Renk Group Ag

Welcome to the RENC Group AG Q1 2026 pre-close call. Please note that the call will be recorded. During today's call, webcast participants will be in a listen-only mode while we conduct the question and answer session. If you wish to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen, or if you have dialed in star nine, further instructions will follow at the time of the Q&A. I would now like to turn the call over to Christian Weiss, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our Q1 2026 results conference call. My name is Christian from the IR team. With me today are our CEO, Dr. Alexander Sage, and our CFO, Anja Mansipje. Alexander and Anja will take you through the presentation. Afterwards, we will open the floor to your questions. But now I will hand over to Alexander. Please go ahead.

Thank you very much. Ladies and gentlemen, also from my side, like always, a very warm welcome and many thanks for joining today's Q1 call. Today's presentation has, like always, three parts. I will start first with a quick review of Q1 2026, followed by Anja, who will guide you through our key financials in more detail. Before I will come back with our outlook and guidance for 2026, a quick review of our current R&D pipeline and the upcoming key order intakes and programs for 2026. But ladies and gentlemen, before we go into details, let me quickly summarize the key messages up front. First, Rank has delivered a solid start into 2026. Q1 confirms the strength of our business model, the strong momentum in our defense segment and operational execution of our entire team. Second, the strongest Q1 order intake in our history at 582 million euro, resulting in a book-to-bill ratio of 2.1. Third, the total order backlog at a new all-time high of 6.9 billion. And importantly, also our fixed order backlog grew further to 2.6 billion versus year-end 2025. Fourth, our defense business continues to be the clear driving force with plus 27% in order intake. Fifth and finally, we fully reconfirm our 2026 guidance. Revenues above 1.5 billion and adjusted EBIT between 255 and 285 million. And again, let me be crystal clear again here. We are clearly targeting the upper half of our adjusted EBIT range. Or to sum it up, rank is on track. Let me now walk you through the details during the next slides. Therefore, ladies and gentlemen, let's move to slide one, which summarizes the four key takeaways I just walked you through. Record order intake in Q1, all-time high backlog, VMS as the clear growth engine, and more than 90% of planned 2026 revenues already covered by our fixed order backlog. So let me focus directly on the key order intakes for Q1 2026. Most of these programs, I'm sure, should be very familiar to you. First, an international NPT program with our transmissions at approximately €157 million. This program is quite relevant for RENK by providing access to a growing market in the NATO environment. Also, the second Puma batch with transmissions and suspensions at approximately €140 million, a quite important step for the modernization of the German army. Also, the US M88 recovery tank program with engines at approximately 49 million. And finally, two orders from international howitzer programs at approximately 25 million. If we move to slide two. Slide two summarizes the group performance for Q1 2026. And as you can see in the four orange boxes at the top, all KPIs show a very positive development. The order intake we already covered, so let's move directly to the revenue. The revenue came in at 284 million, plus 4% year on year. Important to note, when comparing Q1 2026 revenue with previous year's first quarter, Q1 2025 did include Israel-related revenues in the range between 20 to 25 million of euros. for Q1 2026 and as already communicated during our full year 2025 call, we did not have such Israel volumes in our production planning and consequently no Israel related revenue contribution. The adjusted EBIT stands at 42 million plus 10% year on year and once again, clearly outpacing revenue growth and reflecting the operating leverage in our business model. The adjusted EBIT margin improved by 0.9 percentage points to 15.0%. Regarding the end markets, we are now at a defense share of 74% on LTM basis, fully consistent with our sector strategy. The new build versus aftermarket split is at 64% to 36% and within our typical current range, depending, like always, on the specific product may Let's move to slide three. As you all know, defense is the core of our business and the main driving force behind our crew performance. While the defense-related order intake increased strongly by plus 27% to $495 million versus $390 million in Q1 2025, the revenue side came in at $209 million, plus 3% year-on-year. Important to emphasize, if we would, and this is just for reference, include in this revenue figure the missing Israel volumes from Q1 2025, as described before, the defense-related revenue would have been above €230 million, with a corresponding growth of approximately 14% year-on-year. One final word to Israel at this point. Since November 2025, the German export embargo has been lifted and we are now ramping up the production and shipments for Israel during Q2. We continue to expect 80 to 100 million euro revenue contribution for the full year. Ladies and gentlemen, let's move on to a quick view on our divisional performance and starting with our largest and most important division, Vehicle Mobility Solution. VMS is, once again, our clear growth engine. Revenue grew strongly by plus 11% to 191 million, fully in line with our customer contracts and delivery schedules. Our modular production concept in Augsburg, ramped up during Q3 2025, is fully running and supporting ongoing margin improvements. The order intake was outstanding, a record Q1 of 478 million plus 21% year-on-year with a book-to-bill of 2.5, driven by the main programs mentioned earlier. Or to sum it up, BMS is performing both commercially and operationally. Let me now turn to slide five in our Marine and Industry Division. M&I had a software Q1 2026 with revenues at 65 million or minus 11% year-on-year, driven by two specific effects as already mentioned during our pre-close call. First, customer-induced delays in outbound logistics on certain naval projects, approximately 10 million of euro impact on the revenue side, and second, supplier-related schedule issues. These effects are temporary and will be fully recovered during Q2 and Q3. The underlying performance and the order pipeline of our naval business remains fully intact. On top of this, our industrial business is still under pressure due to the GDP-related overall weak market environment. The order intake of 70 million confirms a solid level of activity, and we expect several larger naval order intakes during this year, which I will touch later on in the third part of the presentation. Last but not least, a few words on slide bearings. Slide bearings showed with 30 million euro of revenues a flattish performance in Q1 2026. Reflecting the ongoing headwinds from the weak industrial market mentioned before, a quarterly driven lower aftermarket and a negative impact by U.S. tariffs, which we did not have in Q1 2025. The order intake at 35 million euro is slightly above the revenue level. Ladies and gentlemen, now let's move on to the last slide, at least of my introduction, our total order backlog for 2021. we have reached a new record level of 6.9 billion, up from 6.7 billion at year-end 2025, which corresponds to approximately five times our LTM revenue. Very important to highlight, our fixed order backlog has continued to grow from 2.3 billion at year-end 2025 to 2.6 billion, driven by the strong Q1 order intake and despite our high revenue conversion. The soft order backlog stands at 3.5 billion, slightly below year-end 2025, driven by the conversion of soft into fixed during the quarter. On top, we have 0.9 billion of frame backlog plus our significant recurring aftermarket business outside our framework contracts. Having said this, I would like now to hand over to Anja for a deeper look into our Q1 financials. Anja, over to you.

