Secoo Holding Limited

Good afternoon, everyone. And thank you very much for joining us today for our quarterly earnings call. As usual, our CEO Max will share with you a detailed update on our strategy, as well as some trends on our business. And before that, Lorenzo, our CFO, will cover the key items of our financial results. But first, let me start with the usual snapshot of our first quarter numbers. We are kicking off the year with a 3% year-on-year top-line progression in line with the guidance we had given to the market. In what remains a complex market environment for memories, our P&L has shown strong resilience both at gross and EBITDA margin level. The quarter was also punctuated by good momentum for our hardware business, with our new modular vision product line receiving strong early interest, as well as for our CLIA division, which is seeing a high level of conversion to long-term recurring contracts, as illustrated by the Hitachi win and the 20% year-on-year revenue progression. All of this continues to support a positive outlook for the year and keeps unchanged our 2026 management objectives. Now let me hand over to Lorenzo to go through our full year results in more details.

Thank you, Clarence, and good afternoon to all. I want to start by pointing out that this first quarter was marked by further and significant increase of memory costs with an impact on the availability of those components. In that context, the group was able to react promptly, securing the critical materials and negotiating with the customer the measure to protect its profitability. Therefore, a 3% growth in net sales versus Q125 is for us an important result, given the two very different market contexts. Regards gross margin, we recorded in the quarter a level of 52%, one percentage less than Q1 25. We are really happy about this result, considering despite in the memory prices, we were properly able to manage from a purchasing point of view. In the quarter, we registered also a positive sales mix in profitability terms. Passing to EBTDA, we recorded a minus 1% of profitability, primarily explained by gross margin and by lower other revenues. These include mailing grants over R&D development, which will be partially recovered in the next quarters. Having a look to the sales breakdown by geography, I want to highlight the good performance of EMEA, Germany in particular, driven by the important growth quarter on quarter of customers like Shearer and System, Coesia Group Entity. By industry, I want to point out that the industrial vertical is growing pretty well, while venting decrease as expected due to the completed rollout of our edge payment model over the tobacco sector. Most important is the 20% growth quarter on quarter of CLIA recurring revenues achieved thanks to the progressive penetration of the platform among customers. Analyzing our Q126 eBTDA performance, we were able, still considering the cost I was mentioning before, to preserve a profitability close to Q125 level. We recorded a stable OPEX and similar operating leverage. The 1% EBITDA margin reduction follows mainly the impact of components cost increase over gross margin. I want to point out that from the second quarter, our price increase actions should start to take effect. Adjusted net financial position grows by about euro 7 million respect to year end due to inventory expansion. We reacted immediately to the memories cost spike through strategic purchasing of stocks at acceptable prices. Besides, we had to take in consideration the increase in procurement lead times and so enlarge our inventory level. Despite this growth in depth, our leverage position remain pretty solid. Thank you for your kind attention and I hand over to Max for the business update section. Thank you.

