LPKF Laser & Electronics SE

Hello, everybody, and welcome to our conference call for the first quarter 2025. My name is Bettina Schaefer. I'm head of investor relations at LPKF and your host today for this call. For the first part of this call, all participants have been placed on a listen-only mode. Afterwards, there will be a Q&A session. The conference will be recorded and published for a period of two weeks on our website. Our CEO, Klaus Fiedler, and CFO, Peter Mimler, will now give you an overview of our business development in the first three months. And before we start, I would like to point out that any forward-looking statements in today's presentation are based on information currently available. These forward-looking statements are not to be understood as guarantees of future performance and results. Ladies and gentlemen, I now hand over to Klaus Fiedler. Please go ahead, Klaus.

Thank you very much, Bettina. Hello and welcome everybody to our Q1 earnings call, giving you an overview of how the first three months progressed against our plan and ambitions for 2025. Of course, giving a deeper insight into movements in our markets and how we positioned ourselves. And of course, also giving you an insight how the current perish situation in the US is shaping up for LPKF and how we are responding to it. Let's get started with the first slide. Key takeaway from Q1. Solid start with revenue into the year, meaning we are pretty much exactly on what we planned to happen for revenue recognition in the first quarter. And we see that cost saving measures we implemented in the second half of 24 now flow through to our EBIT, to our bottom line. So in adjusted EBIT, we are up 21% on previous year. And we are continuing to push in this direction. But the first measures really show an effect now. When we look at how did order intake develop and how does it shape up for the year, if you just compare year over year, you see a significant reduction in backlog. That is solely due to a major solar order that we received in March 24, and that, by and large, we have shipped by now. So, I don't see, from an order entry perspective, anything deviating from our expectations in the other three business units. And I'll come to where we stand in solar specifically in also Orders 425 on the next slide, where we have a deviation in the positive direction from our plan. We see a strong increase in order entry in our welding segment. And as you well know, our welding segment had a very disappointing 24. So we refocused the business on consumer electronics, on medical. And we see here that we have received a large order from the consumer electronic market. That definitely gives us the foundation to make and exceed our numbers for 25. Looking at the strategic business development, as you all well know, we have received the first operational order in the display sector we slide and are now in the phase of operational implementation ramp-up and, of course, further market penetration. We have the clear goal for 25 to repeat the same thing in advanced packaging, and we continue to see that our positioning develops as planned. We acquired another customer from Korea, who now bought his first LPKF light machine, which basically gives us a very strong footprint with all the players positioning themselves for this technology. Tariffs, I'll come to more details in the next slide. Of course, we were prepared for tariffs to come in a sense of we don't have any tariffs that are now on our bill to pay. So we basically cleaned up the backlog for this risk months in advance. But we definitely see now the first effects on how US customers respond. That, by and large, is within our expectations. But, of course, we are monitoring very closely what it means for global business development, for global appetite, incapacity expansions in CapEx. And this is something we will continue to monitor through Q2 because it continues to be a very volatile situation. And, as mentioned, the first measures we implemented to gain efficiency, to reduce break-even point, are now visible in our bottom line. We will definitely, and I'm very happy now as a two-person team, with Peter as DFO on board, to continue to strongly drive in this direction. We want to continue to be a first mover and innovator. That's our DNA, but in the most efficient way possible to improve our break-even point, improve our bottom line. A couple of more details on markets and business development on the next slide. So how do we see the market situation? Looking at Q1 now, We see a stable, moderately growing order entry for electronics and prototyping. Even having some headwinds with the currency rates, with the strong Euro now. We see a growth here, so from the fundamentals in Q1, that is all right. As mentioned, continued high activity for light in advanced packaging. We see no customer. basically reducing his energy level here, and we are continuing with very high attention to position ourselves. Again, our positioning is... I would even qualify it as very good. So the worst thing we could do is become complacent, not be paranoid about competition. So we are very close to the marketing customer here. Clear goal, first operational ramp-up PO in 2025. Display applications are in market penetration phase. We of course observed how the tariff situation, which of course also affects the mobile device market, affects the plans of our customers here. And I see that we stay the course and will ramp according to our plan and therefore also sell according to our plan in 2025. Solar, we continue to see an investment hesitation for Simfilm Solar in China. So US is for me pretty much on track. We are delivering completely on track our large volume order we received in 24, so exactly a year ago. It's normal business development that we are now negotiating follow-up orders for 26. So this delta in the backlog is not anything unusual for me. In China, we are very late in the year to collect our POs for the 25 revenue. The deals are very tangibly identified and in the final phase of negotiation, but it's definitely a year with low investment appetite and, of course, a lot of local players fighting for every deal in China. So this requires full attention. The deals are identified. We got to execute and convert to stay the course for 2025. And as mentioned, automotive market for laser welding continues to be very slow. So there are few deals to be picked up and I guess that is very well known that this is not a bullish market at all at the moment. Our focus on consumer and medical bears fruit now. So from an order entry perspective and also on how we will now grow in Q2, we see ourselves above track. And that is helping us to get back our troubled welding division. 24 was very disappointing. back on a growth track and not only in the core markets, but also with innovation. I'll come to that in the business development. So on the business development, as you well know, we have a complete map of the ecosystem in the semiconductor packaging sector and clearly have identified where are players that have not yet bought from LPKF and decided on our technology. Few white spots were left. One we could check in Q1. Also decided for LPKF, so our positioning is on track to our ambitions in advanced packaging for light. When we see how solar is developing, the drive for perovskite continues. Not as frantic as it was in 23, but more on a steady state gets us to qualification level. We continue to be well positioned by having prototyping lines both in the US and in China. And we continue to permanently optimize our technology to deliver the strong USPs we need to compete against specifically local Chinese competition. When we look at fundamental growth drivers in electronics, this technology shift from milling legacy technologies to laser independent continues. We made good progress with large key accounts who are now qualifying to switch to this technology. In the portfolio business, we are observing at the moment how the current tariff situation basically drives general investment appetite here and Specifically now for April, I expect that many players have first needed to sort themselves before they know how they continue with their overall CapEx plans. And, as mentioned, With new market focus in welding, we see that we are back on a growth track, but LPKF stands for highly, let's say, differentiated innovation. So our new product line, ATA, absorbent to absorbent, it has been introduced to the market. First machine is shipped and lead customer is working with it. We are generating far stronger interest in the broad market and will continue to develop that product line to counter the very weak automotive market that we expect this and also next year. And when we look at the operational part, operational execution is on track. No significant bottlenecks. We are shipping as planned. As mentioned, and Peter will show you more details on it, the cost reductions we implemented in 24 now show the flow through to the bottom line. So the first effects to turn around our break-even point and lower it are now clearly visible in Q1, but we will continue to focus on that topic and deliver more and also continue to focus on cash generation and therefore also working capital reduction. That's the overall situation that we see ourselves in. The tariff situation for short-term effects was basically anticipated by us, and the short-term effects are within our expected range and managed. How the global economy and how the reshuffling of certain value streams will now pan up, we are in close observation mode and count us here wherever possible. And with that, I want to hand over to Peter, first time with us. Very welcome, Peter, to give us an overview on the figures and the financials.

