarter. Revenue dipped a bit more than what you would normally expect. I will comment on auto on the next slide. Margin dropped broadly in line with fall-through but is still 5 percentage points higher than a year ago. CSA showed resilience after the typical peak in the third quarter, driven by good demand for custom sensor products for consumer handhelds and better industry medical revenues compared to a year ago. Revenues were broadly stable quarter-on-quarter and slightly up compared to a year ago.

However, adjusted EBITDA margins were down both sequentially and compared to a year ago. An unfortunate product mix, coupled with a strong impact from the weaker U.S. dollar and some inventory cleanup effects were the reason for this. Lamps & Systems saw an exceptionally strong seasonal upswing. Aftermarket demand went through the roof as customers flooded us with short notice orders after our closest competitor fell into financial troubles, we are trying to turn some of this into long-term business for sure. Specialty Lamps contributed for the last time for a full quarter before closing the transaction with Ushio later in this quarter.

In line with fall-through, profitability was up more than 80% compared to Q3. Overall, a good quarter across the portfolio.

Let's now take a closer look at the semiconductor business. I am Slide 6. If you look through the weaker dollar and the noncore portfolio contribution, the clean core portfolio grew exactly in line with our semi target operating model, 8% year-on-year. The noncore portfolio was expected to be fully phased out latest by Q1 last year. However, customers kept ordering and ordering for this, it still contributed a high double-digit million Euro revenue last year.

This page highlights the underlying resilience of our semiconductor business. In automotive, we saw a sequential decline mostly seasonal. The automotive supply chain continues to operate with extremely lean inventories and the competitive environment driven by the kind of war amongst the OEMs is unchanged.

Although difficult to quantify the so-called Nexperia chip crisis, at the beginning of last quarter, certainly had some negative impact on order intake as well. Year-over-year softness is basically due to FX, the order pattern I just mentioned, and that no real restocking in the supply chain happens.

Industrial & Medical, this vertical is gradually improving. We are not out of the woods yet, but indicators are trending in the right direction. Orders in Industrial Automation and Medical came in a bit stronger, balancing the seasonal decline in horticulture, for example. And finally, consumer typical Q4 seasonal decline plus U.S. dollar effect and the exit of the noncore portfolio.

And now let's have a look on Slide 7. We delivered EUR 144 million free cash flow. Adjusted for the onetime cash in from changing the employee pension fund setup. Free cash flow above EUR 100 million as we had promised. That includes a high double-digit million euro inflow from the Austrian chip sector.

The same is true for the full year number, EUR 144 million free cash flow when adjusting for the pension financing, as just described. CapEx remained disciplined, well below the 8% target.

With that, let us take a look at liquidity and the maturity profile on the next slide. With a strong cash flow in Q4 and the inflow from the change in the pension fund set up, our cash on hand was close to EUR 1.5 billion and the available liquidity position rose to around EUR 2.2 billion, backed by a diversified mix of instruments, cash revolver and bilateral lines.

In December, we also rolled EUR 100 million bank loan to '27. In January, we completed a EUR 200 million buyback of the outstanding '27 convertible, including the expected proceeds from the two announced transactions, we have already today sufficient funds to repay both the convertible bond due in '27 and the OSRAM minorities. This sets the stage for refinancing our high-yield maturities at improved terms.

Slide 9 shows how the company has been progressing despite major headwinds from currency. Automotive supply chain pattern changes, precious metal and raw material price increases, et cetera. Our IFRS top line declined by 3% year-on-year, but it's worth looking deeper. EUR 100 million FX impact and the more than EUR 100 million noncore portfolio needs to be considered. With that in mind, the underlying core portfolio would have been up 4%. That is especially true when we look at our semiconductor segment.

The core portfolio for grew by 7% year-on-year at constant currencies, in line with our midterm growth ambition. The year-on-year decline in Lamps & Systems stems mostly from two topics. The decline in the OEM business in line with the lower number of factor in new cars with traditional lamps and the Q2 supply chain adjustment after Liberation Day. On top, the weaker U.S. dollar also weighed a bit on top line.

Adjusted EBITDA margin improved meaningfully, thanks to the implementation of the Re-establish the Base run rate savings 1 year ahead of plan. Cost headwinds have been heavy, gold, silver, rare earth and the top line impact from the weaker dollar.

Let's move to Slide 10. A key highlight. One that has also been a personal ambition for Aldo for more decades, ams-OSRAM is now ranked #1 packaged LED supplier globally by value. We now clearly surpassed our long-term rival to the crown each year. Helped by a weaker yen, but primarily by better relative performance in the marketplace last year. This further strengthens our position with automotive OEMs, professionally lighting customers and in emerging markets such as micro emitters.

On to Slide 11, Design win performance. Last year was again a great year for winning new business, underpinning our semiconductor growth model. Lately reached more than EUR 5 billion. Again, the third year in a row with EUR 5 billion. After strong Q3, we also booked more than EUR 1 billion design wins in the last quarter.

On the slide, we show outstanding design wins with triple-digit million euro lifetime value. In consumer projects in display management and camera enhancement accumulated hundreds of millions. In automotive, EVIYOS, an intelligent RGB ambient lighting projects stood out and professional lighting and medical imaging design wins contributed exceptionally. The example shown demonstrates the strong structure and momentum in our business. Design wins today are the revenues of tomorrow. And our pipeline is very healthy, underpinning our growth ambitions in the semiconductor core business and along the avenues of our key emerging Digital Photonics applications.

Slide 12 shows the next wave of structure improvements. thanks to great execution of our teams, reservice base delivered its savings 1 year early, EUR 220 million. This is a huge success, but we have to get more ambitious in view of the persisting headwinds. We're sharpening our profile towards the clear leader in Digital Photonics, we also want to transform the way we work and thereby saving additional EUR 200 million of annual cost.

Cost, speed, agility are our guiding principle as we reshape our operating model. We want to further reduce overhead, which includes addressing stranded costs of the divestment. We want to improve our manufacturing cost by transferring production of established products to Asia and the productivity push through automation. We are developing cost-optimized product platform. Also product development shall become cheaper and more efficient by developing maturing product families in Asia. The expensive European resources are focusing on advanced Digital Photonics topics.

In total, around 2,000 colleagues will be affected, half of them in Europe. Certainly, we also want to get our share of productivity improvement by rolling out AI.

Now let us turn to Slide 13. Last April, we communicated our accelerated deleveraging plan. Since then, we have made strong progress. First, improving the structural profitability. As I just explained, we implemented Re-establish the Base savings 1 year ahead of plan that launching the new program, Simplify.

Second, generating proceeds well above EUR 500 million from divestments. We delivered. We'll get EUR 670 million in cash from the two transactions that we have announced. The sale of the specialty lamps business to Ushio and the sale of the non-optical sensor business to Infineon. The transaction will also result in a onetime profit of about EUR 450 million to EUR 500 million.

But the solution for the Kulim-2 is on leaseback, we continue working hard on that. There's always been interest discussions intensified recently but it is really too early to call when exactly we will see a deal. But we are fully convinced that it will be a solution. We have always delivered so far and have no intention to change that.

On a pro forma basis, the leverage has significantly improved and will show you -- as I will show you in a minute, but the solution for the sale leaseback and fixing some of the stranded costs of that factory might be needed to really get below 2.

Nevertheless, I'm convinced that we will be able to refinance the senior notes much cheaper to bring interest costs down, the key impediment for strong free cash flow performance. After refinancing the high-yield bond, it is now likely that we land at below EUR 150 million annual interest cost.

On Slide 15, you see the impact of the transactions and our leverage. We discussed the update of our balance sheet as of December 25 early in the presentation. With that, on a pro forma basis, including the divestment proceeds, the leverage drops from 3.3x to 2.5x. Excluding the OSRAM put options, net debt would stand at around EUR 850 million, implying a 1.6x leverage. This is a major step forward and the prerequisite to refinancing our 29 maturities at lower costs.

And on the next slide, summarizing our transformation journey, as Aldo outlined last week in detail when we announced the sale of our non-optical sensor business to Infineon. The path consists of three phases. From '23 to '25, we stabilized and refocused the company, divestments, portfolio sharpening, reestablished the base refinancing. '26 will be a transition year. Reflecting the deconsolidation of all businesses and temporary stranded costs. We'll have a temporary drop in adjusted EBITDA due to several one-off effects. For this and for making the company over more efficient and more agile, we launched a new program, Simplify.

Also financing costs remained high in' '26, approximately EUR 250 million to EUR 300 million until the refinancing of the senior notes, which we have on the radar for '27.

And then from 27 onwards, we enter the growth in value creation piece. We want to see growth in the core business and growth along the lines of the existing and new Digital Photonics applications. Highly pixelated forward lighting, micro emitter projection areas and spectral bio and distance sensing.

Based on the Simplify program and growth, we will see margin expansion. With growing profitability and a solution for the Kulim-2 sale and leaseback. We will have a fully healthy balance sheet with a leverage below 2. And we want to see our financing cost below EUR 150 million and the low run rate of restructuring cost, that is the basis to deliver strong free cash flow well above EUR 200 million.

Before on Slide 16, I believe -- that before we move on to the exciting growth avenues of some of our Digital Photonics projects, we have to look a bit deeper in one aspect of the transition phase. Precious metal prices namely gold. Gold is an important material in the production of LEDs. You need it for -- I mean, if you want to put it simply for corrosion-free mirrors to get the light out of the [ AP ] layers. In normal years, this added to the COGS bill a double -- high double-digit million euro figure. But the unprecedented gold rally that accelerates in '25, that costs an additional EUR 35 million in '25, but 2% margin for OS. The price curve has taken an exponential shape, as you can see on the left. The peak has come down the last 10 days, but when assuming an average price around USD 5,000 per ounce, we have another EUR 60 million cost add-on compared to '25. That would be a 4% margin impact for us and around 2% for the group.

Now we are mitigating that as best as we can. So first of all, we have now good hedging position. So the remaining risk is relatively low, even it would further go up. And we are reducing the consumption of precious metal usage by redesigning our product. Now that doesn't go overnight. That takes a few days, but that will reduce our consumption significantly. And we are launching the Simplify program.

I hate to say that on top of the divestments and the strain across the gold price and precious metal prices overall will weigh further on margins and adjusted EBITDA in '26.

With that, some words on the Digital Photonics growth vectors that will kick in step by step and that we presented in detail last week. And we are on Slide 17. Digital Photonics is opening multiple highly attractive growth avenues across both emitters and sensors. On the emitter side, micro emitter arrays are transforming three key markets.

Advanced automotive lighting is a bias, where we already ship the volume and hold the clear design when lead. Ultracompact RGB micro emitter arrays enabling bright power-efficient AR displays, for the next-generation smart glasses. And finally, the multichannel micrometer based optical links for AI data center, that's called wide and slow, that interconnected offer superior energy efficiency and unlock future chip-to-chip optical architectures. For each of these, we see additional revenue potential and triple-digit million euro territory, over a staggered period of time.

On the sensor side, we are equally well positioned. Spectral sensing is already today a triple-digit million business, and we see it growing further. Anchored in premium smartphones and expanding further with new product generations and the rise of foldables. Biosensing continues to scale as variables at more optical measurable biomarkers, creating incremental double-digit million opportunities. And finally, multi-zone direct time-of-flight centers brings high-precision 3D awareness to smart devices, robotics and emerging humanoid platforms with adoption curve that could drive significant revenues by 2030 and beyond.

Also on the center side, we see additional revenue potential of double-digit million euros, in some cases, triple digit long term. Together, these fixed vectors demonstrate how our unique portfolio of emitter and sensor technologies positions us at the center of major global megatrends.

Automotive safety, AR, AI compute personal health and intelligent robotics, each offering meaningful, scalable and compounding growth potential.

