Comet Holding AG (COTN) Earnings Call Transcript

Ladies and gentlemen, welcome to the Comet First Half 2023 Results Conference Call and Live Webcast. I am Sandra, 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 Ulrich Steiner, VP, Investor Relations and Communications. Please go ahead, sir.

Thank you, Sandra. Good morning or good afternoon, ladies and gentlemen. Also welcome from our side to our first half year audio webcast. Thank you for taking the time to listen to the call today. Joining me on the phone is our CEO, Stephan Haferl; and our CFO, Lisa Pataki. They will take you through the presentation shortly. The presentation as well as the half year report and the media release have been available on our website since 6:30 a.m. today. Before I hand over to our CEO, I would like to draw your attention to the disclaimer in the presentation and thus to the forward-looking statements we will be making during this webcast. With that, I hand over to Stephan. Stephan, please.

Thank you, Ulrich. Ladies and gentlemen, I'm pleased to welcome you to the half year 2023 webcast of the Comet Group. I will start with my assessment of the business and industry environment and Lisa will discuss the financials in detail before I conclude the presentation with an outlook for the second half of the year. Our presentation, as Ulrich mentioned, will be followed by a Q&A session. With that, let me start the presentation. Comet's half-year results, unsurprisingly, reflects the steep correction in the semiconductor growth trajectory. Global semiconductor sales featured a strong decline in Q1 and has by now stabilized during the second quarter. While there's been a very strong year-on-year decline, volumes and ASPs have over the past quarter remained stable, which suggests that the bottom half been reached. Two important takeaway points. Firstly, the correction, especially in the memory market and less so logic. Secondly, the correction was stronger than expected at the beginning of the year. Now the correction is reflected in our numbers, incoming orders and backlogs have been half compared to last year, and book-to-bill is below par. Given the strong exposure to the semiconductor industry, our PCT business was hit hardest. As a consequence, PCT has been the main driver for the 22.6% year-on-year decline in sales. The X-ray businesses performed much better than PCT, but could not compensate the significant decline in the wafer fab equipment market in the broadcast. Lisa will discuss this in more detail later. Now in this challenging market environment, we took early and proactively actions to mitigate the impact of the correction. Targeted redimensioning of the company, one-off costs in connection with these measures, most of all the strong decline in volumes affected profitability. Report with the redimensioning of our activities were done in a targeted manner not to compromise the next upturn in the market, which we anticipate to see by Q4 this or Q1 next year. Also important, while we have cut our overall spending, we have not cut our investments in areas that are critical to Comet's future growth. All in all, we see ourselves well positioned to weather and manage the current downturn despite the weak performance in the first half. And thanks to investments in infrastructure capacity and R&D, we see ourselves very well positioned for the next market upturn. Let's briefly talk about our markets. Our main markets show a strong imbalance. We have a pronounced weakness in the semi market contrasted with a good resilience in our other served markets of automotive, aerospace and security. In the semiconductor market, especially the memory business is affected. This impacted our performance as Comet has around 50% exposure to the memory market. The consumer end market smartphones and DCs were in particular weak. Other end markets showing strength, resilience where, as I mentioned before, automotive and for instance, data centers. On the other side, the automotive industry has held up well despite inflationary pressures, pent-up demand after pandemic years with chips sold business and the transition to electric vehicles and those batteries have offered and let us realize opportunities, most of all of the X-ray businesses. On the latter, also advanced chip packaging is increasingly developing into a very interesting X-ray market segment at the intersection of semiconductors and automotive. Aerospace is also in good shape with the post-pandemic recovery continuing and air travel approaching pre-pandemic levels. The security industry also did well. Travel is increasing and global trade remains at healthy levels. For us, sales in the security market is strongly correlated to the upturn in global air travel. And moving from our main markets to the divisions. For PCT, the semi correction, as mentioned, hit PCT hard given its strong market focus and exposure. Capacity utilization is therefore down significantly and as a measure, headcount has been reduced by 40%, mainly temporary staff, but also some permanent staff. On the latter mainly related to downsizing of San Jose following the relocation of volume production to Penang. In parallel to downsizing in operations, additional resources for Synertia were deployed to accelerate the go-to-market. Test and verification has expanded to 2 of the Tier 1 companies in the wafer fab equipment market and orders according to plans have been received and delivered mainly from Tier 2 and for the company. Given our strong belief in PCT's business case and the strong future of the semiconductor industry, we have confirmed our mid-to long-term plans for our manufacturing site in Penang. As a result of this, we are in the process of securing a plot of land in Penang to build a significant manufacturing for Comet alongside Flamatt in the next few years. Moving to IXS. IXS is continuing with its transition and strategy execution, focusing on the back and mid-end of the semiconductor market despite the current correction. The transformation is gaining traction with significant partnerships and orders from and with leading foundry IDM OSAT and also from leading electronic or electric vehicle battery manufacturers. Next to the transformed product portfolio, the strengthened presence in Asia has been key and is showing results. While for the lease, the integration of ORS in Montreal has been completed, merging the strategically important AI-based Dragonfly software with our hardware system development in Hamburg, increasing competitiveness while improving also cost efficiency. Moving to IXM. The investments in new products over the past 2 to 3 years are paying off. IXM is certainly the brightest line of comment right now, featuring strong growth to a record half year in sales. Growth was thereby also supported by the production of the PAC backlog, which was unusually high due to supply chain problems that are clearly leasing with lower numbers of constraints around at least compared to last year. IXM is and will continue to invest over proportionally to the trans technologically, especially for leading-edge X-ray modules for semi, for instance, for advanced packaging inspection. This will continue to give the division a leading position in existing as well as new markets with strong growth such as batteries or as anticipated advanced packaging. To summarize, the semiconductor market correction has been stronger than expected a few months ago and especially pronounced in the memory sector. Although the X-ray divisions are also exposed to the semi-industry, they have been decoupled from PCT, not experiencing a correction of this magnitude. And at IXM as Lisa will show later a significant growth can be reported both in sales as well as profitability. Targeted redimensioning and cutbacks mostly at PCT have impacted EBITDA for the first half of the year, alongside the strong profitability dependent on volume. The market introduction of Synertia has been further intensified with more resources and increasing traction and very positive results. And because we are presumably at the tail end of the bottom of the market direction, we are diligently preparing for the upturn in a market which features very high and fascinating multigenerational opportunities fueled by a world going digital and electrical. So with that, leaves up, let's move on with the outlook on the second half of the year and our key markets. Sorry.