Many thanks, Lorenzo, for this clear presentation, as always. Let me start with a bigger picture of what underpins our strategy. We are witnessing a fundamental shift in the way how the artificial intelligence is being rolled out for industrial application. The direction of travel is clear. from the cloud to the edge, as an increasing begin deployed directly where decision need to be made, on field device close to the action. This shift is begin driven by three core factor. One, faster real time decision making in mission critical environments. improved cost efficiencies at scale. Third, and greater resilience and data protection. As a result, we are seeing the emergence of a new class of AI-driven application and this is placed directly into our core capability. This is exactly where SECO is strategically positioned and this is where the interception between the Edge AI And all our end-to-end technology capability really play a crucial role for the customers. So let me now show you how we translate this positioning into concrete solution. So here in Seco, our approach is end-to-end, vertical integration. We addressed a broad set of applications where edge AI can create tangible value. This includes industrial automation through HMI, scalable embedded modules, and advanced robotics, including autonomous and humanoid systems. And this sector, I can tell you, is starting to give us very good results, especially considering the business in the 27, because we are getting traction with a couple of very good, very large robot makers. We are also active in the high-performance vision application, intelligent retail, and automatic vending, where edge analytics improve customers' experience and operational efficiencies. In addition, we support critical infrastructure such as smart energy grid, security system, and medical devices, all of which require reliable real-time data processing. And of course, we are more than ever a key partner in more specialized domain like defense, aerospace and drone. And here is where we are facing a very strong demand from the market. So having given this such of positioning, let me now to continue with some feedback that we are getting from the market by the launch of our modular vision. which is offering a very good beginning phase of market adoption. The core idea is simple but powerful. A standardized modular HMI platform that can be configured across different chipsets and applications needed. This approach brings multiple benefits. For SECO, it reduces R&D complexity and enables a more scalable business model. For customers, it shortens their time to market and simplifies the integration thanks to a ready-to-use, customizable solution. We are seeing this translating into a growth pipeline across many verticals like industrial automation, medical, smart building, energy and professional appliances. And we are expanding our go-to-market through distributor and strategic partnership with leading silicon vendors This all together are very good early signals and the sales data that we are receiving are very positive. I think that talking about the traction that we are seeing in the modular vision is almost the same also with CLIA and the customer engagement is really growing also in this specific business and we recently secured a multi-year multi-million agreement with a tier one global leader in electrification This is a strong validation of our end-to-end approach. Hitachi was looking for a secure and scalable way to digitalize distributed energy assets, including data collection, real-time processing, and device management across a global field. They also needed a unified platform capable of handling different kinds of hardware, both new and installed base. Our KIA platform was selected because it's a very complete product with strong differentiation factors. It enables secure data transfer, fleet management and engine solution for AI models and for immediate deploy of this model into the hardware. All of this with a very agnostic approach on the hardware side, meaning that our platform is capable to run Seiko as well as no Seiko hardware and therefore can be used successfully also for the retrofitting program that Hitachi have in place. I think that This is a very good example of how our technology stack can address complex, large-scale industrial needs. And this project moving to the deployment, they also start to impact our revenue mix, which brings to me the next point. So one of our strategic goal is to increase the recurring component of our revenue on the software side. As project progress from the deployment into, from development, sorry, into deployment, more devices get connected to clear platform and this drive a recurring revenue growth. In the first quarter of this year, the recurring revenue presented a 60% of the total mix and showed 20% year-on-year growth. This is an important trend and confirms that our platform-based model is gradually getting traction. Of course, you will see this growth path continue growing over the next for coming quarters because as much as our strategy of deployment go into revenue, as much as this progression will be even better. Let's now look at the order intake which provide a good visibility on the future performance. We are seeking to continue momentum in order intake. The pipeline is converting into confirmed orders at a healthy rate, contributing at a growing backlog and improved visibility. As you can see, we have a very good data point, like the 60% of the order intake year-on-year, counted from January to April. This is encouraging, particularly in a market environment that remains somewhat volatile. At the same time, our order book-to-bill performance remains consistent, which suggests a balanced flow between demand and delivery. Again, we view this cautious optimism as a positive trend but one that we want to continue to monitor because it's a tough year. Supply chain, macroeconomic tension, geopolitical tension. So a lot of things are happening as we speak and therefore we need to continue to monitor it very closely. But I can tell you that data are growing and moving definitely in a positive direction. So looking ahead at the second quarter of the 26, the environment remain, as I told you, complex. However, the year started with a solid piece supported by continued demand for our product and our solution. We expect the revenue to continue along this trajectory at the 15 million plus revenue. We think that this growth path will accelerate further significantly in the second half of the year. And this is based on an already taken orders and therefore we remain positive for the rest of the year. Overall, our priorities remain clear, executing on our pipeline, scaling our recovery revenue base, and maintaining discipline in a still uncertain environment, especially on the cost control. In the summary, we see encouraging signals across multiple dimensions, technology adoption, commercial traction, and order momentum. while remain focused on a consistent execution. I think that's all. I hope that this presentation has addressed all the key points and I want to thank you again for your attention. We can now open the lineup for questions. Thanks again.

Thank you to the speakers today. We now have an opportunity for questions. As a reminder, if you would like to ask a question, please use the reason function on your screen or for those dialing in, it's star nine on your keypad. Once your name is announced, please unmute your line, state your company name before asking your question. Thank you. The first question today comes from Marco Vitale. Please, Marco, the floor is to you.

Good afternoon. Thank you for taking my question. Two from my side. The first one is on the, say, 2026 outlook. On one hand, we noted that, I mean, you've already very encouraging comments on the order backlog year to date and also on the, say, positive interaction you're having with your clients. On the other, we see still growth, say, in the low single digit, you're getting for a flattish revenue trend basically in the second part of the year, while looking at consensus numbers, top line is seen increasing at, say, high single digit to low double digit, requiring an acceleration in the second part of the year. So the first question is on if you can comment on these, say, different trends and which are the key factors that should end up being the, say, a very strong acceleration in the second part of the year, whether second quarter guidance is just driven by, say, temporary factors or slow backlog execution. The second one is on the, if you could provide us an update on the ongoing, say, supply chain tensions. You mentioned that the gross profit margin is just a temporary effect and you already increased, plenty increased in, say, prices from the second part of this year. If you could share with us that if you still see these as very temporary factors, you should be, say, able to overcome the supply chains over the next quarter. Then also, if you could provide us a rough indication of the magnitude of your share price increase. Thank you.