Now let's quickly revisit our financial target for 2030 that we published last week. In Slide 18. This slide sets out our over-the-cycle 2030 target operating model once divestments, including cooling to deleveraging corporate simplification and debt refinancing are complete and with the new applications contributing to growth.

With semiconductors, we target mid- to high single-digit revenue growth starting in '27 based on a variety of growth vectors that I just talked about and an adjusted EBITDA margin of more than 25%.

Traditional auto lamps contributing to the group as illustrated on the right-hand side are expected to be flat, acting as a reliable cash source that helps fund the semiconductor transition and growth. We target consistently an adjusted EBITDA margin between 13% and 15%. With that, we target for the group a CapEx ratio of up to 8% of sales, which should end up typically lower than that.

A group free cash flow of well above EUR 200 million post refinancing and a net debt to adjusted EBITDA ratio below 2. These are over the cycle targets. They reflect our operating model once the portfolio transition is complete.

Now let me summarize the key takeaways for Q4 and thereafter on Slide 19. In Q4, we bet revenue and profitability guidance. The core semiconductor business grew 8% year-on-year on a like-for-like basis.

Free cash flow was strong at EUR 144 million. rest the base run rate savings were achieved 1 year ahead of plan. We also progressed well in deleveraging our balance sheet. Last week, we announced the sale of our non-optical sensor business to Infineon. Together with the sale of the specialty lamps, we will get EUR 670 million in cash, exactly the more than EUR 500 million that we announced last year. We have ample liquidity of EUR 2.2 billion available, we bought back EUR 200 million of convertible notes in January. And most importantly, we have clearly defined the future direction of the company. We have laid out the strategic direction by creating the leader in Digital Photonics where we want to benefit from upcoming inflection points in this field.

And we launched the new transformation and savings program, Simplify, for saving further costs and transforming the way we work.

Now the outlook for the first quarter. We expect revenues to come in between EUR 710 million and EUR 810 million, with adjusted EBITDA around 15% plus minus 1.5 percentage points. That is based on the Euro, U.S. dollar exchange rate of 1.19. Lamps & Systems, we show the usual seasonal reduction, minus 1 month of deconsolidation of specialty labs. So we're assuming it stays 2 months in and 1 month out. Semiconductors will experience a typical seasonal decline.

Given the upcoming changes now portfolio and the associated challenges for you in building a financial model, you want to give you some hints on the full year '26 million. Group revenues might end up slightly softer than in '25, given the divestments and the weaker U.S. dollar.

Please remember that when equals roughly EUR 20 million more or less revenue per year. And the move from [ 1.13 ] we had last year to [ 1.19 ] where we are today would cost us EUR 120 million revenue.

Adjusted EBITDA will be negatively impacted by several one-offs. The divestments where we effectively sell EBITDA to the buyer. Stranded costs from overhead, we are not transferring to the buyers and higher precious metal prices and some other factors.

So that concludes my presentation, and we are now ready for your questions.

[Operator Instructions] and the first question comes from Laura Monty from MFS.

As usual, I've got a few, if I may. One, if you could just provide maybe some more details on this pension benefit change that resulted in a cash inflow of around EUR 400 million. And more importantly, whether there's any chance that this could reverse at some point in the future. Then in terms of your guidance for FY 2026, maybe asking it a different way, should we expect leverage to then move up from the pro forma 2.5% that you're showing? And for free cash flow, do you expect this to be negative, considering there are obviously the impact from the -- on the working capital from the previous grants that you received.

Then thirdly, regarding the convertible notes, you said you now have the cash to redeem them in full what would be your expectation in terms of timing on that? Would you look to do this year completely or potentially some part in 2027 up on the final maturity? And then last question is on the Kulim factory. I read that there was an interview that it was mentioned, you are in talks potentially with multiple interested parties. Just wanted to see what the progress is there, what your sort of view is on timing, whether you think it's likely that it could be sort of completed this year or whether there's still sort of a lot of uncertainty around that process.

All right. Laura, I noted five questions. So the first one was on the pension benefit. So maybe we simply cleaned up what we had, right? And the way it was set up was not very effective. So there was -- in several cases, there was underlined multiple times or at least 2x with assets, and we cleaned it out. We found a way to clean it up, and now we can say that the pensions that our employees in Germany will get just secured exactly one time. and that freed up quite a bit of cash, which is now available cash. It is not restricted and it cannot reverse. So that money is available for general company purposes and we will use it to reduce our debt.

So the second question was there could be a move up in the leverage. It depends is probably the right answer. It could move up a little. That's true. Yes. And then the free cash flow, the free cash flow will be negative. If you exclude the divestments. Obviously, we will receive EUR 670 million from the divestments, which is part of the free cash flow. So free cash flow will be very positive. But if you exclude that for a moment, you first have the effect that we will be repaying the customer prepayment, that is $100 million, EUR 80 million or so this year is a negative. And then the funding, the government funding will be only half of what it was last year. And then we also expect more significant restructuring expenses with the new program. But that is all kind of a temporary thing, right? So that will improve once it is over. And then you certainly also see a bit of -- on the positive side, the improvement of the retained business.

You asked on the timing of the convertible bond, yes, we have the money and we have to make under the moment we made to the convertible bond, we have to make an offer for EUR 150 million -- EUR 130 million at par. The remainder, we would certainly try to get it back below par but we haven't determined the exact timing. We made an offer in January. We're trying to collect EUR 300 million at EUR 94 million to EUR 96 million. We bought EUR 200 million at EUR 96 million. Yes, and -- but no exact timing for the next offer.

And then on Kulim-2, the last question, yes, we are talking to multiple parties. Now we've always been talking to parties, and there was already one or two times where we thought we were close to a deal, but then the parties did not get the funds approved. So we are a bit careful on what we say, but it's true that we are currently talking to a few parties and some of them have already looked at it and really like the facility we have in Malaysia. I hope I got...

You did get everything. Can I just have one follow-up, please. just on the significant restructuring expenses that you mentioned, could you quantify those for 2026 by chance?

No, I did not, but I can give some flavor.

That would be great. We are talking about EUR 200 million savings. And I would say that could cost us EUR 150 million. That is a combination of severance payments, but also kind of cost that you have to move equipment and prepare facilities. So it's also technical expense, as you would call it, it is not all of that in '26, but a pretty big thing, well above EUR 100 million of that will be in '26.

The next question comes from Marco Sang from [ Amova AM ].

I have a few questions, if I may, just for housekeeping purposes. So the leases, what was the leases as of the fourth quarter 2025 and then factoring. So if you could provide a number for the reverse factoring and for the normal factoring as well. And then just on pension. So like I still didn't understand. So do you expect the pension to reverse in 2026 because there was quite a big uptick in liabilities tied to that inflow. So just trying to understand whether the liability -- the pension liability on the balance sheet will reverse at some point in later 2026.

And then in terms of the pro forma estimates for the two disposals, based on my numbers, it seems like the exposure to the auto sector has moved from roughly 50.5% as a percentage of total revenue to 55.8%. Is that correct?

And then just one final one with regards to the new opportunities in Digital Photonics, like this data center AI opportunity like the silicon photonics, the first wave. How realistic is it for you guys to penetrate the market and to start collaborating and selling to the hyperscalers? I believe there's already a U.S. player that is pretty dominant in that space. So I'm just trying to understand like how realistic would it be for you guys to break into the market and start capturing some market share?

Yes, that was very good. So the leasing, I'm not sure if you were talking about the leasing expenses in Q4, the status of the sale leaseback that was EUR 440 million end of December. Factoring, we reduced both reverse and normal factoring. We reduced by EUR 70 million. So basically, we hadn't done that, the cash flow would have been much higher. So the pension will not reverse short term. It is, in a way, you're extending the balance sheet, right? I mean you have a higher liability, a higher pension reserve on the liability side, and you have more cash and that is then something you pay over the next 20 to 30 years. It will not reverse short term. It is money that is available for general company purposes.

The question about higher auto exposure, I cannot tell you 50 to 55 is exactly right, but it doesn't sound wrong certainly.

And yes, the data center thing -- so I mean, data centers consume an enormous amount of energy, right? And one larger consumer is just the transportation of the information between the recs and -- but also between processors and memory and so on. And they're trying to resolve that by using photons instead of electrons. So the first wave that we currently see is based on indium phosphide, which people call kind of fast and narrow. And the second wave is called wide and slow, and that will be built either with micro LED or with [ micropixel ], those technologies where we believe we are clearly leading.

Now we are talking to all of the guys, right, all of the big companies that are somewhere around data centers providing or data centers, providing components. We talk to all of them, and we are in a lot of discussions with them, and we have already showed them a prototype, and we are pretty convinced that we have an excellent product for the second wave of that photonics in data centers.

Just one follow-up. So do you already -- are you already partnering with someone with regards to this digital -- this AI data center stuff did you have a partner?

We are currently talking to a lot of parties, and if they will be partnering, we will certainly plan to issue a press release. So please stay tuned.

Okay. Sorry, just one last follow-up question. So just in terms of the precious metal exposure, is it just gold? Or it's actually silver as well and other rare earths. So I just want to understand. And then my understanding is already partially hedged. So is it 50% hedged or is it bit more than 50% for 2026. Any color would be helpful.

Yes. So it is more than gold, but gold is certainly the largest, right? I mean our consumption of gold is pretty big. And -- but we also consume silver, particularly on the filter side. Rare earth is much smaller, but it is also gallium, germanium, and kind of other metals that you use all prices are certainly moving up. But the gold impact is the biggest. And the EUR 60 million includes also a bit of the impact of the other metals.

Now we always hedge position. We recently increased that somewhere below 5,000 or so. We increased it well into '27. So I would say we are now hedged what, 60%, 70% into Q3 '27 or so.

The next question comes from Connor Ford from Bank of America.

Firstly, could you remind us what the ratio for your maintenance covenant on your RCF was at Q4 versus the threshold of 4x.

Secondly, with regards to the refinancing of the 2029 bonds, would you look to that second call date of the 30th of March 2027 as your ideal refinancing window?

And then finally, have you received any update on the OSRAM minority decision, do you expect to cover that with cash now.

Okay, the maintenance covenant, [ 2.5 ]. Now yes, March '27 for the high-yield band. I mean, high yield bond, I agree that, that would be a good window, right, when it goes down from a half a coupon to quarter coupon. But there, we have certainly have not taken a final decision on what exactly we will do. But it is an attractive window, certainly.

The OSRAM minorities, there's really no news. And kind of a -- we will maybe call the court later this quarter to ask again, but they made very clear that it is not high on their agenda.

The next question comes from [ Luke Rasmus ] from PPM America.

I just wanted to ask what the 2026 outlook looks like on a kind of an end market basis. Autos, I think you mentioned some pricing pressure from Chinese OEMs. I want to make sure if that's trying to pass on their own pricing pressures or potential competitive pressures more broadly I also want to ask what's causing the specific strength in Industrial and Medical, why that's improving? And then lastly, on consumer. I don't think you mentioned -- I think you mentioned you didn't think there are any indirect impacts from DRAM shortages, but I'm wondering if some of your OEMs are being a bit more cautious on the order side with those DRAM shortages.

The '26 outlook along the various verticals. I mean, we are seeing -- I mean we certainly saw automotive to be a bit cautious in Q4. We now see a much improving book-to-bill. The old rule that I learned over 20 years in semiconductor was always that you shouldn't look at book-to-bill prior to Chinese New Year. Because I mean, you typically see a nice uptick prior to Chinese New Year and then that 1 week is very, very slow.

But yes, auto, you certainly see some signals from China that are pointing towards a bit high inventory there. Overall, I would say automotive is will be a few percentage points up year-over-year.

Industrial, Medical was actually quite strong at the end of the year. that was probably more on the emitter side, even than on the sensor side. Overall, it is still particularly on the andesite still rather muted compared to years ago where we kind of -- where there is still a lot of inventory around.