Thank you, Alexander, for handing over. A warm welcome also from my side, and thank you all for joining us today. In accordance with our usual agenda, I will guide you through our Q1 financial performance, the development of our divisions, and then networking capital, as well as cash generation. Overall, Q1 26 marked a strong and profitable start into the year for Rank Group. We continue to benefit from the favorable demand environment in defense-related mobility solutions, while at the same time demonstrating solid execution, especially within VMS. Most importantly, our profitability developed ahead of revenue growth, confirming once again the operating leverage and our ability to make use of it. This was supported by a favorable product mix and positive scale effects, particularly in VMS, which remains the key growth and earnings driver in the quarter. At the same time, we also saw some headwinds in parts of the business, especially in M&I and slide bearings. These effects were mainly driven by customer-induced delivery delays, supplier bottlenecks, and postponed order awards. Nevertheless, we do not regard this as structural. From a balance sheet perspective, NetDev remains stable and our leverage stayed at its known level. Networking capital increased in line with production activity and short-term delivery obligations. So to sum up the first quarter, RENG delivered profitable growth, maintained a strong financial position, and continued to benefit from high visibility in its core defense markets. Moving to our group performance in the first quarter. Order intake increased by 6.1% year-over-year from €549 million in Q125 to €582 million in Q126. This is a record-breaking start into the year and was mainly driven by VMS, which contributed the vast majority of group order intake in the quarter. Revenue increased moderately by 4% from €273 million to €284 million. The main driver here was again VMS, supported by higher output realized based on our modular production process in Augsburg and continued execution of the order book. At the same time, M&I had a counteracting effect, mainly due to customer-induced delivery delays in the marine business and the supplier bottleneck at Rank America Marine and Industry. As Alexander already highlighted, our book-to-bill ratio remained very strong at 2.1 times. This means that order intake again clearly exceeded revenue conversion in the quarter. As a result, fixed order backlog increased by 14% compared to year-end 2025 from about 2.3 billion to about 2.6 billion euro. The key takeaway is that Q1 confirms the strength of demand, the quality of our backlog, and our ability to translate that backlog into execution. Turning to profitability and leverage. Adjusted gross profit margin increased from 78 million euro in Q1 25 to 84 million euro in Q1 26. This corresponds to growth of 7.4%. This adjusted gross profit margin improved from 28.7 to 29.7%. Reflecting positive scale effects and a favorable product mix in the quarter. Adjusted EBIT increased even more strongly by 10.4%, from €38 million to €42 million. The adjusted EBIT margin improved from 14.1% to 15%. This is an important point because earnings growth outpaced revenue growth, confirming the already mentioned operating leverage that allows us to benefit from positive scale effects. On the balance sheet, net debt remained essentially stable at 391 million. In relation to last 12-month adjusted EBITDA, leverage remained at around 1.5 times. This means that we continued to combine profitable growth with financial discipline. The cash position, I will comment on that in detail later on, also remains stable compared to year end. Operating cash flow in the quarter was sufficient to cover investing cash flow and financing cash flow. We therefore see the Q1 development as a constructive signal. The business is growing profitably while leverage and liquidity remain well under control. Let me now move to our divisions, starting with VMS. VMS once again confirmed its role as the group's key growth and earnings engine. Order intake increased by 20.5% from €379 million to €478 million. This strong development was driven by continued demand for land-based drive systems. It is worth noting that the prior year quarter, had already included significant order intake. Against that comparison base, the Q126 order intake performance is particularly encouraging and driven by two major order intakes. Revenue increased by 11.2% from €172 million to €191 million. The main driver was higher output in Augsburg, supported by the modular production setup. This shows that the current growth profile is not only demand-driven, but also execution and capacity-driven. Adjusted EBIT increased by 22.3% from €29 million to €35 million. The adjusted EBIT margin improved from 16.6% to 18.3%. This margin improvement was mainly supported by growth in the margin-incretive Augsburg business. To sum up, VMS had a strong first quarter with order intake, revenue and adjusted EBIT all growing double digit. The division continues to scale and it remains the center pillar of ranks, growth and profitability profiles. Now let's have a look at M&I. M&I had a weaker first quarter compared to prior year period. Order intake decreased from €122 million to €70 million. The main reason is that Q125 had included an exceptionally high order intake level in the Navy business. So the year-over-year decline should be seen against a demanding comparison base. Revenue declined from €73 million to €65 million. This was mainly caused by customer-induced delivery delays in the Navy business and the supplier bottleneck, which led to extended production processes and downstream delays. In addition, aftermarket revenue was below the prior year level, especially in turbo products. Adjusted EBIT decreased from €7 million to €4 million and the adjusted EBIT margin declined from 10.2% to 6.7%. The main drivers were lower revenue, negative scale effects and missing margins from the delayed deliveries. At the same time, it is important to put this into perspective. The weaker Q1 performance does not indicate a structural change in the division's demand profile. It is primarily driven by timing effects, customer-induced shifts, and supply chain constraints. Based on the current view, we expect compensation of these effects in the following quarters. So the key message for M&I is Q1 was below the prior year, but the reasons are identifiable, manageable, timing and supply related. Turning to slide bearings. Order intake decreased moderately from €37 million to €35 million. This development was mainly driven by postponed order awards for marine and e-bearings, despite stronger aftermarket activity. Revenue was broadly stable at €30 million compared to €31 million in the prior year quarter. Performance continued to be affected by the subdued industrial market environment, as Alexander already pointed out. Adjusted EBIT declined from €5 million to €4 million. This adjusted EBIT margin came down from 73% to 13.3%. The decrease was mainly attributable to an unfavorable product mix and negative effects related to US tariffs. The key takeaway is that side bearings remained relatively stable on the revenue side, but profitability was burdened by market conditions and the regulatory setup in the US. We continue to see the division as a high quality contributor to the group, but Q1 reflects a more challenging environment. Let me continue with the reconciliation from operating profit to adjusted EBIT and adjusted EBITDA. Operating profit increased from around 24 million euro in Q1 25 to around 27 million euro in Q1 26. Purchase price allocation effects were stable at around 11 million euro. As a result, operating profit before PPA depreciation and amortization, as well as income and losses from PPA asset disposals, increased from around 35 million euro to around 38 million euro. Adjustments amounted to €48 million in Q1 26 compared to €3 million in the prior year quarter. These adjustments were limited in size and mainly related to global system and process improvements, severance payments, M&A-related costs, and tax compliance standards. In total, adjusted EBIT increased from around €38 million to around €42 million. Adjusted EBITDA increased from around €46 million to €51 million. The main message is that the increase in adjusted EBIT and adjusted EBITDA was supported by the operating performance of the business, while adjustments remained modest. Now let's have a look at networking capital. Networking capital increased from €345 million at the end of 2025 to €380 million at the end of March 26. As a percentage of last 12-month revenue, this corresponds to 27.6% compared to 25.2% at year-end 2025. The increase was mainly driven by inventories, which rose from €436 million to €496 million. This reflects short-term delivery obligations and higher production activity. Importantly, around 69% of inventories are customer-related, which means the increase is closely related to existing customer demand. Customer receivables decreased from €375 million to €356 million, and this development was mainly shaped by reporting date effects. On the funding side, prepayments received increased moderately to €343 million, while trade payables declined to €129 million. Overall, the development of networking capital is in line with production activity and subject to timing effects. Our higher working capital supports revenue conversion and delivery readiness. At the same time, we remain focused on managing the managers, particularly when it comes to inventory discipline. Finally, let me turn to the key free cash flow items for Q1. The starting point is adjusted ABDA of 51 million euro. Adjustments amounted to minus 5 million euro and the change in networking capital had a negative effect of 31 million euro. As just discussed, this working capital increase is closely linked to production activity, inventories and timing effects. CapEx amounted to 5 million euro in the quarter and income taxes paid were around 10 million euro. Including the positive effect from other items, unlevered free cash flow come in of 8 million euro after the interest result of minus 6 million euro. Free cash flow amounted to around 1 million euro. This means that we generated positive free cash flow in Q1 despite the working capital build-up. The last 12-month cash conversion rate stood at 59%, which is consistent with our current growth path and scale-up of production. Put differently, operating performance clearly outpaced the net working capital increase in the first quarter. We will continue to focus on disciplined working capital management, but the Q1 cash flow profile supports the overall message of profitable growth with stable leverage. With that, I would like to hand back to Alexander again, and thank you for your attention.

