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.

Thank you for taking my questions. Just on your full year outlook, can you give a little bit more details how you think about the quarters for the second half in terms of revenue and margin development? You stated also during your prepared remarks that pricing could be an upside to this. What is your, I mean, we are now in August, so what is happening on the pricing front at Almos? Some bigger peers already announced this year two times price increases. and yeah, so what are your expectations there for your company?

So first of all, thank you for your question. Maybe I was a little bit too timid in commenting on the pricing. Of course, prices go up. This is the reality of allocation. This is on a very good way with our customers. Most customers accept that, of course, you have to adjust to the market situation and as chips are becoming a little bit tighter and shorter again it may actually be a good idea to go through that together and to put a focus on securing supply which I think is key in this situation. Yeah, consensus, I believe, is already a little bit above the midpoint of the guidance. I mean, you know, the good thing about the guidance range is that you only have to adjust your guidance when you're over the upper end of the guidance range. So if we look at H2, we are pretty confident that we've got a very good time to have.

Got it. Regarding the allocation topic, I mean, Entering 2026, the situation was, yeah, inventory is not a headwind anymore, but then we got the Iran war, auto cycle improving, etc. Now it looks like increasingly a situation where your customers need to think about securing maybe their allocations in advance, the volumes they need. So my question is, are you already seeing customers Refilling their inventories, willing to take higher inventory levels or accept a higher inventory levels than two, three quarters ago where they really placed orders on short notice. What is the customer thinking right now? Are we shifting to really building inventories again and strategically maybe a bit more than historically seen?

For the time being, I don't think so. But we're in the process of reacting to allocation so that we would actually see a rising inventory level. I don't think so for now. But if we look at, say, the end of the year or maybe the first half of next year, I'm not so sure what the reaction is. I mean, we have a pretty good track record of what the run rates at the different customers is, which is good because then you can assess what they should need. For now, I think we're still in adjustment mode.

Got it. Thank you very much.

Thank you. And the next questioner is Johannes Riess from APOS Capital.

Yes, good morning. Yes, good morning. Good morning, Mr. Riess. Yeah, good morning. First, congratulations to the strong performance compared to your direct competitors. Maybe let's start with this. What product group has maybe been the strongest driver which gives you, compared to most other players in the automotive space, stronger performance?

Well, we see that ADAS is actually a thing that gets more and more real. I mean, that is real in China, that gets even more real in China, and that gets more real in other parts of the world increasingly as well. We also ramp airbag products this year, which are just, you know, you put so much R&D effort into them over the years, and now they finally ramp. So this is also nice. And if you see the illumination on the outside of cars, think of us. We'd like to help to make these things possible. So we think we've got very kind of positive segments that are really part of the automotive future.

Great. Thank you. If I see illuminated cars, I think on Elmos. Maybe on, can you repeat, maybe I didn't get it right, about the design, Vincent, of the first half, how much you catch it. Maybe I didn't, maybe one or other, maybe I don't get it. Maybe can you repeat it? Maybe how's the design? Yes.

So it's 400 million lifetime value. This is about 60%. This is maybe the more intuitive number. It's about 60% of what we should have done for the year. Now we're kind of at half year and we're 60% done. So one reaction would be, ah, let's lean back. The sales bonuses are all secured. Yeah, but the thing is we don't cap them. when it comes to design wins. So don't lean back. It could be a very good year.

Okay. I think the pipeline for the second half for design wins looks also good.

There is no structural change whatsoever. This is running at an excellent speed.

Okay. Maybe a little bit more on robotics. It's a hot topic. Although your direct competitor from Belgium said, yes, it's an interesting part, but Even next year it's not a very strong contribution to sales. Is it also the case for Ilmos or could we also see maybe a meaningful contribution to sales starting next year?