And then on consumer, the revenue might be down a little this year as a high double-digit noncore portfolio will go out. But yes, I think it consumer should be okay. And we also see that our new products have a good start and had a lot of design wins. So it should be pretty good.

And please be reminded that, that kind of depending on the closing point, we will be selling our non-optical sensor to Infineon and that is a lot of Industrial, Medical business.

If I could get one more follow-up from a previous question. On the Kulim facility, I think we've seen generally, there's a bit of acute shortage in terms of clean room space. Has that made some of the conversations around disposal of the facility a little stronger in the last quarter?

Yes. It is kind of -- I mean, look, it's -- the facility has a certain size, right? So unfortunately, it's too small for memory. Otherwise, it would be -- we've long sold. It's also too small for a high-performance computing TSMC kind of factory, but certainly good for a small 300-millimeter or a large 200-millimeter factory. And yes, recently, there's been a bit of a shortage, and that's why a few companies is not at our doors and I mean, have been looking at it. So kind of I mean we don't want to be too sound too positive here because it's really not completely in our hands. But it's a great facility. And I'm pretty optimistic that we'll be able to sell it sooner later.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Juergen Rebel for any closing remarks.

Thank you, everyone, for joining today's call and the questions. If there are any questions beyond, please do not hesitate to reach out. And with that, I'd like to close the call and looking forward to speaking to you during the quarter or latest in a quarter from now. Thanks very much, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the conference call on fourth quarter and full year 2025 results. I'm Moritz, the Chorus Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. This is Juergen speaking. Welcome to today's call on fourth quarter and full fiscal year '25 results. Aldo, our CEO, will comment on business and strategy. Rainer, our CFO, will focus on the financials. During the call, we are referring to the Q4 earnings call presentation that you can find on our website.

Aldo, please share your thoughts on fiscal '25 and Q4 with us.

Thank you, Juergen, and good morning, everybody, also from my side. Let's start with Slide 3. 2025 was another year of disciplined execution. We built a stable foundation for further expansion as a leader in digital photonics. Our core semiconductor portfolio grew 7% year-on-year, underlining the strength of our focused positioning. And importantly, for the first time ever, ams-OSRAM holds the #1 position in the global LED market, a significant strategic milestone.

Design win traction remained excellent with more than EUR 5 billion in new lifetime value added to the pipeline. Profitability also improved again, adjusted EBITDA margin up 1.5 percentage points year-on-year, driven by the accelerated execution of the Re-establish-the-Base program despite significant cost headwinds 1 year ahead of plan. We also delivered EUR 144 million free cash flow, including interest paid. And on top of that, our deleveraging plan progressed strongly. 2 portfolio transactions announced as of last week with proceeds of EUR 670 million and pro forma leverage at 2.5x.

On to Slide 4. Q4 was a strong quarter. Revenues and adjusted EBITDA came in, in the upper band of our guidance, a clear beat, thanks to a super strong aftermarket lamps business. Revenue stayed almost flat compared to last year at first glance, but bear in mind, the weaker dollar cost us around EUR 55 million top line versus last year. Adjusted EBITDA increased 7% year-on-year despite FX headwinds, driven by the continued cost savings of the Re-establish-the-Base program.

Let's move to Slide 5, looking at the segments. OS held up okay in a seasonally weaker quarter. Revenue dipped a bit more than what you would normally expect. I will comment on auto on the next slide. Margin dropped broadly in line with fall-through, but is still 5 percentage points higher than a year ago.

CSA showed resilience after the typical peak in the third quarter, driven by good demand from custom sensor products for consumer handhelds and better industrial medical revenues compared to a year ago. Revenues were broadly stable quarter-on-quarter and slightly up compared to a year ago. However, adjusted EBITDA margins were down both sequentially and compared to a year ago, an unfortunate product mix, coupled with a strong impact from the weaker U.S. dollar and some inventory cleanup effects were the reasons for this.

Lamps & Systems saw an exceptionally strong seasonal upswing. Aftermarket demand went through the roof as customers flooded us with short-notice orders after our closest competitor fell into financial troubles. We are trying to turn some of this into long-term business for sure. Specialty Lamps contributed for the last time for a full quarter before closing the transaction with Ushio later this quarter. In line with fall-through, profitability was up more than 80% compared to Q3.

Overall, a good quarter across the portfolio.

Now let's take a closer look at the semiconductor business on Slide 6. If you look through the weaker dollar in the noncore portfolio contribution, the clean core portfolio grew exactly in line with our semi target operating model, 8% year-on-year. The noncore portfolio was expected to be fully phased out latest by Q1 last year. However, customers kept ordering and ordering. For this, it still contributed a high double-digit million-euro revenue last year.

This page highlights the underlying resilience of our semiconductor business. Automotive sequential decline, mostly seasonal. But the automotive supply chain continues to operate with extremely lean inventories and the competitive environment driven by the kind of war amongst the OEMs is unchanged. Although difficult to quantify the so-called Nexperia chip crisis at the beginning of last quarter, but we also had a bit of a negative impact on order intake. Year-on-year, softness is basically due to FX, the order pattern I just mentioned and that no real restocking in the supply chain happened.

Industrial and Medical, this vertical is gradually improving. Finally, we are not out of the woods yet, but indicators are trending in the right direction. Orders in Industrial Automation and Medical came in a bit stronger, balancing the seasonal decline in horticulture, for example. Consumer, typical Q4 seasonal decline with U.S. dollar effects and the exit of the noncore portfolio.

Let me hand over to Rainer for some comments about cash flow on Slide 7.

Thank you, Aldo. Hello to everyone from my side. We delivered EUR 144 million free cash flow adjusted for the onetime positive cash in from changing the employee pension funds setup. Free cash flow above EUR 100 million, as we had promised. That includes a high double-digit million-euro inflow from the Austrian Chips Act. The same is true for the full year number, EUR 144 million, again, free cash flow when adjusting for the pension financing, as just described. CapEx remained disciplined, well below the 8% target.

With that, let us take a look at liquidity and the maturity profile on the next slide. This is strong free cash flow in Q4. And the inflow from the change in the pension fund setup, our cash on hand was close to EUR 1.5 billion, and the available liquidity position rose to EUR 2.2 billion, backed by a diversified mix of instruments, cash revolver bilateral lines. In December, we also rolled EUR 100 million bank loan to '27. In January, we completed a EUR 200 million buyback of the outstanding '27 convertible. Including the expected proceeds from the 2 announced transactions, we have already today sufficient funds to repay the convertible bond due in '27 and the OSRAM minorities. This sets the stage for refinancing our high-yield maturities at improved terms.

Back to Aldo now for a more detailed look at the full fiscal year '25.

Thanks, Rainer. Slide 9 shows how the company has been progressing despite major headwinds from currency, automotive supply chain pattern changes, precious metal and raw material prices increases, et cetera. Our IFRS top line declined by 3% on a year-on-year basis, but it's worth looking deeper. EUR 100 million FX impact and a more than EUR 100 million noncore portfolio needs to be considered. With that in mind, the underlying core portfolio would have been up 4%. That is especially true when we look at our semiconductor segment. The core portfolio grew about 7% year-on-year at constant currencies, in line with our midterm growth ambition.

The year-on-year decline in Lamps & Systems stems mostly from 2 topics: the decline in the OEM business, in line with the lower number of factory new cars with traditional lamps; and the Q2 supply chain adjustment after liberation day. On top, the weaker U.S. dollar also weighed in a bit on the top line. Adjusted EBITDA margin improved meaningfully, thanks to the implementation of Re-establish-the-Base run rate savings 1 year ahead of plan. Cost headwinds have been heavy, gold, silver, rare earths and the top line impact from the weaker dollar.

Let's move to Slide 10. A key highlight, one that has always been a personal ambition for me for more than a decade, ams-OSRAM is now ranked #1 packaged LED supplier globally by value. We now clearly surpassed our long-term rival to the crown, NICHIA, helped by a weaker yen, but primarily by better relative performance from us in the marketplace last year. This further strengthened our position with automotive OEMs, professional lighting customers in emerging markets such as micro emitters.

On to Slide 11, design win performance. Last year was, again, a green year, great year for winning new business, underpinning our semiconductor growth model. The tally reached more than EUR 5 billion, again, the third year in a row. After a strong Q3, we also booked more than EUR 1 billion of design wins in the last quarter.

On this slide, we show outstanding design wins in the triple-digit million euro lifetime value. In consumer, for example, projects in display management and camera enhancement accumulated hundreds of millions. In automotive, the EVIYOS and intelligent RGB ambient lighting projects stood out. And professional lighting and medical imaging designers also contributed exceptionally. These examples show the strong structural momentum in our business. Design wins today are the revenues of tomorrow, and our pipeline is very healthy, underpinning our growth ambitions in the semiconductor core business and along the avenues of our key engineer-emerging digital photonics applications.

Slide 12 shows the next wave of structural improvements. Thanks to the great execution of our teams, Re-establish-the-Base delivered its savings 1 year early, EUR 220 million. That's a huge success, but we have to get even more ambitious in view of the persisting headwinds. We're sharpening our profile towards the clear leader in digital photonics, we also want to transform the way we work and thereby save an additional EUR 200 million of annual cost.

Cost, speed, agility are our guiding principles as we reshape our operating model. We want to further reduce overheads, which includes addressing stranded costs of the divestments. We want to improve our manufacturing costs by transferring production of established products fully to Asia and the productivity push through automation across the globe. We are developing cost-optimized product platforms and also product development shall become cheaper and more efficient by developing maturing product families in Asia and by using more AI.

Expensive European resources are focused on advanced digital photonics topics. In total, around 2,000 colleagues will be affected, half of them in Europe, half of them in Asia. Certainly, we also want to get our share of productivity improvements by rolling out AI, as just mentioned.

Let me ask Rainer to comment a bit on the progress when it comes to deleveraging our balance sheet.

Now turning to Slide 13. Last April, we communicated our accelerated deleveraging plan. Since then, we have made a strong progress. First, improving the structural profitability. As Aldo just explained, we implemented Re-estab-the-Base savings 1 year ahead of plan and are launching the new program, Simplify.

Second, generating proceeds well above EUR 500 million from divestments. We delivered. We will get EUR 670 million in cash from the 2 transactions that we have announced: the sale of the specialty lamps business to Ushio and the sale of the non-optical sensor business to Infineon. The transactions will also result in a onetime profit of about EUR 450 million to EUR 500 million.

And third, the solution for Kulim 2, the sale and leaseback. We continue working hard on it. There's always been interest, discussions intensified recently, but it is really too early to call when exactly we will see a deal. But we are fully convinced that there will be a solution. We have always delivered so far, and we have no intention to change that.

On a pro forma basis, the leverage has significantly improved, as we will show you in a minute. But the solution for the sale and leaseback and fixing some of the stranded cost of that factory might be needed to really get to below 2x. Nevertheless, I'm convinced that we will be able to refinance the senior notes much cheaper to bring interest cost down, the key impediment for strong free cash flow performance. After refinancing the high-yield bond, it is now likely that we land at below EUR 150 million annual interest cost.

On Slide 14, we already showed that last week, you see the impact of the transactions on our leverage. We discussed the update of our balance sheet as of December '25 earlier in the presentation. With that, on a pro forma basis, including the divestment proceeds, leverage drops from 3.3x to 2.5x. Excluding the OSRAM put options, net debt would stand at around EUR 850 million, implying 1.6x. This is a major step forward and a prerequisite of refinancing our '29 maturities at lower costs.

And on the next slide, Slide 15 summarizes our transformation journey, as Aldo outlined last week in detail, when we announced the sale of our non-optical sensor business to Infineon. The path consists of 3 phases. From '23 to '25, as you know, we stabilized and refocused the company, divestments, portfolio shaping, Re-estab-the Base and refinancing.

