Sfc Energy Ag

Good morning, ladies and gentlemen, and thank you for joining us on a, I would say, a truly special day and special call. After just stepping out of the night train here from Kiev to Poland, I'm still in transit and hope that the connection is stable enough. If it's not, please remind us and then I think Daniel and I can share the presentation or I can find a space where I have a better connection. So as usual, we will lead you through the numbers, but naturally also now we give you our view on the contract and program we signed yesterday in Kiev. As I said, we just arrived here after, I would say for me, a remarkable and impressive visit to Ukraine. And besides, yeah, signing I think this contract, we are looking also at what is the impact of all of this to our business this year, but also beyond. Starting, well, I think we can only also express our gratitude here as SFC Energy the Ukraine and Ukraine partners as well as our own German government for their trust in us. We also, I think, see this as an expression of, let's say, an important contribution here to this initiative here to enable the Ukraine to sustain their efforts in the war against Russia, and I think as a new defense tech company, we are bringing different capabilities there now, and I think that's the main message here. At the end, what do they use it for? We see them use it for actually our conventional critical communication applications. It's used as uninterruptible power in vehicles but the key elements are it's resilient it's um decentralized and it's easy to deploy and easy to move in in very short periods of time and then it comes to to the i'd say to differentiate this it's now Again, combat-proven, like we have systems for years also with other forces, including Israel, but Ukraine has, let's say, I think a leading role right now in every, but it looks at what they use and how they develop it, and it virtually has, and that's a key element, no signature, neither temperature nor noise, and therefore a different level of safety. It's a safe reliable energy source for the ones who use it. And this was also what we got back yesterday as a reflection when talking to one of those commanders there at the end, he said, well, you're making the life safer for my young men and women. It's not just that, let's say, our anti-drone laser operates now not just seven days, but 28 days, so a factor of four longer. It simply gives them the opportunity to exchange fuel cartridges and not charge batteries by generators and therefore expose themselves to a life-threatening risk. So I think that's about how is the user looking at it. If we now look at the structure of the agreement itself, it starts at the end This quarter, we are supposed to ship a good almost half of the equipment until mid of the year. This is also the reason why we compromised on some capacity in Q1 here for production already to satisfy the needs here. And we are supposed to deliver everything within 2026. The first step now is to really operate under this contract that is financed by the task force of the Ministry of Defense. 100% payment out of Germany and with a, let's say, significant impact also on our cash flow where Daniel can give you the mechanics and the details also in a second. The visit we had now the last days here on site was about naturally getting to a final signature on this contract, but it's now also about the next two stages, and also this week's visit of Mr. Pistorius in Kyiv was about, well, how to localize now activities. The next step now is support activities, training, service and repair capabilities on site. And beyond this, then also naturally to look into a local supply chain contribution here from Ukraine, which we see in a timeframe of, I'd say, 27, 28. And all those activities are still supported also by financing from Germany as well as the EU. And that's why we see, I'd say, also an impact beyond the year 2026. If I now go back to, I'd say, what was the original natural topic for the call, we are looking also at a first quarter with a significant increase in profitability. And on the revenue side, as mentioned, we did compromise some capacity and we are looking at let's say a shortfall of about 12% compared to last year's Q1 revenue. If we look into the details here, we also have to say that the first quarter, especially in two regions, in India and in the U.S. last year, were the strongest quarters we had. In those two regions, we also had a currency impact. But overall, looking, I'd say, at the 3% to 4%, 3.5 million capacity we took out of the first quarter and already used for production of components here for shipments to Ukraine in Q2. I think we can look at a solid start on the profitability side. Daniel will lead you through, let's say, the reasons for an improved profitability in terms of EBITDA and EBIT ratio. If we look into the segments and also what we expect now going forward, yeah, the bigger impact we had on the clean energy part of the business here by delivering 24.7 million products out in the first quarter of 2026 