Thank you, Klaus. Yeah, 30 days, and I will start to give you a little bit of an overview about quarter one. When we look at quarter one, Overall, the message is we are on track. We are where we want to be. When I compare this in the revenue, we have a stable revenue with all the circumstances in the market. The profitability in the EBIT we show an improvement. This is what Klaus mentioned, the impact about all the measures of cost savings and reduction. You see it when you go to the last line, you see this impact already. There is an employee reduction. This is an impact about our improvement programs. this will be keeping on focus um and this is what as as being you on board one of my focus areas where we where go uh deeper in the future is really to to keep going on this and even improve um more potential out of this program but it helps a lot to to to come to the the profitability improvement incoming orders klaus mentioned this already this is majorly um driven by um our sq business and when you go down and there's a impact in the orders on hands the reduction compared to the previous year is due to the solar businesses in the us and in in china um what what is um a ship um like a a shift to q2 in the in the in the chinese business free cash flow This is an improvement out of profitability. We will come later on a little bit more where we're getting really good in this. We make the right steps. But further is this one of the focus area we need to go deeper in the next quarters. But we are on track. We're doing our homework here. We're improving. And overall, we are in the range where we want to be. Next slide. going to our business units. Klaus mentioned a couple of these things when I go really from the top to the bottom. The electronics, they have a growth in the semiconductor areas in quarter one, but we have a little bit of a slowdown in the SMT market. um this reflects immediately the areas of the of the um profitability of the business too um this is this is something what what was in the range where we where we want to be um but but this will be improving towards the next quarters development very strong, strong revenue, really, in the first quarter. And we see the impact in the profitability, what's really showing a good direction where we are going in the development business. Here, the topic in quarter one, we have no no aerialized business contributed so far. Welding. Challenging quarter one. Challenging quarter one. This is where we were focusing in improvement areas, especially profitability. You see this, the quarter one, the lower quarter one in the revenue immediately shows us a significant impact in the profitability. Here's major orders from quarter one will have a positive impact in the growth in the quarter two and three. We will see this later on coming. Therefore, there is a good order income in the quarter one, what will reflect immediately an improvement in the next quarter. That's the reason this is not worrying us because there is something in the backlog what will lift the business towards the end of the year solar um very good first quarter uh very and you see this we are really happy um we we delivering and and therefore we're showing a really a high delivery performance in solar first quarter with a profit will be an outcome towards a trusted event Overall, this is on track. Now to come to our free cash flow. I already mentioned, when you really look at the free cash flow, we are improving. We are really going the ways where we want to be. We are improving in the in the net networking capital areas exactly what what uh what we plan to be here you see even um savings measure measurements in there in this in this in this area um we have uh process improvement here that you see um in the in the again in the networking capital area what we what we're expecting in this really upcoming um quarters in the upcoming second half here we will expect an improvement in the free threshold um this is really the the plan it's still in in our um in our plan what we're expecting in q1 um therefore uh we need to keep going improving this area this this um is networking capital further towards the next quarters. Going to the next slide. This is, there you can see with the working capital here that we have different areas where it shows the quarter one. In the one area we had, due to the increase in the inventory, this is really related to our projects. We did a very good job in collecting cash by trade receivables. We improved here. All the measurements was really was pushed starting in the end of 24 was really now getting the benefit. The contract liability is exactly what we mentioned in the order intake in quarter one. The solar business is normally has an advanced payments impact. Therefore, we had an impact in this contract liabilities because of lower advanced payments out of the solar business. And this overall reflects that we had a slight improvement in the working capital. we would get a one of the solar businesses in the quarter one it would look like um would like much more favorable but i expecting in quarter two we will see an improvement here um especially in the in the working capital area too and then head over to klaus