Thank you, Anja. Ladies and gentlemen, let me now come back with a few comments on our outlook and guidance for 2026. Let's move directly to slide 18, where we fully reconfirm our 2026 guidance. Revenues above 1.5 billion and adjusted EBIT range between 255 and 285 million of euro. And as mentioned before, we are fully targeting the upper half of the adjusted EBIT range. The main operational levers, which are key for our 2026 guidance, are summarized on the right side of this slide. First, and clear, strict delivery and revenue conversion based on our customer contracts. We have the order book, we have the fixed backlog, and now we execute it, full stop. Second, a stronger back-end loaded H2, fully in line with our customer delivery schedules and our investment plan for 2026. Third, full focus on operational excellence and our capacity expansion in Augsburg and Rheine. The modular production line is fully running and the next investment steps are coming online during Q2 and Q3. Fourth, the continued road out of the rank production system from Augsburg to Muskegon and now further towards Ostman. And finally, further improvements of our operational efficiency. The overall market environment for 2026, even including a potential peace deal in Ukraine, we do see as strong and positive, and we expect major order intakes during 2026, which I will touch and describe on the next page. Moving now to slide 19 and having a quick view on our order intake situation for the rest of the year, meaning Q2 up to Q4. Regarding Q2, we do currently see a range between approximately 400 to 500 million of Euro for order intake, depending on the timing of the specific programs. For the full year 2026, we confirm our high visibility of approximately 2 billion in order intake, which we have already indicated during the full year 2025 call. Let me highlight a few key programs. Regarding main battle tanks, we do expect further orders from Germany for the Leopard 2A8 and related MBT-based family platforms, but also further MBT orders from various international customers. Staying in Germany, we have the Boxer-Arminus program, most likely a first contract for approximately 1,800 vehicles expected during half year to 2026. We also see further orders for the Panzerwitze 2000 tracked howitzer during Q2 and Q3. And then, of course, the U.S. Thor 4 frame contract and related first contracts for 2026 currently in the final phase of negotiations and new orders from various IFV programs such as Italy, Romania, and Austria. From the Navy side, the F-127, the Mako A200, and the RMD project for the German Navy, and also here, various international frigate programs, including the two programs that shifted, by the way, from Q4 2025 into 2026. Also, and as a first highlight, and if you want a kind of sneak preview for Q2, we were nominated in April with the very first serious contract volume for the Pattaya Trax APC, a great success. By the way, the press release will follow soon. Fair to say, the potential order intake pipeline is full and the underlying momentum is strong. Now let's have a quick look on our production portfolio initiative and let's move to slide 20. Slide 20 is, from my point of view at least, a very important slide which demonstrates very clearly that RENK is doing a lot in terms of R&D and new product developments for the land and the sea domain. Our next-gen mobility roadmap is fully in execution with important milestones through the entire year 2026. Let me just walk you through four of our recent R&D projects, where two are focused on new transmission for LAN platforms, while the other two are related to unmanned platforms. First, the HSWL354B transmission for the future Leopard platform, a development contract from KNDS. Second, the ESM 280, the development of a high-performing transmission for heavy-wheeled platforms above 30 tons. Third, the heavy-tracked UGV concept. Here we are working together with Patria on a new UGV concept between 10 to 20 tons platform weight for multiple use cases. And fourth, the ASV project, a development contract for an autonomous surface vehicle in the Navy domain for an international customer. The UGV and the ASV are underlining our strategy in the field of unmanned platforms for land and sea domains. A new product segment which we believe will be a structural growth area and volume market for the coming decade. Important to mention. Three of these four projects will be shown at the Eurosatory in Paris from June 15th to 17th at the Rangbooth. And of course, we are very much looking forward to welcome many of you in person. Ladies and gentlemen, you did it almost. We are close to the end of our today's presentation. So let's move on to slide 21. The key takeaways of today's call. If I had to summarize Q1 in one sentence, strong demand, good execution, and very high visibility. We are seeing this very clearly in our order intake and total order backlog. This is not just a good quarter. It reflects the underlying strengths of our markets. At the same time, WMS is stepping up exactly as planned. Growth is strong, and importantly, we see the operational improvements coming through in margins. For marine and industry and slide bearings, the picture is more mixed. What we see here is largely timing and external effects, not a change in the fundamentals behind these segments. Finally, more than 90% of our 2026 revenues are already into fixed order backlog. Fair to say that we are exactly where we want to be and fully confident in delivering on our guidance. Very last, but not least, a few words on our financial calendar. Our capital market activities continue to be very busy, and we are very much looking forward to meeting many of you in the coming weeks and months at roadshows, conferences, bilaterals, etc., etc. Some of the key dates are shown on this slide. Let me highlight one date in particular, our annual general meeting on June 10th, 2026, but also, and as already mentioned, Please mark fat in your calendar the Eurository investor meetings in Paris on June 16th and 17th. A great opportunity to see our R&D pipeline live and in color. Ladies and gentlemen, Rank has delivered a solid start into 2026. We are fully on track. The order book is full. is crystal clear thank you very much for your attention we are now looking forward to your questions

Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raised hand function at the bottom of your Zoom screen.

If you've dialled in by phone, please press star nine on your keypad to raise your hand and star six to unmute. Once your name has been announced, please unmute and ask your question. If you want to withdraw your question, please lower your hand using the raise hand function or select star nine. Thank you. Our first question comes from Sebastian Groh with BNP Paribas. Please unmute your line and ask your question.

Hi, good morning, everybody. Hope you can hear me well to start with.

Absolutely, Sebastian. Good morning.

Okay, cool. So then I would start quickly on a recap on the quarter one of mine. So the first one would be around the VMS segment. Firstly on the mix, and I would be interested in getting a bit more color around the drivers behind the strong margin development. I was genuinely surprised to see a contribution margin of more than 30% when at the same time the segment was confronted with limited fixed cost absorption, relatively speaking at least, and then also the missing Israel deliveries. and conversely related ramp-up costs. So if there's anything that you would like to highlight here, then I would appreciate that. And the other question around VMSs in regards to Israel, you mentioned the lifted embargo, but on the other side, it apparently also requires an export approval. So where do we stand here? And then I have two more.

Sebastian, I will try to answer your profound questions as good as possible. If there's not enough, Anja needs to jump in. Maybe first on the margin development of VMS. I think it's fair to say, and Anja mentioned it before, the center of gravity of margin development and improvement is clearly Augsburg. So if you want to call it VTA, it's on the land side. What we simply see here is the fact that the operational efficiency improvements from the modular production line is just kicking in. We see constant improvements in the reduction of assembly time, et cetera, et cetera. So this is clearly the driver for the margin development. Having said this, I'm not saying that the other BMS companies are not performing, but if you ask me personally about who is the main driver, it's absolutely VTA, absolutely. And I can jump on this later on if you want. Israel, you summarized this perfectly. The export embargo is lifted. And all what I can say is we are in full swing in order to ramp up our production, starting the first deliveries. And this includes, of course, a certain legal framework which is given.

Okay, so just on the letter, you have approved those licenses that are required, yeah?

We are preparing and we will deliver according to our customer contracts and the delivery schedules. Yes. Okay, good.

Sorry, I didn't want to interrupt you on that.

Yeah, I only wanted to state that I fully agree with what Alexander said on the margin development. It's VTA. It's really what we can see is what we're always told is that more of the same just supports us at VTA. It's really the scaling up topic because we really produce 16% more compared quarter to quarter. And that's really mostly driven by our scaling up.

Okay, sounds anti-concurrency. And so just as a quick reminder, when did these kind of tailwinds start to come in from VTA? So you rolled out this modular concept, and I recall it was sort of later summer, so maybe the first tailwinds really were visible in the fourth quarter of 2025. Is that the right way to look at things, so that you have still two quarters with those related step-ups and tailwinds?

I would like to answer this, Sebastian. I think we have a continuous improvement of our performance in the line. I think I mentioned last year or during the full year 2025 call that, I mean, just comparing the output figures of October 25 to October 24, we had an improvement, I think it was in the range of 14 to 15%. So what we see is simply the line is running since the end of Q3 and we have a permanent improvement of the parts flow of of of all the warehousing and for this reason um we see that simply the time our people need to assemble one transmission is reducing further and as i just said i think i said it before i mean our our modular production concept and we just talk about the final assembly please keep in mind that because of this year we will roll out the modular production concept from the final assembly, which is running, where we are benefiting, as we can see in the margin development, towards the subcomponents, but also towards the end of year in our MRO line. So we will see a continuous further improvement.

