Agfa-Gevaert NV

Ladies and gentlemen, welcome to the ACFA second quarter 2026 results conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to Pascal Juery, CEO. Please go ahead, sir.

Good morning, everyone, and thank you for attending our conference. I'm sitting today with Fiona Lam, our CFO, and the rest of the executive team. And before I walk you through the results, I'd just like to come back to the transition we are having today with Fiona Lam, who's going to lead the group by the end of the month, and the announcement of our new CFO, Diclan Guerra. So I just want to publicly thank Fiona for the two years she has spent with AGFA having an excellent impact and helping me in steering the transformation of the group. This is the last call that Fiona is going to do today with you and there will be no vacancy because in November we'll have our new CFO in place. Thank you Fiona. Turning to the results. As you've seen, pretty resilient results, but a lot of moving parts actually. If I start with the three growth engines of ACFA, I can start with healthcare IT, very good commercial momentum, very good order intake, excellent move to the cloud, a lot of net new customers, but as I Repeat every time there is an impact of this cloud transformation and that's the delay of revenue and margin recognition. And as you can see, the SaaS transformation of the business is accelerating because our order intake was 50% cloud-based during the quarter. But the message is also we are winning in the market. 54% of our order intake is with net new customers meaning we are winning share and we are able to win this share against the market leaders DPS is back to growth for the semester after a 25 year that was a year of we call it consolidation we are back to double digit growth and that's very good so it's very positive And last, of course, the membrane is having, I would say, a very difficult year, the hydrogen membrane. It's a trough, we're part of a trough today, where actually we are very confident to see a very sizable rebound in 27. But in 26, we are in a situation where our customers have already what they need in terms of membranes in inventory. and therefore it's a bit of a last year for Zirphan but we remain extremely confident going forward about the growth potential for Zirphan and that will start materializing as soon as 2027. So that's the state of the three earth engines. The resilience of the results is also to be credited to Imaging and Chemicals. This film in a volume decline environment has been able to actually generate positive results. This is a reflection of the huge restructuring effort we have undertaken now for a year and a half that places us ahead of the curve today and is more than enough to compensate today the volume decline. And we are able to do that in a very turbulent environment, especially with the huge volatility on silver prices. We are able to navigate the market to increase prices to customers as well. So it's a very positive thing for the group. And DR is, I would qualify it as stable. So overall quite I believe a good performance given the market backdrop. I will turn now to Fiona to walk you through the numbers.

Thank you Pascal. So in terms of the numbers, I sold a quarter like Pascal have said. The filament, chemical, imaging, chemical, the silver impact on the revenue offsetting more than the volume impact. So you see plus 2.6% growth in currency. We are specifically pleased with 11% growth on EPS. although still not sufficiently offsetting the decline of green hydrogen solutions because of soft market condition this year. But like Pascal said, the rebound we are expecting in 2027 in green hydrogen solutions. We are also very pleased with healthcare IT in terms of the transformation, the order intake, the recurrent revenue. So the quality of healthcare IT revenue has been improved on track even though we see a minus 9.5 percent decline in the second quarter on healthcare IT in the current revenue which is anticipated because we also know last year we had a very very strong healthcare IT own license sell in the first half of year so seasonality of healthcare IT last year in the first half of year was very strong and we anticipate on healthcare IT second half of year we would be basically offsetting that negative trend If we look at EBITDA, I think we could say it's really a solid performance on the EBITDA. We see the step up of film and chemicals on the saving program that have adjusted our base, cost base for the decline. So we are able to step up from 4 million to 9 million. For industrial solution also there and also green hydrogen solutions, a very small decline. based because of the top line but the good cost control has been able to maintain a reasonable adjusted EBITDA level and healthcare IT is actually better than our internal expectation even though you see a decline we anticipated it this cloud transition we anticipated strong last first half year so all in all we are happy with the Q2 adjusted EBITDA because it's a very solid performance Here you see also the bridge basically it confirms earlier we said healthcare IT and industrial solution were because of the top line decline. Imaging and chemical, the saving programs were able to contribute so that the volume decline is offset on the gross profit and then we have all the work being done within AFA on adjusting the costs and that savings are delivered and stabilizing our Q2 EBITDA as such. On free cash flow, so even though we still consume 10 million negative free cash flow, it is well managed. It's better than expectation internally because we actually have a large quarter of cash out for the expected transformation program, restructuring program, which we have announced last year. So it's anticipated a large cash out this quarter. we have of course the normal pension so if we look at that all in all our working capital has been managed very well and also our provision etc without let's say the impact of silver it would be much better but we managed to offset quite a lot of this negative impact internally so a minus 10 million cash flow is a good outcome for Q2 And that you can also see the evolution of our debt. If you see the net financial debt basically in Q2, of course, it has been stepped up from 58 million to 74 million because of the net negative cash flow. But we also know, like I earlier said, it is better than expectation. So we have now end of Q2 with $430 million of facility out of the $118 million. It's also provided at the end our Q2 governance tests have sufficient headroom. You see liquidity headroom is sufficient compared to the minimum of $13 million. Leverage ratio is stable at 1.4. And interest cover is also well managed. And just the EBITDA governance is at $52 versus $13 million. This is basically thanks to all the efforts and the business in the working capital improvements and also the better EBITDA as first half of the year. So if you look at the numbers we just highlighted in the graph, the Q2 numbers here is worth also to have a quick look on the first half of year. So first half of year, we deliver actually 10 million more We are working on last year just wanted to remind last year in We had the ARCA photo that was being booked in June of last year, 38 million. It was not cash being received, but it was booked in the P&L last year under the non-recurrence in 2025. Also, the net finance cost was another 7 million because of ARCA photo that was being booked as well in last year. So all in all, you see, without ARCA photo, our net result Improvement step up is equivalent to what we have step up in the adjusted EBITDA to be aware. Free cash flow is the same as what we have earlier set, minus 10 million free cash flow, but also for the first six months we are at minus 52 in total and that's offsetting, remember the first half year we have 45 million silver impact of purchasing silvers for the stock ramp up of our networking capital for that and we were able to offset quite a large part of this and maintain a step up compared to last year of minus 30 to minus 52 so that's in fact is quite largely managed. Thank you for the opportunity to help IT for Pascal.