'26 will be a transition year, reflecting the deconsolidation of sold business and temporary stranded costs. We will have to bear a temporary drop in adjusted EBITDA due to several one-off effects. For this and for making the company over more efficient and more agile, we launched a new program, Simplify. Also financing costs remain high in '26, approximately EUR 250 million to EUR 300 million until the refinancing of the senior notes, which we have on the radar for '27.

And then from '27 onwards, we enter the growth and value creation phase. We want to see growth in the core business and growth along the lines of the existing and new digital photonics applications, highly pixelated forward lighting, micro-emitter projection arrays and spectral bio and distance sensing. Based on the Simplify program and growth, we will see margin expansion. With growing profitability and the solution for the Kulim 2, we will have a fully healthy balance sheet with leverage below 2x. And we want to see our financing costs below EUR 150 million. And the low run rate of restructuring costs is the basis to deliver strong free cash flow well above EUR 200 million.

Before we move on to the exciting growth avenues of some of our digital photonics projects, we have to look a bit deeper in one of the aspects of the transition phase. Precious metal prices in here, namely gold, Slide 16. Gold is an important material in the production of LEDs. You need it for corrosion-free mirrors to get the light out of the EP layers, to put it simply. In normal years, that added to the COGS bill, a high double-digit million-euro figure. The unprecedented gold rate that accelerated in '25 cost us an additional EUR 35 million, that's 2% margin of the OS division. That was in '25.

The price curve is taking an exceptional shape, as you can see on the left. The peak has come down the last 10 days. But when assuming an average price of about USD 5,000 per ounce, we have another EUR 60 million cost add-on compared to '25. That would be a 4% margin impact for OS and around 2% for the group. We are mitigating as best as we can. We are hedging and that limits further risk very much but doesn't solve the problem. But then we are also reducing precious metal usage by redesigning our product. So that takes a bit.

And we are launching the Simplify program. I hate to say it, but on top of the divestments and the stranded costs, the gold price and precious metal prices overall will weigh further on margins and adjusted EBITDA in '26.

And with that, back to Aldo for some words on digital photonics growth vectors that we'll kick in step by step and that, we presented in detail last week.

Thank you, Rainer, and we are on Slide 17 now. Digital photonics is really opening up multiple highly attractive growth avenues across both emitters and sensors for us. On the emitter side, micro-emitter arrays are transforming 3 key markets: advanced automotive lighting with EVIYOS, where we already ship in volume and hold the clear design win lead; ultra-compact RGB micro-emitter arrays enabling bright, power-efficient and small AR displays for next-generation smart glasses; and multichannel micro-emitter-based optical links for AI data centers, wide and slow as it is called, interconnects that offer superior energy efficiency and unlock future chip-to-chip optical architectures. For each of these, we see additional revenue potential in the triple-digit million euro territory over a staggered period of time.

On the sensor side, we are equally well positioned. Spectral sensing is already today a triple-digit million business, and we see it grow further, anchored in the premium smartphones and expanding further with new product generations and the right of foldables. Biosensing continues to scale as wearables at more optical measurable biomarkers creating incremental double-digit million opportunities. And finally, multi-zone direct time-of-flight sensors bring high-precision 3D awareness to smart devices, robotics and emerging humanoid platforms, with adoption curves that could drive significant revenues by 2030 and beyond. Also on the sensor side, we see additional revenue potential of double-digit million euros, in some cases, even triple-digit long term.

Together, these 6 factors demonstrate our unique portfolio of emitter and sensor technologies positioned at the center of major global trends, automotive safety, AR, AI compute, personal health, intelligent robotics, each offering meaningful, scalable and compounding growth potential.

Now let's quickly revisit our financial targets for 2030 that we published last week on Slide 18 now. This slide sets out our over-the-cycle target operating model for 2030 once divestitures, including Kulim 2, deleveraging, corporate simplification and debt refinancing are complete and with new applications contributing to growth.

For semiconductors, we target mid- to high single-digit revenue growth starting in '27 based on a variety of growth factors that I just spoke about and the adjusted EBITDA margin of over 25%. Traditional auto lamps contributing to the group, as illustrated on the right-hand side, are expected to be flat and I guess a reliable cash source that helps fund the semiconductor transition and growth, consistently an adjusted EBITDA margin between 13% and 15%.

With that, we target for the group a CapEx ratio of up to 8% of sales, which should end up typically lower than that. The group free cash flow, as Rainer explained before, well above EUR 200 million post refinancing and a net debt to adjusted EBITDA ratio below 2x. These are over-cycle targets. They reflect our operating model once the portfolio transition is complete.

So let me summarize the key takeaways for Q4 and thereafter on Slide 19. Q4, we beat revenue and profitability guidance. The core semiconductor business grew 8% year-on-year on a like-for-like basis. Free cash flow was strong at EUR 144 million. RtB run rate savings were achieved 1 year ahead of plan.

We also progressed well in deleveraging our balance sheet. Last week, we announced the sale of our non-optical sensor business to Infineon. Together with the sale of Specialty Lamps, we will get EUR 670 million in cash, exactly the more than EUR 500 million that we announced last year. We have ample liquidity of EUR 2.2 billion available. We bought back EUR 200 million of convertible notes in January.

And most importantly, we have clearly defined the future direction of the company. We have laid out a strategic direction by creating the leader in digital photonics where we want to benefit from upcoming inflection points in this field. And we launched today the new transformation and savings program, Simplify, for saving further costs and transforming the way we work.

Now on to the outlook for the first quarter. We expect revenues to come in between EUR 710 million and EUR 810 million with adjusted EBITDA around 15%, plus/minus 1.5 percentage points, based on a euro to dollar ratio of $1.19. Lamps & Systems will show the usual seasonal reduction, minus 1 month of deconsolidation of Specialty Lamps as that business will go to Ushio. Semiconductors will experience a typical seasonal decline.

Given the coming change in the portfolio and the associated challenges for you in building a financial model, we also want to give some hint for the full year of '26. Group revenue might end up slightly softer than '25 given the divestments and a weaker U.S. dollar. Please remember that USD 0.1 equals roughly EUR 20 million more or less revenue per year. The move from $1.13 to $1.19, for example, would cost us another EUR 20 million in revenue.

Adjusted EBITDA will be negatively impacted by several one-offs, the divestments where we effectively sell EBITDA to the buyer, stranded cost overheads that we are not transferring to the buyer, but of course, are working on as part of Simplify and higher precious metal prices and other factors beyond that.

With that, we are now open for your questions.

[Operator Instructions] And the first question comes from Sebastien Sztabowicz from Kepler Cheuvreux.

First of all, on the automotive market, inventories remain at a very low level across, I would say, the board. Do you see any room for kind of inventory replenishment in the coming months? And attached to that on automotive, do you see any specific risk of DRAM shortages impacting your customers and indirectly impacting your business?

Second question is regarding the guide for 2026 in terms of revenue. What are the assumption in terms of asset disposals you have taken into your comment, both in terms of revenue contribution and in terms of timing, just to understand where we should land in terms of revenue in your euro term?

Yes. On auto, as you mentioned, we see overall a very short-term order behavior. Inventories at our customers are low. We've got a lot of orders, still within our lead times. So far, we are able to deal with those.

Is there room for replenishment? Yes, we have been hoping for that, honestly speaking. We feel that overall, the inventories are on the low side. We have started to kind of compensate a bit for that by putting a bit more inventory into our distribution channel. But at the moment, still overall inventories stay low. And I think that's because also a lot of our customers continue to manage their cash flow extremely carefully. Whether that is smart or not, time will tell. As you mentioned, memory is getting tight. And I think people are also a bit uneasy there on what it means for overall volumes. So far, no direct implications. But yes, there's, of course, a potential in that as well.

Do you want to take the guidance question?

Yes. So the asset disposals kind of -- I mean, it's the business we are selling. The first one, the lamps, the industrial lamps business, that was roughly EUR 150 million of revenue and let's say, EUR 15 million of EBITDA, that will go out probably end of Q1. So in the guidance, we assume that it would still be in for 2 months, and the third month will be out. And for the non-optical sensor business, that was a revenue of EUR 200 million and EUR 60 million EBITDA, assuming that would go out mid of the year, then obviously, half of that will go out. And then there's also, yes, for both transactions, roughly EUR 30 million stranded costs that we will immediately tackle one after closing, but then we'll take up to a year to take it out. That is part of the Simplify program, the elimination of that stranded cost.

And when you come for modest, I would say, revenue decline, modest is like a moderate to mid-single digit, is making sense?

Yes, that makes sense.

And the next question comes from Janardan Menon from Jefferies.

My question is just following on the '26 guidance but on the adjusted EBITDA margin. I'm just wondering how we should think about that. You've guided to 15% in Q1. Is that -- would that be a bottom? And should we think that things will gradually improve from there? Or when the non-optical business gets sold in the second half, will that have a sort of further negative effect on the margin as we go into the second half of the year?

And then second one is just on the revenue beyond 2026, especially on the AR projection display and the AI data centers where you are targeting triple-digit million. What is roughly the time scale when you think you'll get material revenues, let's just say, materialize in low tens of millions of euros or something like that? Will that be from '27? Or is that beyond '27?

Yes. Maybe starting with the EBITDA. I mean the negative impact from gold and so on, we already see today. So that is included in the Q1 guidance and that will not get worse. Obviously, then when the revenue and the EBITDA goes out, I mean that goes together and has no major impact on the margin. Obviously, the stranded cost will then come once the business is out. If we are tackling those stranded costs immediately, we will try then to see the improvement already within this year.

The typical seasonality certainly is kind of in Q2 then. I mean, in Q1, we still have 2 months in of the traditional lamps business that will be done in Q2. And anyway, Q2 is typically a seasonal very weak quarter. And then you always see the improvements in the second half of the year, and we should see the same this year.

On the new growth topics, I think AR is much further along in its development than the AI topic. AR is already quite well advanced, and we will see revenues in the somewhat foreseeable future. But still, there is a bit of time before market introduction there.

AI is at the moment in, I would call it, very advanced research stage, quick getting into product development stage. So you can imagine that is something for a bit later in the decade now. But once it comes, for both topics, we feel that these topics will scale quite rapidly because the markets are significant and the interest that we're getting shows that the programs that we're working on would be sizable.

Then the next question comes from Robert Sanders from Deutsche Bank.

I assume you've got works council approval for this restructuring and what you did with the pension trustees, et cetera. Is there anything you've done to guarantee the remaining employees as part of this deal? Just if you can give us some color. And where are these 2,000 headcount going to come out from the company? And then I have a follow-up.

Yes. I mean the pension and the Simplify program are completely independent, right? So the -- I mean, the pension, what we did is we really took some time to go through all of that and kind of see where we had covered it. We basically had a double insurance and so on. So we resolved that and now the pensions are just secured exactly onetime and everything, the pensions plus the pension increases. So we clean it up, and now there's a really good system, and that helped a bit the liquidity in Q4.

Now the headcount reduction from the Simplify program, and we are talking about roughly 2,000 people. A good half of that will be out of Europe with a strong emphasis of Germany, and we had already announced a few months ago the closure of one of the traditional factories in Germany. And with the traditional halogen business declining, we certainly have to do more adjustments, but it will also affect our Regensburg site, where we move some of the manufacturing of some R&D to Asia. But also, as Aldo pointed out, we will invest massively in automation and particularly on the back end, and that is then in Asia. And then we will also see a significant reduction in our Asian workforce. Because of that, automation/productivity improvement/AI.

Got it. Just to follow up on a question on the previous call. I just want to double check that the Premstaetten fab, Infineon has been very clear they're going to move their volumes very quickly over to Kulim. So what percent of that fab wafer capacity is relating to the businesses that you've sold to Infineon? But that's what I just want to double check.

Well, I think actually, yes, they will move product over, but it will not be immediate. They will have to also prepare their factories for it. They have to get customer approval for it. And also, we have agreed on a smooth transition so that we have the time to develop new businesses to compensate for that. The factory has 3 areas in -- the filter making that we mainly use for the display sensors is completely untouched by this transaction. So it stays fully loaded and stays fully there. TSV, that's a specific technology on how you connect different layers in your semiconductor, is also only to a very small extent used by the type of products that Infineon is taking over.

