Melexis N : 2020 - Melexis Annual Report

ANNUAL REPORT 2020

ON THE COVER: THE JELLYFISH

Some jellyfish have ocelli or light-sensitive organs. The box jellyfish has 24 eyes, two of which are capable of seeing color, as well as four parallel information processing areas, which are said to make it one of the few creatures to have a 360-degree view of its environment. Its abilities are very much linked to the unique characteristics of many of our sensors, such as the Triaxis® 3D magnetic sensors or the SensorEyeC light sensors. 

TABLE OF CONTENTS

1	Letter to our shareholders	4
2	Who we are	7
	2.1 We engineer the best imaginable future	7
	2.2	Our sites worldwide	8
	2.3	Our key figures	10
	2.4	Our industry associations	12
3	What we do	14
	3.1 We develop chips	14
	3.2 We innovate for our customers	16
	3.3 We cater to many different markets	17
	3.4	Our solutions	18
4	What we stand for	26
	4.1	Our guiding principles	26
	4.2	Sustainability at heart	28
	4.3	Cybersecurity	30
5	Our strategy	31
	5.1 We are going for 20 ICs per car	32
	5.2 These application trends drive our innovation	32
	5.3 We focus on ASSPs and ASICs	40
	5.4 We want to be our customers' partner of choice	40
6	Our sustainability report	41
	6.1	Our key material topics and concerns	41
	6.2	Our stakeholder engagement	41
	6.3	Our talents	43
	6.4	Safety, health and well- being	49
	6.5	Local communities	52
	6.6 The environment	54

2 Melexis Annual Report 2020

	6.7	Responsible supply chain	58
	6.8	Our business ethics	60
7	Our corporate governance	62
	7.1	Shareholders	62
	7.2 Management structure	63
	7.3	Board of Directors	63
	7.4 Committees	66
	7.5 Executive management	67
	7.6	Remuneration report	68
	7.7	Policy on certain transactions	73
	7.8	Internal control and risk assessment procedures in relation to financial reporting	74
	7.9	Elements pertinent to a take-over bid	75
	7.10 Auditor	76
	7.11 Compliance with the 2020 Belgian Code on Corporate Governance	76
8	Financial report	77
	8.1	Consolidated statement of financial position	78
	8.2	Consolidated income statement	80
	8.3	Consolidated statement of comprehensive income	81
	8.4	Consolidated statement of changes in equity	82
	8.5	Consolidated statement of cash flows	84
	8.6	Result of operations	86
	8.7	Liquidity, working capital and capital resources	87
	8.8	Statement of the Board of Directors	87
	8.9	Notes to the consolidated financial statements	88
9	Shareholder information	132
10	Excerpts from the Melexis nv statutory	134
11	Glossary	140
12	List of used acronyms	141
13	GRI content index	142
14	About this report	146

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1 LETTER TO OUR SHAREHOLDERS

Dear Melexis shareholder,

2020 was so far one of the most bizarre years of our lifetime. The impact of a single virus was felt throughout our professional and private lives like nothing before. We were collectively tested on our capacity to be agile on the one hand and on our ability to keep going on the other. Throughout this report you will be able to read about how we tackled the pandemic within Melexis.

I would like to express special praise to our full Melexis community who have demonstrated tremendous resilience and incredible creativity throughout this difficult period. With the vaccination campaign underway, 2021 brings a positive perspective. This being said, the new way of working, blending physical and online, will be retained going forward, as we've discovered it to be excellently effective and matching our international collaboration, whether internally or with our customers and partners across the globe.

Ahead of the 2020 results publication, I proposed to the Board that I would step down as CEO. The Board agreed that it was a good time to make this change, as all the signals are there that the company is again at the beginning of a growth spurt. It is my experience that such a change brings valuable

new perspectives and new energy that boost the potential of the company, teams and individuals alike.

