Comet Holding AG (COTN) Earnings Call Transcript

Ladies and gentlemen, welcome to the First Half 2021 Results Conference Call and Live Webcast. I am Alice, 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 Ulrich Steiner, Head of Investor Relations. Please go ahead, sir.

Good morning, ladies and gentlemen. Welcome to Comet's 2021 Half Year Results Presentation also from our side. With me today are our CEO, Kevin Croftonto; and our CFO, Lisa Pataki. The presentation that Kevin and Lisa will be giving shortly can be found on our website along with the media release and the half year report. Before I hand over to Kevin, I would like to draw your attention to the disclaimer at the beginning of our presentation. With that, I'd like to turn the floor now over to Kevin. Kevin, please.

Okay. Ulrich, thanks very much. And first of all, I'd like to say good morning to all of you, and say thank you for joining our session today. Before I get into my formal comments, I would really like to make sure that I acknowledge the Comet team. They've done an incredibly good job meeting our customers' needs. They've worked relentlessly to support our customers, and they've worked extremely hard to generate the results that you've seen today. So thanks to the team, and thanks for what they've done. So can you go to the next slide, please? You've already seen our first half results. They represent the best past performance that the company has seen in our history. Lisa is going to go through all the details of that soon. So I just want to comment on the left-hand side of this page. First of all, it's quite clear that our performance has been driven by the boom in the semi cycle. This is as we anticipated at the start of the year, and we can confirm that this will continue into the second half. I have more comments on that in just a few minutes. But also, I can also confirm that as we had projected, we have seen the bottom of the aerospace and automotive industries. And this has obviously affected positively both of our X-Ray Systems businesses. The divisions are positioned to capitalize on their new opportunities that are out there. We've had good acceptance of the new products that we launched in 2020 and the new applications that we've launched earlier this year. And again, kudos to the supply chain management team. They've done an excellent job managing our exposure that would potentially exist in the supply chain. They've done an outstanding job. And yes, we have taken some inventory positions, as we said at -- I think, at our AGM, we said we were going to do that. We've done that. We have done everything we can to protect our customers as well as to protect our revenue expectations for the year. And the third, we progressed quite well in our programs designed to improve our organizational effectiveness to improve our overall infrastructure and continue that whole cultural change that we embarked on a year, 1.5 years ago. And of course, we've already initiated a formal ESG program. We go to the next slide, please. I think it's quite clear. All of the market analysts in the semiconductor space continues to upgrade their view of the wafer fab equipment spending. Even last week, VLSI, one of the most well-recognized market analytic firms in the industry upgraded their view of wafer fab equipment spending from 32%, and now they're projecting somewhere between 35% and 36%, plus other forecasters, our customers, our customers' customers, they all expect a continued growth in the semi cycle. And of course, this is important for us because this pulls our PCT business, our Plasma Control Technology business substantially, but also it has immediate effect on our X-Ray Systems business in Hamburg. In the automotive and aerospace sector, we see a good stable recovery from the bottoms that we had in 2020. I don't want everybody to get too excited. It's not like we're seeing a V-shaped recovery. It's the backs of recovery that we anticipated and we expected. But in fact, we do see a recovery that in both of those markets. And as you know, that drives our IXS and our IXM businesses. Finally, I would say that on the security side, we do see some very modest growth in that area. This is going to be driven by air passenger mile increase as well as the increase in global trade as we come out of the pandemic. So we do see that as an opportunity on the horizon, but there's been some opportunity that we did capitalize on in H1. So if you go to the next slide, please. I would have to say we've seen excellent progress across all 3 businesses. This slide highlights some of those key wins in half 1. Probably the most important item that I should note is the design wins and the application wins that have occurred in all 3 divisions. These are, of course, important for the first half, but they actually come to fruition in the second half. And as you all know, when you have design wins, you actually start to see that materialize in subsequent years. So that design win focus continues on within the company, and I'm proud to say that the company has executed quite well in that respect. Second, as you see on this slide, you could see that the Penang, Malaysia facility is -- has been qualified for high-volume manufacturing, particularly from our most important key customers. And we are doing that transition into high-volume manufacturing, and you'll see an impact of that during the second half of this year. Third, we're really focused on the return on our R&D money that we spent. It's important that we see that these programs yield results. The beta site program for the RF Generator in PCT is going as expected. We do have momentum in our Tier 1 and Tier 2 customers, and we are on track to deliver to the expectations that we've set. Some revenue in 2021, more revenue in 2022 with significant revenues we expect in 2023 and 2024. In addition, we've seen the adoption of the MesoFocus product line that was launched or the items that were launched in IXM, primarily the MesoFocus product. That continues to be strongly adopted by our customers. And finally, I would say that we have successfully launched a very new and novel application within the IXS division that has direct impact and adoption in the semi space. So all in all, execution has been quite good across all divisions. The team is relentlessly focused on what we have to go accomplish. There's been no deviation, and we're staying the course. So if you go to the slide that says summary. I guess this really basically says it all. Our strategic growth targets have resulted in exceptionally good first half results. PCT enjoys a position in the semiconductor industry right now that helps drive the company, obviously, but we do see an upward trend in our served markets for our X-ray divisions. So we do see that, that climb out is occurring. Marketing conditions are quite solid, particularly in the semi space. And I think that the team has done a great job managing the global supply chain. And in our case, we see no material impact into our first half results, and we think it's going to be -- we know it's going to be successfully managed in the second half. So those are my opening comments. With that, I'd like to turn it over to Lisa and have her walk you through the financial results. Thank you.

