Elmos Semiconductor Ag

Good morning, ladies and gentlemen, and welcome to the ELMOS Semiconductor SE conference call regarding the results of Q2 2026. The conference will be recorded. 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 everyone and welcome to the ELMOS conference call covering our results for the second quarter and first half of 2026. Thank you very much for joining us today and for your continued interest in ELMOS. Following an outstanding start to the year, we continued our strong operational execution in the second quarter. We again delivered profitable growth further improved our operating profitability and generated significantly higher cash flows compared with the previous year. These ongoing positive achievements are the results of the strength of our business model, our excellent strategic positioning, and our disciplined execution. And with a very successful first half behind us, we fully confirm our ambitious guidance for the full year 2026. Our consistent operation execution continues to be recognized by the capital markets. Despite elevated AI-related volatility across the semiconductor sector in recent weeks, the Amos share price has increased by around 50% year-to-date, resulting in our inclusion in the German mid-cap index MDAX in June. This marked another important milestone in the company's development and will further increase our visibility among international institutional investors. So let me start with an update about the current semiconductor market. Demand for our innovative analogmic signal semiconductor solution continues at a high level. China remains a growth driver, while product ramps in Japan, Korea, and a slightly better demand across Europe and America further support our business. Importantly, our growth continues to be driven by structural trends. rather than short-term fluctuations in global vehicle production. Electrification, ADAS, software-defined vehicles, and increasingly intelligent vehicle architectures continue to increase semiconductor content per vehicle. These trends create an attractive long-term growth environment for us. At the same time, we continue to monitor foundry capacity and the evolving semiconductor supply chain very closely. While demand for our analog-mix signal automotive semiconductors continues to be robust, we see clear signs of tighter 8-inch wafer capacity. AI-driven power semiconductors for data centers are also processed, at least partly, on the same wafer size as our Elmos products. And as foundries and OZs increasingly prioritize fast-growing AI applications, automotive capacity is expected to become more constrained, resulting in higher wafer and assembly costs. We have successfully managed similar situations before. As in the past, we expect that allocation-related cost increases will be passed to customers in a disciplined and balanced way. Recent pricing actions announced across the semiconductor industry reinforce our view that pricing may strengthen in the second half of the year. Based on our experience during the 2021 to 23 allocation cycle, we believe Elmos is very well positioned. Our fabulous business model, diversified manufacturing partnerships, and longstanding foundry as well as customer relationships position Elmos well to navigate this environment. Therefore, We see limited downside risks and potential upside from selective pricing actions as well as opportunities to further strengthen our market position. Our project pipeline remains very encouraging and we continue to win excellent new business across regions and applications. Year-to-date we have successfully acquired new projects with a lifetime volume of more than 400 million Euro, around 60% of our annual targets. As these design wins convert into serial production programs over the coming years, they provide excellent visibility for future growth. In addition, robotics is developing into an increasingly attractive opportunity for AMOS. We continue to expand our customer base, deepen relationships with leading robotics players globally. Although the business, of course, as you all know, is still at an early stage, The progress we made in the recent quarters reinforces our confidence that robotics can become an attractive additional growth pillar for Elmos over time. Let me now continue with the financial highlights of the first half and the second quarter of 2026. Sales increased by more than 15% year on year to 314.5 million Euro during the first half. reflecting continued strong customer demand and successful product launches. Sales in the second quarter continue to increase as planned by more than 6% sequentially or 11% year-on-year to €162 million. We are also confident about the second half of the year. Based on the midpoint of our full-year guidance, we expect H2 sales of approximately €338 million. In addition, Selective pricing action driven by the current allocation environment could provide some upside. While it is still too early to quantify the potential impact, this represents for sure an opportunity for the second half. Gross margin in the first half was 45.2%, improving by 3 percentage points year over year. The increase is mainly due to the higher volume and cost improvement. Like in the previous quarters, gross profit was impacted by higher gold prices in assembly as well as higher foundry and ozone costs. At 27.5% of sales, OPEX in H1 was higher due to the one-time expense in G&A of around €12 million, resulting from the fair value revaluation of the share-based compensation. As we have already announced in May, the stock-based compensation will be settled in cash for the time being. instead of equity meaning transfer of shares due to the almost complete cancellation of the company's treasury shares. The underlying incentive plans or the number of shares that may be granted of course remain unchanged. The