Thank you Fiona. Nscar IT, so clearly if I look at the P&L, two reasons as explained already why we are below last year for seasonality. Last year we still have more project revenue and license. Very clearly on the transition to the cloud, the other explanation of what we are seeing today. But I want to insist This transition is going well, and as you've seen, the order intake is increasing by 28%. I'm sure that we will break the 200 million mark for the year. So cloud-based order intake more than tripled, which is showing really that this transition is accelerating. So cloud deals have represented 50% of our orders. what I want to insist on as well is it's done with net new customers meaning we are winning new logos in the market which shows that our offer is appreciated and extremely competitive of course and that really this momentum is really accelerating quarter after quarter so overall even if the P&L is not yet delivering you know this this transformation I mean we are in the way of growth and profitable growth in healthcare IT and the order intake is really the best living indicator we can use to describe our business overall I again show the same slide that shows the impact of changing from license revenue to a subscription model as you see it has a significant impact on the sales but also therefore the profit with a totally different model spread over time Then the number, we've already commented this number, so I'm not going to dwell on it too much. But again, nothing is broken with Elzgar IT. On the contrary, we have good momentum in the market and we are expecting also the second part of the year to be as normal, you know, the fourth quarter will be the highest quarter. This is the seasonality of this business and it will happen again this year. So now let me turn to industrial solutions and here a contrast I would say very very good with digital printing solutions after a year 25 where the growth was somehow subdued we are now growing again double digit the business and really what we are pleased to see is we are growing in the high-end market, in the high-end part of our offering. We chose excellent traction today and of course the consumers are part of this growth with sales of ink increasing across about 10% as well. We do for our high-end offering receive a lot of customer recognition and actually awards. And we are not forgetting also to continue to build our offer in packaging. This time it's a collaboration with the software area. to make sure we can offer the best full solution to our customers in the packaging segment. So overall DPS returned to growth and good prospects going forward. Very different story for a green hydrogen solution. 26 is pretty much a trough or a luster but there are things advancing very well in the background. The RAID3 implementation is taking place now, after some delays. We are seeing projects being FID'd in Europe, which we didn't see for some time, actually. And we have an excellent momentum in Asia. We have our first sales in China. Well, still modest, of course, but we can start. and we are also doing extremely well in India. So the message is, yes, short term, 26 is not a good year for Zircon, for the green hydrogen membrane, but we already look at 27 with great confidence that we are going to rebound in the market. and we are also very happy to see that in the meantime we are growing the recognition of the performance of the membrane, but especially in Asia, which are our priorities in terms of commercial development. Turning to the cells, to make a long story short, what you see here is a DPS that is up The membrane that is down, so overall indeed the membrane has an impact on the segment in spite of the good performance of OPS. Imaging and chemicals. Well, where I'm really happy is the fact that somehow we have turned a corner in film. We were suffering from a significant volume decline in film While we were putting in place our restructuring efforts, now these restructuring efforts are going full steam. Our savings are in place, not only in the operations but also in our go-to-market. And we have turned the corner and we are now in a position to claw back some of the profitability of the film. and we are also doing that in the market backdrop that is not easy with the volatility of silver price. So although the volumes continue to decline in film, we are seeing an improved profitability. DR, well Q2 was not a very good quarter for DR but I would say that profit-wise we are on par with NASCAR So nothing really to worry about. We have put together a renewed strategic roadmap for the business, which we are confident will provide the ability to grow top and bottom line in this business. So overall, here maybe I will show the PNL, because the PNL is showing actually the cost efforts that we have made in engineering and chemicals, with gross profit up in spite of decreased volumes, and as you can see as well, our OPEX Outlook, well for healthcare IT we are seeing the rest of the year to continue with our momentum in terms of order intake, same momentum I would say and profitability will be in line with last year's in the context of this cloud transition. Industrial S2 will be the same with DPS well-oriented and Zerphone still subdued. Again, we're not expecting a new rebound in 26 but in 27 for Zerphone. And we do have some visibility of the project and the customer orders. and Imaging and Chemical. We will, for the full year, restore somehow the profitability of film. It's going to be better than last year. Again, Sam Tran will continue to adjust our costs to what we see in the market and will continue to be very proactive in terms of silver-based pricing. Cash flow for the year is expected to be more negative, we trained it, we don't have an ACLA photo this year and we still have significant cash out related to the transformation and restructuring that we are having for the company. But again, I want to repeat, even if the quarter results are today largely due to the good performance of FILD. Nothing is broken with our gross engines. LCLIT is winning in the market, it's winning orders. DPS is growing and Zirphone is going to rebound. So nothing is broken and we confirm the ability of the group to pursue its transformation. I will stop here and open for questions from the analysts and the press.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6. The first question is coming from Alexander Kremersch from Kepler Chevron. Your line is now open. Please go ahead.