All right. Thank you, Stephan. Good morning, everyone, and thank you for joining us on our webcast today. I will take you through our financial performance for the first half of 2023. Stephan will then provide further insight into the outlook for the second half. Comet's financial performance in the first half of 2023 was in line with the lower end of our expectations and correlated with the much weaker demand environment in the semiconductor industry. Wafer fab equipment estimated decline on a full year 2022 to 2023 basis is approximately 20% with an even steeper-than-expected decline of close to 50% in equipment spend by memory fabs according to the latest semi World Fab Forecast. Accordingly, Comet's order intake in the first half of 2023 dropped 48% compared with the first half of 2022. We converted backlog into sales in the first half, resulting in an ending backlog 20% lower than at the fiscal year-end 2022. Our book-to-bill ratio at the end of the first half of 2023 was 0.8%, reflecting the slowdown in spending on capital equipment in the semiconductor industry. We executed initiatives that will result in cost savings in future periods as part of our business transformation efforts to become more flexible and scalable to better absorb the cyclicality of future semiconductor corrections. Our profitability in today's structure is heavily dependent on volume fluctuations in our semi-oriented business. Despite the impacts from substantial semi headwinds on Comet's financial results in the first half, we are pleased to report several highlights. Both X-ray businesses improved profitability and the X-ray Modules division reached an all-time high in sales over a 6-month period. Comet delivered positive operating cash flow and the strength of our balance sheet over 3 consecutive years of record performance has enabled us to invest in areas that support our customer road maps and readiness for future growth. Let's now take a look at the results in more detail. Our sales for the first half of 2023 reached CHF 207 million, a 22.6% decline compared to the same period last year. Semi-related drops most pronounced in our PCT division drove a 23% decrease in sales on a currency-neutral basis. The X-ray businesses achieved 4.4% growth in our traditional end markets of aerospace, automotive and security compared to the first half of the prior year. The weaker U.S. dollar and euro contributed to a negative impact on sales of CHF 10.8 million or 4% decrease from the same period last year. Sales from our North American and Malaysia operations declined by approximately 50% as a result of demand weakness in key customer accounts, most impacted by the oversupply of NAND and DRAM chip devices. On a positive note, sales from our Chinese operations increased 30% compared to the same period last year. We expect that trade restrictions between the U.S. and China remain fluid. However, in today's environment, Comet has the ability to deliver products to its customers in China. Now let's turn to the gross margin. Gross margin declined by 220 basis points to 39.2% compared to 41.4% achieved in the first half of 2022. The gross margin performance in the first half has both positive and negative movements. On a positive note, gross margin from the X-ray division contributed 110 basis points of margin expansion compared to the same period last year, driven by the flow-through of more favorable pricing and as headwinds related to higher input costs and part availability in the supply chain moderated. Gross margin performance is heavily influenced by the variability in volumes and mix of our semi-related business. Lower volumes, idle capacity from the San Jose, California transition to Penang, Malaysia and charges from workforce actions in the PCT business reduced gross margin by 330 basis points compared to the same period last year. Operating expenses were almost CHF 6.5 million lower on a reported basis compared to the same period last year. On an adjusted basis, excluding the first half 2022 one-time effect of CHF 9 million for the trade secret trial, operating expenses are CHF 2.5 million higher. Comet increased investments in its radio frequency platform and X-ray module technologies targeting the Asian markets, leading to an increase in R&D by CHF 1.5 million in the first half of 2023 compared to the same period last year. Comet's net operating expenses as a percent of sales was 37% in the first half of 2023. This ratio is higher than the targeted expenditure profile for the group in the medium and longer term. At this stage, Comet is transitioning to a more structured and scalable organization after a period of high growth, and as a result, is investing in corporate governance and digital programs that will build the foundation for a scalable infrastructure going forward. These programs have been partially offset by cost reductions and reprioritization, spending activities in other areas. Let's