Melexis N : 2020 - Melexis Half Year Report

HALF-YEAR REPORT 2020

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Melexis Half-YearReport 2020

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TABLE OF CONTENTS

1 Comments on the condensed consolidated interim accounts prepared according to

IFRS standards

1.1 Selected financial figures

1.2 Exchange rates

1.3 Result of operations

1.4 Liquidity, working capital and capital resources

1.5 Risk factors

1.6 Events after the balance sheet date

1.7 Statement of the Board of Directors

2 Condensed consolidated interim financial statements

2.1 Condensed consolidated interim statement of financial position

2.2 Condensed consolidated interim statement of profit and loss

2.3 Condensed consolidated interim statement of comprehensive income

2.4 Condensed consolidated interim statement of changes in equity

2.5 Condensed consolidated interim statement of cash flow

2.6 Notes to the condensed consolidated interim financial statements

2.6.1 Company information

2.6.2 Statement of compliance

2.6.3 Summary of significant accounting policies

2.6.4 Changes in Group's organization

2.6.5 Notes

3 Shareholder information

3.1 Shareholder structure

3.2 Shareholder contact info

3.3 Financial calendar 2020

3.4 Dividend

4 Statutory Auditor's review opinion on the condensed

consolidated interim financial statements of Melexis NV for the six month period ending June 30th, 2020

5 Glossary

3

1 COMMENTS ON THE CONDENSED CONSOLIDATED INTERIM ACCOUNTS PREPARED ACCORDING

TO IFRS STANDARDS

1.1 SELECTED FINANCIAL FIGURES

The tables below set out the components of Melexis' operating income and operating expenses, as well as the key elements of the condensed consolidated interim statement of financial position.

Condensed consolidated interim income statement in EUR

	Half year ended 30/06/2020	Half year ended 30/06/2019
Product sales	238,372,508	236,357,864
Revenues from research and development	176,144	180,915
Total sales	238,548,652	236,538,779
Cost of sales	(143,707,884)	(140,032,910)
Gross margin	94,840,768	96,505,869
Research and development expenses	(38,717,556)	(39,274,031)
General and administrative expenses	(14,980,771)	(15,361,310)
Selling expenses	(7,059,440)	(7,693,248)
Operating result (EBIT)	34,083,002	34,177,280
Financial result (net)	(495,627)	(704,217)
Result before taxes	33,587,375	33,473,063
Income taxes	(3,205,316)	(3,952,645)
Net result of the period	30,382,059	29,520,418
Net profit of the Group	30,382,059	29,520,418
Attributable to owners of the parent	30,382,059	29,520,418

4 Melexis Half-Year Report 2020

Condensed consolidated interim statement of financial position in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Current assets	270,433,329	237,327,901
Non-current assets	172,472,892	181,281,953
Current liabilities	48,369,307	54,175,523
Non-current liabilities	65,548,855	65,364,012
Equity	328,988,059	299,070,320

1.2 EXCHANGE RATES

Since the introduction of the euro on 1 January 1999, and in accordance with Belgian law, Melexis NV keeps its books and prepares its consolidated financial statements in euro. The functional currency of its subsidiaries is as follows:

Melexis Inc.	USD
Melexis GmbH	EUR
Melexis Bulgaria EOOD	BGN
Melexis Ukraine	UAH
Melexis Technologies SA	CHF
Melexis NV/BO France	EUR
Sentron AG	CHF
Melefin NV	EUR
Melexis Technologies NV	EUR
Melexis NV/BO Philippines	PHP
K.K. Melexis Japan Technical Research	JPY
Center
Melexis Electronic Technology (Shanghai)	CNY
Co., Ltd
Melexis (Malaysia) Sdn. Bhd.	MYR
Melexis Technologies NV/BO Malaysia	MYR
Melexis Dresden GmbH	EUR
Melexis France SAS	EUR
Melexis Korea Yuhan Hoesa	KRW

Assets and liabilities of Melexis Inc., Melexis Technologies SA, Sentron AG, Melexis Ukraine, Melexis Bulgaria EOOD, Melexis NV/BO Philippines, Melexis Electronic Technology (Shanghai) Co., Ltd, Melexis Technologies NV/ BO Malaysia, Melexis (Malaysia) Sdn. Bhd., Melexis Korea Yuhan Hoesa and K.K. Melexis Japan Technical Research Center are translated at exchange rates at the end of the reporting period. Revenues and expenses are translated at the average exchange rate during the period. Equity components have been translated at historical exchange rates. Gains or losses resulting from this translation are reflected in the component 'cumulative translation adjust- ment' (CTA) in the statement of financial position.

Melexis Half-Year Report 2020 5

1.3 RESULT OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the company's financial statements of prior years.

Revenues

Total sales amounted to EUR 238,372,508, an increase of 0.85% compared to the first half year of 2019. Specific research and development activities are performed under contract for customers. For the first half year of 2020, the company invoiced EUR 176,144 research and development costs to its customers, compared to EUR 180,915 in the first half year of 2019. Sales to automotive customers represented 89% of sales in the first half of 2020. ASSP sales represented 67% of all sales.

In the second quarter of 2020, revenues were significantly impacted by the COVID-19 pandemic. For more details, we refer to note 2.6.5 O.

Cost of sales

Costs of sales consist of materials (raw material and semi- finished parts), subcontracting, labor, depreciation and other direct production expenses. They increased from EUR 140,032,910 in the first half year of 2019 to EUR 143,707,884 in the first half year of 2020. Expressed as a percentage of sales, the cost of sales was 60% in the first half year of 2020, compared to 59% in the first half year of 2019.

Gross margin

The gross margin, expressed as a percentage of sales, was 40% in the first half year of 2020, compared to 41% in the first half year of 2019.

Research and development expenses

Research and development expenses amounted to EUR 38,717,556 in the first half year of 2020, representing 16% of sales. The main research and development activities focused on magnetic sensors, inductive sensors, pressure sensors, temperature sensors, optical sensors, sensor in- terfaces, embedded drivers, embedded lighting and smart drivers.

General, administrative and selling expenses

General, administrative and selling expenses consist mainly of salaries and salary related expenses, office equipment and related expenses, commissions, travel and advertising expenses. The general, administrative and selling expenses decreased by 4% compared to the first half year of 2019, mainly as a result of cost savings.

Financial result

The net financial result increased from EUR 704,217 loss in the first half year of 2019 to EUR 495,627 loss in the first half year of 2020. The (net) interest result decreased from a loss of EUR 349,294 in the first half year of 2019 to a loss of EUR 405,078 in the first half year of 2020. The net exchange results (both realized and unrealized) in the first half year of 2020 amounted to a loss of EUR 22,056, compared to a loss of EUR 287,211 during the first half year of 2019.

