Jenoptik AG

Good morning, ladies and gentlemen, and welcome to the Unoptic conference call regarding the results of the first nine months, 2025. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dr. Stefan Treger.

Thank you very much, and a very warm welcome to our Q3 earnings call. Our third quarter has been a quarter of light and shadows, as so many other companies report. We have some specialties that I was pointing out, and throughout the call, we are going to do that. With me today is, as usual, Priska Havane-Kozacek, our CFO. And I'll give some sort of color up front, and then Priska is going to lead us through the through the numbers. As I said, first quarter, a bit of a quarter of light and shadows. Revenue is down from prior year figures. If you take the third quarter 2025 versus third quarter 2024, our net sales are down by around minus 7%. And as a result, EBITDA or operating profit is also down versus prior year figures. That goes for the quarter as well as for the full year, year-to-date. On the other hand, though, free cash flow is very, very good. They have had a very good free cash flow, significantly improved versus prior year. And probably even more importantly, our auto intake pattern has developed as expected, but, yeah, very nicely. Our auto intake in the third quarter, is almost 14% higher than in the second quarter. And then the order intake in the third quarter of 2025 is 18% higher than in the third quarter of 2024. And as we always expected, order intake will strengthen in the second half of the year. And we do see that pattern emerging, which is great and obviously helps us going forward. Nevertheless, we have implemented a program to reduce personnel and material expenses. I guess that's just prudent. We all do that. That's, yeah, just good management practice. We expect to see a high single-digit number in terms of extra cost, one-time effects in our P&L this year. And let me just address that straightaway in our guidance that we are going to specify a bit more going forward. Those numbers, the one-time effect, the special costs for structural cost takeout is already included. So that's after the number that we are going to specify later is after those special costs. Overall, we do remain focused on our main growth opportunities. I'm very convinced that we have a good opportunity to further growth. Even this year is challenging for all of us, but given not at least our order intake pattern in the third quarter, but overall the macro trends that we have, we're very convinced that we will see further growth in the years to come. There's, you know, ever more AI-driven demand in semiconductors. There's optical communications for data centers, for defense applications, in particular at the moment in Europe. We do see success in expanding our SMS business, in particular in the United States. And at some point, and I'm really convinced about that, ARV applications are going to see an inflection point It's hard to say exactly when, but there will be smarter ways of human and data interaction than just telephones in the future. So if we take it all together, it's a bit of a mixed picture that we are going to report in detail now. A bit of disappointment in terms of net sales due to the time it takes for us always to convert all those into sales. We have a relatively long lead time with our relatively complex products. And as a result of that, operating profit for now is not where it should be. But more than just a bit of light at the end of the tunnel, there's a pretty strong auto intake pattern. And again, Q3 this year, very strong auto intake pointing to growth in future. and we're committed to that. Again, the restructuring project and program that we have implemented is ongoing. We have some of the numbers there already in our third quarter, but predominantly, the costs will become in the fourth quarter and are already included in our forecast, which we are going to specify at the end of the call. And with that said, I'll hand over to Priska

