Soitec, Bernin Ord New

Hi everyone and welcome to Soitec Fiscal Year 26 Results Conference. I'm Alexandre Petovary, Head of Investor Relations, and on behalf of the team, thank you very much for joining us today. Before we begin, let me remind you that today's presentation contains forward-looking statements, so please read the disclaimer that's available in the presentation materials. So today's session will begin with our CEO, Laurent Raymond, and you'll also hear from the executive team, Albin Jacquemont on finance, Steve Baburek on strategy, Christophe Malville on innovation, and Cyril Menon on operations. After these prepared statements, we'll open the Q&A, and Laurent will end the session today with some remarks. Thank you again for being with us, and with that, Laurent, over to you.

Thank you, Alex. Hi, everyone. It's a real pleasure to be here with you for the first time. So since I took over this position on April 1st, I have spent my time getting to know the company from the inside, meeting all the teams and the key customer. I look forward to sharing with you my observations so far, the immediate priorities for Soitec as I see today, and my reading of our position within the broader industry in which I have spent the last 30 years. So, to begin with, I want to take a step back and share with you what I think are the three main takeaways from our fiscal year 26 results. It has been a difficult year for Soitec with inventory correction impacting volume and low visibility in some of our end markets. However, like the rest of the industry, we can also see AI accelerating further and starting to drive a radical shift in semiconductor demand and requirements. So my first message for today is our fiscal year 26 performance reflects that. Revenue is down, our fab loading is below normal, and deliberately so, and it is impacting our margin. On the positive side, our balance sheet is robust, liquidity is strong, and free cash flow has turned positive. Albin will take you through the numbers later on. Second, we continue to innovate, optimize, and strengthen our portfolio to benefit from the strong megatrend, notably AI. So photonic in data center, FDSOI at the edge, power over insulator in advanced connectivity. We are strengthening what differentiates us, strong ecosystem intimacy, unique R&D capability, and an agile and scalable manufacturing footprint. Third, we have started 26 and we will continue in 27 to position the company for a return to profitable, sustainable growth. And we have done that by reducing customer inventory, sustaining discipline on cost, and moderating working capital and capex to improve cash conversion. So regarding fiscal year 26 numbers, let me give you the headline before Alban talks about it. Revenue was down year on year at €592 million, largely due again to ongoing inventory correction in RFSOI. This was partially offset by strong momentum in AI. Growth margin stood at 16%. This is a temporary low linked to the choice to reduce our fab loading and prioritize inventory normalization and working capital discipline. And our efforts have started to pay off. So the free cash flow has turned positive at 63 million euro, thanks to the focus on working capital and the discipline on capex extension. Free cash flow restoration is the first step of our trajectory ahead of revenue growth and operating leverage, as Alban will explain later. So let's now take a closer look at each of our end markets, starting with mobile communication. So we see very different dynamics at play in our mobile RF business. First, power on insulator, piezo on insulator, so POI. POI is gaining market share over SO filter technology. The adoption remains strong. We have now 13 customer in production and nine in qualification. A proof point of this is a long-term agreement signed with Skyworks in March. At the same time, fiscal year 26 POI revenue saw a temporary softness in Asia after a very strong fiscal year 25. Looking forward, we expect volume to increase, partially compensated by ASP erosion, while the POI market matures and reaches scale. We will manage this transition at scale with discipline and execution and investment. Then RFSOI, the second pillar. So customer inventory correction is ongoing. It is moving in the right direction, but there is still a lot to correct. Customers are still holding around 2 million RFSY wafers. The correction in Q4 was limited in line with seasonality and impacted by memory shortage in the mobile market. Looking ahead, Undershipment will continue as customers reduce their inventory, and the pace may also be influenced by other market dynamics. Finally, FDSOI, our third technology used in the mobile market, especially for 5G mmWave transceivers. Here we secured key foundry design wins with leading flagship smartphone, including iPhone 17. We are also diversifying into satellite communication and ultra wideband. Now moving on our second segment on edge and cloud AI. Here performance was strong and is accelerating. The first is FDSOI at the edge. FDSOI is uniquely positioned when it comes to RF, as we have seen in our mobile segment, but also for ultra low power consumption. And this is what matters for edge AI application and personal AI assistant. The ecosystem continues to build up. Adoption by major foundries and IDMs are progressing. We are seeing new design wins for low-power microcontrollers in smart glass and wearables. We are also diversifying beyond microcontrollers into image signal processors and cybersecurity applications. On top of this, we see further potential moving forward with physical AI and battery-powered AI assistant. The second story on Edge and Cloud AI