El. En Spa Ord New

Good afternoon to everyone and welcome to LN's half-year 2025 Financial Results Conference call. Today's call will be recorded and there will be an opportunity for questions at the end of the call. With me on the call are Andrea Cangioli, Alliance CEO, and Enrico Romagnoli, Alliance Chief Financial Officer and Investor Relations Manager. Before we begin, please note that there are management remarks during the conference call regarding future expectations, plans, prospects, and forward-looking statements. Certain statements in this call, including those addressing the company's beliefs, plans, objectives, estimates or expectations of possible future results or events, are forward-looking statements. Forward-looking statements involve known or unknown risks, including general economic and business conditions, in the industry in which we operate. This statement will be affected if our assumption turns out to be inaccurate. Consequently, no forward-looking statement can be guaranteed, and actual future results, performance, or achievements may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update the contents or the forward-looking statements to reflect events or circumstances that may arise after the date year-off. At the end of the presentation, if you need to ask questions, please book your question on the chat or raise your virtual hand. You will have the floor in order of requests. But at this time, I want to give the floor to Andrea Cangioli. Please go ahead, Andrea.

Good morning. Thank you, Nicola. And thank you, Bianca, for introducing this call. And thank you, everybody who's attending, for being with us in this call following the release of our financial report as of June 30th, 2025. Enrico Romagnoli will be on this call with me and I thank him for taking care of the details of our financial reporting that he will be sharing with you in a very short time. The numbers are out since last night, so you have seen that our performance in the six months was good in revenue generation. Revenues exceeded on a consolidated basis to €125 million, up more than 5% compared to the same period in 2024. Meeting our guidance and confirming the positive trends of the first quarter. The goal of overcoming 2024's results wasn't met at EBIT level. EBIT result was in fact quite strong, reaching 34.6 million of euro, meaning 12.1% EBIT margin, but was lower than the 37.2 million of the corresponding semester in 2024. While by slightly exceeding the initial expectation, given the overall condition of the economic environment, the medical sector delivered an excellent performance, revenue growth in the industrial sector was weaker than expected. and its lower contribution to consolidated EBIT constitutes in full the delay of 2024-5 consolidated EBIT versus last year. When I mention the overall economic conditions, I am referring to an overall climate of uncertainty in international relations standing primarily from the failure of international diplomacy to bring to an end the wars in Ukraine and Palestine, and from the trade war initiated by the US administration that is reshaping the trade relation and also the political relations between the most powerful countries in the world, including Europe. While the wars are now in place from so long back, notwithstanding the risk of further escalation, the markets are acting like they are accustomed to this status, The trade war for the time being is impacting on our business, making it more expensive to sell our products in the US, making it less profitable due to a weaker US dollar, and also inhibiting the reduction of interest rates in the US due to the expected tariff-driven inflation. We disclosed before how interest rate and expectations about the change of interest rates impact on our capital goods market where our customers predominantly fund their investments with debt and therefore are helped in their investment decision by lower interest rates. Of course, the conditions in our specific markets are affected by this general situation and are confirmed by the business trend of the financial results that are available concerning certain competitors of us. Below the EBIT line, all the entries, I'm talking again of the consolidated financial results of the ELEN group, and below the EBIT line, all the entries contributed to widening the gap between the results of 2024 and the results of 2025. Foreign exchange rate differences hit financial income for roughly 3.5 million. The contribution of the Chinese activities on the verge of being divested and sold was a €4 million loss in 2025, worse than the €3.2 million loss contribution booked as of June 2024. And we finally had in 2024 a €5 million extraordinary income booked as a remeasurement of a financial debt no longer due at the time, an entry which of course could not be replicated in 2025. So what the very bottom line is showing, a wide gap between the 27.3 million income of 2024 and the 17.9 million income of 2025, is not adequately depicting and reflecting our current performance. But rather than on this gap, which is mainly generated by uncomfortable events or by area of business which