LPKF Laser & Electronics SE

Hello everybody and welcome to our earnings call for the financial year 2025. My name is Bettina Schafer and I'm responsible for investor relations at LPKF. I'm pleased to be joined today by our CEO Klaus Fiedler and our CFO Peter Mimler. Klaus and Peter will walk you through the business development for 2025 and provide an outlook for the current financial year. After that, we will open the floor for your questions in a Q&A session. The conference will be recorded and published for a period of two weeks on our website. Before we begin, please note that today's discussion may contain forward-looking statements. These statements are based on current assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. We do not undertake any obligation to update these forward-looking statements, except as required by law. With that, I would like to hand over to Klaus.

Thank you very much, Bettina. Hello and welcome everybody to our annual results 2025. I want to lead in with the key takeaways of the year. Looking at our revenue, we are at 115.3 million, so down 6.2% from previous year. And at the lower end of our adjusted guidance, our EBIT improved from 0.1 million to 0.8 million adjusted EBIT, which basically shows that despite a decline in revenue, our cost saving matters more and more are visible also in our bottom line. I want to quickly lead into, when you look at the right-hand side, our distribution across the regions. You can see that our business distribution, North America and Asia, is growing, while Europe basically now constitutes less than one quarter of our revenue. Dominantly, our markets, our growth, are shifting step by step outside of Europe. When we look at order intake, we are at 91.6 million, significantly below previous year, which also reflects the backlog. The main impact factor that we have here in order entry, also in revenue for 2025, is that we are going through a slow phase in our solar business, which is driven by the upcoming technology shift to perovskites. I'll come to that in a minute. That reflected also our order backlog and our order intake, which was very strong in the previous years in solar. Looking at other business fields, despite of course the headwinds we had with the Terrace situation, we had a moderate growth in rapid prototyping, We exceeded our planning and expectations in welding, mainly driven by a large order in the consumer field coming out of China. Looking at advanced packaging, we don't make these numbers transparent yet, only for the packaging semi-concept, or it's still in the low eight figures. But from a positioning point of view, above our expectations, Looking at all the customers that are preparing for ramp-ups for glass and advanced packaging, over 80% are now qualifying with LPKF equipment, which gives us a sound basis for the upcoming ramp-ups. What we are doing, we basically treat this as an entry ticket into this market and are right now expanding our portfolio with the goal of becoming strategically relevant in that large growth field. For Avalice, we took the decision to discontinue our internal activities and transfer the business to a suitable external partner. That is driven basically by the fact that our market entry is targeted at academic customers, funding for public institutions in Europe and also specifically in the US. It's quite shaky at the moment. So we see that this would be a longer way to get into this market as anticipated. We need to focus. We need to watch cost. So here we took the decision to basically look for an external partner to continue these activities. Peter will say more about the NorthStar program in the course of this presentation. We have a good start. Part of the journey is completed. Part of the savings are already realized. And we are now in a second wave to secure a double-digit profitability in a volatile market environment in 2028. And we also finished a new financing framework with our existing banking consortium to basically make sure we have the right funding for this transformation. Now a couple more details on our market situation. You know the increasing global tensions that are happening. We had the tariffs impact in 25. We currently have the Iran situation. So this clearly overall creates headwinds for LCKF. more reluctant to invest than in a normal environment. And the investments that are happening, the deals that can be made are increasingly generated outside of Europe. We are below 25% share of sales in Europe now. The semiconductor industry transformation towards land-based substrates is clearly beyond the point of no return. several external sources, all the announcements of the large players drive it. Positioning is very good, but not yet in 25 reflected in true volume sales. The qualification of the whole process chain took longer than also expected by our customers, but is driven with full force and is making the right progress. Our S&T markets were impacted because large-scale projects needed to re-shuffle based on the terrace situation, This was just a fact of that the demand is there, but given the tariff situation, all production chains could no longer be executed as planned. The tariffs would have destroyed the business case. So our customers needed to re-plan where do we do which process step in our business case. So we had delays in there, but definitely not the overall market price going away. we see that it's only a delay and definitely not that projects are going away. What do we see in the solar market? You know, in the solar market, we are active in the US, but also in China. What we