Thanks, Kevin, and good morning to all of you. Comet produced outstanding results in the first half of 2021 and achieved the highest sales and EBITDA over a 6-months period in the company's history. The company achieved sales of CHF 248.3 million, an increase of 36.2% compared to the first half of 2020. This strong top line performance was driven by several factors. As Kevin mentioned in his opening remarks, the demand for semiconductor chips has triggered a significant growth cycle in Comet's primary end market. Furthermore, as expected, going into 2021, the automotive, aerospace and security markets began to show signs of recovery after a sluggish 2020. These general market trends drove demand in all 3 of our divisions. Notably, Comet leveraged its geographic footprint, achieving 51% sales growth in Asia and 38% growth in North America compared to the same period last year. Finally, Comet's innovative solutions and customer focus led to market share gains through design and spec wins, along with continued adoption of new products launched last year. Gross margin improved by 510 basis points compared to the first half of 2020. Gross margin fluctuates based on volume and product mix. In the first half, margin expansion resulted from growth of the semi and electronics markets as well as cross-divisional focus on streamlining and automating operational processes. Operating expenses in the first half of 2021 were higher than in the same period last year due to investments in growing the company. These investments include ramp-up of our team in Penang, onboarding of new management and continued focus on research and development. R&D represents roughly 11.5% sales in the first half of 2021 and remains a foundational focus area for the group, with investments focused on medium and long-term strategic projects, targeting the semi and electronics markets. It should be noted that net operating expenses as a percentage of sales decreased from 32.7% in H1 2020 to 28.7% in H1 2021. The company more than doubled its profitability as measured by EBITDA to CHF 44.3 million compared to CHF 18.8 million in the first half of 2020. This represents an EBITDA margin of 17.8% compared to 10.3% at the same period last year. Strong sales growth, product mix and operational efficiencies were the primary factors influencing the 750 basis point margin improvement on a year-over-year basis. The divestiture of the ebeam segment resulted in a 60 basis point improvement on EBITDA margin. And as a reminder, Comet recorded a CHF 4 million pretax gain in net operating expenses in the second half of fiscal year 2020 related to the divestiture of the ebeam business. As a result of our solid operating results, Comet achieved a net income of CHF 27.8 million, representing a net income margin of 11.2% for the first half of 2021. This has led to a CHF 2.74 earnings per share improvement compared to first half 2020. And finally, one note just regarding the company's effective tax rate. The effective tax rate for the first half of 2021 was 20.9%, driven by the taxable profit mix generated from our international subsidiaries. We will continue to monitor the potential local tax changes of our subsidiaries, especially changes in corporate income tax related to the new administration in the United States. Now let's turn to the division results for the first half 2021. As previously mentioned, strong demand from wafer fab equipment customers in the semiconductor chip manufacturing sector as well as demand from our targeted electronics fabrication customers drove the growth in sales. The aerospace, automotive and security markets started the slow climb out from the pandemic bottom of 2020. All 3 divisions achieved sales and EBITDA growth compared to the same period last year. Plasma Control Technologies division, or PCT, contributed the largest share of the group's sales. PCT sales increased 50.1% from CHF 96.9 million in the first half of 2020 to CHF 145.4 million in the first half of 2021. PCT achieved sales growth across key geographic markets and with all major customers. PCT expanded EBITDA margins by 