Thank you Stefan and good morning to all of you on the call also from my side. As always, I would like to now cover our performance in the first three quarters of 2025 in greater detail, starting with order intake on page six. Looking at order intake on group level, we are pleased to report that overall demand has continued to pick up over the course of the year. with orders now in the third quarter being some 50% higher compared to the first quarter figure. And up, as Stefan has mentioned, approximately 18% year-on-year. If we take the first three quarters together, order intake was at €777 million, and that's only marginally below prior year level. However, dynamics have been very different between our four strategic business units. So, starting with semiconductor and advanced manufacturing, As you know, development has been impacted by certain supply chain fluctuations in our lithography business, as well as an order cancellation in Q1, as we highlighted on our previous call. Thus, order intake for the first nine-month period was down by around 18% year on year. From all we can judge, we believe this supply chain or inventory impact, if you will, was most pronounced in Q1. On the inspection side, however, demand from our key customers remained strong, including in Q3. Turning to our biophotonics business, order intake has been very strong for the first nine months, and particularly in the third quarter. While we saw positive momentum in both life sciences and net tech applications, order dynamics in our optical defense products was particularly strong. So with overall biophotonics order, intake by up by around 34% year on year, which of course is very good. I would like to also note that there is a certain lumpiness in the order pattern of this business, particularly in the defense related part. So let me explain. While major orders in this area were recognized last year in the fourth quarter, we saw them this year in Q3 already. Therefore, we currently expect some sort of normalization for the fourth quarter. Moving on to metrology, for our metrology and production solution business, as well as for smart mobility solutions, order intake was also strong overall, up at high single digit rates, with MPS benefiting from higher orders, especially in the optical test and measurements arena. As a result of all this, our book to bill ratio on the group level returned to above one, or 1.03 to be precise, and reached 1.2 when just looking at the third quarter. Our order backlog reduced slightly compared to prior year end to around 659 million euros. We anticipate turning approximately 35 to 40% of this backlog into revenue this year 25. Now please follow me onto page seven. Revenue in the first nine months declined, as Stefan has already mentioned, by close to 8% year-on-year to around €753 million. This reflects generally weaker order intake trends at the beginning of the year. I think we've talked about that, especially in the semi-space. It also includes about 1%, which points to 100 bps negative impact from FX fluctuations, especially relating to the Euro-US dollar exchange rate. Now, if we look into the businesses, with regards to the semi-business, revenue was down 15% year-on-year. This was a result of what we already discussed several times in earlier calls, meaning softer demand in the lithography business, which, as you know, makes up for a big chunk of our business. On the contrary, however, revenue with customers in the semi-inspection area developed very well in the first three quarters. Now looking at biophotonics, here the revenue was up by 13% driven by a strong demand performance in our defense business as well in our medtech business. For metrology and production solutions, revenue development is lagging a bit behind the order intake dynamics that we just discussed before. So revenue overall was down by around 11% in the first three quarters of the year. due on the one hand to the unchanged difficult market environment that we are facing in automotive, on the other hand, influenced by some revenue shifts into the fourth quarter. Now finally, revenue of our smart mobility solutions business was up almost 14% in the January to September timeframe, particularly as our efforts in the important US market are gaining traction, in addition to some good momentum in the Middle East Africa region. Before moving to profits, I would like to also note that negative FX impacts on revenues in the fourth quarter, I expect it to represent more of a headwind compared to what we have seen in the January to September time frame. Moving on to profits on page eight. As you can see on the left hand of this slide, the group EBITDA reached almost 132 million Euro, down by around 18% compared to last year. Absolute EBITDA as well as EBITDA margins improve sequentially every quarter this year. However, for the first three quarters in total, our EBITDA margin contracted by around 220 BIPs year-on-year, including an about 40 BIPs impact relating to the one-time move cost to our new pet interest, as you know, in the first quarter. On business unit level, influenced by the just-mentioned one-off costs as well as lower utilizations, and product mix effect, EBITDA in our semi-business units dropped by almost 30% year-on-year. However, I'm pleased to report that while third quarter EBITDA margin in semi was still down somewhat year-on-year on the lower revenues, but it was also at almost 28% at a very good level in our view. In our biophotonics business, strong top-line growth drove better utilization of our capacity. In combination with positive product mix effects, even the margin substantially improved from 10.3% to 21.3%. As I've mentioned before, we continue to believe that this business is currently shifting a bit above the normal profitability level. When looking at our metrology and production solutions business, lower overall revenues impacted profitability with lower fixed cost absorption. As said before, Considering our order intake and also our order backlog, we expect revenue development to improve in the fourth quarter. And as a result, we also believe that margins will move back to better trajectories. Finally, for our smart mobility business, we saw very good margin improvement of more than 400 bps to 12.1%. In the first three quarters, and this is based on the strong top line development, and the associated leverage of the functional cost. Moving on to page nine. Here, I would like to give you a little more color on the drivers behind the evolution of our margins. First of all, I would like to stress, as Stefan has also mentioned before, strict cost management remains a key priority for us at the moment, considering the lower revenue levels that we have alluded to before. We've started early on working on this subject, and as a result of that, we've been able to reduce material costs to some extent, and our headcount measured in FTE is down by almost 4% compared to the same time last year. So now, looking at margin development of our P&L in detail, in the first three quarters, we saw gross margin approximately 200 bps down year on year, which was primarily influenced by the lack of fixed cost absorption and product mix effect. And on a business unit level, of course, our semi-business had the biggest impact here. On the functional expense side, as I said before, I think we remained very disciplined at those expenses. They declined by about 3% year-on-year, despite some general labor concentration impact. Moving on to the EBIT line, You see a more pronounced decrease in both absolute terms as well as margin-wise, as compared to the EBITDA, since depreciation and amortization was, as we had expected, slightly up here and there. Further down the line, as you may recall from our Q2 call, we have recognized an income of a little more than 2.5 million Euro, resulting from a settlement agreement regarding the sale of Incorion. That was our previous mechanical defense activities. Bottom line, our earnings per share reached 80 euro cents versus 1.15 euro last year. Now turning finally to page 10, looking at cash flow and balance sheet data. Stefan has mentioned it before. I think we are pleased with the development here, particularly considering the difficult trading environment some of our businesses are facing at the moment. So despite a decline in earnings, as you can see here, our operating cash flow pre-tax improves considerably year over year on lower cash inflows into our working capital. However, working capital intensity has increased somewhat year over year, reaching 30.3%. Moving on to capex, as you know, in the beginning of the year, we stated very clearly our intention was to bring down capex. compared to the somewhat elevated levels that we had during our investment phase in Dresden last year. Overall capex in the first three quarters was down by almost 20%, basically in line with our expectations. Finally, our net debt position was down versus year end at 366 million Euro, reflecting improved operating and free cash flow performance. Finally, our leverage was at 1.9 times at the end of the third quarter. And with this, let me turn back to Stefan to cover our outlook.