Net income

There was an increase in net income from EUR 29,520,418 in 2019 to EUR 30,382,059 in 2020, mainly due to lower income taxes.

6 Melexis Half-Year Report 2020

1.4 LIQUIDITY, WORKING CAPITAL AND CAPITAL RESOURCES

Cash and cash deposits amounted to EUR 57,622,490 as of 30 June 2020, in comparison to EUR 38,771,524 as of 31 December 2019.

In the first half year of 2020, operating cash flow before working capital changes amounted to EUR 55,064,362 compared to EUR 60,498,968 in the first half year of 2019. Net operating cash flow including working capital changes amounted to EUR 31,273,980, compared to EUR 21,721,841 in the first half year of 2019. The increase in net operating cash flow is mainly due to changes in other current assets and income tax paid, partially compensated by an increase in inventories to be able to supply a future ramp-up in demand.

The cash flow from investing activities was negative for an amount of EUR 11,327,230, mainly as a result of investments in fixed assets.

The cash flow from financing activities was negative for an amount of EUR 1,071,451 mainly due to the repayment of leases.

1.5 RISK FACTORS

Melexis, as any company, is continuously confronted with a number of market and competition risks or more specific risks related to the company (including but not limited to currency fluctuations, customer concentration, dependence on key personnel, product liability, IP or litigation). More information on risk factors can be found in the annual report 2019.

Melexis believes that the most noteworthy risks that the company is facing for the coming half year would be the volatility in supply and demand, the fluctuations in the USD exchange rate and the impact of COVID-19.

For risks related to COVID-19, please refer to note 2.6.5 O.

1.6 EVENTS AFTER THE BALANCE SHEET DATE

There are no events after the balance sheet date that have a material impact on the condensed consolidated interim

financial statements.

1.7 STATEMENT OF

THE BOARD OF DIRECTORS

The Board of Directors of Melexis certifies, on behalf and for the account of the company, that, to their knowledge,

1. the condensed consolidated interim financial state- ments which have been prepared in accordance with Inter- national Financial Reporting Standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the entities included in the consoli- dation as a whole and
2. the comments on the consolidated accounts include a fair review of the development and performance of the business and the position of the company and the entities included in the consolidation as a whole, together with a de- scription of the principal risks and uncertainties they face.

Melexis Half-Year Report 2020 7

2 UNAUDITED CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

2.1 CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

in EUR

				Half year ended	Year started
				30/06/2020	01/01/2020
ASSETS
Current assets		Cash and cash equivalents	Note 2.6.5 A	57,622,490	38,771,524
		Current investments, derivatives		-	78,437
		Accounts receivable - trade		48,965,939	58,310,231
		Accounts receivable - related companies	Note 2.6.5 K	95,274	135,774
		Assets for current tax		1,673,743	1,745,394
		Inventories		148,369,341	128,505,476
		Other current assets	Note 2.6.5 D	13,706,542	9,781,065
Total current assets			270,433,329	237,327,901
Non-current assets		Deferred tax assets	Note 2.6.5 I	28,147,800	27,649,279
		Other non-current assets		3,000	3,000
		Leased assets	Note 2.6.5 E	4,047,943	4,812,548
		Property, plant and equipment	Note 2.6.5 F	134,987,452	143,607,634
		Intangible assets		5,286,697	5,209,492
Total non-current assets		172,472,892	181,281,953
TOTAL ASSETS			442,906,221	418,609,854

The accompanying notes to this interim statement of financial position form an integral part of these condensed consolidated interim financial statements.

8 Melexis Half-Year Report 2020

in EUR

				Half year ended	Year started
				30/06/2020	01/01/2020
LIABILITIES
Current liabilities		Derivative financial instruments	Note 2.6.5 B	83,864	-
		Lease liabilities	Note 2.6.5 E	942,292	1,824,954
		Accounts payable - trade		17,136,709	16,139,383
		Accounts payable - related companies	Note 2.6.5 K	10,101,342	15,732,800
		Accrued expenses, payroll and related		11,722,756	10,642,846
		taxes
		Accrued taxes		1,560,846	3,250,601
		Other current liabilities	Note 2.6.5 G	4,466,007	4,304,950
		Deferred income		2,355,491	2,279,988
Total current liabilities			48,369,307	54,175,523
Non-current liabilities		Long-term debt less current portion	Note 2.6.5 H	62,000,000	62,000,000
		Lease liabilities	Note 2.6.5 E	3,146,240	3,026,754
		Deferred tax liabilities	Note 2.6.5 I	402,614	337,258
Total non-current liabilities		65,548,855	65,364,012
Shareholders' capital			564,814	564,814
Reserve treasury shares			(3,817,835)	(3,817,835)
Legal reserve			56,520	56,520
Retained earnings			337,237,911	306,855,934
Cumulative translation adjustment		(5,053,760)	(4,589,522)
Equity attributable to company owners		328,987,649	299,069,910
Non-controlling interest			410	410
Total equity			328,988,059	299,070,320
TOTAL LIABILITIES AND EQUITY		442,906,221	418,609,854

Melexis Half-Year Report 2020 9

2.2 CONDENSED CONSOLIDATED INTERIM STATEMENT OF PROFIT AND LOSS

in EUR

	Half year ended 30/06/2020	Half year ended 30/06/2019
Product sales	238,372,508	236,357,864
Revenues from research and development	176,144	180,915
Total sales	238,548,652	236,538,779
Cost of sales	(143,707,884)	(140,032,910)
Gross margin	94,840,768	96,505,869
Research and development expenses	(38,717,556)	(39,274,031)
General and administrative expenses	(14,980,771)	(15,361,310)
Selling expenses	(7,059,440)	(7,693,248)
Result from operations (EBIT)	34,083,002	34,177,280
Financial income	2,645,551	828,310
Financial charges	(3,141,179)	(1,532,527)
Result before taxes	33,587,375	33,473,063
Income taxes	(3,205,316)	(3,952,645)
Net result of the period	30,382,059	29,520,418
Earnings per share non-diluted	0.75	0.73
Earnings per share diluted	0.75	0.73

The accompanying notes to this condensed consolidated interim income statement form an integral part of these consolidated interim financial statements.