470 basis points compared to the same period last year, ending the first half of 2021 with a margin of 23.9% due to strong demand and production efficiency. Division results for the X-Ray businesses reflect signs of improving market conditions and the proceeds of strategic repositioning, productivity improvement actions and new product launches. The X-Ray Systems business, IXS, accounted for approximately 28% of the group's sales. IXS contributed CHF 70.2 million in sales, an improvement of 30.8% versus the first half of the prior year. IXS sales growth was complemented by competitive wins with newly introduced X-Ray System pointed towards semiconductor and electronics markets. In 2020, the IXS business implemented countermeasures to realign its cost structure. These measures included implementation of operational cost reduction programs, conducting virtual equipment installations, shifting our emphasis to more profitable market sectors, reduction of the product portfolio and discontinuation of low-margin custom products. As a result, IXS successfully returned CHF 4.5 million in EBITDA compared to a loss of CHF 2.1 million recorded in the first half of 2020. The X-Ray Modules division, IXM, achieved first half sales of CHF 37.3 million, a 23.4% increase compared to the first half of 2020. EBITDA margins improved by 180 basis points, 15.8% in the first half of 2021. The IXM core market of nondestructive inspection solutions in automotive, aerospace and security, gained momentum in all regions. The division also benefited from commercial success with its new products, ION modules for security applications and the MesoFocus product line targeting the semiconductor and electronics markets. In summary, focus on strategic objectives, targeted product development and improved productivity measures in all 3 divisions set the stage for a second -- solid second half. Next, I'd like to provide a few comments on the balance sheet and cash flow metrics. The solid performance of the group has continued to allow for healthy balance sheet position at June end 2021, with a cash position of CHF 76.4 million. Comet generated CHF 15.3 million in free cash flow through strong operating cash performance in the first half of 2021. Operating activities generated CHF 21.8 million in net cash, an improvement of CHF 14 million compared to the first half of 2020. Net working capital management continues to be a focus. Comet has prioritized actions to mitigate potential supply chain disruptions and protect the company's ability to meet customer demand expectations as well as our own projected revenue streams. These actions will likely result in higher net working capital balances in the second half of 2021. Capital expenditures totaled CHF 6.2 million and represented 2.5% of sales in the first half. Investments increased by CHF 2.7 million compared to the same time last year when spending was curtailed due to the uncertainty of the pandemic. First half 2021 expenditures reflect investments in our strategic growth, production capacity and IT infrastructure and digitalization efforts. For the full year, we still expect CapEx to be in a range of 3% to 5% of sales, probably closer to the lower end of that range. Finally, with respect to our capital return to investors. Equity as a percent of total assets increased to -- from 50.1% in December 2020 to 52.6% at June period end. Our net debt balance of CHF 6.1 million also remains in line with our expectations. This represents a solid foundation from the growth of the company. So in summary, the company demonstrated strong strategic focus and operational performance in the first half and is well positioned to capitalize on the increased demand in the semiconductor market expected in the second half of 2021. From my side, I'd like to thank our teams, suppliers, customers and investors for enabling us to achieve these excellent results. Additional details of Comet's first half performance can be found in the half year report published on our company website this morning. And now back over to Kevin to provide context for our 2021 second half outlook.