Okay, that's a good message. Then quickly on the order pipeline, you mentioned a couple of programs. I would just like to take it to a higher level for a second, because we saw a bit of news last week that the German government is about to hike the earlier planned budget in 2027 by about a high single-digit Euro billion amount. I was just wondering to what extent you might benefit here. And similarly, if you could also provide an update in regards to the potential configuration of the circular reserve for the German army. That would be appreciated.

Yeah, I think we always shared very openly what are the relevant platforms for rank. And I think from this point of view, my main comment, and you see it, for example, in the booking of the second batch of the Puma, we are fully on track in regards to the visibility, planned visibility, and the entire process. So I do not see that we will have a significant upside swing by the German budget. I think we are exactly running as we have since, by the way, since 10 months or even more communicated this. What was the second part of the question, Sebastian? Sorry.

On the circular reserve, I think it was still unclear how many brigades, etc., what configuration. So if you have any sort of update here, that would be great.

Well, I think the German customer is, how to say, on the move. And this includes not only the new platforms and the new projects, but this also includes on establishing during the next four years. Please keep in mind the circular reserve was always established. targeted during the first phase of the German rearmament program. And all what we see is that the German customer is moving forward. Does it mean that he will have a circular reserve on the transmission side accomplished at the end of 2026? This is most likely not the case. It simply will take time, but he will execute it.

Okay, good to know. And then the last one is just on the strategy part. Apparently, you have been contemplating a potential exit of the slide bearings business. So maybe you can just provide an update where you stand here. And as you also mentioned, the ongoing developments in unmanned vehicles. Is there any sort of, say, white spot in your offering that you would still need to close? So reinvest any potential funds from a potential slide bearings exit?

Yeah, I would like to start maybe with the slide-bearing discussion. In fact, to be honest, there's no update, as I just said, and as Anja has alluded on it, slide-bearing is and will be again in 2026 a value contribution to our overall crew business. And as I already indicated, there is, of course, a certain interest from the market because Some companies also recognize the performance and the market position of slide bearings. And we as the board, we have not only the responsibility, but it's also part of our strategy to constantly review and verify these potential interest indications from the market. And then we will make a decision if there's something attractive. If not, we have a nice round and sound running business. Might have some headwinds in regards to industrials, but the overall market position, especially when we talk about alternative energies, energies in any kind of form where the slide bearings is key, we are also happy to continue. But as I just said, This is an ongoing process and we will see what is the outcome of this. Regarding unmanned platforms and blind spot, well, I mean, I think from a given rank portfolio and product offering, we are focused on the domain land and sea. This is the reason why so far organically and, for example, by partnerships with ARCs for smaller UGB, but if it comes to really full-sized ugvs can drive more than 90 kilometers and the payload of three up to five tons etc etc we are working with brian's for example now with patria and i'm very happy to show you this uh 15 ton ugv on the upcoming usatory so the question is and it's the same by the way for the autonomous surface vehicle or vessels where we got a development contract to provide, if you want, the entire propulsion system, not only transmissions, but E-generators, E-engines, condition monitoring, smart condition monitoring, couplings, et cetera, et cetera. And as I just said before, we do see this as a structural growth market beyond 2030. It's absolutely sure. So we do feel that we are on a good way to position our product offerings in our today's domains. The question is, if you talk about blind spot, the question what is missing are under the water, under the surface, unmanned vessels, vehicle platforms, ships, boats, whatever. And of course, if you talk about aerial, I mean, UAVs, counter UAVs, and Or what I can say is we are observing and following the market, but I cannot give a more deeper and more detailed comment on this. I think that's more than good enough. Thank you very much. Thank you so much.

Our next question comes from Sam Burgess with Goldman Sachs. Please unmute your line and ask your question.

Hey, good morning, Alexander and Anya. Thank you for taking the questions. I'll limit myself to two to let other people have a go. Q1 VMS margins were very strong. And, you know, from the commentary there, it sounds like operating leverage was is responsible predominantly. But Q1 is typically the seasonal low point on VMS margins. So, can we expect quarter-on-quarter growth for the rest of the year? Or will there be mixed changes that might weigh on future quarters? Any guidance there would be really helpful. And then just on M&I, I mean, aside from the revenue deferral, I think the release also mentioned slightly softer aftermarket activity. Can you just give some more color here? And is that expected to persist? Thanks.

Hi, Sam. Good morning. I will try to also hear to answer your questions. I mean, the VMS margin development, I think it's fair to say that Q1 showed a very positive trend. we will have a Q2, Q3, Q4, and as I just said, we will have, especially for Q3 and Q4, according to our customer delivery schedules and according to our investment planning and strategy, especially focused on Q2 and Q3, we will have a stronger back-end loaded half-year tool from the revenue side. I think it's fair to assume that the overall margin development on BMS through the year should be a positive one. And I would say that if you look on the year end 2021, Six, we should see new all-time high in the margins on the VMS side. I hope this answered a little bit your question. The M&I, your second question, Sam, on the M&I side, the aftermarket business, I mean, as Anja said, we have aftermarket in M&I for the Navy segment and for the civil or industrial segment, for example, turbo. I mean, there is, as I just said, we both highlighted this, there is still ongoing industrial headwind for the industrial market coming from the current overall GDP sector-related market challenges. But from what we see is that this... especially on the aftermarket side, is what we would consider more a quarterly specific effect, not a structure. Because if you usually have weak market conditions, the new business is more impacted than the aftermarket business. Got it. Really helpful. Thank you. You're welcome.

Our next question comes from Chloe Limerie with Jefferies. Please unmute your line and ask your question.

Yes. Good morning, Alexander and Anja. I'd have two as well, if I may. The first one is actually on the updated German defense strategy and the budget highlights to 2030. Could you maybe comment on how these align with your expectations? Because there's definite skepticism in the market around obviously the relevance of conventional defense platform going forward. So I'd be keen to hear your thoughts on this. The second one is on energy costs. In case you foresee any kind of impact on your own business or maybe your supply chain due to rising costs on this front. Thank you.