So, first of all, let me start with revenue. As you said, and I can confirm, based on the trend of the order intake and the book to build that we are observing in this slide, I can confirm that we are expecting a significant growth path in the second half of the year. This is confirmed based on the order, as well as on forecasts that we have from clients. But I would say this is something that will happen based on data. And I have no doubt about it. On the margin side, I guided personally the market over all the interaction that I had both in a public speech like this one as well as during all my meetings in the roadshow that the memory we cannot think that having a so big and event like this one with a magnitude of 700% of price increase on the memory side, we cannot think that we can come out with having no impact on it, clearly. As well as I confirmed that we already secured with all the customers negotiation about the price increase. So therefore, we will see our margin improving over the next quarter. I would say the normal situation will be achieved in the second half of the year. but we will see a sort of progression as we go. As Lorenzo said, first quarter was affected negatively by the memory for over 3% in gross profit margin, which was also positively affected by The recurring revenue increase on CLIA in one end and a positive sales mix by margin in the second end that was able basically to neutralize a large portion of this impact. And we were able to see just a 1%. That was good and I think is a concrete proof how the Seiko business model is resilient also in a very tough market condition. On the supply chain in general we are seeing and facing delay into shipping especially with the boats. And therefore, also the guidance of the second quarter take it in account because we have components that will arrive later the quarter and therefore are not included into this guidance. But we were able also to do a very good job increasing our level of inventories, stocking a lot of memories to cover the entire 100% of the demand of our budget 26, as well as, I would say, a portion of the 2007 demand. So thank you very much for your question.

Thank you.

Thank you, Marco. As there are no questions here, we will wait just a few moments to give everyone the opportunity to ask a question. The next question comes from Barat Nagaraj. Please, go ahead.

Thank you for taking my question. Just a quick clarification on the previous answer, Max, if I may. Did you say that the delays in receiving some of the components, et cetera, has been taken into consideration for your Q2 guidance? Can you clarify that? I kind of misheard it. Please.

Yes. As I said, there was an unexpected delay into all the shipping basically over the boats because they ran a war. That's not a secret. So therefore, when we did our on calculation about the second quarter guidance, we had carefully review our shipment dates, arrival of the components, and therefore production dates available, and we took everything carefully in consideration. It will shift in some way some revenue from Q2 and Q3, and we will see a very good effect later in the year.

Okay, understood. Thank you. So my questions include the first one would be around the Hitachi revenue, the contract that you won. Has that already started contributing in Q1 to your revenue? And how much should we start expecting it to ramp up during the course of the year from Q2 onwards? And then a related question on Clear, given the decline in the non-recurring engineering revenue, obviously because it's moved to the recurring revenue, the customer has moved to recurring revenue contract, should we be expecting decline in Clear revenue for the full year given this mixed effect?

Yes, on the non-recurrent revenue, absolutely yes. Because as I already guided the market many times, we changed our business model into CLIA, shifting from a big NRE in the very beginning and the time to revenue between one year and two year into something that is more ready to use with a very low barrier in terms of no recurring fee advances, let me say no recurring fee. So therefore I would see the decline into the no recurring portion of the business consistent for the entire year, as well as a strong growth of the recurring revenue Just because the multi-year, multi-million agreement we just signed with Hitachi, the good news, it will be already making a positive effect on the recurring revenue size starting from the second quarter this year, but will continue to give more and more positive effect as we go. And we have a good line of additional customers that are entering into CLIA as a very short time to revenue now, thanks to the new business model. I think it will contribute to a further acceleration into the recovery revenue in the second part of the year. That's important not only because it's proving that the strategy and the business model that we designed is working well, but it's important because it contributes even better to our profitability as well as to our capability to generate a free cash flow.

Super. That's very helpful. Thank you. The last question for me is around, just a question around your peer, Advantech, who I know are more into standardized manufacturing. They have a lower gross margin than Seco, etc. But in the context of them growing much quicker, I just wanted to understand if there's anything to call out with regards to the demand profile from your customers, Seco's customers, versus Advantech. Thank you.

