Siemens Ag Spons Adr

Good morning, ladies and gentlemen, and welcome to today's conference call at Siemens AG. At the beginning, we would like to inform you about the fact that this conference will be recorded and made available as a webcast. After the presentations, you will be able to ask questions. If you would like to ask a question, please press star 1 on your phone. You will then be registered for questions. And with that, I would like to hand over to Simon Krause, Head of Media Relations and Executive Communications. Mr. Krause, over to you. Good morning, and a very warm welcome to today's conference call on Q2 of Cisco 2026. I would like to welcome you together with our CEO, Roland Bush, and our new CFO, Veronica Binat. Veronica Binat is today taking part in this quarterly call for the very first time in her new function. A very warm welcome to you, Veronica. A few remarks ahead of time. This morning, we published our Q2 results. the presentation, as well as the presentations of our board members, and any other documentation can be found at demons.com slash press. Here, you will also be able to find this conference call's recording. Very quickly on the rundown, after the presentations, Roland Busch and Veronica Bienert will be available for your questions. The conference call will end sharp at 9.15 at the latest. I would like to also point out the safe harbor statement, which you will be able to find at the beginning of the presentation. With that, over to Roland Busch.

Thank you, Simon, and good morning, everyone, and thank you for joining us to discuss our performance in Q2 of 2026. I'm very pleased that we're continuing our successful path to profitable growth, despite the still very tense geopolitical environment. In the crisis-hit region of the Middle East, the security of our colleagues has been our top priority over the last few weeks. From a business perspective, We expect our revenue share from this region to be limited in the current year to 3% to 4%. The region accounts for only 1% of our procurement volume. Nonetheless, we've taken appropriate measures to limit these risks. We're closely monitoring developments as well as the possible impact on inflation, global supply chains, and investment sentiment. However, we haven't yet observed any significant influence on customer buying behavior to date. Siemens is benefiting from its technological leadership and its strong position in key growth markets. Let me walk you through the highlights of Q2. The book-to-bill ratio reached a strong 1.22, lifting our order backlog to a record high of 124 billion euros. As anticipated, nominal revenue growth was again materially impacted by the strong euro. Orders at the group level reached 24.1 billion euros an increase of 18% compared to Q2 of 2025, with double-digit growth at all three core businesses. Smart infrastructure, SI for short, again delivered a quarterly order record. We're seeing strong demand across almost all markets. SI's data center vertical clearly stood out with unprecedented triple-digit percentage order growth, topping even the excellent Q1, which is absolutely exemplary. Demand continues to be vibrant, driven by the build-out of cloud and AI infrastructure. At digital industries, growth continued. The market environment had previously shown some early signs of improvement, but these are now being challenged by renewed geopolitical volatility. The automation business was strong across all regions. Our software business sees several major opportunities across the entire portfolio and is successfully upselling within its customer base. Mobility won several significant large orders in Q2. Two weeks ago, we announced an important project, which we're booking in Q3. We're delivering up to 200 double-deck trains based on our Desiro platform to Swiss Railways SVB for Switzerland's commuter rail network. The order value is around 12 billion Swiss francs. Overall revenue growth totaled 6%, driven by digital industries and smart infrastructure. A very strong contribution came from SI's electrification business, which posted an 18% increase. Digital industry software business delivered compelling growth of 14%. It's been very gratifying to see that revenue was up in all regions. The Americas led the way with an increase of 10% fueled by strong momentum in the U.S. EMEA grew 2%, while Asia-Australia was up 8%, driven by India, which grew 21%. Profit in the industrial business reached 3 billion euros, corresponding to a profit margin of 15.4%. We saw operational strength at digital industries and smart infrastructure, while mobility was burdened by U.S. tariffs. Currency headwinds reduced the profit margin by 80 basis points, but are expected to ease in the second half of fiscal 2026. These results translated into basic earnings per share before purchase price allocation accounting, or EPS pre-PPA for short, of 2.81 euros, which included, as previously reported, a gain from the divestment of our airport logistics business in the U.S. After a somewhat weaker first quarter of 2026, free cash flow increased to 1.7 billion euros. We confirm our outlook for fiscal 2026 at the group level with some adjustments at individual businesses, however. Veronica will provide you with more details on this later on. Let's now take a look at the portfolio. As planned, we've concretized this timeline for the spin-off of Siemens Henselier's shares. The shareholder decision is now planned for our next ordinary annual shareholders meeting in February of 2027. Let's take a look now at the four key levers that are driving our growth as one tech company. First, grow digital. In the first half of fiscal 2026, we grew our digital business by 19%, well above the ambition level of 15%, which we announced last November. What are the drivers? We're generating organic growth from our expanded Siemens Accelerator software and digital services offerings. coupled with strong growth from our latest software acquisitions second growth regions the lionheart project is a prime example of siemens strength as one tech company europe's first integrated lithium project lionheart combines sustainability and critical raw materials the australian company vulcan energy is building a geothermal plant in germany's upper rhine valley to extract lithium, a key component of batteries for electric vehicles. The project will strengthen Germany's competitiveness and, in turn, its growth. Smart technologies, automation and digitalization systems, and smart building solutions are the backbone of the project. We're combining these technologies and helping ramp up production faster. One tech company also includes Siemens Financial Services which will be a minority investor in the project and has supported the structuring and arrangement of its debt financing. Third, growth verticals. Data center demand has been soaring. Our team grew revenue in the first half of fiscal 2026 by more than 45% to 1.8 billion euros. We're confident that we'll be able to keep up the stunning pace throughout fiscal 2026 to meet accelerating demand We're further expanding low and medium voltage production capacities in the U.S. at several locations in North and South Carolina, and we're further expanding our data center partner ecosystem to scale next generation AI infrastructure. The goal is to create more flexibility across computing, energy, and the necessary