see in the US is that also the tariff situation required a complete reshuffling of the operational flows of our large key customer, which definitely weakened investment and allow them to, or force them to focus their activities on setting up their production chain, that it works in this situation. And also in China, we see that overall investment appetite is low and where deals are to be made, there's a strong push to local for local, so an intensifying competition for solar scribing. Overall, and that's now a continued situation that we see, we are operating in an environment with persistent volatility, geopolitical tensions and also fragile supply chains. Looking at business development. In advanced packaging, our positioning, and we have mapped really every customer in the world that is active in the field, It's working very well. We see more than 80% of customers choosing LTKF for their qualifications. We are also selling well into these qualification lines, but that's not yet the volume push we are now expecting for the future, but a very solid basis for this. We are seeing very clearly and also monitoring that many players definitely want a piece of SetPi. So our IT situation and the work we put into this business in the past 10 years is now becoming very important to make sure we defend the market share we are targeting here. And as already mentioned, We know the full process chains. We know, due to our contacts, where also the future needs lie. We are using the opportunity to broaden our portfolio right now to become a strategically relevant partner in that field. Looking at rapid prototyping, we had a positive development under expectations, but positive year over year. Strong North America demand. The U.S. government shutdown in Q4 dampens the order entry a bit in Q4, but the overall trend and our market positioning remains positive. As mentioned in electronics, the tariffs delay projects in the SMT market. We still could grow year over year with our cutting systems. But the over-organic growth we clearly expect, and which is driven by the fundamental shift away from mechanical milling to laser simulation, that was clearly dampened in 2025 because a lot of production planes needed to reshuffle. In welding, automotive continues to be weak, and that was part of our planning, but our strategic shift to other application areas, consumer and medical, definitely worked well in 2025. We are significantly above planned in that area, driven by a large bulk order, and we also were able to win a substantial volume order in the smart robotics field in 2025, with further orders coming in 2026, which gives us a solid foundation for the transformation we are in welding. Solar, we had a weak and significantly below plan year in 25. Operational execution was perfect, but overall the situation that the market is focusing on the shift to perovskites, but perovskites not yet being mature for volume ramp up, that results in a phase of low investment demand. We consider the perspective for solar very good with the transition to perovskites. So we definitely want to continue full force with our activities. But we had a 25 and we also expect the 26 where demand and revenue is significantly below historic figures. We are supporting all these customers with perovskite prototyping lines, of course. but that's a different revenue bracket than fitting a full high-volume factory. Looking at operations, we launched our Northstar program to structurally reduce costs. Peter will tell a little bit more about that. And we have already gone a good step along the way, but are continuing with a true structural change of LPKF to be ready for a world that is in constant volatility. We are targeting through these measures, but of course also through the measures of realizing growth, specifically in advanced tech, a double-digit even notching for 28. And we are safeguarding our innovation investments. IT is becoming more and more important for us. We are focusing our markets. Definitely advanced packaging is set up the way we expect it to be set up, and we see a lot of future perspective in that market where we do a focus in areas where we do not see the progress, be it external factors or not, that we expect. We focus stronger and also discontinue where we say this will not bring the payback in the time we expected it. And as mentioned, syndicated loan agreement is redrafted, extended to 20A, securing a solid financing for LPKS. Next slide, please. Just a bit of an insight. Advanced packaging field. You all know very well what we are doing with glass structuring, with light. We are still in a positioning phase, not due to us. Our customers confirm LPKF is ready, but due to the whole production chain needing to reach volume maturity, we see the ramp-ups coming, and I'm happy to report how that reflects in our figures when we look at Q1 and Q2 results. We expect ramp-up phase 27-28, high volume 29-2030. We have been positioning us with two additional highly differentiated process steps in that field to immediately broaden our footprint and gain strategic relevance, that's ADF singulation and glass bonding. And we are in a market assessment phase in co-packaged optics, the logical next step where the glass is used for data transmission between the individual chips in a package Most of you will know that three years ago, we started already a partnership with a large US semiconductor company. So we already have a track record and the right technologies for this field. With that, I will hand over to Peter, who will walk you in more detail through the financial figures.