No, this will not have a meaningful contribution next year. I mean, any change in a big segment that goes from 150 million euros kind of 10 or 20% up will have a much higher magnitude in terms of growth contribution than the robotics. And this is the nature of the small emerging things. That first they seem small, but then they compound. And only with this compounding, but it's not that robotics is a growth driver for next year. I mean, it will for sure grow, but it's not a growth driver. Next year we ramp ADAS at the big US OEM, which will be a growth driver. We have an eFuse ramp. So it's more of the very advanced car things that make us, we think, grow next year if we look into our books.

But if we got it right, in your 2030 ambition of one billion, there had been no robotics in at this time you made this figure. Nothing. No, no.

This is just because we are, I mean, if something doubles every year, it also means that kind of the statistical estimation range that you would have to give is, that's why we wanted to be clean. We just give nothing and everything comes on top.

It's clear. Therefore, if it comes and then maybe it gets really meaningful towards the end of the decade, it's ice on the top. Yes, exactly. This was also my takeaway. On cash flow, if I'm looking at the past, the second half was most times stronger at the cash flow side than the first half. Could it be the same this year or is it, there's no rule on this maybe that the second half is normally better on the cash flow side?

No, no, this is exactly right. I mean, Q2 is always burdened by seasonal effects. So, I mean, all bonus payments, for instance, happen after the AGM. and some other things happened in Q2. So Q2 is always, and then Q3 with rising revenue, usually a little bit of rising profitability. I mean, you observed rightly, there's this little seasonality in this cash flow thing and it's nice in the second half.

Last question you mentioned with maybe some, yes, questions. Maybe the problem is that you compete with AI on an 8-inch wafer. Maybe there's some shortness and you think you could win market shares. You did it in the past. Is it that you maybe secured more delivery on the wafer side already? Because you are more ready to deliver and fulfill the requirements of your customers that you could win market shares like in the past?

Let me postpone that question a little bit. It's a little sensitive at this time. I think we are very well positioned in this allocation. We got good relationships with the foundries. We have reasonable discussions what our customers need and where we can help the industry in general. I think we all don't want to push Thank you very much. And last time we hugely benefited, so we're in a positive mood.

Okay, that was my follow-on in the last one.

No, we're in a very positive mood, but it's not all finished.

Yeah, thanks a lot.

Thank you, Mr. Wies.

Yes, thank you. And the next question comes from Malte Schaumann from Warburg Research.

Good morning, can you hear me?

Yes, we can, Mr. Schaumann.

Good morning to you. Great morning. First question is on actual life vapor volumes due to the mentioned shortages. How confident are you that you receive sufficient vapor volumes to support the expected growth until the end of the year and then going into 2027?

Well, for this year, this is mostly done. Everything that's not in production right now is not going to have that much impact on the yearly revenue. We have some, I mean, we are generally, as I said, it's a little sensitive, but I believe we are having very reasonable discussions. We're having very good discussions. In the end, the car should get the wafers. And this is where this thing, I think, in the end comes down to. Yes, there will be price increases to a certain degree. which is necessary to show the commitment of the car industry towards getting those wafers. But I do not think that there will be a negative impact on our growth next year. It could rather be the other way around. But don't press me please for too much detail. Some things are in the making and we are in very good mood. But some things are in the making and I can't completely comment on that.

Okay. A comment on the gross margin that was declined slightly. I mean typically it's flat to slightly up in the second quarter. Anything that comes up to your mind?

No, Malte, hi, this is Ralf. If I may, I can jump in. Hey, you remember the first quarter with the 46.4 cross-profit margin? That was a little bit higher. We had some inventory revaluation things in the first quarter. So 44% for the second quarter and year-to-date 45%, I think, exactly in line with our expectations. So nothing out of the ordinary to report here, I would say. Yeah, yeah.

Oh, and any pricing effects are not in there, right? Because they only start now.

Yeah, that was exactly the pricing effect model started at the end of Q3, right?