is Photonic SOI in data center. I am sure you will be all ears for this one. As you know, we have been a leading supplier in photonic soi for optical transceiver for more than 10 years here lately we have witnessed a very sharp acceleration of the demand especially since march fueled by scale out and scale up architecture evolution in data center This applies to both pluggable optics but also to the preparation of the ramp-up of co-packaged optics. Shipments are progressing with more than 10 customers who are either already in full production or in qualification with their own product. Longer term agreements are being put in place both for 200 mm that will remain strong and 300 mm that is getting more widely adopted. We expect strong momentum to continue, but we remain aware that there will be challenge and uncertainty along the way. Customer product qualification cycles, data center architecture choices, reliable interoperability between all the building blocks, and timing of deployment, all of that can create volatility. So our approach here is to be ambitious, but also to carefully check progress of all building blocks through the supply chain at the same time. So Photonic is a clear focus for the company. Responsiveness and execution excellence are key to leverage our unique flexible manufacturing at scale and to continue to implement differentiated roadmap and features like LNOI for the next generation of modulator. So overall, agent cloud AI is a strong growth area for Soitec. Let's now move to automotive and industrial segment where market dynamics are again quite different. Our automotive demand remains weak and there is still excess inventory at major analog players. Power SOI reflects the end market more generally. A long-term agreement with a key customer gives us good visibility, but the volume remains low, mainly because of the overall market condition. We continue to prepare the transition to 300 mm, especially for battery management system, where we continue to see a solid long-term potential. FDSOI is a different picture. Customer appetite here again remains strong. We have good visibility on the RAM trajectory supported by design wins in automotive microcontroller, in radar, ADAS, in wireless communication and ultra-wideband or global navigation satellite systems. That said, we know that automotive qualification cycles are long and ramps do not always move in a straight line. On SmartSeq, the technology value for high-performance segment has been demonstrated. But the ramp-up is not taking the shape we initially expected because of radical market evolution in EV automotive market and very intense price competition from monolithic Chinese players. As a result, we have recognized a 41 million euro impairment. We remain focused on identifying the right path forward for SmartSeq, but we will do so with a more selective approach. Now, based on my experience in this industry and the two months in the job, let me spend a few minutes on what I believe makes Soitec unique. I see three main assets to leverage. Firstly, the depth and the intimacy with our ecosystem built over decades. So research institutes, foundry, IDM, fabless players, design house, technology providers and end customers. It helps us to drive our roadmap and gives us a track record in shaping new markets and transforming innovation into commercial success. The second asset is our innovation engine. This is built on more than 30 years of experience and know-how in engineered substrates, reinforced by strong partnership with leading research ecosystems around the world. The third is our agile industrial footprint. We have state of the art manufacturing capability in large scale, high volume production, high quality, high yield. This gives us the speed today in photonics. We can reliably scale by reallocating fungible SOI capacity already installed without years of capacity ramp and qualification. So underlying all of this, the talent and the engagement of our people, without them, none of this is possible. So these three differentiating pillars matter most when applied to where the industry needs them. And right now, this is AI. AI is not just accelerating growth in our industry, it is redefining it both on the data center side and at the edge. Both matter for Soitec. First in data center, so hyperscaler investment is expected to quadruple in just two years with the rise of inference and agentic AI requiring not only more GPUs, but also to have these GPUs more closely connected together. So called scale-up, for those who heard about it. So optical connectivity is replacing copper connection to increase transfer rate and reduce power consumption. Plugable optics are growing fast now, and the next generation, co-packaged optics, CPO, is lined up. Our photonic SOI platform brings differentiated performance for optical interconnects with waveguide loss specification difficult to match at scale and also features enabling next steps for system integration. Longer term, there might be even a third wave after pluggable and CPO with optical IO and silicon photonics interposer. The second dimension is what is happening at the edge with new battery powered AI assistant and physical AI. Many of the 5 billion AI devices by 2030 will be always on and extremely sensitive to active and passive power consumption. They will require extremely good capability to integrate analog mix signal, RF, and digital together. FD-SOI excels in these two aspects. Always-on AI coprocessor, automotive MCU, AI assistant, IoT AI sensors, all are converging on these requirements more intelligence with less power and higher level of integration so more broadly speaking we expect