move now to discuss Comet's operating performance in terms of EBITDA. In the first half of 2023, Comet generated 14.3 million of EBITDA at 6.9% margin compared to CHF 37.7 million in EBITDA at 14.1% margin in the first half of 2022. Comet's EBITDA margin declined 10.5 percentage points when compared to the first half of 2022 adjusted EBITDA margin, which excludes the one-time effect of the trial expense. Foreign exchange rates impacted margin by 130 basis points, driven by the weakening U.S. dollar versus the Swiss franc compared to the first half of 2022. Significantly, lower volumes and factory underutilization in our semi-related business offset improvement in operating performance in our X-ray businesses. Volume and mix drove the EBITDA margin to decline by 730 basis points in the first half of 2023 compared to the first half of 2022. 2 additional timing impacts deteriorated margins by 190 basis points in the first half of 2023 versus the first half of 2022. First, the semi correction cycle occurred at the final transition phase of our planned ramp down of the San Jose, California production line. Secondly, the planned employee-related actions and accrued severance packages from the ramp down in San Jose and to a lesser extent at other production sites occurred in the first half of 2023. As of June 2023, employee-related actions resulted in an approximately 9% decrease in headcount. At the consolidated level, this reduction impacted 150 employees, of which 40% are temporary staff. The results of those actions should improve profitability in the latter part of the second half and into 2024. Comet has and continues to focus on measures to structurally improve flexibility to absorb the cyclicality of the semiconductor industry while maintaining investments that contribute to customer needs and future readiness. Further measures including the introduction of short-time work in Flamatt, Switzerland and additional cost savings actions are under evaluation. In terms of returns, Comet generated CHF 1.9 million of net income, net of taxes at an effective tax rate of 4.6% in the first half of 2023. The first half of 2023 ROCE of 2.8% is improved from the previous correction, but nevertheless, driven by lower profits tied to the decline in semiconductor volume over a stable capital employed base, which I will discuss further in a few minutes. As we go into the second half, we will continue to scrutinize spending, reprioritize where necessary and identify efficiencies while maintaining readiness for the semi cycle upturn expected in 2024. Now turning to the division results for the first half. Let's start with the PCT division results, which are entirely driven by the decline in customer demand for RF power systems. In the first half of 2023, PCT sales decreased 38.4% from CHF 173.5 million in the first half of 2022 to CHF 106.8 million. The decline is entirely driven by the significantly lower WFE spend. In what is a challenging and transitional year, PCT has taken structural and temporary actions to reduce its cost base and improve efficiency. Many of the actions that have been taken in the first half do not have a positive impact on the EBITDA performance during the period. PCT's EBITDA margin reduced significantly from 19.8% and 25% on an adjusted basis, excluding trial expense in the first half of 2022 to 5.3% in the first half of 2023. This represents a percentage point decrease of 19.7%, of which the significant decrease in volumes overwhelmingly drove the decline in profitability, dropping margins by 16.6 percentage points compared to the same period last year. As noted previously, the timing of the final San Jose ramp down of production coincided with the semi-correction cycle, causing a higher than normalized capacity for PCT. San Jose capacity drove close to 2 percentage point EBITDA margin decline compared to the first half of last year. Workforce actions, including severance payments accounted for in the first half had close to a 1% impact on PCT margins. These actions should result in more favorable margin performance for PCT in the second half of 2023 and into 2024. PCT has continued investments in its RF frequency technology road map, increasing spend to meet demand schedules and readiness for the expected ramp in 2024. PCT will continue to assess its business demand profile and adjust its cost base as necessary in the second half of 2023. Further temporary measures such as short time work in Switzerland will most likely be introduced in August to both retain critical skill sets and absorb idle capacity. PCT expects a gradual improvement in the demand environment in the second half and will continue to both scrutinize expenditures and ensure ramp readiness for the upturn. Moving on to the X-ray division. Both businesses showcased much improved operating performance, providing a bright spot amidst the somber semi environment. IXS achieved sales of CHF 56.8 