Exactly. Or some weeks earlier. But it's kind of that you won't find a gross margin pricing effect. Also, I mean, generally we pass on cost. Then you would see no effect at all. But when you say yes with the growth that you see over the course of one year, usually the second half financially is a very good time of the year. Okay, thanks.

Thank you. Thank you. And the next question comes from Lukas Spang from Tigris Capital.

Yes, good morning, gentlemen. I have two questions. The first one is related to the stock options. Is now everything done with Q2 or will we see further effects on the cash and the earnings side in Q3 and Q4?

Well, the effects on cash is, as we continue to cash settle, there will be effects on cash, but the effects on earnings is, of course, can be positive and negative. I mean, if I look at the share price, where is it currently? Well, somewhere between 140 and 150, maybe 145 or so. Then you would see A gain of probably something in the high single digits in Q3, if the share price now stayed exactly flat. So the IFRS 2 standard is a little complex one and the valuation that takes place is an Excel sheet that It doesn't fit on the toenail, but generally you will see when you go down from 180 to say 145, you'll see pretty significant gains, book gains, but it's all extraordinary. So we included from operations because we think these fluctuations have They more or less cloud the picture of what is happening in the real business. So that's why we will always report that, but we think we should also provide the number and guide the number that is not impacted by such effects.

This is Ralf. As long as we stay on the cash settled mechanism for the time being, you will see some extraordinary earning volatility every quarter because after you remeasure at the current share price every quarter. So that's the thing going forward. But again, that's extraordinary not in our operational performance.

And what should we expect on the cash side for Q3 and Q4?

This is excessively hard to predict because it depends on the share price and a lot of other things.

Honestly, I can't say. Basically, it's the same mechanism, right? If some threshold will be shared. You don't know. You don't know because it really depends on the development of the share price.

And the reaction of people to it. It's so hard to predict. Even if you knew the share price, Then you would also have to know the volatility and a lot of other things that go into these models that we just say we need to exclude that. It's not so easy.

And then the second question is related to the visibility of your customers. In the past you also mentioned that, especially from Chinese customers, there's a very short-term behavior. or in general, how is customer behavior and your visibility on that?

No, I think the general nature of the different regions has not at all changed. This has been the same over the past 10 years or so. And I kind of, at least in my lifetime, I don't expect any changes. Generally, I believe what customers recognize is that You have to be a little bit more disciplined in putting your orders in. A year ago, some customers that have been not so disciplined in putting orders in because they operated under the assumption that chips would always be there in the quantity you desired, even at very short notice. I believe now we are through the adjustment period that Most people know chips are not there at very short notice in every quantity that you could potentially desire. So people try to put in their orders kind of in line, however the logistical challenges in a fast-moving economy remain. That means short-term ordering still remains to be A substantial topic in certain regions.

Okay. And this is now more on the real demand or still dependent also on inventory levels on the customer side?

Generally, we are, I believe, in a pretty balanced situation. People have reached the inventory levels they desire Sometimes we think they are too low, but there you go if that is their desire or their need for cash. I mean, we also have parts of the automotive value chain that is really cash strapped and you can advise them to have more inventory. However, they may advise you that they don't have the cash for more inventory. So we think part of it is nevertheless too low. but unlikely to change in the short term to an adequate level. So I think we are in a balanced inventory situation, not much build up, not much drain.

Okay, thank you.

Thank you, Mr. Schwan.

Thank you very much. At the moment, there seem to be no further questions. Once again, if you would like to ask a question, please press star, nine and pound key. And we're going to give you another moment to see if there is another question coming in. That seems not to be the case, and I would hand back to Dr. Arne Schneider for some closing words.

So, ladies and gentlemen, this is the end of our conference call on the H1. Thank you very much for your participation and your questions. I hope to meet some of you in our upcoming roadshows in London and in Brussels. and during the investor conferences in September, I guess I meet almost all of you. So thank you very much for your support and your interest in Elmos. Enjoy the summer, the rest of the summer. Goodbye for now. Take care. Stay confident. Thank you.