ai to drive new performance requirements that will play along most of our portfolio First, as we said already on the computing side, this is photonic SOI in data center and FD-SOI at the edge. But also, we expect edge AI to drive new needs for connectivity with more data volume to be exchanged. Lower latency, higher band, lower power consumption, and higher integration. This is where POI, FDSOI, and RFSOI come into play. Third is energy efficiency, which is of utmost importance in data center, where we could seek for engineered material opportunities in power SOI or in wideband gap. So what does that mean in practice? It means three short-term priorities for the company. First is to accelerate the strong momentum we have on AI. The opportunity is definitely here, but we need to properly execute. Success will also rely on some external factors, architectural choices, customer qualification timeline, competitive landscape at all the stage of the value chain. We are positioned to capture the opportunity with ambition and focus. The second priority is to sharpen focus and resource allocation. A full review of portfolio priorities and capital allocation is underway. The technology differentiation potential remains. What changes is execution and concentration of resources. We will share findings publicly when conclusions are reached. The third priority is to right-size the organization. So the cost reduction program initiated in fiscal year 26 will continue, including headcount reduction, with formal consultation of employee representatives in progress. The objective is to structurally reduce the fixed cost base and improve operating leverage through the cycle. At the same time, R&D intensity and strategic capability are being protected. We are not cutting our way out of innovation nor in our strategic areas. And we do this for very good reason. Progressive returns to sustainable and profitable growth. This is underway. So that's my reading of where Soitec is and where I'm taking it. First, we have a portfolio built for the right megatrends with a unique position in AI value chain. Second, our talented team has developed structural advantages and we will continue to do so. And lastly, we have a disciplined approach to converting all of this progressively into financial performance. There is real work ahead, but I'm confident we are doing the right thing in the right order with the right team. So finally, with these priorities in mind, let's turn to our outlook for fiscal year 27. Uncertainty remains high across several of our end markets, so we believe it is right to remain prudent on the guidance horizon. For Q127, we expect revenue to be up 15% year on year at constant exchange rate and scope, factorizing in our effort to reduce seasonality. As we navigate in a challenging environment, we will continue to face margin headwinds. Some will progressively fade away as our fab loading returns to normal. Albain will give you more detail on the PNL and CAPEX, but one element I want you to remember We are leveraging our asset fungibility and the previous investment we have made to moderate the cash outflow. And we make sure that we secure our capability to capture growth opportunity. So to conclude, having restored a positive free cash flow in fiscal year 26, our next priority is to get back to a growth trajectory. Thank you. This is in a nutshell what I wanted to share with you today. I will hand over to Albain for more detail on the 26 number and I will come back at the end of the Q&A for some concluding remarks. Thank you.

Thank you very much, Laurent. Good afternoon, ladies and gentlemen, and thank you for joining us today. Fiscal 2026 was a year of decisive execution for Soitec. We took bold, proactive actions to reset our operating base, protect our balance sheet, and position the company for the next phase of profitable growth. Despite a challenging demand environment, we delivered on all the commitments we set out at the start of the year. We took decisive action to proactively manage our FSOI inventories and correct supply. This was the right call. This discipline was essential to streamline our working capital and support a healthy rebalancing of a channel across the RF-SOI ecosystem. Yes, this weighed on growth margin in the second half due to temporary underabsorption of fixed costs, but it was a necessary step to restore structural balance. Second, we successfully restored positive free cash flow. This was achieved through disciplined working capital management and a more moderate capex profile, thereby strengthening our financial flexibility and enhancing our capacity to deploy capital into attractive high return growth opportunities going forward. Third, we are executing a three-stage roadmap to sustainable and profitable growth. Stage one was a restoration of positive free cash flow, which we have now achieved. Stage 2 focuses on cash generation while progressing toward revenue growth as we continue to work through excess RF SOI inventories across the channel. Finally, Stage 3 will be the scaling phase where we will leverage our structurally efficient operating model to drive meaningful margin expansion and cash conversion as end-market demand improves and recovers. Taken together, these three priorities reflect a clear sequencing of discipline, stabilization, and value creation, positioning the company for a balanced and resilient growth trajectory. Let's now look into key numbers, some of which Laurent has already touched upon. Revenue came in at 592 million euros, down 30% year-on-year on an organic basis, reflecting sharply divergent and market dynamics. EBITDA margin was 25.4%, and 810 basis points