Great, Lisa. Thanks. Let's go to the next slide, please. So before I go into our full year forecast, I just feel like it's important that I give you a bit of the fabric behind the macro environment that's driving our business, and really the business of our customers and our customers' customer. And I don't mean this to be a tutorial, but I think it's important for us to really be on the same page when I talk about what's happening in the industry and the go-forward looks for Comet. We all show some variation of this slide, and hopefully, the message is quite clear. From that dotted line, looking to the right, you can see that we've entered the data age, the data age of artificial intelligence and visual computing. And I'd like to put this -- I'd like to attempt to put this into context. Everything we do online and offline leave some sort of data trace. Recently, Cisco published a report stating that in 2016, the world processed one zettabyte of the Internet traffic in that year. That means all data, whether it's e-mail, whether it's file sharing, whether it's video streaming, whether it's music streaming, et cetera, all of that happened in 2016. That's the entire world's generation of data on the World Wide Web in the previous 40 years. By the end of this year, that will be a minimum of 10 zettabytes of data, minimum. Now Cisco project it's going to be somewhere between 13 and 15 zettabytes. By 2025, 4 years from now, we're going to be processing a 150 zettabytes of data just in that year alone. This digitization of society is driving demand for chips or packaged chips, et cetera, across the world and across society. So when I talk about the super cycle, I guess, a year ago or maybe a little less than a year ago, this is the super cycle that we're trying to deal with. And I'm not really sure if we understand what that is. So if you go to the next slide, then. What that means to me, if I look on the left-hand side of this page, is that the semi industry is in this super cycle or perhaps it's a hyper cycle. But I can say it's probably one that we don't fully understand and we don't fully appreciate at this point in time in our industry. But this sector, these changes drive incredible demand for data processing speeds, faster and faster data processing speeds, more and more data storage, more and more data mining. And we're seeing these start to play out in technology changes that occurred -- really announcements that have occurred late last year and in this year. So for example, last year, you may recall, I mentioned that Micron had shown a 179-layer NAND device, NAND memory device. Just 2 weeks ago, Samsung announced a 200-layer NAND device. In addition, in the first half of this year, you've seen that TSMC and IBM have been going head-to-head on who is going to be -- have the fastest microprocessor at the smallest design well, 2-nanometer design well. That's 10 atoms that we're talking about here. This is an important for Comet for really 2 reasons: being able to deliver chips that function at these design levels requires more and more precise control of plasma. And that's really the real mission of our Plasma Control Technology team. Small perturbations in plasma can lead to yield problems for our customers' customers. The second reason these trends are important in the semiconductor space is that these devices have to be packaged and they have to be packaged in architectures that allow for speed. So traditional packaging methods are becoming obviated. And they require unconventional means of inspection. Traditional maintenance inspection don't necessarily provide the data necessary to understand yield results. This means that IXS, for example, the use of X-ray technology to look for design defects -- so to look for device defects is critically important, particularly at these packaged device scales. So that's pulling our X-ray, IXS business into the semi space. Now in the middle of this page, we talk about the automotive and the aerospace sector. I'll just reemphasize. We are experiencing a steady, slow but steady recovery in those industries. There is the demand for electric vehicles, of course, and everything associated with them, batteries, for example. And we're also seeing domestic car production even in combustion engines start to move, particularly in China and in Japan, but we can see that also occurring in the U.S. and in Europe. And that drives our IXM and our IXS businesses. In the aerospace sector, again, slow, steady climb out, as Lisa already mentioned. We do see a return in the passenger air models, which is important, particularly for the IXM portion of the business. And we also see an increase in global trade, which will also drive IXM because the ports of the world are looking for inspection techniques that rely on X-ray. So we're starting to see that pickup in the global economy, particularly in goods trade that is pulling the security sector alone. For the second half of this year, we expect the momentum to continue. We see strengthening areas in the automotive, aerospace and security sector, and we're going to have to ride the semiconductor sector in every way we possibly can. If we go to the next slide, please. And what this translate to is really captured in the headline here. We have to be relentlessly focused on execution. And that's our mission. We have to drive for share gains. We have to continue to increase our operational excellence. Some of that is starting to manifest itself. You've seen that in the numbers that we presented earlier, but that trend is going to have to continue, and we need to be absolutely focused on it. Now within each of the divisions, you can see some of the primary objectives here. Obviously, for PCT, it's still Penang as fast as we possibly can, make sure that we execute on the beta program for the new RF Generator. In IXS, it's continued to gain market share, particularly in the semi space, in 3D packaging applications, but also in our traditional served markets and to continue to streamline our product portfolio. Now on IXM, micro business, we need to continue to harvest the fruits of the investment that we made last year in R&D and get these products continuously embraced by our customers. And we could say with confidence that that's happening at this point. We do have an initiative to look at best cost regions of supply for that division. That's also an area of focus to improve our overall profitability within IXM. So we've got a lot of work to do. It's not over yet, but we do have a lot of work to do. And you could see the major initiatives that are here on this slide. Now with that, I'll move into the outlook. We've already published the outlook that you see here on this page. We do expect sales to improve such that we will deliver between CHF 480 million and CHF 500 million in total revenue and an improved EBITDA margin that ranges between 18% and 20%. The most important thing for us is that we prioritize the safety of our employees and that of our customers. We know the pandemic isn't over. We need to make sure that we manage that situation accordingly. But that's an obvious. We will do that even at the risk of revenue if it ever came down to it. But we have to continue to work on our growth strategies, our cultural change. And well, continue to ride the semi cycle as it moves and the recovery of our industrial end markets. And lastly, the last one, maybe probably one is -- and we'll probably get some questions on that, I imagine is that we need to make sure that we continue to focus on our supply chain, continue to manage the supply chain effectively and make sure that we are able to protect our revenue line and our customers' needs. So we're going to be running that fine line between balances of what's our inventory tolerance, what's the impact on net working capital, our cash flow generation and the assurances to make sure that we make our revenue line. Personally, I know that's under control, but it's something that we continuously monitor. So I would say, outlook for the second half is quite positive, and you should expect a really good result from the Comet team by the end of the year. And with that, I'll open it up for questions and answers.