Yeah, thank you, Pruska. And, you know, if you could go to page 12 or follow me to page 12. When it comes to revenue, the rest of the year will be a sprint against time for us. Essentially fighting hard to make sure that we can convert the increased order intake into as much revenue as possible in Q4. In some of our factories, where we used to have or have had short-term work, we're calling workers back into the factories to, yeah, as I say, run against time when it comes to sales and revenue recognition. Nevertheless, we do see that we will expect to see revenues for the year 2025 the lower end of our guidance range. And you know the figure, our guidance range is between last year's figure and minus 5% of net sales. So we believe we're landing around the lower end of that range. We've talked a lot about our measures to reduce costs already. First I already mentioned we see FTEs down already. We will see further reduction in FTEs in the fourth quarter, in particular, of course, in our admin organizations. We expect a really high single-digit million-euro number as expense for those structural cost takeouts. That included, we believe that our EBITDA margin will be at around the lower end of our guidance rate, and as you know, the guidance ranges between 18 and 19.5 percentages. Last year, it was 19.9, so if you would basically dial back in those numbers, yeah, you can do the math yourself, but essentially, including those very high single-digit million euros, we believe we will be at the lower end of that guidance range. Effects from current macroeconomic and political uncertainties that we all know and we all hear every day in the news and someplace else, as well as fundamentally very positive developments in the semiconductor industry, and their effects on our 2026 business is really hard to assess at the moment. It still is very sort of liquid out there. It's very volatile, and despite the fact that we do see a good development in Q3, that's great, and we anticipate that that's going to carry into Q4, but for a sort of more precise outlook into 2026, it's really hard to give us sufficient certainty for that. We do think that the expected negative impacts from things like material cost increase and wage increase, we will basically offset by our 2025 cost saving measures. So the measures we talked about, We believe that will offset the cost increase that we anticipate at least for next year. And as a result of all of that, we expect an increase in both sales as well as EBITDA and improved EBITDA margin in 2026. A precise number for that, though, we can really not forecast at this point with sufficient certainty. Thank you very much for being with us and we're more than happy to and expect a lot of questions from you. Thank you very much.

So ladies and gentlemen, if you would like to ask a question now, please press 9 followed by the star key on your telephone keypad. In case you wish to cancel your question, please press 3 followed by the star key. Please press 9 and star now to state that you have a question. And the first question at the moment comes from Craig Abbott, Kepler Chivalry. Please go ahead.