million compared to CHF 60 million, a slight decrease of CHF 3.2 million compared to the first half of 2022. IXS made good progress reorienting its sales and market positioning in semi electronics and battery inspection. In the first half of 2023, IXS received several orders from automotive customers requiring X-ray inspection of batteries. Sales are expected as is the typical seasonality for IXS to pick up for the division in the second half of 2023. EBITDA performance was positive for IXS despite a lower sales base. IXS margins improved from negative 2.6% in the first half of 2022 to just above breakeven at 0.3% in the first half of 2023. Price increases and continued focus on profitable growth have contributed to the improvement in operating profit for IXS. Finally, the X-Ray Modules division, IXM, achieved historically high sales for a 6-month period in the first half of 2023. Investments and successful commercialization of new products have produced solid results for the division. IXM's record growth in sales amounted to CHF 50.8 million in the first half of 2023, an increase of 24% compared to the same period last year. IXM grew in all key nondestructive testing and safety inspection markets and in addition, exploited opportunities in promising new markets, such as semiconductor and battery inspection. New product sales now account for close to 16% of total sales. IXM earned CHF 10.4 million in EBITDA in the first half of 2023 compared to CHF 6.1 million in the same period last year. IXM expanded EBITDA margin by 540 basis points as supply chain bottlenecks began to unwind and price increases took effect. In summary, all 3 divisions continue to execute focused strategies and drive efficiencies in complex environments. The first half results have notably reflected the weakness in the semiconductor industry, which is expected to show a more gradual improvement in the second half. Finally, I would like to provide a few comments on the balance sheet and cash flow metrics. The strength of our balance sheet from the past few years of strong operating performance has enabled us to maintain investments that support the flexibility and capacity requirements needed for future growth. Comet had a free cash outflow in the first half of CHF 15.3 million compared to an inflow of CHF 3 million in the first half of 2022. Net working capital is higher at CHF 131 million and expected as lower sales volumes led to an increase in days inventory outstanding. We expect that as semi orders gradually return our inventory balances will reduce and our net working capital will improve. We will more closely scrutinize and manage inventory balances during the remainder of the year. Capital expenditures in the first half summed to CHF 19.4 million compared to CHF 6.9 million in the first half of 2022. The increase of CHF 12.5 million was planned and is largely related to the on-time completion in June 2023 of our site consolidation project in San Jose, California. Our footprint in San Jose was reduced from 4 sites to 1 and offers an innovative workspace for our employees and an efficient and secure collaboration facility for our customers. Second half CapEx is expected to be limited to the deposits for the purchase of leasehold land in Penang, Malaysia and minor maintenance activities at our production sites. Comet ended the first half with a cash balance of CHF 78.8 million, a utilization of CHF 47.1 million compared to the ending cash balance of CHF 125.9 million as of 2022 year-end. In addition to an outflow of CHF 19.4 million in investments, as previously discussed, Comet returned cash to shareholders in the amount of CHF 28.8 million in the first half of 2023 as the company exited a record year of operating performance in fiscal year 2022. Comet ended the first half with a net debt position of CHF 18.2 million. The balance sheet remains strong and provides for the investments and resources needed for the company to build the structure and readiness for the semi upturn. In summary, Comet continues to execute despite the headwinds in what has been a steeper-than-anticipated correction in the semiconductor cycle. The slower demand environment has provided the opportunity to make adjustments, focus on structural improvements in operations and to double down on investments in technology that are driving the company's road map in the future. Our businesses are well positioned to execute their focused strategies and will capitalize on demand when the semi market returns. I would like to thank our Comet employees, customers and suppliers for your exceptional efforts in a dynamic environment. As this will be my final webcast, I would also like to thank all of you on the call and in the investor community for the positive and constructive exchanges over the past 3 years. Thank you for your time today. And now back to Stephan to provide more color on our visibility into the second half of 2023.