only change is the settlement mechanism. Under IFRS, the change from equity to cash settled triggers a different accounting treatment. So please note that the 12.1 million euro P&L one-time impact in Q2 are also based on a share price of 180 euro. If I look today, this is not the case. But if we look at the end of the quarter, this was the case. So at a share price of, say, around 150, the P&L impact would be a lot lower. It would be half or less of the 12 million. So going forward, these non-cash accounting effects will move up or down with the share price each quarter. Since they are purely valuation-driven and unrelated to the underlying operating performance of the business, they are excluded from our financial guidance, which shows the operational performance of our company. We think this is reasonable, and this is, by the way, also what almost all other companies that run such programs do. 2020 share-based incentive plans have been granted to approximately 20 senior executives, including members of the management board. At the time of grant, these plans had a total value of 5.4 million euro and are linked to the share price performance until the end of 2035. So this is when the longest running program actually runs out. So since the first LTI programs were granted in October 2020, the company's value has increased by almost tenfold as of the valuation date end of the quarter two. So this high share price, of course, benefits shareholders while naturally also increases the value of the long term incentive programs. Returning to the business, operating EBIT increased to 75.8 million euro corresponding to an operating margin of 24.1%. This is an improvement of nearly four percentage points year over year. This outstanding development highlights the strength of our business model and our continued focus on profitable growth and operational excellence. Including the mentioned IFRS accounting effect, the reported EBIT reached 63.7 million euro in the first half of the year. So even including the non-operational effects, the EBIT is well above the prior year level. Capital expenditures remained very disciplined at only 2.8% of sales in H1 despite continued growth. Our previous investments in manufacturing efficiency and test optimization enable us to support higher volumes while maintaining a lean capital base. One of the most encouraging developments is our ongoing improvement in cash generation. Operating adjusted free cash flow reached €55 million or 17.7% of sales during the first six months, an increase of around 150% compared to last year. This underlines the successful transformation of Elmos towards the business with significantly stronger cash conversion and higher capital returns. Ladies and gentlemen, let me finish my presentation with the market outlook and our guidance for the fiscal year 2026. S&P projects in its latest July forecast a global production volume of 91.1 million new vehicles. This is down around 2% versus 2025. As we have however highlighted consistently, growth in the automotive semiconductor market is not only driven by the underlying vehicle production. Instead, it is fueled by powerful trends that continue to drive semiconductor content per vehicle higher. On top of these structural tailwinds, Elmos is benefiting from the many design wins secured in recent years. Together, these factors position us to continue outperforming both the automotive semiconductor market and our peers while providing a solid foundation for achieving our long-term growth objective. Based on the strong first half execution performance, the continued high demand for our product and the visibility provided by our product pipeline, we fully confirm our ambitious guidance for the fiscal year 2026. We had upgraded to May a little bit. So we continue to expect sales growth of 12% plus or minus two percentage points supported by an operating EBIT margin of 23 to 26%. Despite our strong growth trajectory, capital expenditures are expected to remain low at around 5% of sales, underscoring the attractive scalability of our business model. We also continue to expect excellent cash generation with an operating adjusted free cash flow margin of 19% plus or minus two percentage points and our guidance assumes a Euro to US exchange rate of 1.15. Ladies and gentlemen, the first half of 26 confirms that Elmos has entered into a new phase of profitable growth and sustainably improved cash generation. We combine structural market growth with innovation, operational excellence and disciplined capital allocation. As a result, we are creating increasing shareholder value while maintaining an attractive financial profile. Looking ahead, we remain excited about the opportunities created by automotive megatrends and increasingly intelligent automotive electronics. Supported by a strong pipeline of design wins, an efficient, fabulous business model, and a highly committed global team, we believe Elmos is exceptionally well positioned for sustainable long-term success. Also looking beyond automotive, we are excited by the opportunities emerging in humanoid robotics. Leveraging our proven mixed signal semiconductor expertise, we are building a strong position in what we believe could become one of the most attractive growth opportunities for the semiconductor industry over the coming decade. Thank you very much for your continued trust and support. I would now like to open the floor for your questions.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press star 9 and pound key on your telephone keypad. If you would like to cancel your question, press star 3 and pound key. You can also use the dial-in function in the webcast if you would like to ask a question by phone. Let's see if we have a first question. Here we go. First question comes from Waisel Theis from Metzler. This stage is yours.