Yeah, good morning. Thank you both. Yeah, my first question, please, just I realize clearly I just said too early to give a guy 36, but you're saying you expect a higher margin versus this year. And I just want to be clear. I assume you're referring to a higher margin versus that, let's call it adjusted DVD margin in 25, i.e., if we take, if we add back the high single-digit one-off cost. Is that the basis from which we should be working? That's the first question.

We don't adjust our forecast obviously. No, but we do. I'm trying to dance around the answer here. But let's see where we are at the end of the year, and then we give you a precise number. But I think your assumption by and large is fair. But we really don't want to give any more guidance at this point. But obviously, given what I just said or what we just said in terms of cost measures should offset costs, increase, and then if you dial, of course, those restructuring extraordinary costs, those are one-time effects and they will not show up next year. So, essentially, I think the answer is yes, you're correct.

Okay, thanks, Stefan. My second question is, and again, we know it's probably going to remain lumpy and all that for those of us that follow the, you know, reporting in the CIMI space. But nevertheless, could you give us, like, some kind of feel, even if it's just a ballpark range of, you know, what your customers are kind of indicating to you for 26? You know, there is the expected growth in WFE CapEx next year, probably mid-to-high single digits, I think, is the current consensus. So are they kind of, like, giving you indications to, you know, be ready, be ready to ramp up? We just can't give you visibility yet on when the call-up rates are really going to materially start to increase. Just to kind of give us a feel what the dialogue is like there.

Look, I would refrain from going into LISO versus inspection too much. Okay. What I could say is, because, I mean, obviously with Lito, there's essentially just one customer. And, you know, you'll understand that I can't really sort of close that. But overall, if you take it overall, like, Lito and inspection together, then I think it's fair to say that at the moment we do see actually a strong order intake or a strong demand pattern in inspection. And it's more the inspection side at the moment than the Lito side. And for 2026, we really have to wait.

Okay. And my last question, I'll turn it over to you. Sorry, Stefano.

Is that fair enough?

Yeah, fair enough.

I know I didn't quite answer your question, but...

Fair enough. And just looking at the other two divisions real quick, I mean, Prisca, you made clear that in biophotonics there were some, you know, some pull-forward effects that you would have thought normally would come in Q4. Fine, we get that. Nevertheless, a really good performance. But on M&P, you said also strong order intake, and you said it was It sounds like you were expecting things to like gradually improve here. I just wonder what's like behind that. Is that upgrade type investment? Is that always a one-off, you know, order in that Q3 number? What's driving, you know, what should drive this number to increase from here?

Thank you. Craig, just to get you right, your question was on biophotonics or the intake dynamics.

Is that correct? Well, I danced around a little bit. Apologies for that. Actually, I was getting to both the M&P and biophotonics. I mean, biophotonics, you said in your comment that, you know, there were some pull-ins. Don't expect that kind of dynamic for Q4. But if you can maybe on both of those divisions just kind of give us a feel for how your pipeline is looking.

Yes, yes. And I think that, as I mentioned in going through the businesses, there is fairly different demand dynamics at this point across the four businesses. Please keep that in mind. So on your question on biophotonics, I think what we have seen is, as Stefan also has alluded to, good MedTech demand, but in particularly very good defense application demand in Q3. And as I've mentioned in my comments, We see these orders in this area particularly lumpy, you know, meaning hard to predict on the one side, but also, you know, sometimes it's also including multi-year demands, you know. So what we expect is that while we have some orders, you know, similar orders in Q4 last year, we have seen them in Q3 in this year. That's what we see. Therefore, we expect in biophotonics a certain normalization. Now, this is different from what we have seen in our MPS segment. We've actually seen quite good order intake in MPS, I would say across the year. We also had a good Q3. I think what we've seen there is that the measurement, so the optical test and measurement part It's actually relatively stronger. I've mentioned in my comments that in the automotive related parts of the business, we honestly, we still see a significant weakness. So you can expect the driver of the good order dynamics comes more from the optical tester measurements. So, yeah.

And maybe to follow up on that first real quick, As Pruska pointed out already, in the MPS segment, it's essentially the trioptics business with good auto intake and the Hummel business with, as Pruska mentioned, what, you know, more automotive related is still somewhat lacking.

Okay, not surprising. Okay, thank you very much, both.

The next question comes from Michelle Korn, Deutsche Bank. Please go ahead.