infrastructure systems. Our customers will be able to connect their data centers to the grid faster, scale more efficiently, and operate more reliably even in a power-constrained world. Fourth, growing with AI. Bringing industrial AI to the real world was the focus of our first Real Meets Digital, or RxE for short, summit in Beijing, an event attended by more than 2,700 customers and partners. While there, I spoke with Joe Tsai, the CEO of Alibaba. We expanded our partnership to bring our industrial software together with Alibaba's cloud and AI. capabilities. Now, experts at our customers in China can run complex simulations more flexibly and more efficiently. At the event, we also introduced 26 new products for edge automation and control to support industrial AI in industry and in infrastructure. We develop these products locally and, as we always say, at China speed for the Chinese market and beyond. Those of you who visited our booth at the Hannover Messe trade show could see firsthand how, together with our partners, we're scaling industrial AI in production facilities. Let me highlight just a few examples. First, we launched our Eigen engineering agent, a milestone that's enabling us to move from an AI that only provides assistance to industrial AI which plans and executes engineering tasks end-to-end in even complex projects. The impact is impressive with up to 50% greater efficiency and up to 80% higher solution quality proven in more than 100 global pilot deployments. Since market launch, customer interest has been high. Second, we're applying physical AI in our own factories. We're automating complex and unpredictable logistics tasks with AI-powered robots. After receiving a task, these robots figure out by themselves how to solve challenges and optimize the required actions, a huge opportunity to address the scarcity of skilled labor. We've entered a strategic partnership with Kion, to jointly shape the supply chains of the future. Using digital twins and our digital twin composer, we turn warehouses from a physical hub into the digital nerve center for the supply chain. A key point in our collaboration is that we're exchanging selected areas of industrial data and domain know-how to better scale industrial AI. As we all know, AI factories will increase the demand for electricity. We already have a solution to help meet this demand, a new comprehensive direct current or DC protection and switching portfolio, the basis for the more efficient and sustainable operation of AI factories with DC solutions. Very pleased with the momentum and performance of our DI software business. Organic annual recurring revenue, ARR, grew a very healthy 11% compared to the second quarter of 2025. The integration of our Altair and .mattox acquisitions is progressing very well. We've taken a key step by implementing targeted cost synergy measures of 150 US, 150 million US following the Altair integration. The bottom line impact will now follow. As AI capabilities continue their rapid evolution, we're far ahead. We're using AI in our own operations massively, I must add, to enhance productivity by leveraging, for example, the full potential of AI-powered coding for our software engineers. We at Siemens are uniquely positioned to support our customers with precisely targeted AI-powered industrial software. Let me explain what I mean in more detail. There are four key focus areas. First, deterministic. Our customers' plans and systems follow physical laws. Predictable, deterministic. Unlike AI that's based on probabilities, our industrial AI provides physics-based solutions that deliver fast, high-quality, deterministic intelligence that can both be trusted and verified. This intelligence isn't a given in the AI world, but for our customers, it's indispensable. Second, contextualized. Industrial-grade AI requires precise data contextualization. Our industrial software understands design intents and all of the product's possible configurations, and it takes into account all the rules and all the relationships relevant for a product. Third, multi-domain. The complexity of innovation is rapidly increasing in a world of more personalized and increasingly software-defined products. Our customers require fully integrated AI that understands a design across all the domains in their enterprises. Siemens is the only company that can deliver this technology. Everything from product lifecycle management to electronic design automation to simulation and shop floor execution from a single source. And fourth, live intelligence. Real-time intelligence. that will drive action requires a digital twin that's infused with real-world physical data, a live digital twin. Siemens is the industry leader in combining the real and digital world to drive better, faster, real-time intelligence and governed action. We're implementing this objective in three concrete ways. First, faster engines. Our physics AI solution doesn't replace deterministic computer-aided engineering solutions for simulation, but it makes them more efficient, much more efficient. With full AI support, an engineer can very rapidly screen thousands of design options and make deterministic calculations with only the top candidates. The result, dramatically faster iterations for the optimal design and dramatically faster validation to get the customer to the market faster. Second, faster engineering. Another key innovation is our new agentic industrial-grade AI platform, which autonomously plans, executes, and validates. Where have we tested it? Well, we've Stress testing platforms are at their absolute highest in semiconductor design. Our FUSE EDA AI system orchestrates highly complex workflows across very specialized tools securely and reliably. In addition, it delivers real productivity for engineering. The companies TSMC and NVIDIA already use it. The system is not a single tool. It's a platform approach. We'll extend this agentic intelligence to more than 20 agents across our entire software portfolio. Third, increase design intelligence. One of the key challenges in building and implementing comprehensive digital twins for factories is complexity because data is fragmented everywhere in different systems, in different formats. Siemens has resolved this issue by introducing the Digital Twin Composer, which can merge all the data streams from the digital and the real world into one software product. We launched it at the Consumer Electronics Show CES in January. Two examples from the Hanover Trade Show are PepsiCo and Kion. These companies have built an ever-evolving engineering mirror of a physical product or factory to constantly drive operational improvement. Customer interest is huge since the CES. We've received more than 300 inquiries from large enterprises. To sum it up, our foundation is very strong. It's built on Teamcenter, the industry's number one trust and secure PLM software for the centralized administration and development data and processes. On its basis, we're bringing to life the benefits of faster engines, faster engineering, and increased design intelligence. Our industrial AI is secure, trusted, and governed. We're building precisely what our customers need, the AI-driven operating system for industry. Now, with that, I'll hand over to you, Veronica, for your first quarterly press conference as CFO of Siemens. All the best.

Thank you, Roland.