Thanks, Lisa. Let me now share light on the outlook for the second half of the year, starting with an assessment of our markets. I guess, the important message is that we anticipate a gradual recovery of the semiconductor industry in the second half of 2023. This recovery is expected to be slower than in previous cycles. From today's perspective, a strong acceleration in wafer fab equipment spending will not occur for the first half of 2024. For 2023, market observers project that spending on wafer fabrication equipment will decline by 14% to 20% versus 2022. To data point semi, the Global Industry Association expects revenue to decline about 19% year-over-year in 2023 and for 2024 estimates very widely, while semi expects WFE spending to grow 14.8%. Others are more cautious. This reflects the current uncertainty in the face of numerous macroeconomic and geopolitical challenges. While the semiconductor industry is difficult to assess, it appears that the automotive market will continue its solid growth path in the second half of the year. Supply bottlenecks that burdened the industry in 2022 have largely been overcome. The shift to electric vehicles is underway and many Chinese suppliers are entering the market. This creates opportunities for Comet due to our strong presence in China. Growth in aviation also continues, although ticket prices are significantly higher than a few quarters ago. This positive trend will continue with air traffic reaching levels close or even above pre-pandemic levels. The security market will also develop positively. Increasing mobility and infrastructure investments will continue to drive this market. Overall, a robust business environment for X-ray divisions, while PCT should recover slightly in H2 after a very strenuous H1. Despite the current unfavorable market environment and because of the enormous opportunities for Comet in these markets, we will diligently focus on our objectives and manage through the trough. As such, we put all our focus on implementing our focus strategy at PCT, we ensure organizational readiness for the upturn in 2024. We continue to accelerate Synertia's market penetration. We focus on expanding our market share with matchboxes and vacuum capacitors as well as expanding our production in Penang in sync with the recovery of PCT's market and anticipated multiyear bull-run to an anticipated semi-device market of CHF 1 trillion in 2030-ish double of what we have today. At IXS, we continue to improve our profitability by pushing our new and higher-margin product portfolio, streamlining our sales processes, investing in productivity and by being very focused on our cost base. We continue to focus on growing sales in higher quality business at the risk also walking away from revenue, revenue that comes at depressed margins. We continue to invest in creating offerings for our new focused markets and application of semi, electronics, batteries and especially advanced packaging while we protect the high-value share in aerospace and automotive. At IXM, we will continue to grow our market share in traditional markets while we increasingly harvest on product launches for new markets and operational efficiency investments. At the same time, as we are already harvesting revenues from semi, electronics and batteries, we will continue to invest in the development of further cutting-edge products with its main markets in Asia where we continue to strengthen the division's prices. Now this brings me to the outlook. With the cyclical correction in the semi industry bottom out in the second quarter, we anticipate a gradual recovery in H2 despite many uncertainties, leading to a ramp-up of demand in H1 2024. We have already realigned and re-dimensioned the company in H1 '23. Nevertheless, as Lisa mentioned previously, we are planning as a next step to implement short-time work at our manufacturing site in Flamatt for PCT. Of course, we are also working on increasing efficiency in all processes and not only limited to PCT. Despite the correction and various cost mitigating measures, we also need to prepare for the next upturn. This means we invest in R&D, which is the basis for future growth, keep an eye on developments to be able to ramp up production quickly in case of a turnaround and work on expanding our top in Malaysia. And of course, we are working on all the other dimensions we have already defined in 2019 in our focused strategy, our Boost program for growth, efficiency and culture. Based on our assessment of the current market environment and the bottom-up analysis our divisions have done, we are adjusting our forecast following the weaker-than-expected first half of the year and anticipate only a gradual recovery in the second half of the year. We therefore expect sales and EBITDA margin at the lower end of the range we indicated in our guidance in April. So to summarize the summary, we are focusing on the right industry and have very good multiyear prospects and a good runway ahead. We confirm our guidance of sales rather at the lower end due to the steep correction in Q1 and Q2. We strongly believe in having reached the bottom of the correction, and we anticipate a gradual recovery in the second half leading into an environment of renewed growth in H1 2024. Before I close, let me make a personal note on my own behalf. This was, as she mentioned herself, the last appearance of our Chief Financial Officer, Lisa Pataki, in front of the financial community, I would like to thank Lisa for the valuable work she has done for Comet in the last 3 years and the extremely collegial and constructive manner in which we have worked together. I wish her from my heart all the best in her new role and hope to see her back in Europe very, very soon. With that, I close the presentation and open the floor for questions. Thank you.