Good morning. Thanks for taking my questions. One more on the one-offs and the expected savings. Firstly, on the one-offs, were those like even the split across the quarters or were there quarters that were more heavily impacted such as the idea in terms of what was underlying profitability across the quarters, and then into next year, you mentioned you expect those savings measures to basically cover inflationary pressures. Could you also quantify that, that we have an idea of what's the million-euro number of savings we expect, and how does it compare to the one incurred this year? Yeah, I think that I did.

Oops.

Yeah, I think, Stefan, yes, I think very – thank you for your question, Michael. So I think this is a very good question. Now, maybe let me clarify. One of the fact in the amount of high single digits that we expect for this year have been in the second half of this year. So you will see a very moderate impact in Q3, and we expect a higher impact in Q4. And that is because the program that is related to that is sort of underway right now, and therefore you'll see basically the impact on the margin of the one-offs in this time period. Now onto your question of the impact. you know, broadly speaking, I think it would be a fair assumption to assume that the amount of the one-off costs is roughly equal to the amount of the full year effect of, in this case, it's personnel cost reductions, of the personnel cost reductions that we expect. I would expect roughly a one-to-one relation on that. And that maybe to the last part of your question, That will, of course, not fully impact this year as we are implementing towards the second half of the year. So you'll see an incremental benefit coming as a full year effect then in 2026. Thank you.

Yeah, that was very clear. Thank you. Then let's say on business mix. Firstly, in biophotonics, obviously a defense driving that business right now. Would you be willing to give us an indication on the defense share of that business? year to date and probably what you would expect into next year and probably medium term because obviously defense is not kind of a one-hit wonder but generally expected to stay strong.

I think the last call we specified that last year in 2024 defense for the overall group has been at around 3% of total sales in 2024. This year, it will grow over and above that. The share of defense in the overall group will be higher than 2023. We cannot give you a specific number at the very moment. Yeah, we do expect it to grow even further. At this very moment, it's not the right time Yeah, to tell what's going on in, you know, 2027, 2028, it's hard to tell. But what we can say is, again, last year I think it has been 3% of overall growth, and it will be more this year, but we're not talking like 10% or so this year or next. It could come to that point in the future, but I'd say we cross that bridge when we come to it. And that was total growth, not by the time, the total growth.

Yeah, no, no, that was clear. Thank you. One more mixed question. In metrology, what is the current share of automotive versus non-automotive and In automotive, also on the last call, we discussed some, let's say, efforts to move away from combustion engines and move into new areas like battery cells and so on. Have you made further progress in the meantime, and what are the longer-term perspectives for that automotive-related metrology business?

And maybe let me take the first question. Okay, go ahead. So just on the numbers maybe, so please bear in mind that the MPS business also includes the former Hommel business, including the Trioptics and some other smaller businesses. So the rough estimate of the exposure to automotive is about 50% for this segment.

And this will return to growth at some point or what's the perspective?

So I will... We do have... Go ahead, Stefan.

Sorry, my bad.

Okay, so yes, correct. We are working on additional applications and new applications for the technologies there. And not all of it, even if it's automotive, is combustion engine related. I think that's important. We cover things like, you know, airbag solutions. Most of you have heard about that. Regardless of whether we talk, you know, EVs or ICE engines, electric vehicles or others, doesn't really matter to us. For that business, we have other new applications when it comes to certain light applications. It's a bit too much to go into all the details here, but interesting new applications that we have based on laser technologies, and we certainly expect that to grow. And what we do expect not to grow at the moment, at least, is the internal combustion engine applications we have. But overall, I think the automotive industry, as much as it's in difficulties, the applications that we serve are growing ones. Can I give you another example? Evermore cars have, you know, cameras, head-up displays, and a lot of optics are caused these days. And here we support our customers with metrology solutions, for example, with all these cameras that cars have these days and all these driver assistant schemes that we have in our cars these days. MMO optics, and that helps us in MPS quite significantly, actually.

Okay, and last one, any news on Protomax or any active conversations going on or was that more or less put on hold?

