Elmos Semiconductor Ag

Good morning, ladies and gentlemen, and welcome to the Elmos Semiconductor SE conference call regarding the Q1 2025 results. 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. Arne Schneider, CEO.

Ladies and gentlemen, good morning from Leverkusen, and welcome to the Elmos conference call for the first quarter 2025. Thank you very much for your participation and your interest in our company. I would particularly like to welcome our new analysts, Amelie and Gustav from Berenberg, who have started to cover Elmos last week. So together with our longstanding analysts, of course, welcome to all of you. They provide a broad coverage for investors. Ladies and gentlemen, in a very challenging environment, I can report a solid start into the new fiscal year in line with our expectations. Let me start with an update about the current market environment. The automotive semiconductor market is still impacted by lower order levels as customers continue to reduce their inventories. Visibility is also still weaker than normal due to the ongoing short-term order behavior. In addition to the overall subdued market development, the rising geopolitical tensions, trade wars, or however you want to call it, potential tariffs have led to further increased uncertainties in the last weeks, as of course all of you know. To quantify the potential direct and indirect effects of the new tariffs on cars, automotive components, or semiconductors is actually not really possible, and the situation is changing on a daily basis. However, if semiconductors would be included in the new tariffs, the direct impact on Elmos would be very limited. as we ship only 2% of our products directly to customers located in the United States. The current market and economic climate requires a high degree of flexibility and responsiveness from the entire Elmos team. Let us dive into the Q1 now. As communicated before, we have expected that Q1 2025 will be the weakest quarter this year, still notably impacted by the stocking effect. Sales came in at 126.9 million euros, minus 7% year on year. This represents a lower level compared to the last quarters, but it is, on the other hand, fully in line with our sales planning from the beginning of the year. So the good news is that we are not experiencing unpleasant surprises or major postponements of orders, and we are seeing gradual upwards trend in our order book for the next quarters. From today's perspective, we expect higher revenue and clear sequential growth in the second quarter. And also, you may have already read it, our book-to-bill ratio is greater than one. Growth margin was 43.4% in Q1 2025, impacted by some fixed cost effects, especially in the testing area due to the lower volumes. EBIT was €25.6 million in Q1 2025 compared to €33.8 million one year ago. This is mostly as a result of lower volumes and the slight increase in R&D expenses. The EBIT margin then decreased to 20.2%. As you know, we are responding to this with consistent cost-cutting measures. We initiated an optimization program that will lead to noticeable reductions in personnel, and also material cost in the coming quarters. The associated reduction in personnel, also at the Dortmund site, of course, will be implemented through mutually agreed solutions with the employees affected. There will be no additional one-time cost, I believe it's worthwhile to add, related to this optimization program, as we have booked the corresponding provision of around 14 million euro in Q4 last year. At 13.5 million euro or 10.6% of sales, Q1 CapEx decreased year over year. Please also note that we have acquired an office building directly at our Dortmund campus for around six million euro at the beginning of the year. And actually the reason why we acquired real estate was that it's directly next to all the existing campus. So we have included that in our full year CapEx guidance we want to exit some of our rented satellite offices in Dortmund and consolidate around 200 employees actually in this new building. So excluding this real estate purchase, the operational capex was 7.6 million Euro or 6% of sales. If you have been following Elmos for some time, then you know that I would normally now have to report a weak cash flow as we did that for some time. Not today. You may have read the adjusted free cash flow developed really nice in the first quarter, and we are at 21.5 million euro, of course, significantly higher than the previous year's figure, which was minus 48.9 billion euro. So, ladies and gentlemen, let me finish my presentation with a market outlook and our unchanged guidance for the fiscal year 2025. According to S&P Global, the latest global light vehicle production forecast shows a total number of 87.9 million new cars, down 2% compared to 2024. S&P lowered its most recent forecast by around 1 million vehicles, mainly in North America as an initial reaction to the new tariffs. So what is our outlook for financial year 2025? Please note that the potential impact of the new tariffs and future tariffs or developments that may come and may be associated with it and the increasing trade conflicts with the United States or a global recession cannot be fully estimated, and therefore we do not include that in our outlook. We will, of course, give you an update should this become necessary in the future. So for the current fiscal year, we confirm our financial outlook published in February. We expect full-year sales in 2025 of €580 million plus or minus €30 million. With more or less flattish sales at the midpoint of our guidance, this would be better performance than our closest peers. We expect a high single-digit sales decline on average in 2025. Q1 was the weakest quarter this year. We expect strong sequential growth in Q2 and a better second half compared to the first six months. We are confident of our resilient operating model and plan to keep our strong profitability with an EBIT margin of 23% plus or minus 3 percentage points for the full year 2025. Again, this means a better performance than most of our closest peers. Similar to 2024, investment in new machinery will be limited due to the lower growth, OEE optimization, as well as test time reductions, and we expect APEX in 2025 to be around 7% plus or minus 2% point of sales. And this, of course, includes the village. Based on the strong cash performance in Q1, we are forecasting a positive adjusted free cash flow in fiscal year 2025 of 7% plus or minus 2% point of sales, supported by lower working capital, low investments, and we talked about it, and I mentioned we are speaking to you from Leverkusen today. So let me summarize. In an ongoing, challenging environment, we were able to achieve a solid start into the new year. As expected, sales and earnings were impacted by lower volumes, but we were in line with our expectations. The program to optimize personnel and material costs was successfully launched, and our measures to improve our cash performance are also showing positive results. Ladies and gentlemen, we are convinced of our operating model and strategic positioning and are confident that we will be able to achieve our ambitious targets. Our approach, focusing on profitable growth, cost discipline, and operational efficiency, combined with a clear focus on a better cash generation, will enable us to create significant value for our shareholders, increasing the valuation of our company and create attractive opportunities for capital allocation. So thank you very much. I'm now opening the floor for questions.

Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to withdraw your question, press 3 and star on your telephone keypad. For any questions, please press now 9 and star. And the first question comes from Malte Schaumann, Warburg Research. Please go ahead with your question.