are not part of the group anymore at the Chinese facilities, it was now to concentrate on the remarkable achievements that we met this year. First of all, revenue and EBIT increase in the medical sector. Both were up by more than 5%, and this is the envelope results of a set of more specific achievements and successes. With the release of the Magneto urology laser system in late 2024, the leadership of QANTA system in the laser devices for urology application was confirmed and strengthened. Almost 900 urology systems, including TFL lasers as well, I mean TFL or the fiber laser source-based systems, those not only including solid-state lasers like the Magneto, were delivered in the first six months of 2025, exceeding 35 million in revenues. And as the installed base increases, and also the manufacturing capabilities of our plant in Samarate are progressively moving upward, the revenue for the sale of sterile optical fibers, the consumable needed for each and every surgical procedure, materially increased, exceeding €20 million in the six months, with close to 180,000 delivered fibers. As demand in our main aesthetic application segment, hair removal, is experiencing progressive softening throughout the last years, we concentrated our efforts on one side in improving the performance and effectiveness of our laser hair removal systems in order to fight the market slowdown. And on the other side, we concentrated in improving the performance and effectiveness of our systems and technology dedicated to anti-aging procedures, and in providing them an adequate marketing support. I am talking of technologies which improve the appearance of the skin, removing smaller wrinkles, which stimulate collagen regeneration, providing shine and elasticity to the skin, which are tightening the skin, providing remedies to laxity, which are removing redness from the face and from the décolleté. I'm talking of RedTouch Pro and DotaPro by DECA, of Discovery Pico by Quanta and Toro by DECA, and of the CO2 laser product range, including ThetaPro by DECA and ULaser by Quanta system. As I said, revenues stemming from these application domains sharply increased in 2025, offsetting the softer demand in other disciplines. Even if the overall performance in the industrial sector wasn't successful nor satisfying, especially due to a soft demand in the manufacturing markets in Italy, we can count several activities that in these six months set the foundations for a marked improvement of the ability to compete of our companies. The Chinese business, which was not contributing anymore to the performance of the group, has been sold and is not constituting a burden for management and financial resources anymore. The European subsidiaries network started up by LASIK in the marketing domain in the last two years is stabilizing and becoming an increasingly reliable source of revenue, also contributing to profit, at least for the older subsidiaries. A similar pattern is now pursued by Catalan Penta, which in rapid succession incorporated three subsidiaries in Poland, Germany and Spain, which for the moment are obviously weighing on expenses and on EBIT, but we count on them being soon a creative in profit generation. Catlite gained control of Nexan, a small company based here around Florence, specializing in the manufacturing of automation systems that are strictly complementary to Catlite's high-power laser sheet metal cutting systems. When jointly installed with the laser system, automation systems by Nexan improve the overall performance and productivity of the laser system. providing 2CAT Lite a means of differentiation on its very competitive market through increased performance of the system and more extensive customization abilities. CatLight is forced to a competitive advantage on one side through the expansion of the offer, integrating it with automation systems, and on the other side through an increased level of service and of proximity to the end user through the organization of local sales and service facilities. Another point I would like to mention, if you look at our financial performance, one of the world's worst performance in terms of financial results in the six months was the industrial division of Elen, the mother company of the group. But the development work performed both on the mid-power range CO2 laser sources for special manufacturing applications. and also in the performance of the scanning units based on our proprietary galvanometers are promising to be the grounds for a future rebound in revenues. Under this profile, I'd like to mention that the performance of our 1.5 kilowatt RF excited CO2 laser source are currently reaching such a level of stability that we are working and counting on the release of a 2 kilowatt laser source within a reasonable time span. Such achievement will extend the maximum power of our product range, meeting a threshold that could open up several interesting application markets. Another item I would like to touch on in my remarks is cash generation. The balance of the net financial position decreased by 20 million in the period. I don't see in this contingent trend any particular