10 Melexis Half-Year Report 2020

2.3 CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

in EUR

	Half year ended	Half year ended
	30/06/2020	30/06/2019
Net result	30,382,059	29,520,418
Other comprehensive income
Recyclable components
Cumulative translation adjustment	(464,238)	300,478
Total other comprehensive income/(loss) for the period,	(464,238)	300,478
net of related tax effects
Total comprehensive income/(loss) for the period	29,917,820	29,820,896
Total comprehensive income attributable to owners of the parent	29,917,820	29,820,896

Melexis Half-Year Report 2020 11

2.4 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

in EUR

	Number of	Share	Legal	Retained
	shares	capital	reserve	earnings
31 December 2018	40,400,000	564,814	56,520	334,719,404
Net result	-	-	-	29,520,418
CTA movement	-	-	-	-
Other comprehensive income	-	-	-	-
Dividend	-	-	-	(36,048,473)
Transactions with owners of the parent	-	-	-	(36,048,473)
30 June 2019	40,400,000	564,814	56,520	328,191,348
Net result	-	-	-	30,734,816
CTA movement	-	-	-	(214)
Other comprehensive income	-	-	-	(214)
Dividend	-	-	-	(52,070,017)
Non-controlling interest	-	-	-	-
Transactions with owners of the parent	-	-	-	(52,070,017)
31 December 2019	40,400,000	564,814	56,520	306,855,934
Net result	-	-	-	30,382,059
CTA movement	-	-	-	(81)
Hedge reserves	-	-	-	-
Other comprehensive income	-	-	-	(81)
30 June 2020	40,400,000	564,814	56,520	337,237,911

Melexis NV holds 1,785 own shares and Melexis Technologies NV holds 344,356 shares of Melexis NV, in total representing 0.86% of shares outstanding. During 2018, 2019 and the first half year of 2020, no additional purchase of own shares was done, therefore the amount of own shares held by Melexis NV and Melexis Technologies NV remains the same.

12 Melexis Half-Year Report 2020

Reserve			Non-	Total
treasury	Hedge reserve	CTA	controlling
equity
shares			interest
(3,817,835)	-	(5,527,096)	10,471	326,006,277
-	-	-	-	29,520,418
-	-	300,478	-	300,478
-	-	300,478	-	300,478
-	-	-	-	(36,048,473)
-	-	-	-	(36,048,473)
(3,817,835)	-	(5,226,618)	10,471	319,778,700
-	-	-	-	30,734,816
-	-	637,096	-	636,882
-	-	637,096	-	636,882
-	-	-	-	(52,070,017)
-	-	-	(10,061)	(10,061)
-	-	-	(10,061)	(52,080,078)
(3,817,835)	-	(4,589,522)	410	299,070,320
-	-	-	-	30,382,059
-	-	-	-	(81)
-	-	(464,238)	-	(464,238)
-	-	(464,238)	-	(464,319)
(3,817,835)	-	(5,053,760)	410	328,988,059

Melexis Half-Year Report 2020 13

2.5 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW

in EUR (indirect method)

		Half year ended	Half year ended
		30/06/2020	30/06/2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net result		30,382,059	29,520,418
Adjustments for operating activities:
Deferred taxes	Note 2.6.5 I	(489,521)	1,316,753
Unrealized exchange results		(3,387)	436,435
Accrued income tax		816,045	4,360,483
Government grants		397,325	323,430
Depreciations		23,069,739	23,347,274
Depreciations leased assets		955,668	835,283
Financial results		(54,566)	358,892
Operating cash flow before working capital changes		55,064,362	60,498,968
Accounts receivable, net		9,321,253	6,766,352
Other current assets		(4,235,708)	(12,721,175)
Other non-current assets		-	(3,600)
Due to related companies	Note 2.6.5 K	(5,631,458)	685,807
Due from related companies	Note 2.6.5 K	40,500	48,345
Accounts payable		1,011,608	(4,644,687)
Accrued expenses		1,079,910	(107,001)
Other current liabilities		109,881	1,469,698
Other non-current liabilities		224,723	(785,420)
Inventories		(22,939,746)	(11,774,981)
Interest paid		(265,546)	(204,127)
Income tax paid		(2,505,799)	(17,506,338)
Net cash from operating activities		31,273,980	21,721,841
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	Note 2.6.5 F	(10,320,968)	(12,849,566)
Purchase of intangible assets		(1,134,432)	(2,034,867)
Interests received		49,733	49,431
Investments, proceeds from current investments		78,437	86,500
Net cash used in investing activities		(11,327,230)	(14,748,502)

14 Melexis Half-Year Report 2020

Condensed consolidated interim statement of cash flow (continued)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment from long-term debts	Note 2.6.5 H	13,918	(1,044,038)
Repayment leasings		(954,238)	(806,886)
Proceeds of long-term debts		-	28,000,000
Impact of exchange results on financing items		(131,131)	(308,432)
Dividend payment		-	(36,048,473)
Net cash used in financing activities		(1,071,451)	(10,207,829)
Effect of exchange rate changes on cash		(24,334)	19,899
(Decrease) increase in cash		18,850,966	(3,214,592)
Cash at beginning of the period		38,771,524	34,521,923
Cash at the end of the period	Note 2.6.5 A	57,622,490	31,307,332

The accompanying notes to this interim statement of cash flows form an integral part of the condensed consolidated interim financial statements.

The movement in net debt is as follows: in EUR

	1 January 2020	Cash flows	Non-cash changes	30 June 2020
			Foreign exchange
			movements
Current portion of long-term debts	-	-	-	-
Long-term debts	62,000,000	-	-	62,000,000
Total debt	62,000,000	-	-	62,000,000

Melexis Half-Year Report 2020 15

2.6 NOTES TO THE CONDENSED

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

2.6.1 Company information

Melexis NV is a limited liability company incorporated under Belgian law. The company has been operating since 1988. The company designs, develops, tests and markets advanced integrated semiconductor devices mainly for the automotive industry. The company sells its products to a wide customer base in the automotive industry in Europe, Asia and North America.

The Melexis Group of companies employed, on average (in FTE) 1,458 people at the end of June in 2020 and 1,525 at the end of June in 2019.

The registered office address of the company is located at Rozendaalstraat 12, 8900 Ieper, Belgium. The company is listed on Euronext.

The consolidated statements were authorized for issue by the Board of Directors subsequent to their meeting held on 17 August 2020 in Tessenderlo.

2.6.2 Statement of compliance

The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board ('IASB') and as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the company for the year ended 31 December 2019. Melexis has not applied early any new IFRS requirements that are not yet effective in 2020.

2.6.3 Summary of significant accounting policies

The accounting policies applied, computation and presentation are consistent with those applied in the annual consolidated financial statements ended 31 December 2019, except as described below.