[Operator Instructions] The first question comes from Michael Foeth from Vontobel.

I have 2 questions actually. The first one is on the margin rebound in the second half. And I guess, Lisa, you gave a lot of details, I'm not sure I could follow everything. But the G&A, so the G&A costs in the second half were pretty high compared to the first half of last year. I'm not sure if the cost measures on the workforce explain all of it, if you can come back on that number. And then the margin guidance for the second half sort of implies really a reduction -- a significant reduction in operating expenses in the second half, and I'm not sure if I can reconciliate all of that. So if you can comment more on the margin expansion in the second half. That would be the first question. And the second one, probably to Stephan is on IXS. I'm not sure I understand why the -- why revenues declined in the second -- in the first half compared to last year considering all the opportunities out there? And what will it take for profitability to increase in IXS. You mentioned pricing, but I'm not sure that this margin really reflects value-based pricing yet. So thanks for a few comments on that.

Okay. Sure. So I'll start with the question on the margin kind of going into the second half. So let's start first with the workforce actions. Not all workforce actions were taken on production steps. We actually also took actions on G&A-related personnel people who are working in some of the functions, I would say that the actions did spread across all different levels of the organization. Of course, the majority of the headcount was associated with the ramp down in San Jose, but there were severance packages taken as well on the G&A side. So that's something that would not then recur going into the second half. The second thing, and maybe just a reminder is we don't capitalize R&D expenditures. So we did have more material coming into the first half and some of the X-ray businesses in R&D that you won't see that happen in the second half. So overall, I'd say the second half is really shaping up to still be a story around how does the semiconductor cycle really picked back up. But we have structured the business at this point in time that we should be in a good position to be able to achieve higher margins in the second half. We've done that before. We typically have a very good second half, especially in our X-ray businesses. So I'm pretty confident with what we have, what actions we've taken the task to be prepared for the next.

Maybe to add on the slight revenue decline at IXS, this is entirely due to the fact that we have started to walk our away from certain projects that previously even last year, we would still pick off despite the not so good margins. And that will continue while we are seeing more and more traction from the focused markets that we want to address, which is semi, electronics and batteries.

Yes, and thank you, Lisa, for the exchanges and good luck for the future.

The next question comes from Marie Ganneval from BAM.

I actually have 2, if I may. The first one would be, you mentioned the beta testing that extended for the Synertia with leading 2 customers. I was wondering if the orders are placed, what could be the timing and the magnitude of revenue for these customers? And how do you include them in your FY '23 guide of a single-digit million revenue from Synertia? And my second question relates to the one-time expense that's impacting your H1 EBITDA performance. I was just wanting to reconfirm if the one-time expense was related only to the San Jose ramp down and the severance packages and related actions that you mentioned earlier in the call?