problem, as seasonality of the net working capital balance is always unfavorable for a group in the first six months, and as we paid out dividends for 18 million and change, and booked investment for 15 million of euros, out of which six I would describe as mid-term liquidity investments. For sure, the net financial position is one of the historical trends strengths of the group. It's one of the components of the wealth of the group. The other components are much more intangible and sit in the capabilities of this organization to continually evolve and innovate its high-quality product range, confirming its recognized position among the world's leading players, also through several soft commercial relationships built over the years. Thanks to the uniqueness and differentiation of its offering, the group is able to maintain a high customer perception of its value, which can be defined as an excellent market positioning. Despite the macroeconomic uncertainties of recent months, the offerings of our business units remain attractive to customers thanks to effective product development, and the excellent technical assistance that accompanies after-sales service in all markets. One last thing before I hand the microphone to Enrico, a comment on the U.S. tariffs. The 50% tariffs which our products are called to pay when entering the U.S. constitutes today a cost increase in the chain that delivers our products to our end users in the U.S., The tariff-induced cost increase could either be absorbed in full by our distributors that could accept the minor reduction of margins that the cost increase would represent, given the high resale margin that they often apply, or could, if reverted to end users, be considered marginal price increase and do not affect demand, maintaining the price in a range where demand is, let's say, unelastic to price. or such cost reversal to end user could push prices in a range where demand could decrease due to elasticity to price. Those are all the theoretical possibilities. Both in our industrial and medical distribution, a key element for selling in the US has always been the innovative content and quality perception of the product that allows to sell it at premium prices and margins, which means keeping the market positioning of the product in an area in which the tariff costs do not materially affect margins and volumes for our distributors. And again, this directly ties our chances to effectively sell on the U.S. market to our innovation capabilities. It is difficult today to predict the mid-term market adjustments that the new tariffs will cause, As of today, the reaction of our American customer has been positive, and demand fluctuation has been limited and more related to specific acceptance of single products than to the extra tariff cost. Under this profile, we have to note that the implicit tariff that the weakening of the U.S. dollar is anyway levying on our sales to the U.S., will be more effective in the second half of 2025 when average foreign exchange rate will be steadily in excess of 1.15 dollars for an euro and the presence of the extra tariff cost on our distributors will make it difficult to neutralize, as we have done in other circumstances, the forex penalization on our margins. Please, Enrico, go ahead with your comments on the financial report.

Thank you, Andrea, and good morning to everybody. As for the ERM, the half-yearly report has been prepared in accordance with IFRS accounting standards, excluding the consolidation line by line of Chinese activities, both in 2025 and in 2024. due to the ongoing negotiation for the sale of the division in accordance with IFRS 5. The majority stake of the Chinese companies was sold on July 15. In the first half of 2025, the land group recorded consolidated revenues for €285 million, up 5.1%, compared to the €271 million on June 2024. The medical sector up over 5%, while the industrial sector up over 3%. Gross margin was 106 million of euro, up 5% compared to the 120 million of euro on June 2024, with an impact on revenue of 44% in line with the last year. It should be noted that in 2024, the group recorded proceeds for insurance and government reimbursement relating to the damages of the flood on November 2023 for an amount of 1.9 million of euro, 0.7% of the revenues. While in 2025, Asklepion accounted 1.3 million as R&D grants, 0.4% on the revenue. Excluding both of these no recurring income in the impact on gross margin on sales, The gross margin would have improved by 0.4% in 2025, attributable to the improved sales mix. Operating expenses increased in value and in impact on sales, mainly in G&A, R&D and IT costs, and sales and marketing activities. The increase in staff cost is due to an increase in heat counts and in salaries. EBITDA was positive at 42.2 million of euro, down 2.7% compared to the 43.3 million of euro on June 2024. and EBITDA margin in 2025 was equal to 14.8% compared to the 16% of 2024. Depreciation, amortization and provision amounted to 7.1 million in 2025 compared to the 6.1 million in 2024. The main reason of the increase was the reversal of the provision for risk and charges in 