During the current financial year, the company has adopted all the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, that are relevant to its operations and effective as per 30 June 2020. The Group has not applied new IFRS requirements that are not yet effective as per 30 June 2020.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2020 and have been endorsed by the European Union:

• Amendments to References to the Conceptual
  Framework in IFRS Standards (effective 1 January 2020). The revised Conceptual Framework includes a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance - in particular the definition of a liability; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
• Amendments to the definition of material in IAS 1 and IAS 8 (effective 1 January 2020). The amendments clarify the definition of material and make IFRSs more consistent. The amendment clarifies that the reference to obscuring information addresses situations in which the effect is similar to omitting or misstating that infor- mation. It also states that an entity assesses materiality in the context of the financial statements as a whole. The amendment also clarifies the meaning of 'primary users of general purpose financial statements' to whom those financial statements are directed, by defining them as 'existing and potential investors, lenders and other cred- itors' that must rely on general purpose financial state-

16 Melexis Half-Year Report 2020

ments for much of the financial information they need. The amendments are not expected to have a significant impact on the preparation of financial statements.

• Amendments to IFRS 9, IAS 39 and IFRS 7: Interest
  Rate Benchmark Reform (effective 1 January 2020).
  The amendments require qualitative and quantitative disclosures to enable users of financial statements to understand how an entity's hedging relationships are affected by the uncertainty arising from interest rate benchmark reform.
• Amendments to the guidance of IFRS 3 Business Com- binations, that revises the definition of a business (ef- fective 1 January 2020). The new guidance provides a framework to evaluate when an input and a substantive process are present (including for early stage compa- nies that have not generated outputs). To be a business without outputs, there will now need to be an organised workforce. The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions across all industries, particular- ly real estate, pharmaceutical, and oil and gas. Applica- tion of the changes would also affect the accounting for disposal transactions.

The following new standards and amendments have been issued, but are not mandatory for the first time for the financial year beginning 1 January 2020 and have not been endorsed by the European Union:

• Amendments to IAS 1 'Presentation of Financial State- ments: Classification of Liabilities as current or non-cur- rent' (effective 1 January 2022), affect only the presen- tation of liabilities in the statement of financial position
  - not the amount or timing of recognition of any asset, liability income or expenses, or the information that en- tities disclose about those items. The IASB has issued an exposure draft to defer the effective date to 1 January
  2023. They:
  • Clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align

the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;

• • Clarify that classification is unaffected by expecta- tions about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
• IFRS 17 'Insurance contracts' (effective 1 January 2023). This standard replaces IFRS 4, which currently permits a wide variety of practices in accounting for in- surance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance con- tracts and investment contracts with discretionary par- ticipation features. On 17 March 2020, IASB decided to defer the effective date to annual reporting periods be- ginning on or after 1 January 2023. The Board expects to issue the amendments to IFRS 17 in the second quar- ter of 2020.
• Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets as well as Annual Improvements (effective 01/01/2022). The package of amendments includes narrow-scope amend- ments to three Standards as well as the Board's Annual Improvements, which are changes that clarify the word- ing or correct minor consequences, oversights or con- flicts between requirements in the Standards.
• • Amendments to IFRS 3 Business Combinations up- date a reference in IFRS 3 to the Conceptual Frame- work for Financial Reporting without changing the accounting requirements for business combinations.
  • Amendments to IAS 16 Property, Plant and Equip- ment prohibit a company from deducting from the cost of property, plant and equipment amounts re- ceived from selling items produced while the compa- ny is preparing the asset for its intended use. Instead,

Melexis Half-Year Report 2020 17

a company will recognise such sales proceeds and related cost in profit or loss.

• • Amendments to IAS 37 Provisions, Contingent Li- abilities and Contingent Assets specify which costs a company includes when assessing whether a contract will be loss-making.
  • Annual Improvements make minor amendments to
    IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments,
    IAS 41 Agriculture and the Illustrative Examples ac- companying IFRS 16 Leases
• Amendment to IFRS 16 Leases Covid 19-Related Rent
  Concessions (effective 01/06/2020, with early ap- plication permitted). If certain conditions are met, the Amendment would permit lessees, as a practical expe- dient, not to assess whether particular covid-19-related rent concessions are lease modifications. Instead, les- sees that apply the practical expedient would account for those rent concessions as if they were not lease modifications.

The following standard is mandatory since the financial year beginning 1 January 2016 (however not yet subjected to EU endorsement). The European Commission has decided not to launch the endorsement process of this interim standard but to wait for the final standard:

• IFRS 14, 'Regulatory deferral accounts' (effective 1 January 2016). It concerns an interim standard on the accounting for certain balances that arise from rate- regulated activities. IFRS 14 is only applicable to en- tities that apply IFRS 1 as first-time adopters of IFRS.
  It permits such entities, on adoption of IFRS, to con- tinue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts. The interim standard also provides guidance on selecting and changing accounting policies (on first-time adop- tion or subsequently) and on presentation and disclo- sure.

At any time, management aims at providing a fair representation of the financial statements to its stakeholders according to IFRS legislation. In case of changes in IFRS legislation that materially impact, but are not yet adopted by Melexis, management ensures timely disclosure of the impact on Melexis' financial statements. There is no impact expected.

The Group elected not to adopt early the new Standards, Interpretations and Amendments, which have been issued but are not yet effective as per 30 June 2020.

2.6.4 Changes in Group's organization

There have been no changes in the Group structure during 2020.

18 Melexis Half-Year Report 2020

2.6.5 Notes

A. CASH AND CASH EQUIVALENTS

in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Cash at bank and in hand	57,622,490	38,771,524
Total	57,622,490	38,771,524

1. DERIVATIVES
   Notional amounts
   The following table presents the evolution of the aggregate notional amounts of the Group's outstanding derivative financial instruments:

		Half year ended 30/06/2020	Year ended 31/12/2019
Outstanding FX hedge contracts,	USD	13,000,000	13,000,000
not exceeding 1 year

FX hedge contracts are entered into in order to hedge (part of) the outstanding balance sheet exposure in foreign currency (USD).

Fair value

The fair value of derivatives is based upon mark to market valuations. The following table presents an overview of the fair value of outstanding derivatives, classified as an asset under current investment, derivatives:

Fair value in EUR

Assets	Half year ended 30/06/2020	Year ended 31/12/2019
Outstanding FX hedge contracts - level 2	-	78,437
Total, classified under current investment	-	78,437

These financial instruments are classified as financial assets at fair value through profit or loss.

The following table presents an overview of the fair value of outstanding derivatives, classified as a liability under Derivative financial instruments:

Fair value in EUR

Liabilities	Half year ended 30/06/2020	Year ended 31/12/2019
Outstanding FX hedge contracts - level 2	83,864	-
Total, classified under Derivative financial instruments	83,864	-

As of 30 June 2020, there were no outstanding derivatives for which hedge accounting was applied as defined under IFRS 9. As a result, no changes in the fair value of hedging instruments were recognized in a hedging reserve.