Always a pleasure. Also here, I will do my very best to answer your strategy. I mean, Our reading of the updated German defense strategy and the discussions, I mean, who are in the market about all conventional platforms dead and we only have future unmanned UXV, whatever, domain air, domain land. Honestly, and I said it last time during our pre-close call, we do see our... revenue and order intake planning according to the few platforms which are relevant for us on the land side. Still fully on track to make this absolutely clear. We had last week, we had a strategy meeting. We had a guest, a VIP guest, a two-star general from the German army who was leading one of the tank divisions. And we had extensive discussions about using conventional platforms. Do we need them? Do we not need them? And I simply would say, and this is in alignment with the Bundeswehr strategy, if you talk about the main attack points of a potential russian aggression this will be not in the same geographically a geographic position like ukraine if you talk about the baltics if you talk about the north cup if you talk about finland We talk about, for example, very dense forests. In these very dense forests, the entire effect of drones is not given like in the open cornfields in Ukraine. So why I'm saying this, I think we need both. And this is part of our planning. And again, we see this fully on track. We need to have in the Bundeswehr, not only in the Bundeswehr, need to have conventional platforms. More of them, especially beyond 2030, will become unmanned, especially when you need to supply certain use cases like ammunition logistics, air defense, etc., etc., For this reason, we are focusing as a new product development area on these unmanned ground vehicles, for example, and it's the same for the unmanned surface vessels. So overall, we see no change in our technology. in our prognosis in our forecast and and and i think you know me chloe since two years i'm talking about the same point and i think um it's a clear statement we need both conventional and new innovations on the air on the ground whatever regarding your second questions i mean so far And we are monitoring this on a biweekly basis about supply chain, energy costs, et cetera, et cetera. It's a kind of pre-crisis committee in order to evaluate the impact of the Gulf War. So far, we do not see a significant impact. And this includes estimates. including increasing energy prices and also increasing energy prices to our supplier. For example, as you know, aluminum casting is always full of energy in all respects. And our big housings for the gearboxes are aluminum sandcasted aluminum parts. But so far, we do not see an effect. And all what we see towards the end of this year, we believe we can manage it. But to be also crystal clear, Chloe, if there is... If there is for the next six, seven months a total blockage of the street of Hormuz, if on the other side Iran continues to blow away LPG terminals, whatever, then I think sooner or later the global economy has in the full glance a different challenge.

And please also keep in mind our total energy costs really make up only 3% of our total production cost. So it's not a significant. Yeah.

Fair point.

Yeah, very clear.

Thank you so much both.

Our next question comes from Benjamin Helan with Bank of America. Please unmute your line and ask your question.

Yes, thank you for taking the question. I just had one that was a follow on from Chloe's, I guess. The full year you talked about the Arminius programme as an example being awarded in Q2 or Q3. And I think in your prepared remarks, you talked about it being in the second half of the year. I think what we see from some of the companies as well, we are kind of seeing some of these big orders get pushed to the right. So I was just hoping you could talk about that a little bit. Is it just because of the scale of the orders, the amount of, you know... work investigations that need to be done? Is there, you know, questions about do we need 1800 vehicles or 2000 vehicles? Just if you could give us a bit of a color, a bit of color as to the discussions with the German customer, because it does feel as though from the outside, some of these big programs are being moved to the right slightly. Thank you.

Yeah, Ben, hi. Again, I will try to do my very best to answer. I think First of all, before I talk specifically about the German customer programs, I think it's important to mention, and you have seen this in our order intakes of Q1 and you have seen this also in our outlook for the key order intakes of 2026, that we are not depending solely in our order intake, in our revenues from the German customer. We have various international customers from west to east, and this gives a nice diversification of any kind of order intake risk. And for this reason, we are staying strong in our high visibility of this 2 billion of order intake. I think this is If I could make some commercial for rank, I think this is one of the strong points of rank to have a fully diversified portfolio of customers and markets coming to Germany. Well, I think if you talk about the box and you ask for the reasons. First of all, I think these are complex programs. I mean, from the contract negotiations and from an allocation of, for example, 1,800 or 1,900 boxers on different platforms. As you know, I mean, these 1,800, 1,900 boxers are not going on to the IFV version or to one or two specific. There are five, six, seven different boxes. platforms they need to serve. And this needs to be arranged under these contracts. And there is obviously still the question of Should the Bundeswehr and the Bayern BV use existing contracts of some of these frame contracts of some of these platforms who should get more of the boxers? Or should they negotiate a full new frame contract out of this? So this is one thing. And the second thing is, I think... Part of the truth is also that part of the complexity is not only complexity from the political side or from the procurement department, from the MOD. It's also part of the industry, to be honest. I mean, the reason that the Boxer has a delay is that our customers could not provide a quote when it was requested. So it's not a... Driven delay by political decisions or by budget. The budget is there, but it needs to be finalized now in contracts. As I just said, it's not only one platform below this threshold. 1800 or 1900 boxers. There are multiple platforms. In the industry, we all, we have to perform in order to meet timelines when these programs should be submitted to the end customer and to the politics in order to start the political approval process. I hope this Did that help you a little bit?

No, no, no. That's super clear. Thank you. Just a quick follow on. As you sit here today, do you think the customer will want to negotiate new frame contracts or use the existing contracts for that program? Do you have a strong view?

I mean, a personal statement, I see it as 50-50. It's not clear yet. Okay. Okay. Super clear. Thank you. I think the fastest move forward would be to use, at least for the majority of these programs, existing contracts. Okay. Okay, fine. Very clear. Thank you. You're welcome.

Our next question comes from Marie-Therese Grubner with Kent of Fitzgerald. Please unmute your line and ask your question. Marie, please unmute your line and ask your question. We will come back to Marie in just a moment. Our next question comes from George McWhirter with Berenberg. Please unmute your line by pressing star six and ask your question.

Good morning. Thank you for the questions. I've got two, please. Firstly, on the aftermarket business, I think you mentioned that the full year results that you plan to maximize the potential of this business. Can you just update us on how that's going? And the second one is just on the EBIT consolidation line. It came in a bit lower than expected, I think. So can you just remind us what you expect for the full year on that one? Thank you.