declined year-on-year, driven primarily by lower volumes and our deliberate FAP deloading. Despite this, operating cash flow remained resilient at 202 million euros, broadly in line with last year, underscoring the strength of our cash generation model. As a result, we generated 63 million of free cash flow, a significant improvement from the 23 million outflow in fiscal year 2025. Consequently, our net debt position improved to 56 million euros, resulting in a strong and comfortable leverage ratio of 0.4 times EBITDA. In fiscal year 2026, our top line declined by 30% year-on-year on an organic basis, reflecting sharply contrasted and market dynamics across our portfolio. Mobile communication declined 41% year-on-year, continuing to be impacted by RFSOI inventory corrections at direct customers. That said, we are seeing encouraging adoption momentum in POI, highlighted by a first multi-year LTA signed with Skyworks. Automotive and industrial remained tepid, down 44% year-on-year, as the ongoing global automotive downturn and softer demand in both Power SOI and FT SOI persists. Edge and Cloud AI was once again the standout performer, up 8% year-on-year and up a strong 19%, excluding Imager SOI. Photonics SOI is now a $100 million plus platform, growing in excess of 30% year-on-year. This is consistent with the continued expansion of our addressable market as optical interconnect demand accelerates across AI data centers. As Laurent has already provided an overview of the operational context across our co-product line, I will now turn directly to gross margin performance. Gross margin came in at 16.3% of revenue, down from 32.1% last year. Beyond lower volumes, three factors drove the decline. Lower utilization rate at circa 50% versus circa 70% last year, representing a circa 800 bps headwind. Unfavorable mixed price driving a circa 300 bps contraction. Operational efficiencies and subsidies provided circa 180 bps of relief. Looking ahead, as utilization recovers and volumes ramp back up, we would expect growth margin to naturally expand through operating leverage. Turning now to our operating performance. We reported a current operating loss of 8 million euros compared to a current operating profit of 136 million euros last year, driven by gross margin compression. This was partially offset by disciplined cost management, which we achieved while maintaining our commitment to R&D investment. Net R&D expenses decreased to 45 million euros in the year, reflecting dolphin design divestiture, higher recognized subsidies and lower material consumption, particularly within smart SIC development activities. Stripping out these items, growth R&D remained on par with last year. SG&A declined by 10%, driven by lower share base compensation expense. The rest of variable profit sharing accruals to zero and disciplined cost savings across the operating base. On this next slide, we set out the breakdown of our non-recurring items. Net loss amounted to 220 million euros, significantly impacted by non-recurring items, most of which result from decisions taken many years ago. More specifically, we recorded €123 million of operating expenses, primarily comprising a €41 million impairment charge related to smart SIC assets, a €29 million impairment on the currently unequipped PACIRIS extension, an impairment charge on advance payments made in 2022 under long-term raw material supply agreements, and a single-digit earn-out loss associated with the disposal of dolphin design. These non-cash charges reflect disciplined portfolio management and a clear-eyed reassessment of market dynamics, particularly in light of a rapid expansion of lower-cost Chinese monocrystalline silicon carbide capacity and a resulting pricing environment impacting smart SIC-related assets. Moving below the line, net financial expense amounted to 31 million euros, reflecting higher interest costs associated with recent financing activity, and the 17 million euros non-cash forex loss recorded in April and May 2025. The group has since implemented an enhanced hedging framework to mitigate residual currency risk going forward. We can turn to the next slide. Adjusting our reported net income of 220 million euros for the exceptional non-recurring non-cash items previously outlined results in a current net loss of 14 million euros and current EPS of negative 0.38 euros. We fully delivered on our commitment to restore positive free cash flow generation, which reached a positive 63 million euros in fiscal year 2026, marking a strong improvement compared to the negative 23 million recorded last year. This performance clearly demonstrates the strength of our execution rather than reflecting any support from market conditions. I would like to sincerely thank our teams for this achievement. This marks a structural inflection point. SoeTech is now back to generating consistent free cash flow over the cycle with a more selective and returns driven capital allocation framework. This improvement is underpinned by two key drivers. First, we maintain strict discipline on working capital resulting in a positive 49 million euro contribution to cash here and here. This was mainly driven by a 145 million euro reduction in trade receivables, reflecting lower activity levels and tighter collection management, as well as a 24 million euros reduction in inventories driven by deliberate actions to reduce fab loading and operate below underlying end demand, particularly in the second half of the year. This reflects a clear prioritization of cash generation and balance sheet strength over short-term margin optimization. To give you more context, this slide offers a closer look at these working