[Operator Instructions] The first question comes from the line of Michael Foeth with Vontobel.

Three questions from my side. You were talking about market share gains in semiconductors. And I was wondering if you could be a bit more specific in terms of in which applications you are seeing market share gains? And also, if you can eventually quantify those comments and tell us what sort of market share levels in semi we're talking about? The second question would be regarding the margins. So we see a nice development in EBITDA margins. But we're still quite far away, especially in PCT and in IXM from the historical EBITDA margin levels. Although revenues are at very, very high levels. So I was wondering what needs to happen for those margins to go back into, let's say, the 25% plus area? And then the final question is on IXS. You're talking about the sort of beyond inspection and AI applications there. If you could give us an update on the road map, what's the current status there on those programs? And then what milestones should we be looking for in the coming 12 months?

Great. Thank you, Michael. This is Kevin. I'll take one -- 3 out of your 4 questions. I'll turn the gross margin one over or the margin one over to Lisa, and maybe I'll kick in with some comments. Thank you for your question, though. So relative to market share gains, most in terms of PCT, I think, is what your -- the context of your question was. We continue to win in RF match applications with really the Tier 1 and Tier 2 customers. It's kind of across the board. You may recall that last year, we indicated that we had won, I think, 26 design and specification wins last year. We're on track. We believe to do something quite similar at the same level, I would say. So this is in -- primarily this comment is in the RF match space. We continue to maintain our share in the Vacuum CAP market. And well, we know that we've taken share as well within IXM, particularly because of the MesoFocus product launch. So the -- and maybe one -- my one last comment, if you were to look at the report generated by VLSI for component market share, Comet was attributed with 36% share in the RF match space. That's a #1 position relative to our nearest competitor, which had 31% share. Hope that answers that part of your question, Michael.

Yes, very well.

The second question, I think, I missed my note here. You said to quantify -- or maybe it was actually part of the same quantify as to...

Yes. That was what you just said, the 36% RF match. It's an indication.

Yes. Okay. Thank you. And then I'll take on the IXS question where you asked about beyond inspection and artificial intelligence applications. Actually, the win, the application win that I referred to has much to do with the use of AI or machine learning applications to look at yield and yield enhancement possibilities. So it's early days, but I can say that, that activity is going forward. We launched our first joint workflow between ORS, the Object Research Systems group that we bought in Canada. We launched that first workflow with the IXS team in June. It's having incredible interest from customers as well. So I guess my comment will be steady as she goes. And as we've said before, we don't really expect to see that companion to actually yield real tangible results until next year. But we can say that we've got the first path-finding activity going on at the moment. Now I'll turn your margin question over to Lisa, and I'll chime in if I have anything to add.