Melexis Half-Year Report 2020 19

C. TRADE RECEIVABLES

in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Trade accounts receivables	49,038,167	58,382,459
Allowance for doubtful accounts	(72,228)	(72,228)
Total	48,965,939	58,310,231

As of 30 June 2020, trade receivables of EUR 4,020,276 were past due.

The aging analysis of these receivables, including allowance for doubtful accounts, is as follows: in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Not due	44,945,663	51,768,559
<30 days	3,170,212	4,960,377
>30 <60 days	625,898	854,631
>60 days	224,166	726,663
Total	48,965,939	58,310,231

In the following aging analysis, the distinction is made between the receivables for which an allowance for doubtful accounts is made and the receivables for which no allowance for doubtful accounts is needed:

in EUR

30 June 2020	Allowance for	No allowance for	Total receivables
doubtful accounts	doubtful accounts
Not due	-	44,945,663	44,945,663
<30 days	-	3,170,212	3,170,212
>30 <60 days	-	625,898	625,898
>60 days	72,228	224,166	296,394
Total	72,228	48,965,939	49,038,167

The credit control department reviews on a regular basis the outstanding balances of customers. When there is a significant increase in the credit risk of a customer, an allowance for doubtful accounts is made. The analysis of the increased credit risk is performed according to the credit loss model of IFRS 9. The output of the analysis did not result in material amounts to be accounted for.

20 Melexis Half-Year Report 2020

D. OTHER CURRENT ASSETS

in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Other receivables	7,396,107	6,681,549
Prepaid expenses	6,310,435	3,099,516
Total	13,706,542	9,781,065

The other receivables mainly relate to VAT.

Prepaid expenses are expenses paid in advance for the whole year, for example insurance fees, licence fees, etc. These increase at the beginning of the year and decrease towards the end.

E. LEASED ASSETS AND LIABILITIES

This note provides information for leased assets where Melexis is a lessee. The balance sheet shows the following amounts related to leased assets:

in EUR

30 June 2020	Land and building	Furniture and	Total
vehicles
Leased assets
Balance year ended 31 December 2019	6,425,811	221,960	6,647,772
Additions of the year	82,161	97,468	179,629
Retirements ( - )	-	(32,018)	(32,018)
CTA	(5,848)	-	(5,848)
End of the period	6,502,125	287,410	6,789,535
Accumulated depreciation
Balance year ended 31 December 2019	1,751,571	83,652	1,835,223
Additions of the period	890,742	57,064	947,807
Retirements ( - )	-	(32,018)	(32,018)
CTA	(9,420)	-	(9,420)
End of the period	2,632,894	108,698	2,741,592
NET BOOK VALUE	3,869,231	178,712	4,047,943
The balance sheet shows the following amounts related to lease liabilities:
in EUR
30 June 2020	Current liabilities	Non-current	Total
liabilities
Beginning of the period	1,824,954	3,026,754	4,851,708
End of the period	942,292	3,146,240	4,088,532

Melexis Half-Year Report 2020 21

The table below shows the duration of the outstanding lease contracts:

in EUR

30 June 2020	Land and building	Furniture and	Total
vehicles
< 1 year	66,521		3,702	70,223
> 1 year < 5 years	2,669,298		181,122	2,850,420
> 5 years	1,167,889		-	1,167,889
TOTAL				4,088,532
The statement of profit and loss shows the following amounts relating to leases:
in EUR
30 June 2020				Total
Depreciation charges leased buildings				898,603
Depreciation charges leased vehicles				57,604
Interest expense (included in finance cost)				16,446
Expenses related to short-term leases or low-value assets (included in admin expenses)	344,896

22 Melexis Half-Year Report 2020

F. PROPERTY, PLANT AND EQUIPMENT

in EUR

	Land &	Machinery	Furniture	Fixed assets
	under	Total
	buildings	& equipment	& vehicles
	construction
Cost:
Balance year ended 31 December 2019	57,351,006	319,880,942	19,761,499	12,112,168	409,105,615
Additions of the year	74,035	2,767,835	1,458,056	6,254,505	10,554,431
Retirements ( - )	-	(1,201,889)	(220,718)	-	(1,422,607)
Transfers	115,063	2,173,043	172,042	(2,460,149)	-
CTA	(10,628)	(954,711)	3,491	523,162	(438,686)
Total half year ended 30 June 2020	57,529,476	322,665,220	21,174,371	16,429,687	417,798,753
Accumulated depreciation:
Balance year ended 31 December 2019	20,042,087	231,555,971	13,899,924	-	265,497,982
Additions of the year	1,166,007	16,427,967	1,382,476	-	18,976,450
Retirements ( - )	-	(931,142)	(185,252)	-	(1,116,394)
CTA	7,049	(542,313)	(11,472)	-	(546,736)
Total half year ended 30 June 2020	21,215,143	246,510,483	15,085,675	-	282,811,301
Carrying amount half year ended 30 June	36,314,333	76,154,737	6,088,696	-	134,987,452
2020
Carrying amount year ended 31 December	37,308,918	88,324,971	5,861,576	12,112,168	143,607,634
2019

Additions of the year mainly relate to test equipment.

Retirements: no material amount of compensation from third parties which have been included in the consolidated interim

statement of comprehensive income.

Melexis Half-Year Report 2020 23

G. OTHER CURRENT LIABILITIES

in EUR

		Half year ended 30/06/2020	Year ended 31/12/2019
Accrued real estate withholding tax		173,100		110,600
Accrued financial services		318,150		270,783
Accrued design services		2,000,588		1,979,087
Accrued management services		221,156		434,354
Accrued HR services		171,073		176,720
Accrued insurances		123,931		112,000
Accrued IT services		34,234		75,620
Accrued grant		94,000		94,000
Accrued licenses and royalties		821,280		287,228
Other		508,496		764,557
Total		4,466,008		4,304,950
H. LONG- AND SHORT-TERM DEBT
in EUR
			Half year ended 30/06/2020	Year ended 31/12/2019
Unsecured loans
Unsecured loan (in EUR) at floating interest rate, ma-		40,000,000	37,000,000
turing in 2028
Unsecured loan (in EUR) at floating interest rate, ma-		12,000,000	15,000,000
turing in 2028
Unsecured loan (in EUR) at floating interest rate, ma-		10,000,000	10,000,000
turing in 2028
Total unsecured loans		62,000,000	62,000,000
Total debt		62,000,000	62,000,000
Current maturities		-	-
Long-term portion of debts		62,000,000	62,000,000

As per 30 June 2020 and for Melexis consolidated, there are engagements for the following financial covenants:

For Melexis NV:

• Net debt/EBITDA ratio ≤  3.5
• Tangible net worth/total assets ≥ 30%

As per 30 June 2020, Melexis is respecting all its financial covenants.