The latter ones, more or less put on hold. We don't have any active communications with potential acquirers at the very moment. Strategy is still the same. We in the long run believe that there should be a better owner out there for Protomax, but the... The difficulties or the challenges or the discussions between Canada and the United States of America doesn't make it any easier at the moment. And given where this business currently is and where it actually should be, and we know it's a strong business, actually. I mean, last year it was one of our most profitable units. We believe it's better at the moment to wait until the business is back at the point where it should be. and then try again in an effort to dispose it. Strategically, no change. We still believe that there should be better owners out there, but at this point in time, it's clearly not the right time to go for a sales process, yeah.

Very clear, thanks for the answer.

The next question comes from Martin Jungfleisch, BNP Paribas. Your line is open.

Yes, good morning. I have two questions on semis. So firstly, I mean, semi-orders were better here and here, but they were weaker sequentially. I mean, would you expect semi-orders to improve in Q4 sequentially, or is the visibility on semis specifically little, not really improving from here? That's the first question. I think the answer is yes. Okay, that's good. And then maybe a bit more in detail, right? So you, I think you mentioned you're seeing lower demand in this, right? And your main customer there sees DUV shipments to decline in 2026, while EUV shipments should be up. How does this mix impact you? I mean, is it financially really in net neutral when you ship more into EUV and less into DUV due to higher SP? So is this, I don't know, that negative? Mm-hmm. Yeah.

So really what matters to us is the number of machines sold. For us, there is, you know, we do take more price for EUV versus DUV, but not as much, if that makes sense. And so what really matters for us is not the revenue growth, but the number of shipments growth. It all makes us summer. And so, you know, it's good for us if there are more EUV machines than EUV machines, but what really matters is the overall number of machines shipped to us.

Okay. And the content in EUV is not higher than in the EUV, right?

I mean, I can't go into very specifics here, but I'll put it that way. Essentially, the technology is needed in both. Obviously, EUV is more complicated than DUV. Therefore, it costs a bit more and it's a bit more expensive, cost a bit more to produce and it's a bit more expensive. But it's not like you need 10 times more product for EUV machine versus a DUV machine. That's what I'm saying. By and large, at least, you know, these are just sort of really back in the envelope figures. But by and large, for us, It matters the number of machines shipped and not that much the number of revenues sold by our customers. That makes sense. Thanks a lot.

The next question comes from Les Stuben Durenberg. Your line is open.

Hi, good morning. Just some guidance for this year. If I'm just looking at the fourth quarter, if I take out that one-off effect, You know, you're looking at basically stable margins on Q3. I'm just wondering in terms of mix, does that capture biophotonics remaining at a similar level kind of in the fourth quarter, or should we expect that normalization to already take place in Q4? And then the second question would just be on defense orders within bio. Can you just help us understand the lead times here, or if that's, you know, materially different from the rest of the business? And also what that means in terms of profitability, because we've heard from other businesses that defense customers tend to be, how should I put this, willing to pay a bit of a better price than others. So just wondering how you see that in terms of margin mix as well. Thank you.

Yeah, maybe I'll take the second question. And first, you can take the first one. So it's the second one with the defense business. Yeah, the lead times in defense tend to be longer, or the timescales, I should say, tend to be longer. And it's not necessarily always more profitable, actually, because often it's, at times at least, it's like open book contracts, and it really depends on the individual projects and the individual agreements. So it's hard to say, overall, The defense is more profitable. But I guess by and large it probably is. There is pressure on price everywhere as much in defense as much as in other applications. But there's always if demand is so much higher than supply, then, you know, the supplier has a good position when it comes to price negotiations. And I think if that answers the question, then I would hand over to Priska for the first question.

Yeah. Yes, of course, Lasse. So your question on the biophotonics margin level, I think I've mentioned it also in my comments earlier. We're having a really, really good year for biophotonics, you know, on the demand side, as we just discussed it, with particular defense, but also on the top line growth and margin expansion. So I have cautioned already in the last call and I will do that again. I don't expect this to be a run rate margin and I would expect the margin somewhat to contract again as also expected. And I think also includes the fourth quarter specifics now biophotonics. On your second part of the question, when you said one of effect, I assume you mean the one of cost regarding to the personnel reduction. Bear in mind that there is effects both in the Q3 and in the Q4. I would expect the effect in Q4 more pronounced, but of course, it's in both quarters.

Understood. Thank you very much.