Hello, everybody. I want to give you a little bit more insight about our financial year 2025. And it shows really a diverse picture in our world. When we go to the next page, as Klaus mentioned, the revenue, we had a challenging year. We are on our communicated guidelines on the lower end. still a race towards Q4, but we are in the range. Klaus gave a little bit of feedback about this, and then later on, we showed a little bit more about our different units, where the worst picture comes from. EBIT, the EBIT development is strongly hit by restructuring measures. We already mentioned that we We started Northstar, and you see this on the lower end in employees. On the one side, we are really reducing significant headcount, and these are special costs, restructuring costs, what we have still considered, and therefore this development of the profitability is really $11 million of a hit towards previous year. When you look at our adjusted EBIT margin, there we have an improvement towards previous year. Here you can see that we already have in the North Star, in our cost reduction measures, we have already the inputs. And when you look at the development of revenue, that we have 6% below, but we could improve our adjusted EBIT There you can see that we're really hardworking on the so-called break-even point to be profitable. And we really put costs out of this during the year. And I would say this is a good situation and a really good move we did. And therefore, we could improve our adjusted EV towards private years. When we're looking at one of our really positive developments is a lower element, it's the free cash flow. Here we must really say we did, in our asset management, significant improvements, and especially where we have a huge driver is in our DSO, where we really, on the one side, we're collecting much earlier the cash by the customers, compared to last year, and we even made a significant improvement about collecting cash from so-called overdue receivables. There we did really a very good job, and therefore we improved our cash-free cash flow significant by 400%, even that we are still not growing towards previous year. The orders in hand, and you see this when you look at the order income numbers before, we are still in a book-to-bill rate below one. That shows and is reflected in our development in the order backlog. And the significant solar business where we have so-called big orders in there, that shows that we really hit in our order backlog by minus 47% in to its previous year. Northstar, Claude mentioned this, Northstar is an overall profitability program we started. We see here already in the development of the employees that we are progressing here. We reduced by 6% our employees. There's still a way to go, but this is the first steps we are doing. And therefore, we have the right trend when we look at our revenue development today. Therefore, we made the first steps, and I'm really happy to show that we are developing in the right direction. Net cash follows the free cash flow, therefore. Here we are about our working capital. Next slide. Yeah. Yeah, working capital. It felt a little bit diverse. First of all, I mean, the Brooklyn Capital follows in the structure the revenue development to our business development. But we have two elements where we really made good progress. On top of the development is our inventory and our trade receivables. I mentioned the trade receivables already in the slide before, where we really improved our DSO by 40%. by the significant measures. And our inventory, even in our inventory asset management, we improved. Despite the development of the revenue, we had, when you see this in our DIO, we reduced by 10% towards previous year. Overall, it's a very positive development. Our working capital improved by 34% towards previous year. This is a good step. And we want to keep this level now for the future because it was a really good approach in our asset management. Overall, very positive development compared to the previous year. Next slide. Here we see the diverse picture we mentioned. Claude mentioned already in the beginning a little bit about the business development. But here you can see really our diverse picture in our business units. When you look at electronics, electronics were short of the budget in our previous year, basically by the tariff discussion about the investment, how the customer really looking at the investment, there was really a downside in our electronic business. We're still pushing for the semi-market. Therefore, the EBIT follows the reduction of the profitability a little bit more because we're still going, investing in our semi-businesses. Back in business unit development, I must really say development really grows even in this challenging environment, market environment we have with the tariffs. The water grows. It's a very good story. And we had even measurements in here that we over-proportional growth, the profitability in this business from 0.1 to 1.3 million. This was really a good story and a good push. Welding. Ian Welding Cloud mentioned it already, the growth of 30% towards previous year, majorly driven by an order out of the consumer electronics. But today, we really executed this contract even very efficient. Therefore, you see the impact about the profitability, really the turnaround in the welding business towards a positive business. was really good improvement here and one of our good storylines we had in 25. Now, Solaar. Solaar mentioned it. It's our downturn in this year, last year, because we had a significant hit of one third of the business is gone. And here we go, when you really look at the number that we had a significant reduction of revenue, we still made a pretty good job that it's not a one-to-one extremely hit in profitability. There were certain cost reduction measures have been done that the hit we received here is still in a range where I must say we did a good job. mainly driven from the diverse businesses you see. Solar is kicking us very hard this year. So, Klaus, I hand over to you towards the proposal.