24 Melexis Half-Year Report 2020

I. COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES

Components of deferred tax assets are as follows:

in EUR

	1 January	Charged to	Charged to	30 June 2020
	2020	income statement	equity
Amortization and depreciation of intangible	24,938,000	813,000	-	25,751,000
assets, property, plant and equipment
Fair value adjustments financial instruments	(23,202)	44,168	-	20,966
Tax losses carried forward	2,350,000	(340,000)	-	2,010,000
Other	384,481	(18,647)	-	365,834
Total	27,649,279	498,521	-	28,147,800
Components of deferred tax liabilities are as follows:
in EUR
	1 January	Charged to	Charged to	30 June 2020
	2020	income statement	equity
Other	(337,258)	(65,356)	-	(402,614)
Total	(337,258)	(65,356)	-	(402,614)

Melexis Half-Year Report 2020 25

J. OPERATING SEGMENTS

Operating segments

Melexis products and production processes that are regularly evaluated by the chief operating decision maker have only one operating segment. Operating decisions are taken for each individual product during a committee led by the CEO, based on performance assessments.

Information about transactions with major customers

The following table summarizes sales by customer for the 10 most important customers, as % of total sales. It consists of the sales to the end customer and not to the subcontractors or distributors.

in %

	Half year ended 30/06/2020	Half year ended 30/06/2019	Year ended 31/12/2019
Customer A	16	16	15
Customer B	5	7	7
Customer C	5	6	6
Customer D	5	6	6
Customer E	4	3	3
Customer F	2	3	3
Customer G	2	3	3
Customer H	2	3	2
Customer I	2	2	2
Customer J	2	2	2
Total	45	51	49

26 Melexis Half-Year Report 2020

Information about geographical areas

The Melexis Group's activities are conducted predominantly in EMEA (Europe, Middle-East and Africa), APAC (Asia Pacific) and NALA (North and Latin America).

The origin of all revenue is in Belgium, as the invoicing entity is located in Belgium.

in EUR

	Europe, Middle	North and Latin	Asia Pacific	Total
	East and Africa	America
Half year ended 30/06/2020
Non-current assets	162,124,519	1,724,729	8,623,645	172,472,892
Half year ended 30/06/2019
Non-current assets	171,822,841	2,175,414	11,545,746	185,544,001
Year ended 31/12/2019
Non-current assets	168,592,217	1,812,820	10,876,917	181,281,953

Due to the fact that the production sites are mainly located in Europe, the assets are also centralized in Europe (see table above).

The following table summarizes sales by destination, which is determined by the customer's billing address:

56% Asia Pasific

2020 33%

11%

Europe, Middle East and Africa

North and Latin America

Melexis Half-Year Report 2020 27

in EUR

	Half year ended 30/06/2020	Half year ended 30/06/2019
Europe, Middle East and Africa		96,743,117
77,877,829
Germany	32,045,180	42,592,773
France	5,120,564	5,617,208
United Kingdom	4,064,824	6,119,314
Poland	5,096,774	7,970,166
Switzerland	8,321,591	6,184,929
Ireland	292,030	1,900,079
Czech Republic	1,944,111	1,366,092
Austria	5,047,537	6,862,724
Netherlands	534,307	555,539
Romania	5,666,028	6,631,225
Bulgaria	1,337,149	2,096,238
Spain	870,442	991,090
South Africa	-	130,599
Hungary	1,418,945	1,369,598
Italy	3,082,913	3,487,464
Other	3,035,434	2,868,081
North and Latin America	25,887,948	33,095,663
United States	16,999,839	22,002,457
Canada	2,544,882	3,099,901
Mexico	6,323,027	7,941,596
Brazil	20,200	51,709
Asia Pacific	134,782,875	106,699,999
Japan	20,547,847	16,155,908
China	27,603,852	22,731,418
Hong Kong	20,533,108	12,517,486
Thailand	24,454,284	24,435,195
South Korea	14,566,806	12,045,360
Philippines	10,401,239	5,465,122
Taiwan	8,744,976	4,780,671
India	1,870,360	1,624,096
Singapore	5,263,185	6,447,497
Other	797,218	497,248
TOTAL	238,548,652	236,538,779

28 Melexis Half-Year Report 2020

K. RELATED PARTIES

1. Shareholders' structure and identification of major related parties

Melexis NV is the parent company of the Melexis Group that includes following entities which have been consolidated:

Melexis Inc.	US entity
Melexis GmbH	German entity
Melexis Bulgaria EOOD	Bulgarian entity
Melexis Ukraine	Ukrainian entity
Melexis Technologies SA	Swiss entity
Melexis NV/BO France	French branch
Sentron AG	Swiss entity
Melefin NV	Belgian entity
Melexis Technologies NV	Belgian entity
Melexis NV/BO Philippines	Philippine branch
K.K. Melexis Japan Technical Research Center	Japanese Entity
Melexis Electronic Technology (Shanghai) Co., Ltd	Chinese entity
Melexis (Malaysia) Sdn. Bhd.	Malaysian entity
Melexis Technologies NV/BO Malaysia	Malaysian branch
Melexis Dresden GmbH	German entity
Melexis France SAS	French entity
Melexis Korea Yuhan Hoesa	South Korean entity

The shareholders of Melexis NV and related parties are as follows:

• Xtrion NV owns 53.58% of the outstanding Melexis shares. The shares of Xtrion NV are controlled directly and/or indirectly by Mr. Roland Duchâtelet, Mr. Rudi De Winter and Ms. Françoise Chombar. Mr. Duchâtelet and Ms. Chombar are directors at Melexis NV.
• Elex NV is 99.9% owned by Mr. Roland Duchâtelet. One share is held by Mr. Roderick Duchâtelet.
• Xtrion NV owns 48.4% of the outstanding shares of
  X-FAB Silicon Foundries SE, producer of wafers, which are the main raw materials for the Melexis products. X-FAB Silicon Foundries SE sells the majority of its products also to third parties. X-FAB has been listed on Euronext Paris since 2017.
• Melexis, as in prior years, purchases part of its test equipment from the Xpeqt Group. Xpeqt Group

develops, produces and sells test systems for the semiconductor industry. Xpeqt Group is owned by Xtrion NV for 99.99%. One share is held by Ms. Françoise Chombar and one share is held by Mr. Roland Duchâtelet.

• Xtrion NV owns 86% of the outstanding shares of X-Celeprint Ltd.
• Xtrion NV owns 86% of the outstanding shares of X Display Company Technology Ltd.
• Xtrion NV owns 24% of the outstanding shares of Anvo- Systems Dresden GmbH.
• Elex NV owns 99.9% of the outstanding shares of Fremach International NV.