Hey, good morning. Thank you for taking my questions. So the first one would be on the transformation cash out. So when you announced the transformation program in 2024, you indicated that it would be self-funding, but of course now we already see a 30 million euro cash out by H1. So what has changed versus that original assumption and how much additional cash out should we now expect from these programs going forward? The second question would be on the AGFA photo. So you mentioned that the Frankfurt Higher Regional Court decided to annul the ICC award that remits the case back to the tribunal. So, I mean, as an analyst, you know, it's difficult to see the downside risk from here. Could you actually be required to pay that €45 million back or are you already required to give it back? That would be my second question. Then the third question would be on the healthcare IT. I think when looking at peers we see that there's also increasing investments in AI related functionality and I was wondering how much product development is required for the healthcare IT specifically the cloud to remain competitive midterm and how much we should pencil in a sort of R&D budget for these features. Thank you.

Thank you, Alexander. On the first question on the cash transformation when Yes, I mean, it is self-funding. I mean, today we have a recurring level of savings of more than 60 million from the program. And that corresponds more or less, I would say, to the cost of implementation. So yes, things are self-funding in this way, so to speak. You want to add something, Fiona?

Yeah, maybe just to add. Of course, you see in the free cash or cash out, of this amount per quarter and the savings are in the operating expenses where you also see we improved EBITDA where you also see how much lower operating expenses you can see in our P&L delivering and plus of course each quarter seasonality is different because your cash out sometimes you see a different quarter while your saving are ramping up so you see like Pascal said Thank you, that's actually quite clear. So does that mean or imply that then the full year costs cash out is also around 60 million? On the Moonshot program, you can say that. But it's different timing, different year, some last year, some this year, some this year.