And then the more generic CMOS is where the product lines that Infineon is using is probably in the 30%, 40% range of that capacity. So that's where we see, over time, a step-wise reduction and where we feel we can compensate that by expanding, on the one hand, our internal business. We spoke about the emitter arrays, both on headlamps, but also, for example, on AR, those need to be controlled by CMOS building blocks, if you will, or steering blocks on the backside of this product, and they will increasingly come out of Premstaetten. So that's, for example, one of the internal growth factors externally beyond the business that we keep, we also see that actually the foundry business is a part of the growth story here as well as selected PMIC on customers and applications, where we have a good access and a right to play.

So we feel quite comfortable with these growth factors and with the time that the transition will take because it's quite a number of smaller products. It's not one product with a huge volume that is in this product line. Industrial Automation and Medical are usually smaller programs running for a long time but are very specific in their technological needs and also in the customer approvals. And therefore, it was a logical combination that we agreed on a time schedule in the step down that allows them to do a good preparation and gives us the time that we need to then refill the fab with good new business.

Got it. If I could just squeeze in one more. Just about auto LED, I mean, that business, in the past, you said, could grow at sort of 10% per year. Obviously, this year looks like a difficult year for the car industry. But is there anything that would prevent auto LED growing at 10% per year, maybe changes in mix or something that you see from today's perspective?

Well, there are 2 factors, I would say. The one hand, we see a clear push to more of these highly integrated, high-performance headlamps like EVIYOS. And we have now a variety of flavors in that, and we see really good traction now across the globe. It used to be a very European program. Then a number of the Chinese jumped on. And now with the new regulation in the U.S. also enabling adaptive driving beam, we also see much more interest from the U.S. So that category will significantly outgrow that percentage that you just mentioned.

At the same time, of course, the saturation in the car with standard LEDs is already quite a bit higher. And there, of course, we are also confronted with price pressure, especially in China. You can imagine that the war amongst the OEMs has also an impact there. And that's why the efforts that we put in, in Simplify and also in a lot of the product cost optimization that we are doing, are very important to defend our shares there, but that weighs a bit on the growth rate.

So overall, I would say mid- to high single digit would still be my view given the mix of topics that I just outlined.

The next question comes from Craig McDowell from JPMorgan.

The first one, just on the pension trustee piece. Can you explain what that means in practical terms for cash? What's actually happened in practice? And just to confirm, there's no restriction on the cash released from this arrangement?

And then secondly, thanks for the color on the adjusted EBITDA of the divested assets. Just wondering whether you give any indication on gross margin of those sold assets as well, just to help modeling.

Yes. Craig, yes, sure. Yes, I can confirm, I mean, the cash on hand that we had end of last year that included the pension transaction which was close to EUR 1.5 billion, is no restricted cash, right? It's on our bank accounts, and we can use it. We can use it for operational matters. We can use it to repay the debt. And as I said, together with the divestment proceeds, we have all the money on hand that we need to repay both the convertible and the minorities.

Now with the adjusted EBITDA that goes out for the transactions, I would say that just the margins are comparable to the business we keep, though. The manufacturing services that we will then provide to the buyers, that holds true for both transactions, those typically have a lower margin.

[Operator Instructions] The next question comes from Harry Blaiklock from UBS.

Aldo, you kind of mentioned in a previous question around the Chinese market and potential pricing pressure from -- given the pressure that OEMs are seeing there. And I know you have decent exposure and the market is obviously, as you mentioned, softening after a few strong years. Can you maybe comment a bit more around the dynamics that you're seeing in that market? And then also your view on Chinese competition currently, kind of whether that's intensified over the last year or so?

Yes. I think China is a bit of a question mark for '26 now in terms of volumes. At least at the moment, it seems to start a little slower and also the projections are a bit lower. At the same time, I think if we think back a number of years, every time when things truly started to slow down, there were incentives put into the system to make sure that everybody in brackets can survive.

So let's see how '26 truly plays out. China will still remain an important market, both in terms of volume but also in terms of innovation. As I said before, one of the markets where a lot of our new products get accepted very quickly and where we see high adoption rates, for example, of EVIYOS. So it is always important for us to be the clear innovation partner for our customers and at the same time, have a cost position that allows us to also continue to capture a very significant share in the more established products. But that second part requires a lot of work. I mean prices are coming down, and we need to do a lot of work to take cost out of our products to be able to continue to enjoy that business. And that's not easy.

But so far, we are able to pretty well defend our shares, but there's definitely pressure, and we acknowledge that, and therefore, we take action to counter that.

Got it. Makes sense. And then on the EBITDA margin target for the semiconductor business of over 25%. Obviously, you gave that last week, which was before the announcement of the plan, but I'm sure the Simplify plan was obviously baked into that. But I'm wondering would you be able to hit that over 25% margin target without the Simplify plan? Like does the Simplify plan provide some kind of upside to where you could have got? And -- yes.

I should say it was priced in. We didn't want to speak about it last week because it would very much confuse the messages. I think both topics, the deleveraging and the divestment, were an important topic to give the bandwidth to last week so that people, also our employees, could really understand what was going on. And now this, with Simplify this week, we give a lot more insight in how we want to defend and expand our margins. That was baked into this target. Obviously, what we, of course, will push for is to get these things implemented as quick as possible. And with that, get to the target margins as quick as possible. That's the key focus now. And then let's see how it goes.

I mean with the last 2 programs, I think we have shown a pretty good track record of being aggressive, being quick, and that's what we would like to repeat. But obviously, it doesn't get easier. You need different levers, and we are now using very different levers than last time, for example, really reallocating the full standard product portfolio on the chip side from Regensburg to Malaysia, including the R&D that is associated with it to really compensate also these pressures that I spoke about before and to free up then room for highly automated innovative products, for example, on the AR side here in Germany. So it is quite a structural change that is important for competitiveness and important for innovation at the same time.

Got it. Super helpful. And one last question, if I may, just on the consumer business and any impact that you've seen there, like obviously not -- I'm sure you haven't seen kind of tangible impact yet from the memory disruption, but any conversations that you've been having with customers about their thoughts going into the second half of the year?

Well, our customers are worried about it, but so far, say they have secured their volumes. Whether that is fully true or not, the year will tell. But it is acknowledged. Our customers are working on it. So far, no reductions in forecast or outlook yet. But can it happen? Well, AI pays top dollar to compete with a simple smartphone against that will not be trivial. At the same time, the industry have always found ways around it and to deal with it. So yes, it's too early to tell what the true impact will be at the moment.

There are no further questions at this time. So I would now like to turn the conference back over to Juergen Rebel for any closing remarks.

Thank you, operator. Thanks, everyone, for joining today's call. If there are any follow-up questions, there's a lot of material on our website, and you can always reach out to the Investor Relations team. Thanks very much, and speaking to you soon.

Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.

Good day, and welcome to the ams OSRAM Q3 '25 Results Credit Investor Q&A Call. My name is Sergio and I'll be your Evercall coordinator. The format of the call includes prepared remarks from the company followed by a question-and-answer session, at which point then you'll have an opportunity to ask question 5. Attendees are also welcome to submit questions in writing via the ask a question button found on the upper right of the deal road show. At this time, I will turn the call over to Juergen Rebel, Head of Investor Relations. You may now begin.

Hello. Good afternoon, Europe. Good morning to the U.S. This is Juergen speaking. We'd like to welcome you to our financial and business update on the first quarter -- on the third quarter 2025 for our credit holders. Rainer, our CFO, will walk you through. And during the call, we're referring to an excerpt from the earlier analyst call where you can find the slides on our website. You can also find a full IR presentation on the website for further details. Rainer, the stage is yours.

Yes. Thank you, Juergen, and hello, everyone. It was a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than the previous quarter, also supported by a one-off. Re-establish-the Base savings continued to be ahead of plan. I'm now on Page 3, looking at the financial performance of the group. Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semi business. In the Auto Lamps aftermarket business, where the double-digit seasonal upswing. The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year, revenues are down a bit with 3%. This is completely due to the weaker U.S. dollar. Note the $0.07 difference in the average euro-U.S. dollar exchange rate, which equates to approximately EUR 35 million top line.

If you look truly at a like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional Auto Lamps business. The semi core business against which we measure our growth grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off. Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit, a onetime profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility. Now let's move to the segments. On Slide 4, a snapshot a snapshot of the segment performance that you find in our IR presentation. Opto semi revenues improved 6% sequentially, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar.

Coming to profitability. Adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increased was balanced by inventory reduction, the absence of onetime effects that were supported in Q2, such as an [ FCF ] funding catch-up. In the end adjusted EBITDA margin stayed almost flat at 22.6%. Now Sensors and ASICS, an encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand. Android business was okay. Products, we basically discontinued still saw some further orders, but that live longer as often, little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased-out non-core portfolio and the top line impact from the weaker U.S. dollar. Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more than EUR 10 million windfall profit from cell and manufacturing equipment helped. And lastly, in Lamps & Systems, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere made drivers replace their broken lights in their cars more frequently. Nothing particular to report in Specialty Lamps for industrial and entertainment applications. The business remained at a similar level as last quarter was approximately EUR 40 million of revenues.

We sold this business segment to [ Assure ] as part of our accelerated deleveraging plan. Closing is expected around end of the first quarter '26. Adjusted EBITDA stayed almost flat. [ Wise Road ] revenues were up almost EUR 25 million. The gross profit fall through from higher volume was eaten up by a meaningful reduction of inventories. Now looking at the semi conductor end markets. In summary, we're on Slide 5. Sequentially, 9% up in year-over-year 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew year-on-year by approximately 9% on constant currencies, well in line with our semiconductor growth model and higher than last quarter. Now first, automotive. LED inventory correction has ended but no significant restocking insight. We even hear some customers who want to reduce their inventory reach even further. Book-to-bill ratio hovered around one throughout the quarter. Nevertheless, we saw a slight sequential increase in revenues of 4%. The uncertainties in the supply chain persist. We still see a lot of short-term ordering, which is not often below normal lead times. Fulfillment channels inventory went further down. Now we are between 7 and 8 weeks. In the old days, 8 to 10 weeks were considered healthy and normal. Second, Industrial Medical, in line with the slow recovery of the overall market, we saw a sequential improvement of 2%.

However, we are still below last year's level. When ignoring the weaker U.S. dollar, may be roughly on the same level. As always, we have to look at the verticals individually. [indiscernible] revenues at its seasonal peak. Professional lighting unchanged. The demand for industrial automation is improving only gradually. Same is true for medical. When we look at the channel, same picture as last quarter, Europe and U.S. relatively stronger than China. Third, consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker U.S. dollar. The slight decline is entirely due to FX. Business-wise, our new center products more than compensate for the phased out noncore products. Now let's talk about future business. I am slide 6, Design wins are underpinning our midterm growth model in semis. Traction in the market continued unabated in the third quarter. We are well on track in reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year. We landed about 800 projects in the last quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months, a few wins that we are very proud of are sticking out.

Give you some examples. First, Automotive. With our industry-leading intelligent RGBI interior lighting solution, we secured another design leading Chinese OEM and on top of a large design win for a prestigious car platform and European premium OEM. Now second, consumer, our spectrum and proximity centers are the best that you can get. This once again convinced leading customers, where Design wins are worth a couple of hundred million euro. With that, let us look at some of our recent advances when it comes to differentiating technology platforms, that on Slide 7. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance-optimized platforms. The other part of R&D is focused on differentiating technologies, especially for new applications that might see a growth inflection in the future. We are also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia, covering thousands of patent protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes Matrix headlamps as an example. As such, we are the right partner for our customers holding a unique IP position.