2024 for 1.6 million of euro, due to some legal disputes that were resolved more favorably than expected. Net of this amount, the overall cost aggregate is in line with the previous year. EBIT for the six months was 34.7 million of euro, down 7% from the 37.3 million of euro in 2024. The margin of revenue was 12.1 down compared to the 13.7 of last year. As already mentioned by Andrea, financial management recorded a loss of 2.6 million euros. In details, the first six months, the interest income generated by liquidity was 1.7 million euros, while the interest expenses on debt was 0.9 million euros. exchange rate differences had a strongly negative balance equal to 2.5 million of euro but in addition there is a one-time exchange rate loss recorded in q1 for around 1 million of euro following the release of the currency conversion reserve resulting from the sale of the majority in with us another income last year was accounted the one-time income of 5 million due to the remeasurement of the liabilities related to the earn-out to pay to former minority Chinese shareholders in case of IPO of Pentaraz and Zhejiang. Income before taxes showed a positive balance of €31.7 million, lower than the €42.3 million on June 2024. In this continued operation is summarized the net contribution to consolidated result of Chinese activities under disposal. The negative impact was 4 million compared to 3 million of last year. The main reason of the negative impact in 2025 is due to the devaluation of KBF equity investment in the first six months of 2025. The effective tax rate in 2025 increased to 32% from 27% of last year, and the main reason for this increase is due to the no-taxability of the 5 million accounted in other income last year. Moving on the analysis of the balance sheet amounts, we can see an increase in total non-current asset and net working capital, When the net financial position decreases, the value of ratio networking capital on sales is close with the value of last year. In detail, cash flow for the period showed a reduction of approximately 20.6 million of euro in the group net financial position from 110.6 million at the end of 2024 to 90 million at the end of June 2025. This reduction was also due to dividends paid by the group, 18.6 million of euro, capital expense for 10 million in fixed asset, 6 million of euro in mid-long-term liquidity investment, 2 million has been invested in own shares, and the seasonality expensive trend of the networking capital components resulted in a cash absorption of approximately €20 million in the six months. Regarding sales analysis, in the medical sector, system sales showed strong growth in all major segments. In the aesthetic segment, plus 3%, the very favourable trend for anti-aging application continued. Among surgical applications, plus 14% urology system continued to record significant growth in sales. ASA performance in physiotherapy, plus 7%, was also very satisfactory, thanks to the significant incremental innovation in the range of products offered, a more widespread and effective coverage of international markets, together with relaunch of sales in Italy. Sales of consumable and after-sales services remained very satisfactory, driven by the sales of optical fiber for surgical application, which kept service revenue growth to 6%, despite the low of service contract revenue from Japanese companies with us, whose majority stake was sold in February 2025. In the industrial sector, the CARTIC segment, which no longer includes Chinese companies, maintained growth of over 6%, thanks to the excellent sales result of the Brazilian subsidiaries, plus 6 million of revenue in the first six months, and the inorganic contribution on Nexam, 1 million. a company dedicated to the manufacture of automation systems for catalyte-penta laser systems, a majority stake of which was acquired in early 2025. Lasit also performed well in the marketing segment, with an increased weight of its subsidiaries, while performance was more challenging for Oatlus, And the industrial area of Elen, highlighted by the reduction in revenue from sources for industrial application. After seed service, revenue remained stable. For what concerns the breakdown by area, revenue growth in Italy was interiorly driven by the medical sector. While in the industrial sector, despite strong order intake, which bodes well for the rest of the year, overall revenue failed to match the already poor results seen in the first half of 2024. In European markets, growth benefited industrial companies, which are gradually building their direct distribution network. Lezit has branches, some of which are almost fully operational in Poland, UK, Germany, Spain and France. From 2025, also CatLight has just launched branches in Spain, Germany and Poland. In the European market, the sales in the medical sector increased by 13%. Revenue in the rest of the world declined slightly in both sectors, penalizing the industrial sector by lower demand from American markets, and in the medical sector by the challenging performance of the Middle Eastern market. Andrea, please go ahead on 2025 guidance. Microphone, Andrea.