As of 1 August 2021, Marc Biron will be appointed as the new chief executive officer of Melexis to replace me and will become in charge of the general management of the company. Marc is the best successor I could wish for and I will be by his side during and after the transition period. He is well placed to guide us through the transition that the automotive industry, a key area for Melexis, is in today. In addition, he has started paving the way for the company to also apply its wealth of technological knowhow to carefully selected new markets.

Along with the decision to appoint my successor, the Board of Directors graciously elected me as their chairwoman from 1 August onwards. Subject to the approval of the shareholders during the annual shareholders' meeting in May, Marc Biron will also join the Board.

Financial performance

When it comes to our financial performance, 2020 was

• to say the least - a challenging year. After a solid start, whereby Melexis posted a year-over-year sales growth of 19% in the first quarter, the pandemic struck and caused a

• Melexis Annual Report 2020

• Today, every new car worldwide carries on average 13 Melexis chips. This makes me"
  very proud and excited for the future.

substantial impact on our second- and third-quarter sales. In the course of September, however, we started observing an uptick in orders, whilst inventories at customers were estimated at very low levels. Since the release of our third- quarter results, we have been witnessing a strong order intake. The end of 2020 marked a turning point for Melexis. Despite the numerous challenges that COVID-19 had posed, out of adversity came opportunity: next to catering to our valued automotive customers as always, Melexis also tapped into other applications that gained momentum with the COVID-19 outbreak. Driven by the increased demand in healthcare, micromobility and gaming applications, Melexis could grow its adjacent sales by over 50% vs. the previous year. We ended the year with a record quarterly sales level of 147.4 million EUR, resulting in 507.5 million EUR or 4% sales growth for the full year. Also remarkable was the outperformance of Asia, which represented 55% of sales in 2020.

The Melexis share price ended the year at EUR 79.90, up 19% over the year. The Board of Directors approved on 29 January 2021 to propose to the annal shareholders' meeting to pay out over the result of 2020 a total dividend of EUR 2.20 gross per share.

On 22 March 2021, Melexis was included in the BEL 20 index, the benchmark index for the Belgian stock market.This milestone proves that Melexis is an established value with a positive impact on the Belgian economy.

For the full year 2021, Melexis expects sales growth between 15% and 20%, with a gross profit margin around 41% and an operating margin around 19% at the midpoint of the sales guidance, all taking into account a EUR/USD exchange rate of 1.21. CAPEX is expected to be around 40 million EUR.

Disruption in supply chain

For a couple of months now, we have been in a turbulent market situation because of strongly increased demand that

took off in the last quarter of the year after uncertainty created by COVID-19 throughout 2020 and partially also induced by the geopolitical tensions. The overall global microelectronics supply chain finds itself in the midst of a technology war. There is an overheating of the semiconductor market, particularly manifesting in significant component shortages. Already in the second quarter of 2020 Melexis started to take precautionary measures, increasing stock levels and communicating with our customers to prepare for demand increases later in the year.

Product launches

In 2020 and despite the operational challenges triggered by the pandemic, we launched no less than 13 new products, almost half of which are specifically conceived for adjacent markets such as 2-/3-wheelers, home appliances and products for industrial use. Newly launched automotive products all serve the future car, carbon-free and intelligent. Based on 2020 data, we can now state that on average, every new car worldwide carries 13 Melexis chips on board from 11 the year before. All this makes me very proud and excited for the future.

Sustainability at heart

Since its conception Melexis is dedicated to positively impact and care for our various stakeholders, on an economic, environmental and social level. That is why we embrace two globally recognized sustainability initiatives: the United Nations Sustainable Development Goals (SDGs) and the Global Reporting Initiative (GRI). This year we held a compelling materiality workshop that included all internal key representatives and departments of our company. During that workshop Melexis defined the SDG topics that are material to our company and stakeholders and you will find more information about them and our approach in the next chapters of this report. I would just like to highlight here that Melexis is especially well positioned to contribute to the electrification trend in the automotive industry that is currently seeing an acceleration on the back of a heightened and justified attention to combating climate change.

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