I will start quickly with the first question. This I see more in my responsibility. Then I will hand over if it comes to the console figures to Anja. Well, absolutely right. You are referring to my statements on the rework or redefinition, new definition of our aftermarket strategy. And I can confirm we are right in between. We have approximately done 50%. We have calculated eight weeks for this program. The teams are running on full speed. We are through the first data analysis. We are in the modeling of the future perspective. of the aftermarket development, MRO development, because there will be, as we already discussed, there will be different drivers compared to the past and as of today. And the final step is then, of course, to define short, mid and long term measures. In order to drive, as I said, my perspective in the next 10 years is to develop potentially towards a business model similar to M2Aero engines and so forth, but a significantly higher aftermarket share. But I'm confident that during our next call, so this is for the Q2, we can give first insights about our aftermarket potential and our approach.

So for the consolidation line, if you look at Q1, you can see that we are slightly above prior year for 26. And for our planning, I would say we're at closely to be the same level as in prior year for the full year.

Thank you very much.

Our next question comes from Spencer with Kepler Chevro. Please unmute your line by pressing star six and ask your question.

Hello, thank you for taking my questions. Just one left on the 90 percent of revenues. in the fixed order backlog for, no, sorry, 90% of the fixed order backlog. Does this include aftermarket or is this just equipment orders?

I mean, this does include a certain share of aftermarket. But I mean, if you talk about equipment order, it's more or less fixed. And the data, what we see here is this is driven by the nature of the business. If you talk about our industry business, like couplings, for example, or if you talk about slide bearings, we have usually very short lead times. So the majority or the I would say almost 100% of this remaining 10% is not driven and triggered by the platform because they are fixed and sealed. It's driven by the nature of the business for industrial business with short lead times.

Okay, thanks. Yeah, that's clear. And then on the rollout of the rank production system at Horstmann, Should we assume similar efficiency improvements than we are seeing in Augsburg?

You are asking a tricky question. I mean, I'm asking the same question to my CEO, to be honest. And I think what we have done, and this is not related to the rank production system, fundamentally what we have done in Augsburg with the introduction of the assembly line is absolutely key. I think what we will see, and this is also a lesson learned from my time in automotive, by installing these kind of rank production systems, or these production systems, you are defining standards, processes, tools, how to run your operations. And there will be an impact on efficiency, on lean, on how to work. And there will be also a continuous improvement on process. And this will be also reflected on the margin. But most likely, you cannot expect such a kicker in the EBIT or in the EBIT margin development like in Augsburg by a fundamental new breakthrough step of introducing this modular production line. But yes, I mean, as I just said, we had last week a strategy meeting and one of the key things We did not only change our brand slogan, so from trusted partner is not anymore existing. Our brand slogan we adapted from our RAM company in US is now We Power Freedom. But one of the major things was also that we handed out to all of the 89 executives of RENK, a booklet about the rank production system so we are now in the full swing to introduce it and this will help us during the next year to have incremental improvements on top of major kickers like for example the modular production line on our margin understood thank you you're welcome

Our next question comes from Joe Orchard with Rothschild & Co. Redburn. Please unmute your line and ask your question.

Good morning. Thank you for taking my question. Just one, please. Please, could you expand a little on the press release from yesterday and your decision to enter the transmission market for wheeled armoured vehicles with the ESM 280? And wheel transmissions seem to be more of a competitive environment. So it would be great to hear your reasoning here and what sort of demand you're seeing compared to track vehicles and how material this opportunity could be for rank. Thank you.

That's a good question. We are working, I mean, to give a little bit of color on the ESM 280, that's the name of our wheel transmissions. We are working on this since three, four years, and the lead is here with rank forms. And having the lead with rank forms implies certain platforms, which are maybe more related in the first hand, to the french customer we also do this development for other international platforms which are as of today at least not in europe but for example if we go towards the middle east so this is the kind of framing why we are doing this the second thing is um This could be an attractive market, but we are not going, at least not now, in the mass market. We are looking here on above 30 tons and especially for heavy wheeled vehicles which are having heavy payloads or who needs to carry a lot of weight somehow. There are certain platforms, and what is clear is during this development period, we focus very much not only on meeting the performance, which is, and you know my statement, you cannot compare the performance of a tracked transmission to a real transmission. I mean, to come from the tracked technology to a real transmission. It's significantly easier than to go from wheeled into tracked. It's a totally different number. But we focused on this in order to develop a very cost-competitive transmission. A very cost-competitive wheeled transmission for platforms above the 30 tons, where we are not... giving the market prices for these specifics, where we are not giving up our margin expectations towards 2030 and beyond. But to make it also clear, we are not targeting to go into a significant super mass market. We are focusing here on specific platforms. This will most likely bring us volumes. With these volumes, we can further improve our cost situation, and then we just see.

Okay, that's great. Thank you very much.

You're welcome.

Our next question comes from Christoph Menard with Deutsche Bank. Please unmute your line by pressing star six and ask your question.

Yes, good morning. Thank you for taking my question. I had two left. The first one was on M&I. You were saying you're going to recoup the lost sales in Q2, Q3. Will you also recoup the lost EBITs given the drop-through margin you had, or negative drop-through margin? It was quite big, so that's the first question. And the second question is on the next-gen mobility. The R&D investment and the CAPEX, is it all behind this? And what is the amount? If not, what is the amount that is coming? And also, when do you think those products will be ready for deliveries, I would say, when we'll see tangible revenues coming from this? Thank you.