I think what we are seeing into the growth of Advantech, we will see, historically speaking, and this will be true also, this time six or nine months later, And this is simple because the different kind of product we are selling, basically they are more based on a standard solution and therefore they have a time to revenue which is faster than Seiko. And so the positive effect of the demand, they captured it earlier. We are more focused on system, HMI, customized. So this is such of a product have a longer time to revenue. And therefore we are able to capture the same kind of trend in terms of growth, which is confirmed by the way, by our book to build as well as by our order intake and it will come into the results in the second half of the year.

Okay, got it. Thank you very much.

Very clear. And also in 2027. So we will see a very positive trend into revenue and thanks to our capability to have operative leverage profitability starting from the second half of the year, but moving into the 27 in a very consistent way.

Very helpful. Thank you very much.

Thank you to you, Bharat.

Thank you, Bharat. The next question comes from Alexandra Arsova. Please, the floor is to you.

Alexandra, please unmute your line. Alexandra.

so i think we have some problem in connection over there so i would suggest keep this one and to go ahead if we have any other questions thank you the next question today comes from pietro nargi please go ahead

Hello, good afternoon. Do you hear me?

Yes, very well.

OK, thank you for the presentation, for taking my questions. The first one is on the organic growth. We have seen a 3% growth in the first quarter. I would like to understand what could be the organic growth at constant exchange rate since More or less 20% of your revenues are outside the INEA. So I would like to understand what is the impact from the FX. I guess it would be negative since you are exposed to the US dollar. So I think the organic growth at constant exchange rate could be higher than the 3% we have seen. And the second question is on the OPEC side. We have seen OPEX almost stable year on year. I would like to understand better if this brand could be, let's say, a proxy also for the coming quarters. So just to have an idea on the path of these operating expenses. Many thanks.

OK, on the rate, on the exchange rate, I think you should consider between 1 and 1.5 in terms of better growth path. as a constant effects. Into the OPEX, I think we are working with the entire team, especially with Lorenzo to well control the OPEX. I think this is a good proxy. However, keep in mind that as we are expecting, as I said already many times, an important growth into the second half of the year, I would suggest also to take it into account in terms of OPEX, because maybe we can have some temporary workers just to execute the production in addition. during the second half but as a company structure I think we are controlling carefully the level every quarter because that is the level where Lorenzo and I we want to keep the company also to scale in terms of profitability as soon as we will see the growth of the revenue accelerating.

Thank you.

Thank you, Pietro. The next question comes from Tommaso Martinacci. Please go ahead. Tommaso, can you hear us?

Hello. Hello, can you hear me? Yes, now yes. Can you provide more color on Germany in the first quarter, including its current weight on group revenues versus the historical level of 30%? And clarify whether the weakness remains purely micro-driven or if you are seeing heavily signs of stabilization in customer orders? even with the last all-time high order intake. Thank you.

All right, so Germany is counting, roughly speaking, about 30% of our total revenue. and is growing in the first quarter was above 10% year on year, showing a very good growth path, not only because the revenue we recorded into the quarter, but more important, looking at the order intake as well as the pipeline, which is growing every week. in the region, I can confirm that the positive sign of a recovery for the German economy are really happening right now. Meaning that we will see positive impact as we go and especially in the second half of the year as well as for the 27th. looking to the situation of the order intake as well as the pipeline, despite the Let me say the environment condition, which is really tough. Iran war, war in Ukraine that is never stopping. I think a lot of problems on the supply chain, not only for memory, but shipping, longer time to market. So all these sorts of things. Despite all of that, I think what is really exciting in this moment is looking at how many large projects we are facing right now with new logo. So new customers that we are winning also, a lot of them actually with a very strong conversion rate into design win. It looks very promising. Also, I had the 26. But in general, the level of discussion that we are having both with existing and new customer It's very good. It's actually client are asking for more in terms of innovation, in terms of new generation of project. And all these such of things are mainly driven by the first slide, the trend that I showed to you during the today presentation, which is basically the physical edge AI. Physical edge AI is happening. It's something that agentic AI, LLMs, are starting to be used into the HMI, into the machine, into all the product that we are selling. This is driving basically the adoption and the demand of the market at a very high level, very, very high level. And this is really good for the next future. Thank you. Thank you for you.

Thank you, Tommaso. Is there any question here? We will wait just a few moments to give everyone the opportunity to ask a question. As there are no questions queued, I will now hand back to the speakers for any final comments before bringing this presentation to a close. Please, go ahead.

Thank you very much to all for attending. Clarence and I will be always available and we will be on the street already later this week and then next week having a meeting with many of you. So we will see soon. Thank you again and have a nice day. Bye-bye.