Okay. Perfect. So just to provide a little bit of color on the margin development for PCT. I think there's a few factors that we just need to make sure that all of us kind of keep an eye on as we execute going into the second half. The first one is that we expect to see contribution from our Penang facility really in that second half. So that -- that's a lower-cost manufacturing environment that should provide some lift to the PCT business going into the second half. And then obviously, there's a product mix element and then the production volume with our RF matches are going to be critical for us in order to achieve the numbers that we hope to achieve with PCT. Ultimately, I mean, the other thing I think to say too is that just generally speaking, if we look at the history of PCT and even in context of some of our strategic focus, we did divest that ebeam business last year. It has provided us an opportunity to focus more on what our strategic objectives are. And some of our major objectives in PCT from an investment standpoint are with respect to the RF Generator and the RF match. So we'll continue to invest in this business, but we have a fairly positive outlook going into the second half for PCT.

Let me make a comment or 2 there as well. Remember, also, Michael, that we invested quite significantly in creating manufacturing capability for the RF Generator in Aachen as well as setting up the new Penang facility. I think that if you think about historical performance of the organization, PCT specifically, we should be demonstrating in the second half a significant improvement half over half. Lisa just mentioned that. And I think you'll say, okay, maybe they're going to be in a positioning later to exceed historical highs and maybe look a bit different in the future. Second thing I would say relative to IXS that, IXS, we will demonstrate good performance this year. As you know, there's been a reorganization that's going on. I think we've got another year before you'll see us operating at the historical levels. And I would say that, that's still not good enough by a long shot. So we've got work to do. That involves changing serve markets, changing the product mix continuously and keeping an absolute dead focus on operating expenses.

The next question comes from the line of Serge Rotzer with Credit Suisse.

I have several ones. I will ask them one by one. So the first one is, based on your guidance, let's take the upper range, it's CHF 500 million. You already achieved half of that. So this tells me that there is no growth half over half. And now, we also have been guiding for a steady recovery in the X-ray business. So this would tell me that then sales in PCT business would be probably even lower than in the first 6 months. Is this correct? And can you explain me that? Or in general, the seasonality of the different businesses, probably also in relation to the margin as you already answered Michael's questions about PCT margin. This will be the first one.

Do you want to take that sale question or I can?

Yes. I'll start with that. So I think there's a couple of comments that I would make there. First of all, I don't want to be accused of saying. There is a potential of potentially exceeding that range. But I also have to make sure that we communicate clearly that we are taking into account our supply chain, our supply chain situation, which we know is managed. But more importantly, what our customers supply chain look like. If there is a risk at all that our bigger customers are not going to be able to ship because of other issues in their supply chain, we need to be cautious about that. So it's more of a second-order effect, what's happening with our customer situation. And that's maybe the area that I would say we're being a little bit cautious on, and we wanted to make sure that, that was factored into our thinking first half to second half. We will see some incremental growth in PCT. We will see growth in IXM. And we'll have to see how we're able to manage our IXS revenue because of the need for deploying field service engineers to actually be able to do installations. So that might be a more of a flattish-looking business half over half. So order book will be there. Question is revenue generation. And as you know, IXS has a roughly 10 to 12 months or more in some cases than with the product lead time. So orders will be quite good. We'll have to quite careful about how we manage the revenue line. Hope that gives you the color around that.

No, this was very helpful. And then relation to margin then, Lisa, can you elaborate on that? Then based on the comments Kevin made?

Yes. I mean I think going into the second half, the margin story is, first of all, it's going to be volume -- independent on the volumes. The second is going to be dependent on the mix of the products that are going into that. And especially, the production sales that are in our factories are going to play a heavy role into that. And then, for us it's really going to be just execution on the OpEx side and making sure that we are managing our costs and that we're fully committed to expenditures in the areas that are of strategic focus for us. So just to sum that up, it's -- we need to do what we say we're going to do. We need to execute in the factories. We need to see the results coming from Penang on gross margins side. And we need to be diligent on and disciplined in our OpEx.

Yes. And I would chime in and say, if you run the numbers, then you could see that we are expecting an EBITDA evolution -- positive EBITDA evolution half over half, probably in excess of what we're signaling in terms of revenue growth half over half. And I think that you'll see really, really positive performance. You can even do the half point and you can see what we have to do in the second half EBITDA performance-wise versus first half to get even midpoint. So I think you'll -- I think you'll be delighted with the results.