On Slide 7, you get an impression of our leadership in infrared emitter technologies that are used in a multitude of applications. We are speaking of the AlGaAs material system that provides LED and laser light with 808 and 1130 nanometer, just beyond what the human eye can see, the so-called near infrared. Our LEDs boost industry-leading wildfire efficiency and red glow suppression. Our laser diodes boost industry-leading efficiency and optical output power. Together with high-quality, cost-effective standard packages, these components are highly suited for a multitude of applications that deliver already to date the revenue contribution in the triple-digit million territory. We see the infrared LEDs in the car for in-cabin sensing in consumer applications or in drones amongst many others. Our lasers are very established in material treatment LIDER. These properties also make them ideally suited for future defense applications, such as drone defense or even more visionary regulations like nuclear laser fusion. A technology that will harness the energy generation process of our sun. We think there's much more to come from this technology platform.

Now let's switch to the center side of things on Slide 8. We recently introduced the industry-leading 2 dimension and direct time-of-flight sensor platform. Now why direct? The sensors measures the time. The photon travels from the object and back and calculate the distance, pretty fancy. I'm very proud of our engineers who deliver the industry-leading sensors that feature twice the frame rate at the same resolution as competitor devices. Our [indiscernible] resolution at the same frame rate, whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distance measurement. And that's quite interesting. It enables edge AI sensing applications in gene smartphones. We see the principal in the lower left corner. When the image is enhanced with the 3 dimension adapt information from the center, you can place objects such as furniture, for example, in an environment completely virtually. Just to give you an example, we see applications for this center technology, not only in smartphones, but also building automation, home appliances, robots, drones, consumer electronics, you name it. Completing our technology and product tour this quarter. And I'm on Slide 11, we have the leading spectral sensing center platform in the industry. DC honors the latest flagship model, the Magic 8, a high-end premium smartphone with 4 cameras on the world-facing side.

Our sensors allow for eye-fatigue protection and professional grade color accuracy for an enhanced user experience. With this, let us move to bottom line topics. Re-establish the Base continues to make great success as it has been instrumental in making many of the headwinds to our bottom line, especially when it comes to the gold price this year. We are on Slide 10. By end of September, we have pocketed approximately EUR 185 million of implemented run rate savings, another EUR 25 million during the last quarter. now it's time for more details. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar and euro senior notes, we increased our cash on hand position to EUR 979 million end of September. End of October, we are even above EUR 1 billion. After the tap in July, we have approximately EUR 651 million equivalent in U.S. bond and EUR 1.03 billion in the Eurobond, both are due on March '29. Last quarter, we got some questions on why we tapped at that particular moment. And if you look at the leveraged finance market in the last couple of weeks, it turns out that the timing was pretty good. And yes, voluntary conditions would certainly be less favorable. No news in the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September.

This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June. Kevin just mentioned the SRB. We certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the entertainment and specialty lamps that we announced in July, eventually realized proceeds well above EUR 500 million. We are fully on track. Minority shares with a value of only EUR 11 million were tendered during the summer months. Consequently, the outstanding minority put options amount stood at EUR 570 million, a 12% outstanding at the end of Q3. Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities. Any liquidity concerns in the market should be a thing of the past. And now on Slide 12, cash flows. Strong improvement in third quarter operating cash flow. We recorded EUR 88 million despite us paying the coupon, the high yield bond, which, as you know, is always due in Q1 and Q3. But we managed inventories well and make sure we are collecting money from litigation and subsidies. Last year in Q3, we had a customer prepayment of approximately EUR 220 million that came in as a onetime at the time. CapEx stayed in check, EUR 48 million in third quarter for the full year, we will land between 6% and 7% of revenues, well below the long-term average ratio of 8%. In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date breakeven in free cash flow.

If you exclude the customer prepayment last year, Q3 was the best quarter in a long time. Though Q4 is certainly expected to be better with lower interest payments and counting on the promised money from the Austrian government and under the European Chips Act. And now on Slide 13, let me summarize the key developments of the third quarter. On the business, we delivered revenues above the midpoint on profitability at the midpoint of the guidance, 9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model. Execution of RTB programs ahead of plan now with EUR 185 million run rate savings. Securing future semiconductor business continues unabated. We are on track to reach again the EUR 5 billion mark for this year, with passing the EUR 4 billion already at the end of September. And on the deleveraging plan, everything is well on track, which are obviously being able to go into further detail now. R&D, I've presented the example of our relentless effort to find future growth opportunities by investing in differentiating technology with great potential. Today, we talked about infrared emitters in 2-dimensional time-of-flight centers.

With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million with an assumed exchange rate of EUR 1.16 compared to the beginning of the year, the weaker dollar cost is a mid-double-digit figure on the top line. Automotive lamps will see its peak in the annual lighting season. With semis altogether, we expect a small seasonal decline. Industrial & Medical might be kind of stable, but we sent a lot of uncertainty in the auto market, maybe flattish at best, whereas in consumer, the smartphone season is cooling off a bit as always. We expect adjusted EBITDA margin to come in 17.5% plus or minus 1.5 percentage points. In essence, stable compared to Q3, if you back out the windfall profit from selling the manufacturing assets in Singapore. And finally, cash flow with year-to-date 0 in keeping -- we're keeping up our promise for the full year. We expect free cash flow of more than EUR 100 million in the fourth quarter, certainly driven by the expected inflow from Chips Act. And with that, we're ready for your questions.

[Operator Instructions]

Our first question is a written question from Marco with Amova Asset Management. Could you provide some guidance on when the settlement of the domination agreement is expected? Would a time line in the first half of 2026 be realistic? And during this morning's earnings call, you mentioned that the auto inventory correction has not yet peaked and that you anticipate further weakness in Q4? Could you confirm this and share some additional color on your outlook for 2026?

Sure, we can. Yes, the settlement, obviously, not this year, the court hasn't had a date here, so certainly somewhere in '26 if it is in the first half of the year, then probably more towards the end of the first half, could also be in the second half of the year. You said that the auto inventory correction has not yet peaked. I think that's not what we said. We said that the inventory correction is over, but there's no restocking. What we also said is that channel reach in the fulfillment is reducing further down to 7 weeks, which is pretty short compared to 8 to 10 weeks in the past.

And our next question is a written question from Connor with Bank of America. Do you have any update on the sale of the Kulim 2 fab in Malaysia? How many parties might be interested?

Yes. I cannot say much more. It's very confidential, but there's at least a couple of interested parties that we're talking to, they need to do their homework. So things take a time. But it's certainly moving in the right direction. But as I said earlier, we are not yet on the final approach.

And our next question is another written question from Benjamin with Robus Capital. Your cash flow is up but mostly driven by EUR 189 million inflow from other assets. What is behind this?

Yes. That that's a complicated way that cash flows are determined. The other assets have always kind of -- I mean, you book reserves for interest, for example, in Q2 and then you pay it in Q3, that will be part of it. But there's also kind of collections from subsidies, for example, in Germany, it also inflows from a court litigation that we had won and so on. So -- and it's a small portion, less than EUR 20 million, but that is also from a factoring related. But it's really a strong cash flow given that there was such a -- I mean, Q3 is one of the 2 quarters that sees the interest payments and despite us paying so much an interest, the cash flow was really positive. So I'm really happy about that.

Our next question is written question from Lucy with Apollo Global Management. Are you still progressing more than one asset sale process?

Lucy, yes, we are pursuing a couple of things in parallel. We continue to do that. But kind of, as I said, we are very well on track with that, and we will soon need to decide which one then to conclude.

And for our next written question comes from Julie with Alliance Global Investors. In order to face your 2029 maturity wall, don't you need to raise equity and debt?

No, we don't need to raise equity. That's not part of the plan. We have the asset disposal. We have Kulim as disposal, right? And then our net debt-to-EBITDA would have improved and then as we approach the maturities, we'll find the right instrument to replace.

Our next question will be a verbal question from Tomas with Sarria.

In relation to the prepayment you received in Q3 last year. I believe that was in relation to product to be produced from FY '26. Is that still on your -- is that still the same target? And do you account for the prepayment in the working capital, i.e., is it in one of your prepaid liability and your current liabilities?

Yes, yes. It's certainly part of the working capital. So yes, and the plan is to repay it over 10 quarters starting in Q2.

And is it linked to sales of product?

Yes, absolutely.

Okay. So and it's still on target. Thank you.

Our next question comes from Laura with MFS Investment Management. You may proceed.

Just on the asset disposals going back, do you think you'll be in a position to announce any potential deals before year-end? I obviously understand that completion will be in 2026. And then secondly, on the repayment of the 2027 converts, I think part of the proceeds from the TAP issue on the bonds that you completed earlier this year was to partially repay these for EUR 150 million. What about the timing for that? And have you decided whether this is going to be a tender process?

Yes, Laura, thank you for those questions. I mean they're certainly very good questions, but please understand that that's all very confidential, and I cannot really answer that, yes. As soon as we have something to say on the disposals, we will immediately publish it as an ad hoc, but it couldn't give you the exact timing. And when it comes to EUR 150 million or so that we earmarked for the buyback of the convert, that is very high on our list, right? But we'll announce it at the moment where we will start the tender offer.

Our next question comes from [indiscernible] with Lazard Asset Management.

I hope you can hear me. And I have a question regarding your Kulim sales. if it's been a long time that you're trying to sell the Kulim plant, and you always mentioned that you continue to talk to interested parties. It seems that it's progressing well. But just by if you are finally not able to sell the Kulim asset. Is there any alternative plan on this asset?

Yes. I mean it certainly takes a little longer than we had hoped for. But it is a very good asset. And many companies looked at that, and they all confirmed it's a high-quality, absolute kind of best kind of factory you can get. Now there's certainly some buyers it's too large. There's others, let's say, it's too small, right? I mean, it would be small for a major 300-millimeter factory. It would be large for just a simple 200-millimeter factory, but there's buyers for them is just right, and they're waiting for the signal from the market upturn that they would want to start investing, right? I mean you need to somebody who wants to extend capacity now in Asia, and then it's the perfect place and it's a great asset.

So we're very confident that somebody will buy it. And it's just the timing is a bit difficult to predict. As I said, we continuously talk to several parties. And I hope that one day, we'll be able then to finally convey the message that we found a buyer.

That's great. And just as a quick follow-up, is the Kulim sale on top of the $500 million target disposal or it's included in the EUR 500 million disposal?

No, no. That's 2 different things.

That's what I understood for the disposal. Yes, please go on.

Yes, please question, please.

Yes, for the disposals, what could be the targeted assets except the lamps business on the pipeline? And what multiple do you target, please?

Yes. It is -- yes, again, I would love to answer that question, but we don't want to do the business any harm that we are selling, right? So we're keeping it confidential -- what exactly it is. And yes, and we always said kind of, yes, we want to generate proceeds, but we need a -- we also need a very decent EBITDA multiple, so that it would actually help to improve the net debt to EBITDA. So we want a good EBITDA multiple, and we want to have well above EUR 500 million of proceeds. So the first EUR 100 million are basically already in the pocket from the sale of the [ E&E ] business, which is supposed to close in Q1 next year.

Our next question, is a verbal question from Benjamin with Robus Capital.

Yes, regarding the cash inflows from the Austrian government under the European Chips Act, is it still expected for Q4? And how much are we roughly talking about?

Yes. I mean, we expected in Q4, that's what the government said also in public. So -- but I mean it's not yet in the books, but we are confident that it will come. In terms of the volume, we expect it to be in the high double-digit million figure.

On your RCF, how much of that is currently drawn or available? What is the maturity again? Can you remind me? And are there any restrictions in uses like what you can use it for?

So the total is EUR 800 million of that EUR 670 million are available.

Maturity?

September '27. So it will reduce to EUR 600 million end of next year. Let me specify the -- I mean, technically, it's not drawn. I mean we didn't draw any money under the revolver, but we used it for a letter of credit for the payment. The EUR 130 million are used for the letter of credit, but it's not drawn as cash on.