Melexis Half-Year Report 2020 29

2. Outstanding balances on 30 June 2020 The following balances were outstanding:

Receivables

in EUR

	Half year ended 30/06/2020	Year ended 31/12/2019
Elex NV	1,033	2,033
Xtrion NV	4,840	4,840
X-FAB Group	80,099	114,617
Xpeqt Group	9,302	14,284
Total	95,274	135,774
Payables
in EUR
	Half year ended 30/06/2020	Year ended 31/12/2019
Elex NV	63,676	62
Xtrion NV	406,804	36,912
X-FAB Group	9,365,197	15,002,727
Xpeqt Group	267,126	694,525
Anvo-Systems Dresden GmbH	(1,460)	(1,426)
Total	10,101,343	15,732,800

30 Melexis Half-Year Report 2020

3. Transactions during the year

In the course of the year, the following transactions have taken place:

Sales/purchases of goods and equipment in EUR

Sales to	Half year ended 30/06/2020	Half year ended 30/06/2019
Fremach	17,788	10,965
Xpeqt Group	1,967	1,040
in EUR
Purchases from	Half year ended 30/06/2020	Half year ended 30/06/2019
X-FAB Group (mainly wafers)	94,074,309	81,128,472
Xpeqt Group (mainly equipment and goods)	963,428	2,957,988
Xtrion NV (mainly IT infrastructure)	81,488	94,664
Sales/purchases of services
in EUR
Sales to	Half year ended 30/06/2020	Half year ended 30/06/2019
Elex NV	10,080	10,080
Xpeqt Group (infrastructure office building)	45,428	66,063
Xtrion NV (infrastructure office building)	24,000	24,000
X-FAB Group	257,352	441,447
Anvo-Systems Dresden GmbH (mainly test services)	30,461	77,878
in EUR
Purchases from	Half year ended 30/06/2020	Half year ended 30/06/2019
Xtrion NV (mainly IT and related support)	1,236,867	1,103,899
Elex NV (mainly IT and related support)	392,839	522,477
X-Celeprint Ltd	24,025	-
Xpeqt Group	1,267,819	1,650,371
X-FAB Group	2,515,706	2,646,574

The Board of Directors and the Audit Committee have reviewed and analyzed the major transactions and concluded these transactions are within the normal course of business and that there are sufficient elements to conclude that the remuneration is based on arm's length principles. As a result, there was no need to apply articles 523 and 524 of the Belgian Companies Code (articles 7:87, 7:96 and 7:97 of the Belgian Code on Companies and Associations) dealing with conflicts of interest between related parties.

Melexis Half-Year Report 2020 31

L. COMMITMENTS & ESTIMATED LIABILITIES Purchase commitments

The Group had purchase commitments for a total of EUR 13,458,427 on 30 June 2020.

M. LITIGATION

There are currently no litigations.

N. FINANCIAL INSTRUMENTS

Financial risk management

Melexis operates internationally, which could give an exposure to market risks from changes in interest and foreign exchange rates. Melexis can use financial derivative instruments to manage the foreign exchange risks.

Risk management policies have been defined on Group lev- el, and are carried out by the local companies of the Group.

(1) Credit risks

The Group has no significant concentration of credit risk with any single counterparty or Group of counterparties having similar characteristics. The Group has a policy to ensure that sales are only made to new and existing customers with an appropriate credit history.

Specific measures to manage credit risks related to COVID-19 are disclosed in note 2.6.5 O.

(2) Interest rate risk

The Group does not use derivatives to manage interest rate risks of the outstanding bank debt.

The schedule of long-term debt repayments is disclosed in note 2.6.5 H.

(3) Liquidity risk

Liquidity risk arises from the possibility that customers may not be able to settle obligations to the company within the normal terms of trade. To manage the risk, the company periodically assesses the financial viability of customers.

(4) Foreign exchange risk

The currency risk of the Group mainly occurs due to the fact that the Group operates and has sales in USD. The Group uses derivative contracts to manage foreign exchange risk. The table with outstanding derivatives is taken up in note 2.6.5 B.

Fair value of financial assets and liabilities

The fair value of foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. For all of these instruments, the fair values are confirmed to the Group by the financial institutions through which the Group has entered into these contracts.

The Group's principal financial instruments not carried at fair value are cash and cash equivalents, trade receivables, other current assets, other non current assets, trade and other payables, bank overdrafts and long-term borrowings.

The carrying amount of cash and cash equivalents and of bank overdrafts approximates their fair value due to the short-term maturity of these financial instruments.

The fair value of the long-term loans is based on the current rates available for debt with the same maturity profile and approximates their carrying amounts.

Management believes that the exposure to interest rate risk of financial assets and liabilities as of 30 June 2020 was minimal since their deviation from their respective fair values was not significant.

32 Melexis Half-Year Report 2020

O. COVID-19

Status 17 August 2020

Melexis has been closely monitoring and responding to the COVID-19 outbreak around the world and this since Janu- ary. More than ever, the health and safety of our people and our other stakeholders are our foremost concern. We have a Melexis COVID-19 taskforce in place which has been working intensely to plan for and react to the outbreak in a timely fashion. Specific measures - such as working from home, social distancing and business continuity planning - are implemented in all facilities worldwide.

Business and financial impact

Despite a solid start of the year, Melexis decided on 1 April 2020 to withdraw its full year 2020 outlook as the economic impact resulting from the COVID-19 pandemic could not be quantified at that moment. As a matter of prudence and in light of the extreme unpredictability of the situation at that time, the Board of Directors decided to propose to the annual shareholders' meeting to pay out over the result of 2019 a total dividend of 1.30 EUR gross per share, which was paid in October 2019 as interim dividend, meaning a final dividend would not be paid.

On 29 April 2020, Melexis published its Q1 2020 results and was not able to provide a financial outlook for Q2 2020.

On 29 July 2020, Melexis published its Q2/1H2020 re- sults, stating in the business comment that despite the COVID-19 pandemic, it was able to post 1H2020 sales growth of 1% versus 1H2019. Supply and demand disruptions had been tackled in an efficient manner, and cost savings had been effectively implemented where possible.

With approximately 90% of its products sold in automo- tive, Melexis depends on the worldwide demand for vehi- cles. This demand has been significantly impacted in 2020 by COVID-19 and the accompanying measures, such as quarantine measures and cities put on lockdown. Melexis content growth in vehicles softened the negative impact of lower car sales in 1H2020.