Moonshot program, but... What we call Moonshot is the restructuring of Marsal operations, actually. It's our internal project name. And indeed, that's one-to-one, so to speak. Agfa Photo, let me explain the situation. What happened recently in Germany when you have the result of an arbitrage, you have the possibility to go for an annulment process that is not based on the subject matter but on the process itself. And that's what happened in a Frankfurt court. and so the judgment is not about the subject matter it's about a process and actually the right of the defense in respect so first we have made an appeal of this judgment for which we are awaiting the outcome then if the judgment is sustained it means it will go back to arbitrage but not for the full arbitration just on the specific issue that was pointed by the court related to the right of the defense. So we are not starting again. And point number four, no, we keep the money. We keep the money. There is no impact at all on the money. And I would like to remind everyone that we have prevailed in two arbitrations of the subject matter. So, whatever the decision of the appeal, we are extremely confident that it will be the case for the part that we will have to review in the arbitration. So, no, we are keeping the catch. Point number three, Telsca IT, and thanks very much for the question, Alexander, it's an excellent question. First, I would like to I remind everyone that we are investing a significant amount of R&D in the business and we have over time increased significantly our efforts in R&D because today it's close to 40 million out of a business that is about 240 million. Then AI is not only an investment. It has a return and for instance today we are using AI for coding activities and here you have an immediate benefit because you are increasing productivity by 30 to 50% depending on what you do on AI. So actually it's not a cost, it's a boost for us. And indeed, we are integrating, we always have integrated AI for many years in the diagnosis part, in the solution part, in the image generation part. We have already solutions that are commercial today in AI. And the third impact where we are using AI is actually on what we call the workflow orchestration, because remember, we are not selling only a software, we are selling a full solution. where we are managing the workflow of the radiologist from the time he takes an appointment to the time the image is being stored and archived. Managing this workflow is leveraged today by AI. So don't believe that we need a specific more budget for AI. We are using our current R&D resources to actually invest in this in these solutions and I gave you three areas where AI has an impact and I repeat it in the coding itself by going faster and doing more for the same resources AI solutions to help the clinician to make a diagnosis and three automation of the workflow also to gain productivity and Capacity at the end of the day in a world where we are resource constrained for radiologists. So AI is totally embedded in everything that we are doing in healthcare IT and actually for us it's a great opportunity to develop our products for the benefits of clinicians and patients.

Okay, thank you. And maybe if I can just ask a small follow-up on that. Does the cloud also allow for third-party applications to be integrated?

Yes, we are providing, as I said, a full solution model in which we have our own, of course, software, but we also integrate third-party software. So the answer is yes, yes, absolutely.

Okay, thank you.

The next question is coming from Guy Sips from KBC Securities. Your line is now open. Please go ahead.

Thank you. I have one question that I already highlighted in my morning notice this morning. The new director, Kurt Katt, and the new CFO have both carved out history. Could this lead the way for healthcare IT?

Well, you're right, but they also have history in corporations as well. I think Kurt Ducat was the CFO of Cibelco, for instance, which was not a carport. And I think Declan has experience as well in very good corporate names like Rolls-Royce and whatnot. But the fact that indeed they have an experience and background in PE is a plus for me and is a plus, I think, for the team because we are going through a transformation, yes, where we might look at strategic options. Of course, we are always looking at strategic options. So I think it's a very good observation from you, indeed. But they are not only PE, they are broader than that, both of them.

And I speak to my question, could this lead the way for healthcare IT?

I'm not going to comment on that. Clearly, the first priority we have for healthcare IT today is to succeed the cloud transition, okay? Now, if the question is why do we keep an IT business with an industrial business, it's a legitimate question. But for the time being, I think we have been the right shareholder and investor for LCL IT, given our track record in the past years on the business transformation. And again, this is our first priority. And clearly, it's built up the value of this business. Thank you. Fiona wanted to add something.

Yeah, I just wanted to add, based on the eyes of CFO to your question, Guy, is I think we just need an all-around comprehensive CFO who is good in finance, corporate finance, but also good in transformation, who is strategic optionality, and that is where a good

And by the way, yourself, you have both an experience in corporate and in PE-backed companies. I think it's part of being a well-rounded CFO, as you say very well. Okay. Thank you. Thank you.

There are no further questions at this time, so I hand the conference back to Pascal Juery, CEO, for any closing remarks.

Thanks a lot, thanks a lot. So again, we are, as you see, we have addressed the film situation I think quite efficiently and that shows today in our results. In the meantime, I want to repeat my message. Nothing is broken with the growth engines, on the contrary. I mean, the commercial momentum that we are seeing for LCRIT, we have never seen that before. Gaining so many new customers, large contracts, and very interesting contracts. DPS is in growth mode, and here, the name of the game for us is only to accelerate this growth. And Zerfone is not having a good year. But stay tuned, it's going to change very rapidly in 27 and the technology is confirmed to be the top class and the reference technology for salt membranes in the hydrogen world. So clearly we are extremely confident about what we are doing. So thanks very much and speak to you now in November, I guess.

This concludes today's call. Thank you for your participation. You may now disconnect.