Okay. So maybe first, the testing that is going on. As a matter of fact, now with series products and no longer prototype app our 2 Tier 1 customers in WSE, they are progressing very well. We have not taken revenue from them into account for the anticipated revenue for 2023. In terms of the potential and volume, with the different applications that we are collaborating with them now, there is substantial volume possible, and we are rather upbeat that this will materialize probably in the first half of next year. So we're working diligently on making this happen.

Yes. And then maybe I'll just follow up then with the margin question. So the one-time impacts that I mentioned in the prepared remarks, amount to about 190 basis points on a group level. That's split into really 2 parts of the workforce actions that we took at the group level that result in severance accruals that we needed to take. And then second was the idle capacity related to the transition of ramping down San Jose and having the capacity pretty much already up and running in Penang, Malaysia. So the workforce, if you want to think about it in terms of basis points, the workforce adaptation was really about 70 basis points.

The next question comes from Michael Inauen from Stifel.

Couple of questions also from my side. Just one that I probably didn't catch right on Malaysia. You mentioned that you bought a plot of land to build up capacity there. Is that something else than what you announced a couple of months ago that you are actually increasing the capacity in the existing building? So is that something additional? And if yes, so what gives you the confidence to really have much more capacity in Malaysia? That would be my first question. I just didn't get it right. And maybe then on the packaging you mentioned -- or I assume it's in the packaging when you say semiconductor, IXS projects that you won. Can you give us a little view on the dynamics actually there? I think you're making good progress, but I'd like to understand a little more what's really happening there. And the third question particularly say, you've been at the Semicon West, and we hear a lot about artificial intelligence. And now we also hear from your #1 client potential business, good business going forward in HBM DRAM in artificial intelligence or actually memory chips. So I was just wondering how you look at this whole AI discussion at the moment, particularly when you look at your major clients, maybe these 3 things that I would like to get a bit more.

Michael, so first, on Penang, what we announced a couple of months back was a capacity expansion for the current operations that we have in Malaysia where we are currently leasing basically 2 floors now when we made the announcement, the announcement pertains to adding 1 year floor in the building where we are currently located. What we announced this morning is that we are in the process of securing a plot of land where we can build a common site comparable to what we have in Flamatt, where initially, PCT will start moving all the matchbox manufacturing that we have in the leased building today, but then also look with a much broader view on creating an actionable business continuity that means looking into vacuum capacitor manufacturing there. As you know, we're sort of exposed with making capacity manufacturing only in Flamatt. The second question was concerning...

Packaging dynamics...

The packaging dynamics and the collaboration we have with our partner. The dynamics there is actually very good and challenging at the same time. When we started out with our partner, it was really aimed at R&D labs and failure analysis, and we are now heavily involved with them to bring those systems into the fab to the line, not in line but outline. So what we are now codeveloping with them and getting a lot of support from them is basically the entire automation that is required as well as the integration into their fab system. And then thirdly, on AI and definitely also the many comments that you see currently on its defect on DRAM and HBM. Obviously, that helps overall, but still the output of these AI chips are very, very, very low. So this is not, in that sense, a game changer right now. However, looking forward, we have a very strong conviction that these types of chips will make up a sizable portion of the semi device output. But this is something that will happen over the course of the next probably 24 months only.

Our next question comes from Sebastian Vogel from UBS.

I have got 3 questions that I would ask them one by one and the first one is on the RF Generator. Great to hear that there is a second larger customer potentially looking at it. A question first one on that one would -- what was taking him so long to start looking at it. And you still continue to be committed to the plan of having around like 100 million sales in 2025 on this product.

Okay. So you want to go.

Yes, I will ask them one by one.

Questions. Well, which is 3 questions. Well, that's absolutely very well because it's always very hard to remember all 3 questions. So what fits the second customer? What took him so long? I wouldn't say it took him so long. We tested with them in-house at Comet for a very long time prior to them bringing the RF generators into their lab, and that has also something to do with what they have on their plate. So we have been engaged with them in a very positive manner for quite a long time. And now we are working with them for quite some time already actually on testing on their tools. And when it comes to the CHF 100 million aspiration for 2025, it all depends, obviously, on how the ramp-up is going to be and on which tools that we are going to be. And we will definitely, at the Capital Market Day, gives a consolidated and more accurate view on what we assess is going to be possible until the end of 2025.