Okay. This was very helpful, too. So then probably the second question is that -- well, it's a crystal ball question. Can you update us on the market size of generators -- usually would be the 0.1 and 0.2 in the past you mentioned to achieve a margin of 10%, a margin of market share. But on the other hand, you mentioned before that you're winning market share in matchboxes, and I believe that matchboxes and the success in generators is quite -- has a certain correlation. So can you give us an update what you believe in what kind of market share you can build up going into '22, '23, '24?

Okay. First of all, I have to say from your lips to God's ears, so as long as we continue to gain RF match share, then perhaps that will be the footprint to allow us or the foothold to allow us to move into a generator relationship as well. Unfortunately, in this industry, that doesn't always happen. It does sometimes would not as a norm. But I'll ride that comment and say, yes, please, let's make that be the case. The generator market is -- the generator market or I should say that the RF systems market is growing really as -- currently as you see the wafer fab equipment market growth. In fact, it probably grows a little bit in excess of that. Our challenge at Comet is to make sure that these beta sites that we have ongoing and the future beta sites that we put in play that they -- that this generator does what we say it's going to do as advertised. And so currently, I can say that the generator is working. It is doing what we say it's going to do. But we're still quite a ways out of getting qualified. Now if this product does perform as we think it will and as we've demonstrated so far, then our 10% market share target for 2025, probably is an understated goal. We're not prepared to go and revise that yet until we see first revenue and see all of the qualification acceptances occurring as we see fit and as we expect. So I think the bottom line on that is we're confident of the generator. It is performing to our expectation and, more importantly, to our customers' expectations. But we're not viable in that marketplace yet. If it works, then that 10% goal is more than achievable in terms of share. Hopefully, that helps.

That helps, yes. And then probably the last one now. It's about -- you mentioned some important design wins. Can you tell us a little bit more about that? Is it on new products, existing products or from the application or new customers?

Gosh, that's a little bit of a follow-up question to Michael's, and that's great. I thought of -- no, it's -- first of all, the design wins are actually yes with new customers. Primarily customers that would classically be referred to as Tier 2 customers to be -- and by the way, Tier 1 and Tier 2 only has to do with how big are these customers, what's their revenue line. And if they're in that CHF 500 million to CHF 1 billion or CHF 1.5 billion, they're typically classified as Tier 2. For us, that's a very big customer. Of course, the other customers of Tier 1s are in multi-billions to multiple double-digit billions. So we've had design wins and RF matches in Tier 2 customers. I won't go into specifics there because, of course, that's competitive information that we just don't want to divulge. We also have recorded design wins within our top Tier 1 customers. That is clear. Again, these are RF-matched design wins. And we expect that to continue during the second half of the year and into the future, of course. I mean that's our bread and butter as a company or as a division within PCT. The -- there are multiple wins. I think the last one, I remember, the number is 10. I believe it's 10 new customers for the MesoFocus products from IXM. I have to go and confirm that number, but I think it's in that range. Most of that's in the security sector, if I remember correctly. And within the IXS business, there have been -- there has been one significant brand-new customer in the packaging space that we have recorded our first hard copy PO with. We are engaged with that same customer on multiple other opportunities. And in fact, they've been influencing other companies in the outsourced assembly and test arena. So that's sort of a watch this space, what we've proven first principle that we can be successful in that market sector.

Probably a follow-up question, but what does this tell me about the competitive situation because you are in oligopolistic or duopolistic market, like in matches, you and Advanced Energy cover 80% of the total market. Do they step back? Or do they have a problem with the product? Or is your product much better? Or will they strike back? Or how can I put this in relation?

It'd be interesting to hear AE's perspective on this as well, of course. First of all, we're in the situation where if we get a design win, we expect to keep that design win. So I don't -- and I cannot imagine a situation where we'd be kicked out. So we're doing our best to either win head-to-head on new product designs with our customers or in a few cases, displace our #1 competitor and the other competitors in their existing customers. So I think you'd have to address the question to them. We do watch our competitors, of course. But really, we need to keep our head down or butt up. We've got to keep moving and just keep focused on what we need to accomplish as an organization.

The next question comes from the line of Michael Inauen with Stifel.