In adjacent markets, there is no negative impact of COV- ID-19. On the contrary, part of Melexis products like temperature sensors are critical components to many of the

equipment to overcome the pandemic. The applications range from diagnostics, patient monitoring systems and respiratory devices to a variety of body thermometers. Increased traction in gaming applications, as a consequence of the globally increased consumer interest during lock- down, and spurred by the recent release of the next generation gaming GPUs, boosted the demand for our 1-coil fan drivers. In 1H2020, sales to adjacent markets represented 11% of total sales, a strong increase versus 1H2019.

COVID-19 adversely impacted the Melexis supply chain, for example by causing a delay in delivery of equipment, wafers, packaging services, etc. due to mitigation measures taken by governments and bottlenecks in production, transportation and customs activities. Supply chain and business contingency planning ensured that our manufacturing sites kept running under the best achievable circum- stances. These disruptions in the supply chain, arisen due to COVID-19, have been resolved to a large extent. The remaining issues are often linked to products where demand is high.

Melexis implemented technical unemployment due to COVID-19 in several countries. This resulted in cost savings of approximately EUR 1.5 million. The impact of specific COVID-19 related costs (mainly supplies and services related to hygienic measures) was minor.

Balance sheet

On 30 June 2020, the cash position had increased to 57.6 million EUR and the outstanding bank debt was 62 million EUR, almost stable compared to end 2019. Unused committed credit lines were 107 million EUR. The inventory increased with 20 million EUR compared with end 2019, offset by a decrease in accounts receivable by 9 million EUR.

Following the outbreak of the COVID-19 pandemic, Me- lexis performed impairment testing in June 2020 under IAS 36. This exercise compared the discounted cash flow with the carrying amounts of the company's assets (sum of intangible and tangible assets and working capital,...). In this process, estimated future cash flows were discounted to their present values using discount rates reflecting the

Melexis Half-Year Report 2020 33

current market assessment of the time value of money. Future cash flows were estimated based on management's most recent business planning forecasts, which take into account the estimated impact of COVID-19. Based on the various scenarios considered in this exercise there is sufficient headroom. No impairment is required and Melexis will continue to respect all covenants on its active loans.

Deferred tax asset

Based on the discounted cash flow analysis, as described in the paragraph above, there are no issues noticed in regard to the recoverability of the Deferred tax asset on our balance sheet.

Credit risk

Due to COVID-19, the credit control department increased their focus on the outstanding balances of customers.

When there is a significant increase in the credit risk of a customer, an allowance for doubtful accounts is made. The analysis of the increased credit risk is performed according to the credit loss model of IFRS 9. The output of the analysis did not result in material amounts to be accounted for.

Outlook

While customer sentiment and order behavior remain fragile and visibility remains poor, Melexis confirmed in its press release of 29 July 2020 that the second quarter marked the bottom and it could start looking forward to a path to recovery. In the third quarter of 2020, Melexis expects a sales growth of around 10% compared with the previous quarter, provided that the second COVID-19 wave will not trigger the same financial impact as experienced in the second quarter.

The consolidated interim financial statements were approved and authorized for issue by the Board of Directors on 17 August 2020 and were signed on its behalf by Françoise Chombar.

Françoise Chombar

Managing Director, Chief Executive Officer (CEO)

34 Melexis Half-Year Report 2020

3 SHAREHOLDER INFORMATION

•	Listing	Euronext
•	Reuters ticker	MLXS.BR
•	Bloomberg ticker	MELE BB

3.1 SHAREHOLDER STRUCTURE

Situation on 30 June 2020

Company	Number of Shares	Participation Rate		53.58% Xtrion
Xtrion	21,644,399	53.58%	2020	45.57% Public
Treasury Shares	346,141	0.86%
	0.86% Treasury shares
Public	18,409,460	45.57%
Total	40,400,000	100.00%

3.2 SHAREHOLDER CONTACT INFO

Investor Relations

Phone: [phone]

Rozendaalstraat 12, B-8900 Ieper, Belgium

www.melexis.com/en/investors

3.3 FINANCIAL CALENDAR 2020

Dividend pay date	22 October 2020 (ex coupon 20 October 2020)
Announcement of Q3 results	28 October 2020
Announcement of full-year results	3 February 2021

Melexis Half-Year Report 2020 35

3.4 DIVIDEND

Taking into account the current and future cash flow situation and if no rewarding investment opportunities can be found, Melexis NV intends to pay out regular (interim) dividends, in order to maximize the return on equity for its shareholders.

Gross (interim) dividend per share out of distributable reserves:

2016: EUR 1.30 interim dividend and

EUR 0.70 final dividend

2017: EUR 1.30 interim dividend and

EUR 0.80 final dividend

2018: EUR 1.30 interim dividend and

EUR 0.90 final dividend 2019: EUR 1.30 interim dividend

2020: EUR 1.30 interim dividend

The Board of Directors decided to pay out an interim dividend of 1.30 EUR gross per share. The Melexis shares will start trading ex coupon on 20 October 2020 (opening of the market). The record date is 21 October 2020 (closing of the market) and the dividend will be payable as from 22 October 2020.

36 Melexis Half-Year Report 2020

4 STATUTORY AUDITOR'S REVIEW OPINION ON THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF MELEXIS NV

FOR THE SIX-MONTH PERIOD ENDING 30 JUNE 2020

Melexis Half-Year Report 2020 37

38 Melexis Half-Year Report 2020

5 GLOSSARY

Earnings per share

Profit attributable to equity holders of Melexis divided by the weighted average number of ordinary shares.

Earnings per share diluted

Profit attributable to equity holders of Melexis divided by the fully diluted weighted average number of ordinary shares.

Revenue

Product sales + Revenues from Research and Development

EBIT (Earnings Before Interests and Taxes)

Turnover/sales - cost of sales - research and development expenses - general and administrative expenses - selling expenses - other operating expenses

EBITDA (Earnings Before Interests and Taxes + Depre- ciation, Amortization and impairment)

EBIT + depreciation, amortization and impairment.

Shareholders' equity

Shareholders' capital + retained earnings (inclusive current year's result) +/- reserves (reserve treasury shares, revaluation reserve hedge, revaluation reserve fair value, legal reserve) +/- Cumulative translation adjustment.

Net Indebtedness

Current portion of long-term debt + long-term debt less current portion + bank loans and overdrafts - current investments - cash and cash equivalents

Working capital

(Total current assets - cash and cash equivalents - current investments) - (current liabilities - bank loans and overdrafts - current portion of long-term debt - derivative financial instruments)

Net cash from operating activities

Net Result +/- adjustments for operating activities +/- changes in working capital

Capital expenditure

Investments in property, plant and equipment

ROE (Return On Equity)

Net income/shareholders' equity

Liquidity

Current assets/current liabilities

Solvency

Shareholders' equity/total assets

Tangible net worth

Total assets - liabilities - intangible assets

Melexis Half-Year Report 2020 39

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