Yes, that makes sense. And originally, you said you had that to sort of back potential puts from the OSRAM shares. Are there any restrictions on what you could use it for? Or could you also use it to pay down other debt? And from the tender for the convert or something?

Yes. I mean, there's no restrictions in the use. I mean and the minorities are down to EUR 500 million and a little. So the revolver that way is much higher. We could use this for all kind of things, but I doubt it would be a good strategy to use the revolver to pay down other debt, right? I mean, that doesn't sound like a good financing strategy. But theoretically, we...

And how much is currently drawn under factoring lines?

Just a second to look that up. We'll look at that and give us a minute. Do you have more questions?

Yes. I was just wondering, have you reduced your Q4 outlook, I think? Because when I look at the share price development, that was quite drastic today. So seems to be a bit of a disappointment. Can you maybe elaborate on what could have been the disappointment here?

Yes. No. I mean, we're asking investors what they believe. Maybe it was the absence of any news on the disposals or whatever. Maybe it was a bit the outlook. But I mean we always have this logic in Q4 that the traditional business is at its peak in Q4 and the semi business is coming down a little because kind of the consumer business has its peak in Q3. So in our view, there wasn't a disappointment. It was maybe a bit lower than consensus, though we believe that the consensus had a certain age and was maybe not properly reflecting the current exchange rate. But maybe I'm speculating a bit.

Our next question comes from Jeff with JPMorgan.

A couple of quick ones. On the semiconductor revenue, you spoke to core revenue growing over year. How much of your revenue you consider core? That's my first question.

Yes. Almost everything that we have today, right? I mean, a year ago, we had some revenue still in on platforms that were either sold or discontinued. But everything we're selling now are almost everything, 98% is core.

Got it. Okay. The design wins, you spoke to EUR 4 billion, I guess, year-to-date EUR 5 billion hoped for, for the year. Is that level sufficient to generate revenue growth, just given the legacy programs that roll off? Is that level of design wins sufficient to grow semicon total revenue?

Yes. I think so that -- I mean, the rule of thumb, that's -- I mean that's now no science, but the rule of pump is you need EUR 4 billion to keep your revenue flat and EUR 5 billion would then support a very decent growth like in our midterm model. And maybe quickly coming back on the factoring. So the factoring is a bit below EUR 150 million, and the reverse factoring is around EUR 90 million. That is slightly up, yes, low double digit compared to the previous quarter. So almost stable.

This is Jeff again. Maybe I can ask just a couple of questions on 2026 cash flow items. What's the estimate for the entertainment light business sale, the net proceeds in '26, as well as are there any other like Chips Act or government subsidies expected to be received in '26?

Yes. I mean, this year, the chipset money will be higher because there's kind of -- it's more or less for 2 years. And next year, there will be more, but just the portion for 1 year. So maybe half of that. For any what we just sold, we expect an inflow in line with the asset purchase agreement of roughly EUR 100 million. You know that there will be the outflow from the customer prepayment in a similar order of roughly EUR 100 million. And then hopefully, also the other asset disposal that we are currently working on, which we hope will close number in the mid or half next year or Q3 next year.

Our next question is a written question from Sharmin with Lion Trust. Thanks for the presentation. Any progress on the Kulim facility sale? And there's 2 more questions here. Can you give an update on the government grants you were expected to receive this year and likely timing? Is there FCF guide reliant on these grants materializing? And third question is Q4 EBITDA margin lower than previously guided to? I have 19.5% in my notes. If so, what are the main drivers of this change?

Yes. Sharmin, I mean the Kulim factory, I think we answered that there. We have good discussions. We are not yet on the final approach. The government grants, I mean the Austrian government, even in public said that they want to wire the first tranche in still this year before Christmas. I think, therefore, the certainty is quite high. We would certainly want to overachieve EUR 100 million of free cash flow guidance that we have. But yes, the government grants would be an important contributor to that.

We never guided the Q4 EBITDA margin. I think the Q4 margin is coming in as we had expected, but we never guided it. As I said, Q3 had a bit of a one-off effect in there. In Q4, we always have the semi business being a bit weaker because of seasonality and the traditional business to be a bit stronger. But the traditional business certainly has a bit little lower margin than the semi business. So kind of the guidance for Q4 is what we always have in the books, and we never guided it. There is certainly -- it is a bit lower than the consensus was, but I mean, I think the consensus also had a certain age and was kind of -- I mean, some of the estimates were put together when the exchange rate was more at 105 or at 110, maybe that is the reason.

Our next written question is a follow-up from Julie with Alliance Global Investors. A follow-up question on debt. Would you consider new convertibles?

Yes, Julie, we would consider new convertibles, but not under today's share price, right? I mean, today's price, there would be a waste of opportunities and would also not be fair to our equity investors, we did that. So kind of -- I think I always set that kind of the moment where we would see a share price more around 20%, then we will probably start considering that.

And our next question is another written question from Chris with M&G Investment Management. The revenue guidance range for Q4 is quite wide. What are the items that can tip it one way or the other?

Yes. I mean, the range is always the same. We always have that range. You could say it is why, given that it's already mid of November now. So yes, we certainly expect to be closer to the midpoint that the guidance is indicating. But you never know exactly, right? I mean, there's kind of order intake. You never know if there are some customers that might take some -- do some shutdowns at year-end and the Auto lamps aftermarket business kind of -- it is another 100% certain. But I agree that the range probably looks a bit wide given that it's already mid of November.

[Operator Instructions]

It appears there are currently no further questions. Handing it back to Juergen for any final remarks.

Yes. Thank you, operator. Thanks so much, everyone, for joining this call. And as always, if there are further questions, many of you will meet on the road shows that were having the next days and weeks. And besides that, you can always reach out to us for any other questions, and we try to come back as quickly as possible. Thanks so much, and looking forward to speaking to you next quarter, which is next year. Thank you, and goodbye.

This concludes today's Evercall. Thank you, and have a great day.

Ladies and gentlemen, welcome to the conference call on third quarter 2025 Results. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead.

Good morning, everyone. This is Juergen speaking. We welcome you to today's call on third quarter results of fiscal year 2025. Aldo, our CEO, will comment on business and strategy; Rainer, our CFO, will focus on financials. We are referring to the Q3 earnings call presentation that you can find on our website. There, you'll also find further materials such as the full comprehensive IR presentation.

Aldo, please let us have your thoughts on Q3.

Thank you, Juergen, and good morning also from my side. Overall, I would say a good quarter. Our strategic focus is paying off. We delivered strong cash flow and significant growth in the core portfolio on a like-for-like basis. Profitability was better than previous quarter, also supported by a one-off.

We established base savings continue to be ahead of plan, and I'm now on Page 3, looking at the financial performance of the group.

Revenues came in at EUR 853 million, above the midpoint of the guidance. We saw an almost double-digit percentage improvement in our semiconductor business. In the Auto Lamps aftermarket business, we have double-digit seasonal upswing.

The weaker U.S. dollar cost us EUR 20 million top line compared to the previous quarter. Year-over-year revenues are down a bit with 3%. This is entirely due to the weaker U.S. dollar. Note the $0.07 difference in average euro-U.S. dollar exchange rate, which equals approximately EUR 35 million top line.

If we truly look at the like-for-like comparison based on today's core portfolio at constant currencies, we have grown by about 6% year-over-year. This includes the traditional Auto Lamps business. The semiconductor core business, against we measure our growth grew approximately 9% on a comparable basis, a really good result in the current market conditions. It clearly shows that our portfolio choices are paying off.

Profitability. Adjusted EBITDA margin improved quarter-over-quarter and year-over-year by almost 1 percentage point to 19.5%. In euro terms, adjusted EBITDA improved by EUR 21 million. Within that number, we have a profit of a bit more than EUR 10 million from the sale of some manufacturing assets in our Singapore production facility.

Now quickly on the segments. Page 4, look at the traditional Halogen Lamp business, a classic seasonal upswing. We saw a steep 13% quarter-over-quarter increase in revenues driven by the aftermarket season. The darker months in the Northern Hemisphere make drivers replaced their broken lights in the car more frequently.

Nothing particular to report on Specialty Lamps for industrial and entertainment applications. The business remained at a similar level as last quarter with approximately EUR 40 million of revenues.

We sold this business segment to show as part of our accelerated deleveraging plan as we communicated last quarter. Closing is expected around end of first quarter '26.

Adjusted EBITDA stayed almost flat. Why? If revenues were up almost EUR 25 million, the gross profit fall-through from higher volume was even up by a meaningful reduction of inventories.

Now on semis, I'm on Slide 5. First, business unit OS. The sequential increase in Opto semis with 6% revenue improvement, EUR 365 million compared to EUR 344 million in the previous quarter. The increase was mainly driven by automotive, but also by the seasonal peak of the Horticulture business. The upswing could have been higher if it wasn't for the negative impact on the top line of the weaker U.S. dollar.

Coming to profitability. Adjusted EBITDA improved by EUR 3 million to EUR 82 million. At first glance, you might have expected a higher fall-through from EUR 20 million more top line. However, the increase was balanced also here by inventory reductions and the absence of onetime effects that were supported in Q2, such as [ ease of ] funding catch-up. In the end, adjusted EBITDA margin stayed almost flat at 22.6%.

Now Sensors and ASICS on Slide 6. An encouraging seasonal jump in revenues by 13% to EUR 271 million. Consumer products were in high demand and our business was okay. Products, we basically discontinued, still saw some further orders that live longer as often. Little changes in demand for industrial and medical products. Year-over-year, business grew by 2%, mainly driven by the new sensor products, which are more than compensating for the revenue loss from the phased-out non-core portfolio and the top line impact from the weaker U.S. dollar.

Adjusted EBITDA jumped to EUR 64 million. However, I mentioned earlier that more EUR 10 million win for profits from selling manufacturing equipment was included there.

Now looking at the semi end market in summary, and we are on Slide 7 here. Sequentially, 9% up and year-over-year, 2% down. If we exclude the noncore portfolio that we discontinued last year, the semi core business grew by 9% and year-on-year at constant currencies, well in line with the semiconductor growth model and higher than last quarter.

First, automotive. LED inventory correction has ended, but no significant restocking in sight. We even hear from customers who want to reduce their inventory even further.

Book-to-bill hovered around 1 throughout the quarter. Nevertheless, we saw a slight sequential increase in revenue of 4%. If the uncertainty in the supply chain persists, we see a lot of short-term ordering, which is now often below normal lead times.

Fulfillment channel inventories went further down. We are now between 7 and 8 weeks in the old days, 8 to 10 weeks were considered healthy and normal.

Second, Industrial and Medical, in line with the slow recovery of the overall market, we saw a sequential improvement of 2%. However, we're still below last year's level. And ignoring the weaker U.S. dollar, maybe roughly at the same level.

As always, we have to look at the verticals individually. Horticulture revenues had a seasonal peak. Professional lighting, unchanged. Demand for initial automation is improving only gradually. Same is true for medical.

If we look at the channel, same picture as last quarter, Europe and U.S., relatively stronger than China.

Third, Consumer, a steep seasonal increase of 22% compared to Q2. Our main business is sensors for smartphones and wearables. Year-over-year, we see the impact of the weaker USD, a slight decline is entirely due to FX. Business-wise, our new sensor product more than compensate for the phase out noncore products.

Now let's talk about future business. I'm on Slide 8. Design wins are underpinning our midterm growth model incentives. Tracks the market continued unabated in the third quarter. We are well on track to reaching again accumulated lifetime value of EUR 5 billion of new business for the full calendar year.

We landed about 800 products in the September quarter across all verticals. This pushes the total to already EUR 4 billion for the first 9 months.

A few wins that we are very proud of are sticking out. First, in automotive. With our industry-leading intelligent RGB interior lighting solutions, we secured another design win at a leading Chinese OEM. And on top of that, also a large design win for a prestigious car platform at the European premium OEM.