capital dynamics from a balance sheet perspective. As you can see here, our optimization efforts paid off, particularly in the second half of the year. Turning now to the second driver of our free cash flow improvement, capital discipline. We further reinforced capital discipline, reducing capital expenditures by 40% year-on-year to €135 million. Our capital allocation framework has become decisively more selective with resources increasingly directed towards some of the most attractive long-term value creation opportunities, in particular Photonics SOI and POI. In parallel with proactive inventory optimization, this sharper capital allocation has enabled Soitec to return to structurally positive free cash flow generation. Leveraging significant past investment in capacity expansion allows us to secure growth opportunities at the same time. This is a key inflection point. It strengthens our financial profile, significantly enhances earnings quality, and increases our strategic flexibility as we enter the next phase of development. Beyond performance, we are further strengthening the quality and consistency of our financial reporting framework. As part of this ongoing effort, we have updated free cash flow definition to reflect prevailing market conventions. The revised definition consistently includes capital expenditures irrespective of funding structure, as well as the net impact of interest paid and received. This enhancement materially improves comparability across reporting periods and provides a clearer view of the group's underlying cash generation capacity. It reflects our continued focus on strengthening the credibility, transparency and investor relevance of our financial disclosure framework. Turning to the balance sheet, we ended the year with a strong and further reinforced financial position. Net debt decreased by €38 million to €56 million, driven by continued strong cash generation and disciplined financial execution. This further strengthens our balance sheet and enhances our financial flexibility going forward. Liquidity remains very strong with 562 million euros of gross cash and 270 million euros of fully undue committed facilities, providing substantial financial flexibility to support both operations and future growth initiatives. A major achievement this year was the successful repayment of our October 2025 OCEAN maturity, partially refinanced through a 222 million Schuld Schein issuance with an average maturity of approximately four years. This refinancing significantly enhances the quality of our balance sheet by extending debt maturities, diversifying funding sources, and substantially reducing near-term refinancing risk. To conclude on our fiscal year 2026 performance, we continue to maintain a solid balance sheet underpinned by strong liquidity and a moderate debt position. In parallel, we are further progressing on our commitment to greater transparency, consistency and higher quality financial reporting. So, bringing all this together and moving to the outlook. We expect Q1 revenue to be up around 15% at constant currency and scope year on year. Mobile communications is likely to remain challenged, reflecting the ongoing RF SOI inventory correction as well as softer smartphone demand amid current memory supply constraints. In stark contrast, Edge and Cloud AI should continue to deliver robust growth momentum, underpinned by the accelerating ramp-up of photonics SOI solutions for optical interconnects in AI data centers. Automotive and industrial demand is likely to remain muted in the near term, pending a more meaningful recovery in demand trends. In parallel, we remain firmly committed to our disciplined capital allocation framework, with fiscal year 2027 cash capex expected to remain contained at around 100 million euros for the full year. Fiscal year 2027 will be a transition year, but the path to margin recovery is clear and tied to FAB utilization improvement and the scaling of our high-growth platforms. Fiscal year 27 will be reflecting FAB utilization rates which, while improving, will remain materially below optimum levels, as well as a level of subsidies expected to be significantly lower. Indeed, discussions are ongoing as calendar year 2026 marks the conclusion of the IPCEI2 program ahead of the anticipated launch of a potential IPCEI3 framework. Finally, the strengthening of euro against the US dollar is expected to create an additional headwind for our financial performance under the current operating conditions. Our net for rate exposure for fiscal year 2027 is now 95% hedged at 1.19 euro per US dollar. In closing, the company is well positioned for the future, supported by the significant diversification of its portfolio achieved over the past several years. Execution of the plan articulated back in November remains firmly on track. As a reminder, the plan is structured around three distinct phases. Phase 1, restoring cash derivation through a reduction in working capital and the return to positive free cash flow. Initial results are already tangible and we expect further progress ahead with a meaningful portion of working capital expecting to be monetized over the coming years. Phase two, returning to growth. For the first quarter, we are guiding to approximately 15% organic revenue growth, reflecting the improving momentum across the business and some efforts to reduce seasonality. Phase three, restoring a structurally higher level of profitability with operating leverage and cash conversion as growth resumes. This phase is expected to follow the sustained recovery in top line growth. At this point, let me pass you on to Steve to take you to our strategic priorities.