Melexis N : 2023 - Melexis Annual Report

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LETTER TO OUR SHAREHOLDERS

Dear shareholders,

2023 was another successful year for Melexis. The automotive sector moved towards a more balanced supply and demand and we made great strides in electrification, comfort and safety.

Today, we are witnessing a transformation in the global automotive industry. While European carmakers are adapting to the electrification trend, Asia is emerging as a dominant force, with high production and sales volumes, fueled by a growing middle class. Adapting to the expectations of Asian customers, who prioritize speed, cost efficient solutions and specific product requirements, is crucial. In order to do this, we are already actively building strong connections in Asia. The inauguration of our new facility in Malaysia in the summer of 2024 will give us extra impact in the entire region.

I would like to commend our colleagues in Kyiv for their outstanding work in very difficult conditions. They delivered a major project for a key customer with excellence. In 2024, they are working on another very important project for another key customer with impressive commitment. We are immensely proud of our people in Ukraine for their resilience and motivation. They inspire us all at Melexis.

Embrace the change and capture the opportunities

During our Capital Markets Day in November, we presented our new strategy and long-term financial targets. The automotive industry is our main market, with 90% of our revenue from chip sales to carmakers. Electrification, premiumization and ADAS in new EV platforms lead to an ever-increasing number of chips per car. Our current focus is spread over five domains which are related to these trends and offer significant market growth: electrification of the powertrain, thermal management, lighting, e-brake,e-steering and battery. Our goal is to achieve a 10% compound annual growth in the automotive domain until 2030.

We are developing specific products to expand our presence in the emerging markets of sustainable world, alternative mobility, robotics, and digital health. These four areas headed under the 'beyond automotive' category make up 10% of our turnover. We selected these domains because we anticipate that they will grow significantly in the coming years thanks to trends like aging, population growth and electrification. We aim for a 15% or higher annual sales growth in these areas between now and 2030. Innovation and product development at a fast pace are essential for us to stay relevant in the next decade. Together, we are welcoming change and pursuing opportunities.

As the CEO of Melexis, my responsibility is to prepare Melexis for the future and adapt to change. It is my role within the company to enable my teams to perform at their best. I believe in clarifying the purpose of our actions and empowering the team to choose their methods, which fosters self-motivation. By creating this entrepreneurial mindset, we are boosting innovation and forward thinking. As enabler for productive and successful innovation, diversity in all the teams and departments of the company is also a key element that I want to strengthen in the next years.

If we want to continue riding the crest of the wave, we need to invest in both 'automotive' and 'beyond automotive'. The strategy has been set, the execution has been launched.

Sustainability in all its facets

Sustainability is at the core of all our strategic decisions. One of our key contributions to a more sustainable world is our wide product range that supports vehicle electrification. This helps lowering CO2 emissions.

In terms of our emissions as a company, since 2021 we have been reporting on Scope 1 (direct emissions from energy and heat) and Scope 2 (indirect emissions from purchased electricity, heat, steam or cooling). In 2023, we voluntarily decided to take another step in assessing our total carbon footprint and started measuring our Scope 3 emissions (indirect emissions from our value chain). This will allow us to further define our environmental strategy.

Sustainability and Environment Social Governance (ESG) go beyond the climate and nature. One example on the social side is that we keep promoting a gender-diverse and multicultural workforce, resulting today in no less than 56 nationalities. Having such a diverse workforce enriches our

discussions and perspectives and is a key factor for the strength and success of Melexis.

To support Melexis and the Executive Management in steering our ESG strategy and in defining priorities, an ESG committee has been established at the Board of Directors' level. Furthermore, to ensure continuous and aligned progress in our ESG journey, a dedicated cross-functional ESG team is working on the identified goals and projects.

In 2023, we took a pulse check with our entire workforce through an employee listening survey. This comprehensive internal assessment delved into their motives and motivations. We were delighted to see that 'innovation', 'sustainability' and 'people' scored the highest. This aligns perfectly with the vision of management and the Board of Directors.

Financial performance

Sales for the full year 2023 were 964.3 million EUR, an increase of 15% compared to the previous year. Electrification and the growing need for comfort and safety applications were once again the driving forces behind these results. The outperforming product lines of 2023 were current sensors, embedded motor drivers and pressure sensors. The magnetic position sensors product line continued to thrive in absolute numbers as well.

For the full year 2024, we expect sales to be around 1 billion euro, with a gross profit margin above 44% and an operating margin above 25%. Backed by another solid design win performance in 2023, we look forward to a promising future.

The Board of Directors approved to propose to the annual shareholders' meeting a total dividend of EUR 3.70 gross

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WHO WE ARE

Melexis is a limited liability company headquartered in Ieper, Belgium, and incorporated under Belgian law. Melexis designs, develops, and delivers edge sensor and driver solutions with a heart for people and planet.

We sell our products to a wide customer base in Europe, Asia and North America. This introductory chapter provides an organizational profile of Melexis.

CELEBRATING MELEXIS' INCLUSION IN THE BEL20, THE BELGIAN BENCHMARK STOCK MARKET

In March 2023, we celebrated Melexis're-entry in the BEL20, the most important stock market index in Belgium, containing 20 shares selected by Euronext.

"We are proud of this important moment and are grateful for all the fabulous people at Melexis who are behind this success!", concludes Chairwoman Françoise Chombar.

2.1 WE ENGINEER THE BEST IMAGINABLE FUTURE

Melexis is a global supplier of microelectronic semiconductor solutions. Our company represents engineering that enables the best imaginable future - a future that is safe, comfortable and sustainable. Because we care. We care about our planet, about our customers and about our colleagues. All of these aspects are reflected in the multitude of applications that our technology empowers.

Operating results

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2023

Balance structure

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Cash flow and capital expenditure

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Ratios

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2023