Second consumer. Our spectral and proximity sensors are the best you can get. This once again convinced leading customers the design wins are worth a couple of hundred million euros.

With that, let us look at some of our recent advances when it comes to differentiating technology platforms. Now on Slide 9. We do spend a lot of R&D money as we continue to believe in exciting growth opportunities. One part of our R&D is dedicated to mastering the cost pressure in more established technologies by creating cost performance optimized platforms. The other part of R&D is focused on differentiating technology, especially for new applications that might see a growth inflection in the future.

We're also making sure that our customers benefit from an appropriate IP safety for those innovations. For this, we signed a comprehensive cross-license agreement with Nichia, covering thousands of patents, protected innovations in LED and laser technologies. The new agreement also covers sophisticated LED packages and also includes metric headlamps as an example.

As such, we are the right partner for our customers, holding a truly unique IP position in the industry.

On Slide 9, you get an impression of our leadership in further emitter technologies that are used in a multitude of applications. We're speaking of AlGaAs material systems that provides LED and laser light between 808 and 1,130 nanometers, just beyond what a human eye can see, the so-called near-infrared.

Our LEDs boasts industry-leading wall-plug efficiency and red glow suppression. Our [ laser design ] is post industry-leading efficiency and optical output power, together with high-quality, cost-effective standard packages, these components are ideally suited for a multitude of applications to deliver already today a revenue contribution in the triple-digit million territory, see the infrared LEDs in the car for incumbent sensing and consumer applications or in drones among many others.

The lasers are fairly established in material treatment and LiDAR with these properties also making my dealer suited for future defense applications such as drone defense or even for more visionary applications 1 day like nuclear fusion, laser-based nuclear fusion, a technology that could harness the energy generation process of our sun. We think there's much more to come here on this technology platform.

Now let's switch to the center side of things on Slide 10. We recently introduced the industry leading to dimensional direct Time-of-Flight sensor platform. Why direct? This sensor measures the time of [ photon transfer ] from the optic come back and calculate the distance. Pretty fancy.

I'm very proud of our engineers who delivered industry-leading sensors that featured twice the frame rate at the same resolution as competitor devices or twice the resolution at the same frame rate whatever you need in your application. You can use this performance for gesture and object recognition, but also for 3D distant measurement.

It also enables edge AI sensing applications, for example, smartphones. You will see the principle in lower left when it images enhanced with the 3D dimensional information from the sensor, we can place objects such as furniture in an environment completely virtually.

Just to give you an example here. We see applications for the sensor technology, not only in smartphones, but also in building automation, home appliances, robot drones, consumer electronics, you name it.

Completing our technology product toward this quarter. I'm on Slide 11 now. We have the leading spectral sensing platform in the industry. Here you see on our latest spec model to Magic 8, a high-end premium smartphone with 4 cameras in the world facing side. Our sensors allow for [ eye flicker ] protection and professional grade color accuracy for an enhanced user experience.

With this, let us move to bottom line profits. We established the base continues to be a great success as it has been so instrumental in mastering many of the headwinds to our bottom line, especially when it comes to gold price this year. We're on Slide 12 here.

By the end of September, we have pocketed approximately EUR 185 million of implemented run rate savings. Another EUR 25 million during last quarter alone.

Now this time for more details on the financials. And Rainer, please tell us about the latest progress.

Thank you, Aldo. Hello, everyone, from my side as well. Let us look at the balance sheet first. With the private placement of an additional EUR 500 million of U.S. dollar in euro senior notes, we increased our cash on hand position to EUR 979 million end of September and end of October were even above EUR 1 billion.

After the tap in July, we have approximately EUR 651 million equivalent of the U.S. dollar bond and EUR 1.030 billion with Eurobond, both as during March 29.

Last quarter, we got some questions about why we tapped that at a particular moment. If you look at the leveraged finance market in the last couple of weeks in terms that our timing was pretty good, momentarily conditions are certainly less favorable.

No news on the Malaysia sale and leaseback transaction yet. We continue to talk to interested parties, but we are not yet on the final approach. The value stood almost unchanged at EUR 422 million end of September. This brings us to an almost unchanged net debt position of EUR 2 billion compared to end of June.

Having just mentioned Basel leaseback, we certainly continue full steam in negotiating the indicated asset disposals on top of the sale of the Entertainment and Specialty Lamps that we announced in July. To venture realize proceeds well above EUR 500 million. We are fully on track.

Minority shares with the value of only EUR 11 million were tender during the summer months. Consequently, the outstanding minority put options stood at EUR 570 million, 12% outstanding at the end of Q3.

Taking cash, the revolver and bilateral lines into account, our available liquidity significantly increased to approximately EUR 1.6 billion. We are prepared for all eventualities any liquidity concerns in the market within of the past.

And switching to Slide 14, cash flows. Strong improvement in the third quarter operating cash flow. We recorded EUR 88 million. And that's despite us paying the coupon on the high-yield bonds, which, as you know, is always due in Q1 and Q3. So we paid that in Q3, but we also managed inventories well and make sure we are collecting money from litigation and subsidies.

Last year in Q3, we had the customer prepayment of approximately EUR 220 million became as a onetime positive at that time. CapEx base in check, EUR 48 million in the third quarter for the full year, we will land between 6% and 7% of revenues, well below our long-term average ratio of 8%.

In total, we finished the quarter with EUR 43 million positive free cash flow. This brings us year-to-date to breakeven in free cash flow. We exclude the customer prepayment last year, Q3 was the best quarter in a long time, though Q4 is expected to be better with lower interest payments and counting on the promise money from the Austrian government under the European Chips Act.

We switch to Slide 15, net earnings and earnings per share. On the left, you find adjusted figures. The adjusted net result improved in line with EBITDA to EUR 27 million in the third quarter. Adjusted EPS developed accordingly. The net financing result came in with EUR 59 million. Income tax stood at just EUR 5 million. Following the rule of thumb that there's always EUR 50 million, EUR 60 million adjustments per quarter due to transformation cost depreciation of PPA and share-based compensation, we ended up with minus EUR 28 million net results according to IFRS. Consequently, IFRS earnings per share also came in negative EUR 0.28.

That conclude my remarks. And with that, I would like to hand back to Aldo for the summary and outlook.

Thanks, Rainer. And now I'm on Slide 16, let me summarize the third quarter results again. Looking at the business, we delivered for revenues above the midpoint and profitability at the midpoint of the guidance.

9% growth in the core semi business year-over-year on a comparable basis, well in line with our midterm target model.

Execution of resemblance based program is ahead of plan now with another EUR 85 million run rate savings implemented. And we are securing future semiconductor business with an abated design win streak, now EUR 4 billion already in the first 9 months of this year.

Looking at the leveraging plan, everything well on track without being able to go to further detail right now.

R&D investments, I've presented to you an example of our relentless efforts to find future growth opportunities by investing in differentiated technology with great potential. Today, we talked about infrared emitter and to 2 dimensional Time-of-Flight sensors.

With that, let us look at the right-hand side of the slide, the outlook for the fourth quarter. We expect revenues to come in between EUR 790 million and EUR 890 million at an exchange rate of 1.16.

Compared to the beginning of the year, the weaker U.S. dollar cost us a middle double-digit million figure in top line.

Automotive lamps will see its beacon annual lighting season. For semis altogether, we expect a small seasonal decline. Industrial medical might be kind of stable, but it sends a lot of uncertainty in the automotive market, maybe flattish at best, where I think consumer, the smartphone season is cooling a bit logically.

We expect adjusted EBITDA margin to come in at 17.5%, plus or minus 1.5 percentage points, in absent stable compared to Q3. If you back out the win for profit from the selling of manufacturing assets in Singapore.

Looking at cash flow. With easily 0 and keeping our promise for the full year, we expect free cash flow of more than EUR 100 million in the fourth quarter, certainly also driven by the expected inflows from the Chips Act.

With this, I conclude my remarks, and we're now ready for your questions.

[Operator Instructions] The first question comes from the line of Sébastien Sztabowicz from Kepler Cheuvreux.

The first 1 is on the automotive market. So do you see the demand building up, it seems that you are coming to the end of the inventory correction. But I'm just curious about the trajectory of growth moving into the next few quarters? And in the short term, have you seen any specific downside to demand linked to next turmoil or is not something that is affecting the global car production volume for your demand?

And the second question is on the synergies and the cost saving program. You already reached EUR 185 million at the end of Q3, which is well above the target for '25 and you are coming closer to what you expect for 2026. Do you plan to accelerate a little bit more further the cost-cutting action or you will stick to EUR 225 million for next year and then are you going to stop cutting the cost base?

Yes. Thanks, Sébastien for those questions. Yes, on the automotive side, I would say inventory situation is okay. We do see that there is a lot of short-term order behavior. And I do also link that partly to the Nexperia topic, just our carmakers also have to be very agile in their production schedules and what they build and when they build it does vary a bit. So I would expect this quarter and next quarter to be impacted a bit by that.

But overall, vehicle build volumes globally are actually holding up quite well. And here, this is also important that we have a good position in China. The Chinese market is doing -- is growing quite nicely, I have to say. And Europe and the U.S. are struggling a bit. But given our global exposure, we are able to benefit out.

So I would say, overall, the story hasn't really changed. We still see more content per vehicle globally that we benefit from a fairly stable vehicle build volume currently and not for next year. At the same time, also the usual price pressure that eat up a bit. And then, of course, FX that also goes against us.

But yes, underlying demand, I would say, is a principal okay with some short-term hiccups as explained.

On reestablished base, yes, we're very happy that we are making very good progress, EUR 185 million already. So I would assume that we can get to the EUR 225 million goal also significantly ahead of plan, and we are thinking about how to extend this program after that. But we, at the moment, mainly focused on bringing in the savings as quickly as possible of the measure that we've already defined.

The next question comes from the line of Harry Blaiklock from UBS.

First is just on the consumer business. I know you've had success at 1 of your big consumer customers in terms of getting a socket rolled out across the whole kind of smartphone portfolio. And historically, you've spoken about potentially getting further socket wins in that business. I was wondering whether you could just provide an update on that?

And then my second question is just on whether there's any update you can give us in terms of progress on the further asset disposals for generating over EUR 500 million?

Sure, Harry. Thanks for the question. So yes, at the various cellphone customers, we are making good progress and are winning new sockets. And I must say that it goes across both Android and non-Android space in a very steady and good manner, I must say, without calling out 1 specific socket, but I must say the engagement across the customer base is very strong and we continue to see good growth potential in this space with our technology.

On the asset disposals, yes, it's hard to comment on that in detail, but I can say we are very active in the process. And the plan still stands. We will deliver significantly more than EUR 500 million of disposals proceeds. As we have communicated, the first step, EUR 100 million on the lamp business, on the entertainment lamp business is in execution. We are progressing well towards closing, probably by the end of Q1 next year. And on a second bigger step, we are making a good progress, and we'll share that, of course, as soon as we can with all of you.

[Operator Instructions] We now have a question from the line of Reto Huber from Research Partners.

Yes. Thank you very much for your very detailed reporting. Now I was wondering, the adjusted EBITDA maybe I missed it, that includes the gain from sales of assets, if I understood this correctly. Have you disclosed that number somewhere? And how much is the one-off gain?

And then secondly, what is the reduction in year-over-year sales due to disposals?

Yes the adjusted EBITDA had a benefit from that asset sale of roughly EUR 10 million, a bit north of EUR 10 million. That's obviously a onetime impact. And yes, if you look at the year-over-year impact from asset disposals from portfolio, I would say that that's probably EUR 30 million.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Juergen Rebel for any closing remarks.

Thanks very much for the interest. We had a lot of people who dialed in. If you have any further questions, don't hesitate to reach out to us. And we're looking forward to receiving your feedback. Thank you. Bye.

Bye-bye.

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