The next question comes from Olivier Curvie, UBS. Please go ahead.

Yes, hi. Good morning. A couple of questions. The first one on semi, could you remind us how to think about this time for, you know, EUV? So, you know, if your client gets an EUV order, when do you think you'll see the orders come in? That's the first one.

Well, typically we do get frame contracts and we produce sort of level loaded and then into stock and then basically get a call off and then we ship the product and then we cut an invoice and then revenue recognized. Often we have POC revenue recognition with that, but it does depend on the individual contractor. It varies, shall we say. I mean, that's what I'm saying. Lead time, it's not as if, you know, we get an order and then we start to produce the product and therefore it can be shipped, I don't know, X weeks later. But we have the frame and we know roughly, you know, how many products over a period of, let's say, two years or so we need to produce. And that's what we balance. and then we ship whenever we get a call. Lead time is a difficult term in that respect. Visibility is probably the better term. You know, how much visibility do we have? And I used to say in the past we have, you know, a couple of quarters. That's shorter now. The visibility is much shorter now. That's the point. More than lead time is the question sort of visibility. For us, at the moment, it's more like a quarter or so. And in the past, it was more like three quarters.

Yeah. Okay. Makes sense. Well, on the topic of visibility, you know, I understand you don't have enough details for your customers to create like a new form of guidance, but It's also when the current strategic period now lapses. So I'm just wondering if you're thinking about a midterm update when that could come.

Yeah, I think that's fair. I think, you know, we need to do a midterm update sometime next year when we have more clarity. That's a very fair comment. We're not in a position as of now, but I think in the next year, you can expect a new midterm plan from us. Okay.

And finally, just on Photomax, it's still within the other part, right? Not in the segment. Can you just give us a bit of color on how the business developed? We're profitable in other disorders, so I just want to

Yeah, it's in others because, you know, it doesn't really fit into any of the segments. And we also want to highlight and signal that we still aim to, from a strategic point of view, find a better owner for and a better home for Protomax since there is pretty much no synergies anymore to the record for business. How it develops? Well, it is challenging for Podomax at the moment. I mean, we're talking really challenging. Podomax has lost significantly in both in terms of orders and sales. And we really saw significant numbers here. And as a result, Of course, profits are down. They are still profitable, but given that it was used or used to be one of our most profitable units until last year, me saying they are still profitable indicates the size of the issue. It is significant. I mean, we do see light at the end of the tunnel in terms of now more requests for proposals, and that's good. There is activity going on again in Ontario, in the automotive industry around Toronto. And in particular, now that it turns out that most of the products are actually what's called KUSMA exempt. So KUSMA is basically what used to be NAFTA in the past. And therefore, now that the dust starts to settle on the tariffs, It turns out that most of the products of Protomax are actually not, the tablets are actually not applicable. But the whole uncertainty in the region is what, yeah, is so hard for Protomax at the moment. And I'll use the term significant when you ask me about the impact of it to the business.

Okay. Okay. That's helpful. Just a final one on the defense side of things, actually. Can you remind us about the kind of applications that you're supplying here, if you can?

Yeah. Yeah, sure. I mean, those are products that we have in the portfolio ever since. It's optics, photonics-based products for, you know, range finding, for night visions, those type of stuff. So not new product development, but products that we had in the portfolio all the time, but didn't see much demand for it in the past, and now demand is increasing like big time.

You're selling a complete solution, or is that just a part of a... No.

We sell optical components by and large. Thank you.

Okay, so ladies and gentlemen, just as a reminder, if you would still like to register for a question at this point, please press 9 followed by the star key. And there is a question coming from Malte Schaumann, Warburg Research. Please go ahead.

Yes, good morning. First question is on the OPEX. That has come down quite strongly to the third quarter of the year, so I was wondering, having in mind the additional cost savings, what's your target OPEX 1 rate for 2026? Maybe that was artificially down in the third quarter, but maybe not, so maybe you can share some color on what the expectations on functional costs are for next year.