Hi, bonjour and good morning. I will try also here to answer, and I would like to start with the next-gen mobility. I mean, as you have seen this, we have in principle, I mean, the Zone 4 projects, we have some which are financed from our customers. If you talk about the next generation of the HSW354, the LEPR transmission, So this is funded, a funded development contract from KNDS. By the way, we will deliver in the beginning of June our 4,000 LEPR transmission, I mean, just as information. And if you take the ASV, for example, it's also customer funded. But if you take on the other side, as I just said, alluded before, the question from Joe regarding our ESM 280, or if you talk about the heavy-track QGV concept and other programs which are running, we are doing, of course, by self-funding, and we are staying, as we always communicated, in our approximately 3% of self-funded R&D, and you need to add overall globally roundabout 3%, 3% to 4% of customer-funded R&D. So we have a clear roadmap and we are executing this roadmap. And we are very, very taking care, according to our four technology segments, that we are efficient in the spending of our precious euros. So it's pretty much about to focus where to spend the money, what are the future, and also from a business case, of course, attractive development projects. So this was my answer on the NextGen regarding M&I. I mean, I think I mentioned this in the pre-closed call, The reasons why we were about 8 million below the revenues compared to Q1 2025 are somehow ridiculous. When we talk about outbound logistics, there were two cases and they triggered almost 10 million of revenue shift out of Q1 2025. where either we were shipping according to delivery our transmission to the harbor and unfortunately the customer missed to order right in time the boat so we could not realize it as revenue we will realize it in q2 there was another reason it's difficult to explain this, a bloody captain was so dumb and he just loaded one transmission instead of two. So we could not realize the revenues. And the second one, also one driver, and this was an impact maybe on the lower single digit Euro figures. One of our suppliers in US had problems in scheduling their deliveries because they had quality issues, cracks in the weldings of housings. They fix it now, but of course they could not deliver and we could not integrate them in the building, in the transmissions. So these programs, they are coming during Q2 and Q3 and they are not lost. This is all what I can say. Did I answer your question or did I miss something, Christoph?

And now I was just wondering whether you will also recoup the lost EBIT. I mean, they had a shortfall. Yeah. Absolutely. Okay.

Absolutely. The revenues are shifting and therefore the EBIT will also shift.

Okay. No, that was just this because the margin differential was quite big. Yeah.

Okay.

Perfect. Thanks.

You're welcome.

Our next question comes from David Perry with JP Morgan. Please unmute your line by pressing star six and ask your question.

Hi, Alexander and Anja. Thanks for squeezing me in. I've got three questions. Hopefully they're reasonably quick. First one, just on Israel, can I just clarify something? I read an article that said the arms embargo had been lifted by Germany, but not for heavy equipment like tanks. So I guess two parts of the question. One, is that true? And if it is true, does it exempt systems like transmissions or are your transmissions being delivered as spares? Is that how you get around it? That's the first one. The other two are probably quicker. Andy, I think you used the word structural when you were talking about the slide-bearing margin issues. Maybe I misheard, but just wondered what you're thinking for the margin through the year, given some of the issues there. And then very quickly, Andy, could you just tell us what you're expecting for adjustments for excluding PPA, but the other adjustments for the full year? Thank you.

Good morning. I will take over the first two questions. Then regarding the adjustments, I would like to hand over to Anja. Regarding Israel, you are right. I read this article also, but I can confirm we are not impacted by this. So we are not considered as tanks or as heavy weapons. We are defense good, but we are not goods who are killing people. So from this point of view, I can clearly confirm we are not impacted by this. On our slide-bearing business, we do expect to recover during this year on a similar margin level like we had, maybe even slightly better like what we had in 2025. So I think this was my part of this, David. Was this okay before I hand over to Anja? Thank you very much.

Okay, so let's talk about the adjustments. We pretty much on a similar level if we look at the prior year, not considering any, let's say M&A you can't really plan. So we need to see how that would come in. But on the other topics like process developments and so on, And we are still working on our back-to-standard topics and so on to really get our systems up and running fully professionally. So that will remain in the same topics. So it could be that we have some payments to living persons that could come in too, but that's it.

So for the full year, it was 13 last year. Excluding transaction and PPA, you had other costs of 13. Is that kind of the number you've got in mind for the full year?

No, it's a little bit higher. I think it was like around 15. So what you need to add in is we might be kicking off in Q4 our SAP S4HANA project. So if that would work out, if we could hire people and so on. But we really need to get the people first and onboard them. So there we need to see whether that would fit in. So we would say around five a year or slightly above.

Okay. And then once you've hit that level and you're rolling out the SAP, what would those numbers look like each year? Those exceptional items or adjustments, you call them?

That's really a tough one. I mean, we have said that SAP S4HANA implementation would be a project running about five years and altogether it's 50 million. So there it really depends on our contract. So, you know, do we do that on FEM or not? And because then if we would do it on-prem, that means we would capitalize a portion of it. If we go into a cloud or whatever, we cannot capitalize that. So then that would be an exceptional item. But in order to really assess that, we would need to have the signed contract and really need to make the assessment on what parts and what features do we want to use for the S4 system. But for 2026, that's not the plan because we will only have effects of Q4.

All right. Thank you.

Our last question comes from Marie-Therese Grubner with Kent Fitzgerald. I wanted to ask about USD hedging. What exchange rate are you hedged at for 2026? Anya?

Hi, Marie-Therese. Yeah, we do. When you look at our setup, you can see that the big parts is we have here of the production we really have in Germany. And we also have mostly suppliers here in Germany. So there is no hedging necessary. Then if you look at our U.S. business, which is basically the next biggest business. So they're also here. The suppliers are mostly within the U.S., So typically from the supply side, we do not have that big coverage. So we do a lot of, let's call it natural hedging, because we stay in our currency domains, basically. When we contract big projects, let's, for example, take some RTS topics where we produce in Germany, where we have different suppliers, then we do a hedging depending on the contract and on the currency. However, that hedging is being determined at the inception of the contract. And this is how we hedge.

This concludes the Q&A session. I will now hand back to Christian Weiss for closing remarks.

Thank you all for joining us today. We look forward to see many of you in person at the upcoming investor conferences and roadshows, as well at the EuroCentury in Paris. We will, of course, remain available for follow-up questions in the meantime. And have a great day and goodbye.