compared to at 28.4 million. The lower sales, as said, in core businesses in the civilian part as well as in the defense part, but looking at where we are right now at the end of or at mid-May, we also see, I'd say, activities are significantly in Europe with Germany and the Netherlands being leading here. On the defense side, we had the first shipments on a sizable project here above a million euros to Austria here for portable fuel cell systems, which also had a good impact on the mix and on the profitability. No rebound here. in India in Q1 as expected because it was the last fiscal year of their year to be completed. We also see and expect a rebound in the Indian defense part. If we look onto the power side, a slight increase here in terms of overall proportion of the key power business. but also there in terms of revenue and expected lower revenue in Q1 because we had, as already also mentioned and reported before, a soft start with our biggest customer Thermo Fisher. Looking at the forecast as of today and also looking at an up cycle the semiconductor business and therefore our second biggest customer, ASML. We are seeing a catch up here in Q2. On the power side, a really good start in Canada in the oil and gas business. The high oil price doesn't lead now to immediate new projects coming up, but what we see is a solid execution on budgets, and we also expect this to be and have a positive impact on, let's say, Q2 and Q3 here in terms of significant orders and projects out there for decision making. So looking at the backlog, I think if we look at the historical data back in at the end of first quarter, I think that's Maybe from today's point of view, not that meaningful. Adding up what we would be signed yesterday, we're looking right now at the backlog between 112 and 115 million. Total and a solid pipeline. Therefore, I think we we were catching up compared to 31st of March. With this, I would like to hand over to Daniel to look into the earnings of Q1.

Good morning, everybody. Thank you for joining our calls. I want to keep it kind of short today. I'm assuming that the Q&A session will be a little bit longer. I'm just going to go through a few highlights, a few explanations with regards to financial things. We quickly want to drop a word on the gross margin. The gross margin on group level you've seen has gone down to 42.7%. We're coming from 44.3% in the first quarter of 2025. So that is slightly below what we've seen in the first quarter of 2025. Still above what we've seen on the full year level where the gross margin was 40.8% for the entire year. So we are kind of happy and okay with that gross margin. When we look at the segment, and Peter kind of indicated already, the gross margin on the segment clean energy is 48.8%. It's on the higher side, so that is okay and a little bit above our expectation, to be honest. If you look at the gross margin on the segment clean, That is definitely on the lower side and below our expectation a little bit. The reason is, Peter mentioned it, that we have lower revenues in FFC Netherlands. We have the power electronic components. And the margin decline is mainly due to the lower manufacturing overhead dilution. which is a result of those revenues. Again, the overall gross margin, we are fine with that and it's on a decent and good level. If you look quickly at the operating expenses and also there, let me just go through the three, four highlights for the first quarter. We had a positive impact from an exchange rate net gain. It's a small gain of 200,000 euros. However, that compares to a loss that we had in the last year for a quarter of 800,000 euros. So we see that this has a positive impact on the EBITDA. Again, also here, you know, the larger part of these net gains have not been realized as past a larger part of the net losses. We've seen that the expenses for IT and ERP are on a higher level, but it's not above what we've budgeted. We will expect those costs to remain a little bit on the higher level. We've also seen that the capitalization of R&D expenses is on the lower side. We're looking at 40% versus 23% in the first quarter of 2025, which has an implication on the R&D expenses on the P&L, but still overall R&D expenses are slightly lower If we look at the entire operating expenses, so operating expenses meaning sales and marketing expenses, development expenses and admin expenses, we see that we're roughly a million lower from what we've seen in the first quarter last year. year, which of course has a positive impact on our EBITDA. Main reasons are here and there a little bit less headcounts. Of course, some savings or lower expenses for advisory expenses. So overall, some of the, you know, let's call it cost discipline measures we introduced in the last year are still helping us and leveraging us. Now we'll get to the adjusted EBITDA. It's about 6.2 million euros, pretty much on the level of what we've seen last year, with the lower revenue that we realized in the first quarter that, of course, translates into a higher adjusted EBITDA margin with 18%, which