Yeah, exactly. Thank you, Michael, for your question. I cannot give you an expected OPEX run rate for next year, but what I can tell you is that, as Stefan has already mentioned, and then I as well, we've been very cautious on, you know, adding personnel wherever we have people leaving. So attrition, basically, we have used that to not hire again. On top of that, we've already talked about the costing the personnel reduction measures. So, of course, that goes across both gross margin, but also several OPEX lines. So you'll see, you know, a positive impact from that. Now, labor cost inflation, I would expect in the broadly in line with what we've seen this year, you know, what we have right now. And then also bear in mind that there's a small part of amortizations in some of the OPEX lines that are also decreasing. It comes from the purchase price allocations of the previous acquisitions. So if you take all of that, you get a few ups and downs in what happens in the OPEX. But I can assure you that we will continue to be very, very strict on cost management across. And of course, that includes also the functional expenses.

Okay, good. Then on MPS and the order intake indicated that it's mostly coming from tri-objects. I was wondering which applications are driving the kind of uptake. We have recently seen some improvement maybe in the AR with the recent launch of the meta, new meta glasses. Is that something that is also beneficial? for optics, do you actually see other applications driving the uptake and then what's the sustainability of maybe a better business from what we have seen in the past?

Thanks for that question. I don't want to go into too many specifics in the product lines here, but it's measuring the measurement of the quality of optical components for a number of applications. Yes, ARVR is part of it, but they're also just classical optics production at a very high end. And other systems is growing strong at the moment. So others in terms of advanced driver assistance systems for the automotive industry. And the combination of all of that is driving the bond in particular trioptics at the moment.

Okay, and this is somehow sustainable, so you see kind of a better pipeline than going into next year?

It can be lumpy, but, you know, I don't want to forecast the rest of the year, but overall, yes, I would say it's sustainable. Now, don't take that as a guidance on Q4 or take MPS. Please, but in the midterm, yes, I would think so.

Sure, okay.

Then on the biophotonics again, you indicated to expect a normalization of the order intake in the fourth quarter. We have seen quite significantly differentiation between order levels. So should we assume that maybe we... Second quarter auto level we have seen is that kind of normal level you would consider as normal going forward. Q1 has been significantly lower than that. Last year it's been between 40 and 70 million, so maybe you can add some more color on that.

Again, very difficult to answer the question. As Chris already pointed out, that business is very lumpy. You can get big auto intake swings from in particular defense contractile spaces. That's what we're talking about. And therefore, it is very challenging to predict, shall we say, you know, all the patterns by quarter. I would rather not do it, but focus on the long run, on mid-range and long-range. I would say, you know, Medical and life science industry is still under pressure overall. We all know that. And that's, you know, there's still the remaining of the post-COVID blues. There is, you know, the fact that research budgets are cut, NIH budgets are cut, and so on and so forth. That will have a negative impact on our biophotonics business in 2026, and maybe beyond that, particularly in 2026. And on the other hand, defense budgets are growing, in particular in Europe, but also in other parts of the world. And that should have a positive impact. And which one of those two factors is stronger is a bit hard to tell. But I would say, life science, healthcare, more on the negative side, and defense on the positive side. And we'll have to see what that means for 2026.

Yeah, okay, understood. Then on CIMI, the indication for kind of an improvement, sequential improvement in the order intake into the fourth quarter, is that also then mostly relating to the inspection part of the business? No.

Okay. I'm sorry. I got to place my words helpful enough, but no, I think... I would say that goes overall for the total . Okay, good.

Okay, thank you very much for those questions. Let me just wait a couple more seconds if there are any more questions coming in. But that does not seem to be the case, so I'd like to hand it back to the speakers at this point.

Okay. Well, thank you very much for being with us today. As I think the discussion has shown, it's a bit of a bumpy ride at the moment. Most important for me, for us, is that we really have a sprint ahead of us for the next couple of weeks to make sure that we can turn as much as possible those nice auto-intake patterns that we have seen in Q3 into safe in Q4, and then, you know, have a good basis and a good foundation for 2026. And with that said, thank you for, again, for being with us and to our teams everywhere, good luck and all the best for the rest of the year. But no, joke aside, you know, I think we will see a good closure of the year with all the challenges that we had throughout the year. We always indicated that the second half will be better. And those of you who follow us for a bit longer, you will probably know that the fourth quarter tends to be the strongest far for your optics. So we'll work hard to deliver that this year as well. Thank you very much.