is, you know, normalized on the higher side. Of course, it will change a little bit to the positive with a large order we just received yesterday. And we then look into CapEx. CapEx in the first quarter, if you look at the cash flow, you'll see that it was above 3 million, which again is on is really the investment in OneBerry, which we had. So this is carried under CapEx because it's a participation. The CapEx in PP&E and intangible assets really without the investment in OneBerry was a much lower level of 600,000 euros. So that is the normalized run rate that we're having. That is, I think, something I just want to mention and go through. Cash position, $45.7 million. So, again, at a very solid level. It's about one million lower from what we've seen at the year end. The financial debt has slightly decreased. So that brings us to a net cash position of $42.3 million healthy for our operations and to finance our group. If we look Quickly, at the cash flow, operating cash flow before in the change of net, before, sorry, the change in net working capital is about 5.5 million euros, 22% lower from what we've seen in the last first quarter, which is mostly due to the lower revenue that we generated. Networking capital quickly went up by roughly 800,000K. The largest impact on the networking capital had the decrease in accounts payables in the first quarter with a negative cash impact of 3.2 million euros. So if we then look at our days of payable outstanding, 12-month trailing, we had 63 days. below what we've seen at year end. So not significantly, but apparently paying a lot of bills in the first quarter. If we look at the inventory, the inventory decreased slightly, so not worth mentioning. Basically it stayed at the same level what we've seen at year end. Days of inventories have increased to 155 days from 151 days. And apparently as Peter just mentioned with the order, of Ukraine, we will expect our inventory to decrease significantly over the next two quarters. And then, and also when it comes to the working capital, we did collect quite a large amount of accounts receivables, 2.2 million euros in the first quarter, which brings our days of collectibles outstanding to 103 days. Overall, after tax payment, investment, and financing cash flow, the change in cash is negative 1 million, so at the very healthy level. I will leave it at this call, and thank you very much. Getting back to Peter.

Well, thank you, Daniel. And, yeah, let me summarize now. the outlook. And also, apart from what we signed yesterday, I think we see a healthy development in the business, but based naturally on yesterday's decision, we have changed the guidance and we have raised the guidance revenue-wise to $163 to $175 million. It's not just an add-on of, let's say, the total order of Ukraine to this because I think three elements to mention. We had a part of it, and I'd say obviously a small part of it in our planning. You can think about 10 million. We add the differential to it, and then still there is, let's say, a differential remaining of another whatever, 15 million, where at the end we see naturally headroom throughout the year to our business, there's still risk in some projects we have planned for. So we still expect this to close, but it's not closed yet. And the other element is also it's not about production capacity, but it's really now a significant task here on supply chain. We have specific components, dedicated components for our fuel cell products, be it civilian, be it defense, where we are now working on still increasing capacity here with our suppliers, especially for Q4. And that's my, somebody might call it cautious here at this level. I would call it realistic. It's the range here that we are seeing as the realistic one. If we improve on the supply chain part, and if we can execute on all the projects we had in there originally, naturally, we would have to look at this range again. On the profitability, we see a significant impact also of the operational leverage and the mixed impact here, especially of our defense business bringing the EBITDA range up from $29 million to $34 million is the bandwidth we are seeing compared to the $20 to $24 million we had before. Well, and likewise, on the EBIT side, also a jump, raising it to a range from $20.5 million to $25.5 million from the previous $11 to $11.5 So overall, I think a solid outlook, and you see us confident to really deliver on this. The workload metric now is on the operational side, but as mentioned before, we started to work on this already in Q1 as we had indications of an earlier signing of this contract, which now coincidentally was just the day before our publication of the Q1 results, which ended up naturally now in a sequence of news from yesterday night to today. But overall, I think you're having the overall picture right now, and we are happy to now go into the Q&A session and give you more details, especially also on the structure of the deal and the program here for the enablement of Ukraine. Handing back to Hilly to open the floor for Q&A.